FSA Flashcards
How do you treat
- Gain from sale of land
- Depreciation
in CFO calculations?
Gain = include
Depreciation= add back in (non-cash)
Calculate coefficient of variation and explain how it is used?
Mean / SD
Coefficient of variation of sales (standard deviation of sales / mean sales) is a measure analysts can use to compare the sales variability of different firms
When an asset is revalued past it’s original value, what happens?
balance sheet - back to normal
income statement - surplus
For a lessor, how are lease payments classified?
For a lessor, lease payments are classified as operating cash inflows under both IFRS and U.S. GAAP.
convert lifo to fifo
Balance Sheet
Inventory FIFO: Inv LIFO + LIFO Reserve
Cash FIFO: CASH LIFO - (LIFO reserve x tax rate)
Equity FIFO: Equity LIFO + [LIFO Reserve x (1-T)]
I/S
COGS FIFO: COGS LIFO - Change in LIFO Reserve
Tax FIFO: Tax LIFO + [Change in LIFO Reserve x Tax rate]
NI FIFO: NI LIFO + [Change in LIFO Reserve x (1 - Tax rate)]
New process for calculating weighted average shares outstanding
- Initial shares (+ stock dividends applies from start) x (months year)
- Reacquired shares x months year
- Issued shares x months year
/12
Explain the treatment of research and development costs under IFRS
Research costs must be expensed
Development costs, under certain circumstances, may be capitalized.
What are the key causes of a DTL and DTA
Permanent tax differences such as
1.tax credits
2.non-deductible expenses
3.tax differences between capital gains and operating income give rise to differences in the effective and statutory tax rates.
Explain the treatment of a sale of treasury stock
The gain on the sale of treasury stock is not reported on the income statement but is reflected on the statement of changes in stockholders’ equity and on the balance sheet. The sale proceeds simply increase equity and increase cash.
Which accounting board requires estimated amortization expense for the next 5 years
US GAAP
Calculate the reinvestment ratio
Cash paid for long term assets
/
CFO
What requires retrospective presentation
Changes in accounting principle require retrospective presentation.
Accounting estimates e.g a change in the salvage value of an asset is a change in accounting estimate, which does not apply retrospectively.
Explain the treatment of non-cass transaciton
Non-cash transactions are disclosed separately in a note or supplementary schedule to the cash flow statement.
Explain the differences in standards regarding balance sheet presentation (liquidity vs current or non current)
Liquidity-based balance sheet presentation is an exception, under IFRS only, to the requirement (under both IFRS and U.S. GAAP) for assets and liabilities to be classified as current or non-current. Under IFRS, a firm may present a liquidity-based balance sheet if this format is more reliable and relevant than a classified balance sheet.
Calculate Interest Expense
Calculate total interest expense
Calculate amortization of premium for discount and premium bonds
PV bond x YTM at issuance
Difference between FV and PV
Amortization of premium / discount =
Premium: PMT - interest expense
Discount: Interest expense - PMT
Calculate goodwill
Purchase price - (fair value of assets - fair value of liabilities)
What are the differences between Direct and Indirect calculation of CFO
Direct
Cash collected from customers, typically the main component of CFO.
Cash used in the production of goods and services (cash inputs).
Cash operating expenses.
Cash paid for interest.
Cash paid for taxes.
Step 1: Begin with net income.
Step 2: Add or subtract changes to balance sheet operating accounts
Step 3: Add back all noncash charges to income (such as depreciation and amortization) and subtract all noncash components of revenue.
Step 4: Subtract gains or add losses that resulted from financing or investing cash flows (such as gains from sale of land).
Explain how a gain or a loss is calculated when selling, exchanging or disposing of long lived assets
When exchanging
Carrying value of old asset - fair value of new asset (or carrying value if more evident).
When selling an asset
Difference between carrying value - amount received
When abandoning an asset
Loss = carrying value of asset
