FR&A Flashcards
Beneish Model
8 variable regression model to estimate probability of earnings manipulation
Adjustment for Operating Leases
PV of minimum lease payments @ implicit interest rate on capital leases
FIFO Inventory =
LIFO Inventory + LIFO reserve
Adjustment for DTL
Treat as equity if not expected go reverse in the future
Adjustment for Capitalized Interest
Subtract amount from asset and decrease equity
Increase interest expense in IS by same amount
Securitized receivables
Increase receivables and current liability by proceeds amount from sale
Adj CF: decrease CFO and increase CFF
The Temporal Method is used to…
Remeasure financials from a Local currency to the Functional currency
The Current Method is used to…
Translate financials from the Functional currency to the Reporting currency
Temporal Method B/S FX Translations
Monetary Assets/Liabilities: Current Rate
Non Monetary Assets/Liabilities: Historical Rate
Common Stock: Historical Rate
R/E: Plug
Total Equity: Mixed Rate
Current Rate B/S FX Translations
Monetary Assets/Liabilities: Current Rate
Non Monetary Assets/Liabilities: Current Rate
Common Stock: Historical Rate
FX G/L: Plug
Equity (in total): Current Rate
Plan Assets =
Beginning Plan Assets
+ Contributions
+ Actual Return
- Benefits Paid
PBO =
Beginning PBO \+ Service Cost \+ Interest Cost \+/- Past Service (plan amendments) \+/- Actuarial losses/gains during the year - Benefits Paid
TPPC =
Change in PBO + benefits paid - actual return on plan assets
or
Contributions - (Change in Funded Status)
Pensions GAAP vs. IFRS
Past Service Cost: OCI, amortized over service life vs. IS
Actual Gain/Loss: Amortized in IS, Unamortized in OCI vs. All in OCI (unamortized)
Firm Exposure under Current Rate Method
Shareholder’s Equity
Firm Exposure under Temporal Method
Net Monetary Assets
Inventory Valuation (GAAP vs. IFRS)
GAAP: Min[Cost,MV] //
MV Upper Limit = NRV
MV Lower Limit = (NRV-Margin) // Not reversable
IFRS: Min[Cost,NRV] //
NRV = Est Sell Price - Cost of completion - Selling Cost //
Reversals allowed
Long Lived Asset Valuation (GAAP vs. IFRS)
GAAP: Impaired when BV > Undiscounted CFs; Write down to Fair Value or Discounted Future CFs //Loss on IS irreversable
IFRS: Impaired when BV > Recoverable Amount; Write down to recoverable amount // Loss on IS is reversable
Avg Age of Asset
Accum Depreciation / Annual Depreciation Expense
Avg Depreciable Life of Asset
Gross Investment / Annual Depreciation Expense
Remaining Useful Life of Asset
Net Investemnt / Annual Deprecation Expense
COGS(FIFO) =
COGS(LIFO) - Δ LIFO Reserve
Inventory (FIFO) =
Inventory (LIFO) + LIFO Reserve
Cash (FIFO) =
Cash (LIFO) - (LR * Tax Rate)
Equity (FIFO) =
Equity (LIFO) + [LR * (1-t)]
Taxes (FIFO) =
Taxes (LIFO) + (Δ LR * Tax rate)
NI (FIFO) =
NI (LIFO) + [Δ LR * (1-t)]
A _____ in dividend yield _______ the estimated fair value of a call option when using the Black–Scholes model and hence would ______ the related compensation expense
decrease; increase; increase
Stock option compensation expense:
Expense = Options granted × Option price on grant date / N-year service period
PPC =
+ Service Costs
+ Interest Costs
- Expected Return on Assets
+ Amortization of Past Service Costs
