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Study Session 9: Financial Reporting and Analysis: Financial Reporting Quality and Financial Statement Analysis

Amortization of Bond Discount or Premium and Income Statement

  • Is the Amortization of Bond Discount or Premium ever shown as a separate line items on the income statement?
  • Or, It is always aggregated as the Interest Expense?
  • If interest expense is ever show as two components: Coupon and Amortization can you give me a link to an example?



FIFO to LIFO (Change of Cash)

Hey Guys,

I am having a bit of trouble understanding how cash changes when we switch from LIFO to FIFO. My question is related to P.195 in Book 3 of schweser notes. 

Under LIFO:

- Cash: 20X6: $115 20X5:$95 

FRA - Software development for internal use

I stubmled with this question. I thought that under GAAP, if software development was not for sale the development cost had to be expensed. This question’s answer says the oposite. Can you help me?

Under US GAAP, what is the treatment of expenses incurred on the development of software that will be used for a company’s internal own purposes?

A) All costs are expensed until the technology’s feasibility is established.

B) All costs of this project are capitalized. (CORRECT ANSWER)

C) All costs of this project are expensed as incurred.

Notes Payable CFO or CFI


When practicing for FRA I encountered a question that included “Increase in Notes payable” as a Increase of CFO. I tought that notes payable was part of CFI not CFO. 

Can you help me to understand?

Defined contribution plan

Which of the following is recognized as an expense under defined contribution plan?

a) Actuarial g/l

b) Periodic contributions to the plan

c) Service costs incurred during the period

OA is B

Why is C) incorrect? Isn’t it that service costs go through income statement both under IFRS and GAAP?

Question about amortization with corp bonds.

I have a question and sorry if i am asking a dumb one. in level 1 it talks extensively about amortization, about how if a bond is issued at a premium for example, with every interest payment you receive the bond is amortizewd down to par.

So i’ve always thought all bonds amortizes. But i was speaking with a coworker today and he says no, amorziation is mainly for instruments that do paydowns like mortages/cmo.

Financial Reporting Quality

So CFA has introduced FRQ replacing old topics in FRA. Has contents changed significantly? I am using 2014 schweser book.

Application of Working Capital Turnover

Does anyone know a good site to see what a company’s 2014 Working Capital Turnover is? I tried to calculate it for Amazon. I am getting 36.44. I checked a few sites and see they are not using average working capital in the denominator; however, they are using 2014 Working Capital as the denominator. This results in ratio of 27.48. Any suggestions?

Tax shields

When is a company most likely to use debt financing?

I.)  A high degree of business risk

II.)  Little shielded taxable income

III.)  When it seeks financial flexibility

IV.)  When it has conservative management 

The answer is II.