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

## Multinational Operations

For calculation of ratios such as return on assets/return on fixed assets, should I be using the end of period assets by default, or the average assets?

## When to use current vs temporal – does IFRS / GAAP impact this decision?

I am so unnecessarily confused on this – when do you use current vs temporal methods and which do GAAP / IFRS prefer?

I understand that you use current method when the subsidiary has autonomy and temporal when there is no autonomy. But then some problems specifically give you GAAP or IFRS – and I can’t find a definitive answer whether GAAP or IFRS in any way impacts which method to use. Can anyone help out?

## CFAI online book Postemployement compensations... (reading 15) EOC Q7

Why is the cash flow adjustment be based on periodic pension cost (PPC) and not total periodic pension cost (TPPC), with the answer as C. As per Kaplan Tppc is considered.

## Can there ever be CTA for hyperinflation under IFRS?

My understanding is that whenever we restate for inflation under IFRS and then translate into the parent’s currency, we just multiply everything including the purchasing power gain or loss in the IS by the current exchange rate, so there would never be a CTA in stockholder’s equity on the parent’s balance sheet. Is this correct? Thank you!

## Adjusting cash flow due to company's contribution and total pension cost

Can someone explain how this will be classified in CFO and CFF:

Contribution of $500 and Total Pension Cost $600.

Thus, $100 x (1-0.3) = $70 after tax

Underfunded by $70 so will this be considered as borrowing? Thus CFF (outflow) will decrease by $70 and and CFO (inflow) will decrease by $70?

What if CFF had a net inflow? Then would the inflow have increased by $70?

## Basel Accord: Tier I & II Capital

Reading 17: Analysis of Financial Institutions

LOS C

1. Why was a Tier I and a Tier II Capital structure created?

2. Taking an intuitive approach, what criterion/criteria should an item on the balance sheet fulfill to be put into either Tier I or Tier II?

3. Based on the criterion/criteria, why have allowance for loan losses been included in Tier II Capital?

4. In what real-life contexts will this classification prove useful? What are the practical applications?

## Interest income calculation-Amortised cost table

If the fair value changes to $950, but the carrying value for yr 2 is $930, what should the interest income for yr 2 be calculated on, $930 or $950 for available for sale and held for trading securities?

## Pension - GAAP Actuarial G/L

Ok so I get the corridor approach and how it works. Essentially, the excess above 10% of either the obligation or FV of plan assets is amortized into P/L… But it’s not clear to me yet what actually goes into OCI.

For instance (000,s):

Pension Obligation 3800

FV plan assets 4200

Actuarial G/L 450

Corridor = 420 (10% X greater of PO or FV plan assets)

Amortize 30 over employee working lives..let’s say 10 yrs

P/L shows a 3K loss.

## Is IAS 39 still relevant?

Now that IFRS 9 has been effective since Jan 1 2018, does this make IAS 39 irrelevant?

I really can’t see the point in learning about a redundant accounting standard; or am I being naive?

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