FRA Reading 14, question 6: operating margin when using acquitision method
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.
My choice is correct though, I calculated in 2009 this ratio is 126/1400 =9% (available for sale so no consolidation) and 2010: (88+142)/(1575+1100) = 8.6% (acquisition method so it must be consolidated in total)
Does anybody understand the reason of the answer in curriculum? Thanks in advance.
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