Three Qs on FSA

1.What are the classifications of " Loss on disposal of fixed assets" and “interest expense” respectively? Operating item or nonoperating item. 2.Which of the following factor is the least likely to be considered when determining if a company’s deferred tax liabilities should be treated as a liability or equity? A. The growth rate of the firm. B. The average discount rate of liabilities. C. The expectation that temporary difference will reverse. D. The use of accelerated depreciation methods for tax purposes. 3. Which is the most useful when assesing the credit worthiness of a company? A. Return measures related to net income. B. Return measures related to operating cash flow. C. Information related to the scale and diversity of a company’s operations. D. Information realted to operational effieciency of the company’s opearations. My opinion: 1. I think both of them are nonoperating items (under EBIT but before tax) 2. B. The discount rate of liabilities will be used to calculate D/E ratio. But I don’t think it is useful for determining whether DTL should be treated as L or E. 3. I don’t know the correct choice. Notes only mention that NPM, scale and diversification, operational effienciency are relevant.

  1. Loss on disposal of fixed assets - non operating other is op 2 A 3b
  1. no clue 2)C 3)B

For 1 the loss is operating and interest non-operating 2 is B

I need to sort out operating items on Income statement from operating thingy on Cash flow. Totally mixed up. S

  1. Loss on disposal of fixed assets -Non operating interest income - operating for financial firms and non-op for non-financial firms 2. Confused with A and B A - if company continues to grow at a rate faster than reversal --> DTL is treated as equity B - Analysts use PV of future reversals to compute/adjust equity based ratios I’ll go with B 3. C

Loss on disposal of fixed assets should be unusual or infrequent. isn’t it ? interest expense is non op item but CFO (very tricky) 2/ the least likely should be B ?? as everything else would tell us that the firm keeps investing and creates further DTL. 3/B Edit: thunder p169 FSA book loss on disposal of fixed asset is NOT extraordinary item but unusual or infrequent --> operating same applies for restructuring charges, termination cost

Infrequent items are included in income from continuing operations. Here, question asks about operating or non-operating. I think I am bit confused now. what are the answers Sekyzhou

  1. Loss on disposal - Investing if sold, if written off non cash flow activity Interest Expense - Operating 2. B - FSA p439 3. C

1: Non-op, Non-op 2: B 3: B

1: Non-op, op 2: B 3: B

where is the poster ? we would use the answers

he disappeared, leaving us all more confused … Dartagan are you sure about your ans on 3rd question ? I remember seeing this question in sample exams ? would def like to know the ans ? I wasn’t 100% sure when i picked C

p169 FSA book I would have liked to get map’s view on that. she is pretty good on FSA

1.Loss on disposal is addback to the net income-non operating 2.a 3. b

Hi, there! sorry for late. I didn’t post the answers because I think the answers are confusing. There you go: 1. op, op 2. A; 3. B BTW, I think interest expense is Nonop. Remember the two versions of ROE? acutally, interest expense is one of the most important items of nonop.

NOTE!!! Loss on a sale of asset would be part of operating income according to IFRS, would it not?!