I’m very frustrasted by SS 7 - A Synthesis! Ideally, this should be very basic but I’m struggling with tying it all together. I scored over 70+ in FSA for Level 1 but I’m very frustrated by having to ‘adjust’ the B/S, I/S for 5 -6 different O/B footnotes and then answer 6 questions based on those adjustments. Are there any suggestions PLEASE for tackling this section??? I’m sure it will come up in an item set form and it has the potential to bring down my score significantly in an area that I normally do very well in. For the retakers, does the real test give difficult O/B adjustments???
it sux. swaptiongamma HATES ss7. i’m not a huge fan either. i can’t remember too too many adjustments, maybe 2 or 3, but tricky weird&ss ones that you want to pull your hair out and say crap i’ve never done that adjustment before what the heck do i do here. i remember there were only maybe 2 or 3 adjustment q’s last year but i can safely say i think i f’d them up nicely. this is one of my *must practice* study sessions before i take this bad boy. they’re hard and if you miss one little thing, your ratios don’t work out and they drive you insane.
easiest way - give everyone a workout on the forum… next few days is key to getting and solidifying our concepts. Would be willing to give it a twirl…
Yes it’s a pain in the butt topic. The only topic I can’t consistently get over 70%. I am betting on Quant to make up my last few percent on the exam.
Totally agree. SS7 sucks!
i’m just trying to put together a list of restatements I saw in Schweser, CFAi, try to memorize the less obvious ones and hope I won’t have to deal with them on the actual test
it sucks. Hopefully there won’t be a full vignette on mofo
http://www.analystforum.com/phorums/read.php?12,771442,772297#msg-772297 whatever i did was probably wrong… seeing as i’m still here. 
but yeah, there were maybe 2 adjustment q’s and at least one of them was a bit funky.
I’m w/ you all on this one. I’m also struggling here. You would think it’s as simple as adjusting both sides of the B/S … but oh no. Let’s get started: On the B/S - Goodwill - GET RID OF IT and adjust equity downward - never liked it to begin w/. Capitalize operating leases - up PP&E by PV of lease payments; up LT debt LT Debt - Adjust to fair value and do the opposite to equity Pensions - Replace net pension A/L with funded status - offsetting entry is to equity and deferred tax liability A/R - Adjust for allowance of doubtful accounts if disclosed. … Also adjust if co’ sells receivables WITH recourse. Up A/R and offsetting entry is to debt. Inventories - FIFO is preferred on B/S. So, add Lifo Reserve to LIFO inventories. Offsetting entry is to equity. VIE’s - Consolidate with B/S of primary beneficiary. Deferred taxes - If DTL likely to reverse in the future, include PV as liabilities. If unlikely to reverse, treat as equity. On I/S - If LIFO reserve is decreasing, that means inventory prices are declining and/or there is LIFO liquidation. So … COGS - Adjust downward by amt of LIFO liquidation Am I missing something?
You forgot to deduct AR sales w/ recourse from Sales on I/S. Deferred tax treatment doesn’t sound right. If it is likely to reverse, you charge the PV of the tax into liability and any difference into equity. Deferred tax allowance should be charged into equity if it is unlikely to reverse. You also forgot capitalized interest. It should be deduct from asset and equity on B/S, and increase interest expense on I/S.
Agree with Eltia -> You sold A/R at a loss on your income statement and you will add that loss back. When you sell receivables, usually it’s at something like 95% of full value (at least this was the case in level 1) so you recognized a loss. I believe you add that loss back.
COGS - Adjust downward by amt of LIFO liquidation COGS would be adjusted upward by amt of LIFO liquidation, no, yes, maybe? LIFO liquidation causes COGs to be too low --> must fix this
(For all the cases listed above, think A=L+E, and keep that equation always balanced.) Goodwill - GET RID OF IT and adjust equity downward - never liked it to begin w/. A down, E Down Capitalize operating leases - up PP&E by PV of lease payments; up LT debt A Up, L Up LT Debt - Adjust to fair value and do the opposite to equity L Up, E Down or L Down, E Up Pensions - Replace net pension A/L with funded status - offsetting entry is to equity and deferred tax liability Not sure if this is something that is in this year’s readings. Last year I know they had Pension adjustments going to DTL but this year, that is not the focus on the Pension reading. Most of the time it is Bring the Pension Funded Status on the Balance sheet, and correspondingly increase / decrease the Equity account. A/R - Adjust for allowance of doubtful accounts if disclosed. … Also adjust if co’ sells receivables WITH recourse. Up A/R and offsetting entry is to debt. A/R is a Current Asset - it was sold with recourse. So now A Up, L Up. Inventories - FIFO is preferred on B/S. So, add Lifo Reserve to LIFO inventories. Offsetting entry is to equity. A Up, E Up.
TheAliMan Wrote: ------------------------------------------------------- > COGS - Adjust downward by amt of LIFO liquidation > > COGS would be adjusted upward by amt of LIFO > liquidation, no, yes, maybe? LIFO liquidation > causes COGs to be too low --> must fix this LIFO liquidation will cause COGS to be lower because you would be tapping into “lower” priced inventory. When there is LIFO liquidation or prices are declining, FIFO COGS > LIFO COGS. Agree w/ eltia above. Forgot about capitalized interest.
clama Wrote: ------------------------------------------------------- > TheAliMan Wrote: > -------------------------------------------------- > ----- > > COGS - Adjust downward by amt of LIFO > liquidation > > > > COGS would be adjusted upward by amt of LIFO > > liquidation, no, yes, maybe? LIFO liquidation > > causes COGs to be too low --> must fix this > > LIFO liquidation will cause COGS to be lower > because you would be tapping into “lower” priced > inventory. When there is LIFO liquidation or > prices are declining, FIFO COGS > LIFO COGS. > > Agree w/ eltia above. Forgot about capitalized > interest. clama, exactly, so your COGS is lower than it should be because you tapped into older inventory which isn’t an accurate measure of inventory costs, so you should adjust COGS UP
So we all agree this topic is a pain in the butt…
^^ yeaph
The rod is so deep now that it’s hurting and touching my tonsils.
My greatest fear is that I get one of these questions (which we will), and i do all the number crunching, and get an answer that is NOT listed. So easy to F something up and get a random answer. This happens to me about 50% of the time on these stupid questions. And there seems to be an infininite number of adjustments that could be tested. Awesome.
A common theme of SS7 is marking to market financial statement based on footnotes, etc.