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


The Statement:if one entity absorbs the majority of the variable interest entity residual income and another entity absorbs the majority of the VIE’s losses, then the entity that is absorbing the residual income needs to consolidate the VIE

Correct answer:the statement is incorrect as it should be the entity that is absorbing the majority of the VIE’s losses that needs to consolidate the VIE.

Why?isn’t SPE regarded as VIE and must consolidated when

1. Equity less than 10%

2. Shareholder don’t have decision making

3. Shareholder don’t absorbs losses

Total Pension expense

What is the right formula for total pension expenses? schweser says it is employer contribution less (end funded status - beginning funded status) while as per Fitch it is reverse tht is change in funded status less employer contribution

Confused about past service costs and actuarial gains/losses

I’m confused as to which factors exactly affect those two. It seems like it’s unclear in Schweser. For example, life expectancy, salary increase assumptions, years of service, and so on. I’m confused as to which of these types of factors would go under past service costs vs. actuarial gains/losses.


Any idea on how the Equity portion of the SPE is accounted for? In the curriculum Blue Box example (last example of the Intercorporate reading), they have shown that AR comes back, when we consolidate. But Equity? That is not considered while consolidating. Why?


In GAAP Reclassification, when we re-classify from HFT to AFS, why unrealized Gains/ Losses go to Income Statement and not to OCI?

Expected return on plan assets

How is it that return on plan assets has no effect on PBO but is included in actuarial gains/losses (which DO affect PBO)? Which of the two is it?