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

## CFAI FRA Reading 14 - EOC #30

[question removed by moderator]

**Can someone explain why 320 is subtracted?** Thank you!

## Consolidation Method - Qbank

The consolidation method results in:

A) same equity as the cost method.

B) same net income as the equity method but different shareholders’ equity.

C) same net income and shareholders’ equity as the equity method.

Now, according to Qbank, correct answer is **B) **however, if you check the book it literally says “Equity method and proportionate consolidation report the same equity” (book 2 page 30). I dont know if I’am missing something very obvious or if its an errata. Anyone that can shed a bit of light would be really appreciated.

## Total Periodic Pension Cost Calculation

Total Pension Periodic Pension Cost = Current Service Cost+Interest Cost-Actual return on Plan assets+/- Actuarial losses/Gains due to changes in assumptions affecting PBO+Prior service cost

I understand that interest cost is calculated on the Beginning fund status using the discount rate.

In the above formula, Can anyone please explain about the how Actual return/Expected return on plan assets is calculated?

## Equity method of accounting for Associates

Hi All

Was going through the FR - Accounting for Associates - In the section on problems with the Equity method which an analyst should keep in mind - there was a section on the leverage ratios being impacted by the Equity method

Now do they mean the Total Assets (which includes Debt and Equity) to Equity of the investor being affected by the inclusion of the investment in associates?

## Multinational Operations/Currencies

Under the Schweser topic review of multinational operations, I came across the following quotes :-

USD/LC 0.4545

USD/LC 0.4000

USD/LC 0.4292

USD/LC 0.5000

Do these quotes imply that 1 USD = 0.4545 LC, and so on, or do they imply that 1 LC = 0.4545 USD?

## Benefit Obligation

Per the Example 4 pg 95 CFA book question

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The answer in the book is :

For A Liability is 106 +50738 divided by

Equity is 8,823 - 106

**Why are the subtracting the increase in obligation from Equity?**

Thanks

## SPE Transactions

When a company sells its receivables to a SPE, does it record it as revenue?

Additionally:

- are receivables recorded as cost of sales?
- if the company makes a $10M equity investment into the SPE, would that $10M show up on the investment account like with other transactions using the equity method?

## 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?

## Equity Method for excess purchase price

Figured it out

## 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.”

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