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Core 1 > Unit 7 > Flashcards

Unit 7 Flashcards

1
Q

Other Stmts and Reports. What HB?

A

Chapt 15
IAS 34

* No ASPE guidance because it is for public accountable entities

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2
Q

What are the periods presented for Interim Financial Statements
- SFP

A
  • End of current interim period
  • End of immediately preceeding financial year
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3
Q

What are the periods presented for Interim Financial Statements
- SCI

A
  • Current interim period
  • Year to date period
  • Comparables (using previous year) for
    1. Current period and
    2. Year to date
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4
Q

What are the periods presented for Interim Financial Statements
- SCE

A
  • Year to date
  • Comparables for YTD with preceeding period
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5
Q

What are the periods presented for Interim Financial Statements
- SCF

A
  • Year to date
  • Comparables for YTD with preceeding period
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6
Q

What are the major disclosure requirements

A
  • Explanation of events and txns that are significant since the last report
  • Statement that same accounting policies as annual reports are applied. Disclose on changes to acctg policies
  • nature and amount of changes
  • Issuances, settlements, pymt of debt obligations
  • Dividends paid
  • material subsequent events : Significant long term investment disposal OR significant equity repurchase
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7
Q

What are pro forma statements

A

They are future oriented FSs created using hypothetical scenarios and or estimates from management

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8
Q

What are the objectives of Management Discussion Analysis (MDAs) required by regulators

A
  • Viewing the company through the eyes of management
  • Integration of FSs - Supplement & complement
  • Completeness & materiality - more balance to info
  • Forward looking orientation - eg key trends/risks
  • Strategic perspective - focus on mgmt strategies
  • Usefulness - Understandable, relevant, compable
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9
Q

Hedging?

A

Review Forward contracts etc

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10
Q

HB guide for EPS

A

Chapt 44
IAS 33

* No ASPE guidance because it is for public accountable entities

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11
Q

What is the formula for basic EPS

A

Net earnings/ (loss) available to common shareholders
:/:
Weighted Average common shares outstanding (WACSO)

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12
Q

How is net earning /loss derived

A

Net earnings/ loss for the period
(-)
Dividend entitlement for the period for cummulative preferred shareholders
(-)
Dividend declared for the period for non cummulative shareholders

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13
Q

How is WACSO derived

A

Begining common shares outstanding*
(+)
Pro rated share issuances
(-)
Pro rated share repurchases

* must be adjusted for stock splits and stock dividends as if they happe

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14
Q

Diluted EPS HB guide?

A

Chapt 45
IAs 33

* No ASPE guidance because it is for public accountable entities

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15
Q

What is the formula for diluted EPS

A

(Net earnings/ (loss) available to common shareholders + income effect of diluted PCS)
:/:
(Weighted Average common shares outstanding (WACSO) + share effect of diluted PCS)

  • Ensure to remove tax and dividend to cumm. s

* Potential common shares

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16
Q

What are the steps to calculate diluted EPS

A
  1. Identify all potential common shares (PCS)
  2. Calculate potential EPS for each class of PC: Convertible bonds, convertible preferred shares, warrants
  3. Order the incremental EPS for each class of PCS from the lowest (most dilutive) to the highest (least dilutive
  4. Recompute provisional EPS by adding the dilutive PCS from the lowest until the diluted EPS is determined (ie, not higher than original EPS)
17
Q

Accounting for changes

A

Chapt 51
IAS 8
ASPE 1506

18
Q

What are the 3 ways it could happen

A
  • Change in accounting policy
    1. By choice OR
    2. Standard requires it
  • Change in estimates
  • Correction of errors
19
Q

What are the steps to determine the correct application

A
  1. Is the accounting change by choice?
    a. If yes, account RETROSPECTIVELY
    b. If no, go to 2
  2. Is the change as a result of initial application of IFRS or new IFRS standard?
    a. if yes, use transitional provisions in IFRS
    b. if no, go to 3
  3. Is the change the result of information that was known or available in prior period?
    a - If yes, account as correction of an error RETROSPECTIVELY
    b - If no, Account as change in estimate PROSPECTIVELY
20
Q

Diff between IFRS and ASPE - voluntary change in policy

A

IAS 8
- Must present more reliable and relevant info
ASPE 1506
_ Does not require more relevant and reliable info for these :
- subsidiaries
- jointly controlled entities
- Defined benefit obligations
- Convertible debts
- income taxes
- Development costs

21
Q

Business Combination
- After Acquisition HB#s?

A

Chapt 58
HB
IFRS 3
ASPE 1591

22
Q

What are the steps for Biz comb after acquisition

A
  1. Prepare acquisition differential schedule
  2. Assess goodwill for impairment (if any)
  3. Analyze amortization of FV differential
  4. Analyze Intercompany transactions
  5. Calculate consolidated ending R/E
  6. Calculate opening NCI
  7. Prepare eliminating entries
  8. Prepare consolidated FSs

-

23
Q

Step 4 - How do you analyze interCo transactions

A

They should include
- InterCo balances
- InterCo revenue and expense

24
Q

Step 5 - how do you calculate consolidated ending R/E

A

Opening consolidated R/E
+ Consolidated net income
= Consolidated ending R/E

25
Q

Step 5a - How do you calculate opening consolidated RE

A

Subsidiary’s increase in R/E since acquisition to bgn of year
(+/-)
Amortization to FV since acquisition to bgn of yr
(-)
NCI portion
(=)
Equity pick up
(-)
Goodwill amortization from bgn of yr
(+)
Parent’s opening R/E
(=)
Consolidated opening R/E

26
Q

Step 7 - What are the elimination entries

A
  • Adjust SFP balances
  • Current period good will impairment (step2)
  • Amortization of FV differreential and good will impairment (step3)
  • InterCo txns
  • Consolidated net income for NCI
  • Subsidiary dividend declared
27
Q

Step 8 - what are the steps to preparing consolidated FSs

A
  • Add parent and subsidiary bals
  • Adjust for elimination entries
  • Plug in R/E from step 5
28
Q

First step in preparing eliminating entries is to adjust opening SFP. What are the 6 entries.

A
  1. Eliminate investment account
    • CR Investment
  2. Set up unimpaired goodwill
    • Dr Goodwill
  3. Adjust opening SFP for unamortized FV diff
    • DR asset/ liability if negative FV diff
    • CR asset/ liability if positive FV diff
  4. Eliminate subsidiary’s interest
    • DR Common shares
  5. Adjust subsidiary’s R/E
    • Dr R/E (S’s stand alone opening R/E)
    • CR R/E ( step 5a- Equity pick up sub total)
  6. Set up NCI SFP account at begining of year
    • CR NCI (SFP)

Core 1 (8 decks)

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