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Study Session 5: Financial Reporting and Analysis: Intercorporate Investments, Post-Employment and Share Based Compensation, and Multinational Operations

Held for trading bond (debt securities)

Can anyone explain me if a held for trading bond or debt security has to account for amortization to calculate any unrealized gain or loss?

Someone please help with this - been struggling for days now

IFRS Hyperinflation

So, in the reading for multinational operations, CFAI book’s Example 7 restates the balance sheet and income statement for inflation and recognizes a purchasing power gain in the income statement. Then, every single account in both financial statements (including the purchasing power gain) is multiplied by the current exchange rate and then the book states this: “Note that all inflation-adjusted FC amounts are translated at the current exchange rate, and thus no translation adjustment is needed.”

How to account for associate income and dividends?

A few questions on intercompany investments with associates:

1. Let’s say the parent owns 50% of the subsidiary; the sub’s income is $100k and assumes no dividends paid, the parent’s investment account of the sub increases by $50k. Why are we accounting for the value of the sub through its net income, and not its fair value change?

2. When the investment account increases by $50k for the parent, how is this increase balanced? Is it in shareholder’s equity?

IFRS Hyperinflation

IFRS Hyperinflation

So, in the reading for multinational operations, CFAI book’s Example 7 restates the balance sheet and income statement for inflation and recognizes a purchasing power gain in the income statement. Then, every single account in both financial statements (including the purchasing power gain) is multiplied by the current exchange rate and then the book states this: “Note that all inflation-adjusted FC amounts are translated at the current exchange rate, and thus no translation adjustment is needed.”

Periodic Pension Cost

What does “set equal to discount rate” mean?

 Under IFRS, P&L incorporates a return on plan assets set equal to the discount rate used in estimating the pension obligation

FRA Reading 14, question 6: operating margin when using acquitision method

Hi everyone,

I have done reading 14 and start to practice question but got confused with answer of Question 6 (page 70 in curriculum)

The question is comparing operating margin in 2009 and 2010 if using acquisition method (my interpretation as it’s has control) but the answer does not mention of year 2009, rather they calculate both operating margin in 2010 for parent and target company separately then concludes it’s lower because this ratio of target company is lower than parent so the consolidate ratio is lower.

Defined Benefit Plan : US GAAP

Hello,

Can someone example with example what actual return and expected return would be for calculating Defined Benefit Plan?

Recognized immediately in P&L or, more commonly, recognized in OCI and subsequently amortized to P&L using the corridor or faster recognition method.b

Difference between expected and actual return on assets = Actual return – (Plan assets × Expected return).

Pg 84 CFAI.

Thanks