FRA Flashcards
Explain Special Purpose Entities (SPEs).
Special Purpose Entities (SPEs) allow the sponsoring company to retain financial control over the SPE’s assets and/or operating activities, while third parties hold most of the voting interest in the SPE.
Typically, these third parties funded investments in the SPE with debt directly or indirectly guaranteed by the sponsoring company.
Describe other factors to consider in analyzing a bank.
Describe the two methods by which the periodic pension cost may be calculated.
Describe how to evaluate the quality of a company’s financial reports.
Describe debt security impairment under U.S. GAAP.
Impairment means that the investor will be unable to collect all amounts owed according to contractual terms at acquisition.
Differentiate between loans and receivables under IFRS and U.S. GAAP.
List choices that affect the balance sheet or cash flow statement.
Overstated equity due to understating liabilities or contingent liabilities or overstating financial assets.
Cash flow from operations may be increased by deferring payments on payables, accelerating payments from customers, deferring purchases of inventory, and deferring other expenditures.
Identify the components of high financial reporting quality.
Describe recognition of noncontrolling interests on the consolidated balance sheet and income statement.
On what does the current period’s translation adjustment results in a gain or loss depends on?
Describe how an analyst’s viewpoint on the permanence of earnings should affect a forecast.
Analysts should consider whether events occur with enough regularity to be considered a permanent source of income or expense, or whether the event is a one-off with little likelihood of repeating.
Distinguish between IFRS and U.S. GAAP for those pension costs that are not capitalized.
List the forms of accounting difficulties that can result in a delay of filing.
(1) Internal disagreements on an accounting principle or estimate, (2) lack of adequate financial staff, or (3) discovery of an accounting fraud that requires further examination.
Distinguish between impairment under IFRS and U.S. GAAP.
Explain the income tax paid by multinational companies.
Describe effects of increasing the expected return on plan assets under U.S. GAAP.
Explain mean reversion in earnings and how the accruals component of earnings affects the speed of mean reversion.
Describe impairment of goodwill.
List other types of postretirement benefits.
Health care insurance
Life insurance premium payments
Describe effects of an assumed increase in compensation growth.
List the indicators of influence of investments in associates.
Representation on the board of directors.
Participation in the policy-making process.
Material transactions between the investor and the investee.
Interchange of managerial personnel.
Technological dependency.
Describe dirty surplus accounting.
Identify the disadvantages of share-based compensation.
Describe available-for-sale (AFS) investments.