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

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


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.


Reclassification of Investment

According to CFAI book pg 14.

“If a security initially classified as held for trading is reclassified as available-for-sale, any unrealized gains and losses (arising from the difference between its carrying value and current fair value) are recognized in profit and loss”

Why is it recognized in PnL and not in Other Comprehensive income?


Absolute must knows

Hey guys,

Tomorrow I will be focusing on reading ethics and writing out formulas/key tables etc. What do you think are absolute must knows?

Obvious ones I can think of are:

Anova tables

Current/temporal adjustments

pension formulas

intercorporate investments.


FRA - TT & Mocks

Anyone’s finding this year’s FRA TTs and Mocks a tad more difficult this year? I’m a retailer and I was crushing the FRA last year. But the subject seems too harsh. Is it just me or is everyone getting crushed?

financial reporting

dear all,

can someone explain why with the Equity method when we have to calculate the value of the investment at year end (same year when the acquirer has bought lets say 32% of a company and has significant influence) we are doing the following:

Value of investment at year end = Initial investment +%*Associate NI - %*dividends paid by Associate - Amortization of excess amount paid for PP&E. Should I consider the Amortization of excess amount paid for PP&E like an expense that decrease the NI?


Adjusted cash flows - pension

When contribution > TPPC, it is similar to repayment of a loan. Since that’s an outflow we add the amount to CFF. It would mean increase in CFO, so we add the amount. 

How would the reverse treatment be? 

When TPPC > Contribution, and we are ‘borrowing’ would it mean an inflow and so we adjust CFF by subtracting the amount? And what about CFO? 

Total Cash Outflow Related to Post-Employment Costs

If you are asked to calculate the total cash outflow related to post-employment costs with a defined benefit plan and a health care plan. What do you include? (Company uses IFRS)

P.S Good luck for the last week!