CFA二级财务报表习题 PDF

2018 CFA二级课程
FSA 习题课
王老师和贾老师的CFA课堂
| BT学院陪伴奋斗年华
主讲人：王丹贾虹
注意事项
 每个case都要先找到该公司运用的是IFRS还是GAPP
 看清题目中问的是least likely还是most likely，是least correct还是most correct
 读题不要慌张，务必看清题意再做题
 边看问题边读题
王老师和贾老师的CFA课堂 2
Case 1
Mark Crawley Case Scenario
3
6.1 Foreign currency transactions 外币业务
探讨的是用外币进行的业务business transactions that are denominated in a foreign currency

Sale: Dec. 15 €10,000 exchange rate: $1.6
BS date: Dec. 31 exchange rate: $1.56
Settled: Jan. 15 €10,000 exchange rate: $1.5
记账如下：
Dec. 15 确认Sales $16,000
确认AR $16,000
Dec. 31 AR调减 $400 [10,000× (1.6-1.56)]
确认损失 $400
Jan. 15 AR调减 $600 [10,000×(1.56-1.5)]
确认损失 $600
冲抵应收 $15,000，确认现金$15,000
6.1 Foreign currency transactions 外币业务
结论：如果因为外币交易产生AR，则外币汇率上升会为公司带来gain
如果因为外币交易产生AP，则外币汇率上升会为公司带来loss
Foreign Currency
Transactions Types of Exposure
Appreciation Depreciation
Export sales Asset (A/R) Gain Loss
Import purchase Liability (A/P) Loss Gain
注意：IFRS和GAAP均没有说明transaction G/L是计入Operating income还是Non-Operating income
6.2 Translation of foreign operations 海外子公司报表换算
6.2.1 货币分类
Local Currency 子公司所在国的当地货币
Reporting Currency (或者叫做Presentation currency) 母公司的财务报表货币
Functional currency 子公司生产经营中的主要结算货币
6.2.2 两种换算办法
过程名称方法名称适用对象

Re-measurement Temporal method Local currency → Functional currency
Translation Current rate method Functional currency → Presentation Currency
问：哪种子公司的local currency = functional currency ≠ presentation currency？

答： self-contained, independent subsidiaries whose operating, investing, and financing activities are
decentralized from the parent 比较独立的子公司，与母公司的业务往来较少
问：哪种子公司的local currency ≠ functional currency = presentation currency？
答：a subsidiary is well integrated with the parent 子公司与母公司的业务往来较为密切
6.2.4 Current rate method 和Temporal method的处理方法
Current rate，Average rate和Historical rate分别简写为C，A，H
 Current rate method
IS报表：全部科目均使用A
BS报表：Common stock和dividend用H
其余BS报表科目均使用C
Equity中增设CTA（cumulative translation adjustment）来反应translation G/L
换算顺序：先换算IS报表→换算BS报表，RE的计算依据BASE法则→反推CTA
 Temporal method
BS报表：Monetary assets & liabilities用C
Nonmonetary assets & liabilities用H
Common stock和dividend用H
常见的Monetary assets & liabilities 包括 cash, AR, AP, short-term debt, long-term debt
常见的Nonmonetary assets & liabilities 包括inventory, fixed assets, intangible assets, unearned (deferred)
revenue
IS报表：Expenses related to nonmonetary assets用H (COGS, depreciation, amortization)
其余全部用A
IS中增设Re-measurement G/L来反应汇兑损益
换算顺序：先换算BS报表→反推RE→反推NI→换算IS报表→反推Re-measurement G/L
 特殊账户一：Inventory
Under Temporal Method, the inventories are re-measured at H
FIFO LIFO
ending inventories COGS ending inventories COGS
Historical e more recent older older more recent
 特殊账户二：RE
Current rate method方法下
（1）换算IS
（2）根据IS计算RE
ending retained earnings = beginning retained earnings + NI from income statement — dividend
（3）倒推CTA
CTA = assets + liability — other accounts of equity
Temporal method方法下
（1）换算BS，计算RE
ending retained earnings = assets + liability — other accounts of equity
（2）倒推NI
NI = ending retained earnings — beginning retained earnings + dividend
（3）倒re-measurement G/L
Re-measurement G/L is the plug to finally get NI in the income statement
 汇率风险敞口
Local currency
Exposure Appreciation Depreciation
Current rate method
Net assets Gain Loss
Net liability Loss Gain
Temporal method
Net monetary assets Gain Loss
Net monetary liabilities Loss Gain
 对比总结
Temporal method Current rate method

Monetary assets & liabilities C C
Nonmonetary assets & liabilities H C
Common stock H H
Total equity Mixed C
Revenue and SG&A A A
COGS, Depreciation, Amortization H A
Net income Mixed A
Exposure Net monetary assets Net assets
Exchange rate gain or loss Income statement Equity
2014 2015
6.2.5 Current rate method 和Temporal method的
Cash LC100 LC100
处理案例 Accounts receivable 500 650
Inventory 1,000 1,200
FlexCo International is a U.S. company with a
Current assets LC1,600 LC1,950
subsidiary, Vibrant, Inc., located in the country of Fixed assets 800 1,600
Martonia Vibrant was acquired by FlexCo on Accumulated depreciation (100) (700)

Net fixed assets LC700 LC900
12/31/2014. FlexCo reports its financial results in Total assets LC2,300 LC2,850
U.S. dollars. The currency of Martonia is the loca Accounts payable 400 500
Current debt 100 200
(LC). Vibrant’s financial statements for 2015 are
Long-term debt 1,300 950
shown in the following two figures. Total liabilities LC1,800 LC1,650

Common stock 400 400
Vibrant December 31, 2014 and 2015 Balance
Retained earnings* 100 800
Sheet Total equity LC500 LC1,200
Total liabilities and equity LC2,300 LC2,850
* Retained earnings on December 31, 2014, were $50.
Vibrant 2015 Income Statement
2015
Revenue LC5,000
COGS (3,300)
Gross margin 1,700
Other expenses (400)
Depreciation expenses (600)
Net income LC700
The following exchange rates between the U.S. dollar and the loca were observed:
• December 31, 2014: $0.50 = LC1.00.
• December 31, 2015: $0.4545 = LC1.00.
• Average for 2015: $0.4762 = LC1.00.
• Historical rate for equity: $0.50 = LC1.00.
• Historical rate for fixed assets: $0.4881 = LC1.00.
• Historical rate for accumulated depreciation = $0.4896 = LC1.00.
• Historical rate for COGS = $0.4834 = LC1.00.
• Historical rate for depreciation = $0.4878 = LC1.00.
• Historical rate for ending inventory = average rate during the year (for this example).
方法一 current rate method

（1）先换算IS表
2015(LC) Rate 2015($)
Revenue LC5,000 0.4762 $2381.0

COGS (3,300) 0.4762 (1571.5)
Gross margin 1,700 809.5
Other expenses (400) 0.4762 (190.5)
Depreciation expenses (600) 0.4762 (285.7)
Net income LC700 $333.3
2015(LC) Rate 2015($)
（2）换算BS表 Cash LC100 0.4545 45.5

Accounts receivable 650 0.4545 295.4
Inventory 1,200 0.4545 545.4
Current assets LC1,950 886.3
Fixed assets 1,600 0.4545 727.2
Accumulated depreciation (700) 0.4545 -318.2
Net fixed assets LC900 409.1
Total assets LC2,850 1295.3
Accounts payable 500 0.4545 227.3
Current debt 200 0.4545 90.9
Long-term debt 950 0.4545 431.8
Total liabilities LC1,650 749.9
Common stock 400 0.50 200.0
Retained earnings* 800 （a）
CTA （b）
Total equity LC1,200 545.4
Total liabilities and equity LC2,850 1295.3
（a）ending RE = Beginning RE + NI – dividend = $50+$333.3 – 0= $383.3

（b）CTA = total equity – Common stock – Retained earnings = -$37.9
方法二 temporal method 2015(LC) Rate 2015($)
Cash LC100 0.4545 45.5

（1）先换算BS表
Accounts receivable 650 0.4545 295.4
Inventory 1,200 0.4762 571.4
Current assets LC1,950 912.3
Fixed assets 1,600 0.4881 781.0
Accumulated depreciation (700) 0.4896 -342.7
Net fixed assets LC900 438.2
Total assets LC2,850 1350.6
Accounts payable 500 0.4545 227.3
Current debt 200 0.4545 90.9
Long-term debt 950 0.4545 431.8
Total liabilities LC1,650 749.9
Common stock 400 0.50 200.0
Retained earnings* 800 (a)
Total equity LC1,200 600.7
Total liabilities and equity LC2,850 1350.6
(a) RE = total equity – common stock = 400.7

（2）换算IS表
2015(LC) Rate 2015($)
Revenue LC5,000 0.4762 $2381.0

COGS (3,300) 0.4834 (1595.3)
Gross margin 1,700 785.7
Other expenses (400) 0.4762 (190.5)
Depreciation expenses (600) 0.4878 (292.7)
Re-measurement G/L (b)
Net income LC700 (a)
(a) NI的求解是通过RE倒推，即
$50.0 beginning balance + net income – $0 dividends paid = $400.7 ending balance
因此NI=$350.7
(b) 根据NI倒推Re-measurement G/L
785.7 - 190.5 - 292.7 + Re-measurement gain = $350.7
所以Re-measurement gain = $48.2
6.2.6 Current rate method 和Temporal method的处理结果

两种方法的处理结果主要体现为以下四点的不同
（1）Income before translation gain/loss 不同
这主要是由于两种方法对于COGS和Depreciation使用的方法不同
（2）translation gain/loss 不同
Current rate method的风险敞口为net asset / liability，translation G/L 列示在Equity中
Temporal method的风险敞口为net monetary A / L, translation G/L 列示在NI中
（3）Net income 不同
主要原因有两个，一是两种方法对于COGS和Depreciation使用的方法不同
二是对translation G/L的处理方式不同
（4）Total assets不同
两种方法对于nonmonetary assets的处理方法不同
6.2.7 Current rate method处理前后财务指标对比

 Pure balance sheet and pure income statement ratios will be the same;
 Mixed ratios depends on their ratio calculation & local currency exchange rate trend
例如：如果子公司所在地的local currency在depreciation，则H > A >C
income statement item A

= former ration × > foremer ratio
end−of−period balance sheet item C
end−of−period balance sheet item C

= former ration × < foremer ratio
income statement item A
6.2.8 Current rate method和Temporal method处理后财务指标对比

注意：运用end-of-period balance sheet figures
LC Depreciation Temporal Current Rate

Current ratio Higher Lower
Quick ratio Same Same
A/R turnover Same Same
Inventory turnover(LIFO FIFO uncertain) Uncertain Uncertain
Fixed Asset turnover Lower Higher
Gross profit margin Lower Higher

Net profit margin, ROE, ROA Uncertain Uncertain
(translation G/L uncertain)
Interest coverage Lower Higher
LTD-to-Total capital Lower Higher
Mark Crawley Case Scenario题干 Q1
Mark Crawley is an analyst at a London-based private equity firm and is reviewing the firm’s file on Thames Air Plc
(Thames), a company it provides financing for. Thames uses International Financial Reporting Standards (IFRS) in the
preparation of its financial statements. Thames is a relatively new airline based in the United Kingdom specializing in
flights and vacation packages to Mediterranean locations, primarily Spain. Thames sells most of its flights and vacation
packages to British residents in British pounds (GBP) and considers the costs of local competitors’ packages when
determining its prices. Costs are incurred in multiple currencies:
 Wage costs are primarily in GBP.
 Typical of the industry, airline fuel and lease costs are normally priced in US dollars (USD). Q2
 The landing fees paid at the vacation-area airports are in the local currency, primarily euros (EUR).
First, Crawley turns his attention to the effect of the transactions undertaken in various currencies by Thames.
 He reviews the change in the exchange rate for the USD to GBP during 2015, shown in Exhibit 1, and wonders what
the effect of this change was on Thames’s operating income.
 At year-end (31 December), Thames had a large outstanding payable in Spain related to landing fees that were
incurred there evenly over the final quarter. The company paid the amount in full on its due date of 28 February.
Crawley observed that the EUR to GBP exchange rate had changed between when the costs were incurred and the
year-end and again by the payment date, as also shown in Exhibit 1.
Q3
Mark Crawley Case Scenario题干
EXHIBIT 1 SELECTED EXCHANGE RATE DATA
GBP/USD Close GBP/EUR Close

1-Jan-15 0.64
30-Jun-15 0.72
31-Dec-15 0.68 0.75
28-Feb-16 0.73
Average, 1 July–31 December 2015 0.7325
Average, 1 October–31 December 2015 0.74
Because of the growing demand for vacation rentals in Spain during the past year, Thames acquired 100% of Tagus SA
(Tagus), a Spanish company that owns a small vacation hotel and a few villas. Tagus has long-term debt outstanding
from a Spanish bank that financed the 2012 purchase of the vacation properties, which will now be rented as part of the
vacation packages offered by Thames. Tagus incurs all costs related to operating and maintaining the rental properties in
EUR.
Q4
Since the acquisition, all of Tagus’s revenue comes from Thames’s sales in Britain of the vacation packages. Tagus
receives the amounts in GBP. But Tagus hopes to expand and start renting out any excess capacity of the properties, or
newly acquired properties, to local tourists in the next few years. Crawley notices that Thames is using the temporal
method to translate Tagus’s financial statements prior to consolidation and asks another analyst, Dee Chopra, if this is
appropriate.
Crawley next reviews the information in Exhibit 2 related to the Tagus acquisition to consider the effect on Thames’s
year-end financial statements (31 December 2015).
Mark Crawley Case Scenario题干 Q5
EXHIBIT 2 SELECTED FINANCIAL INFORMATION OF TAGUS SA AT ACQUISITION AND YEAR-END (EUR THOUSANDS)
Balance Sheet Balance Sheet Income Statement
Date of Acquisition (30 Year-End (31 December Six-Month Period Ending
June 2015) 2015) 31-Dec-15
Cash and accounts 4,000 4,200 Revenues 8,200
receivable
Inventory 2,000 2,250 Operating costs 6,485
Capital assets 15,000 14,625 Operating income 1,715
Total assets 21,000 21,075 Interest expense 395
Earnings before 1,320
taxes
Current liabilities 3,500 3,400 Income taxes 395
Long-term debt 10,000 9,750 Earnings after tax 925
Share capital 5,000 5,000
Dividends 500
Retained earnings 2,500 2,925
Total liabilities and 21,000 21,075
shareholders’ equity 王老师和贾老师的CFA课堂 27
As the final step in his review, Crawley starts a ratio analysis of Thames and Tagus, and he asks Chopra which ratios, if
any, would be unaffected by Thames’s choice of translation method for Tagus.
Q6
Mark Crawley Case Scenario题目
1. The functional currency of Thames is most likely:
A. EUR.
B. GBP.
C. USD.
1. The functional currency of Thames is most likely:
A. EUR.
B. GBP.
C. USD.
Solution
B is correct. The functional currency is the currency of the primary economic environment in which an entity
operates. Using the IFRS factors for determining the functional currency, Thames’s functional currency is most likely
GBP. The company sets its prices in GBP based on competitive factors in the British market; it is financed, to date, by
a British private equity firm, and it receives its revenues primarily in GBP.
A is incorrect because although Thames incurs landing fees in euros and it sub operates in the Eurozone, there are
more factors that support the pound as the functional currency of Thames.
C is incorrect because landing fees and aircraft costs would be a large portion of Thames’ costs, but operating
revenues and financing are in pounds, and the IFRS list of factors gives priority to those.
2. Which of the following statements about the effect of the change in the USD to GBP exchange rate during the year
is most accurate? Operating income for Thames would:
A. increase because of the positive effect on revenues.
B. increase because of the positive effect on operating costs.
C. decrease because of the negative effect on operating costs.
2. Which of the following statements about the effect of the change in the USD to GBP exchange rate during the year
is most accurate? Operating income for Thames would:
A. increase because of the positive effect on revenues.
B. increase because of the positive effect on operating costs.
C. decrease because of the negative effect on operating costs.
Solution
C is correct. Thames incurs fuel and lease costs in USD. During the year, the USD has strengthened relative to the
GBP (from GBP0.6400/USD to GBP0.6800/USD), thereby making purchases (costs) in USD more expensive for Thames
and thus decreasing operating income.
A is incorrect because the strengthening USD would not significantly affect revenues because most sales are in GBP.
B is incorrect because the USD strengthened thereby increasing the costs incurred in USD and decreasing operating
margins.
3. Which of the following best describes the effect on Thames’s financial statements of the payment terms related to
the landing fees in Spain? Thames would:
A. report an unrealized exchange loss at year-end.
B. defer recognizing any currency effects until the payable is paid.
C. adjust the landing fees expense to reflect the change in exchange rate when they are paid.
3. Which of the following best describes the effect on Thames’s financial statements of the payment terms related to
the landing fees in Spain? Thames would:
A. report an unrealized exchange loss at year-end.
B. defer recognizing any currency effects until the payable is paid.
C. adjust the landing fees expense to reflect the change in exchange rate when they are paid.
Solution
A is correct. Between incurring the fees and the year-end, the EUR appreciated against the GBP
(GBP0.7400/EUR to GBP0.7500/EUR), and Thames would report an unrealized loss (from holding a liability in an
appreciating currency) in net income. The payable would be originally recorded when the landing fees were incurred
during the final quarter (GBP0.7400) but revalued at year-end to GBP0.7500; an increase in a liability results in a loss.
B is incorrect because FX gains/losses from payables (monetary liabilities) are reported in the period they occur even
if not realized.
C is incorrect because the expense would not be adjusted. The choice to not pay it immediately and incur a payable is
a financing decision, and the gains and losses from that are not adjusted to the operating cost.
4. Chopra’s best answer to Crawley’s question about Thames’s use of the temporal method to translate Tagus’s
financial statements is that it is:
A. correct, if the presentation currency of Tagus’s financial statements is GBP.
B. correct because the functional currency of Tagus is GBP.
C. incorrect because the functional currency of Tagus is EUR.
4. Chopra’s best answer to Crawley’s question about Thames’s use of the temporal method to translate Tagus’s
financial statements is that it is:
A. correct, if the presentation currency of Tagus’s financial statements is GBP.
B. correct because the functional currency of Tagus is GBP.
C. incorrect because the functional currency of Tagus is EUR.
Solution
B is correct. The functional currency of Tagus currently appears to be GBP. The operations of Tagus are
presently just an extension of Thames as supported by the fact that the only source of revenue is payments from
Thames, received in GBP. Even though Tagus incurs most costs and its financing (long-term debt) in EUR,
under IFRS, Factors 1 and 2 (dealing with revenues and sales prices) rank higher than Factors 3 and 4 (dealing
with operating and financing costs) when determining functional currency. Under IFRS, when the functional
currency of the subsidiary is the same as the parent, the temporal method should be used to translate the
subsidiary’s financial statements.
A is incorrect because it is the subsidiary’s functional currency that determines the translation method not the
subsidiary’s presentation currency.
C is incorrect because the functional currency of Tagus is the pound not the euro, despite incurring most costs
and their financing in the euro. Factors 1 and 2 (dealing with revenues) rank higher than Factors 3 and 4
(dealing with operating and financing costs) in the IFRS hierarchy of factors determining functional currency.
5. The most likely effect of the change in the exchange rate between the EUR and GBP arising from Thames’s
investment in Tagus in 2015 will be a translation:
A. loss reported in net income.
B. adjustment reported in other comprehensive income.
C. gain reported in net income.
5. The most likely effect of the change in the exchange rate between the EUR and GBP arising from Thames’s
investment in Tagus in 2015 will be a translation:
A. loss reported in net income.
B. adjustment reported in other comprehensive income.
C. gain reported in net income.
Solution
A is correct. Thames is using the temporal method for its translation of Tagus, and the initial exposure is a net
liability exposure (monetary liabilities of EUR13,500 exceed the monetary assets of EUR4,000). The EUR
strengthened against the GBP during the six-month period (from GBP0.7200/EUR to GBP0.7500/EUR). The net
effect of having a net liability position in a strengthening currency will be a translation loss for Thames, which, under
the temporal method, is reported in net income.
B is incorrect because under the temporal method, it is reported in net income not other comprehensive income.
C is incorrect because due to the net liability position in a strengthening currency, it will be a loss not a gain.
6. The best answer Chopra can give to Crawley’s question about which ratio would be unaffected is the:
A. receivables turnover ratio.
B. current ratio.
C. operating profit margin.
6. The best answer Chopra can give to Crawley’s question about which ratio would be unaffected is the:
A. receivables turnover ratio.
B. current ratio.
C. operating profit margin.
Solution
A is correct. The accounts receivable turnover ratio is calculated as sales/average accounts receivable. Under both
the current method and the temporal method, both sales and accounts receivable are translated at the same rates:
average for sales and year-end for accounts receivable (accounts receivable are a monetary asset for the temporal
method). Therefore, this ratio would not be affected by the method of translation.
B is incorrect because under the temporal method, the monetary (cash and A/R) and non-monetary (inventory)
components of current assets are translated at different rates (balance sheet rate and historical respectively) vs. under
the current rate method, where all are translated at the balance sheet rate. Therefore, the ratio will differ under the two
methods because the total current assets once translated would differ.
C is incorrect because the sales are translated at the same rate (average) under the temporal and current methods, but
the costs of goods sold are not. Under the current method they are at average, but under the temporal method it
depends on when the inventory was purchased. Therefore, the ratios will differ under the two methods.
Case 2
Dagmar Case Scenario
41
Re a d i n g 2 1
I n te r c o r p o r a te I n ve s t m e n t E t h i c s
考点二 Investments in associates

□ 金融资产的分类
□ 金融资产的减值
42 42
2.1 Equity method权益法
BS报表
One-line consolidation 所有的会计处理均在BS以一行的形式反映
期初计量: cost
增加：accumulated net profit of the investee×share percent [对应Retained earnings +]
减少：declared dividend×share percent [对应Cash +]
IS报表
One-line consolidation 所有的会计处理均在IS以一行的形式反映
投资收益= current year’s net profit of the investee×share percent
Fair value option
GAAP允许对于使用equity method的投资采用fair value来计价
IFRS只允许venture capital firms, mutual funds, and similar entities对于使用equity method的投资采用fair value
来计价
例如：Suppose that we are given the following:
December 31, 20X5, Company P (the investor) invests $1,000 in return for 30% of the common
shares of Company S (the investee).
During 20X6, Company S earns $400 and pays dividends of $100.
During 20X7, Company S earns $600 and pays dividends of $150.
Calculate the effects of the investment on Company P’s balance sheet, reported income, and cash flow for
20X6 and 20X7.
答案：
 BS for 20X6.12.31
investment in S期初计量: 1000
增加：accumulated net profit of the investee×share percent=400×0.3=120
减少: declared dividend×share percent=100×0.3=30
期末计量=1000+120-30=1090
cash 增加30
 IS for 20X6
投资收益= current year’s net profit of the investee×share percent = 400×0.3=120
答案：
 BS for 20X7.12.31
investment in S期初计量: 1090
增加：accumulated net profit of the investee×share percent=600×0.3=180
减少: declared dividend×share percent=150×0.3=45
期末计量=1090+180-45=1225
cash 增加45
 IS for 20X7
投资收益= current year’s net profit of the investee×share percent = 600×0.3=180
2.2 对于购买价超过账面价的金额的处理
 购买价超过账面价的金额的组成
购买价超过账面价的部分包括两大部分，分
别是（1）goodwill （2）fair value appreciation
Fair value of net identifiable assets = book value of net identifiable assets + fair value appreciation
Goodwill = Acquisition cost - Fair value of net identifiable assets×share percent
 goodwill
在Equity method下，goodwill并不在财务报表中列示体现
 fair value appreciation

Amortized to the investee’s profit or loss over the economic lives of the assets whose fair value exceeded book
value. 在未来进行摊销
需要注意的是，对于收购方Acquirer，其计价基础为fair value of net identifiable assets.
对于被收购方Target，其计价基础仍旧为book value
例如：At the beginning of the year, Red Company purchased 30% of Blue Company for $80,000. On the
acquisition date, the book value of Blue’s identifiable net assets was $200,000. Also, the fair value and book
value of Blue’s assets and liabilities were the same except for Blue’s equipment, which had a book value of
$25,000 and a fair value of $75,000 on the acquisition date. Blue’s equipment is depreciated over ten years
using the straight-line method. At the end of the year, Blue reported net income of $100,000 and paid dividends
of $60,000.
Part A: Calculate the goodwill created as a result of the purchase.
Part B: Calculate Red’s income at the end of the year from its investment in Blue.
Part C: Calculate the investment in Blue that appears on Red’s year-end balance sheet.
答案：
Part A
Fair value of net identifiable assets = book value of net identifiable assets + fair value appreciation
= $200,000 + ($75,000- $25,000)
= $250,000
Goodwill = Acquisition cost - Fair value of net identifiable assets×share percent
= $80,000 - $250,000×30%
= $5,000
Part B:
Red Company基于自身的book value计算的NI= $100,000
然而对于Blue而言，其资产以收购时的fair value来记账，因此需要将fair value appreciation进行摊
销。由于某资产收购时账面价值$25,000，市场价$75,000，在未来的十年内采用直线法进行摊销，
因此对于Blue而言，被投资方每年的收益需要多扣减（$75,000-$25,000）/ 10 = $5,000
因此对于Blue，其计算的Red company的收入 = ($100,000 - $5,000) ×30% = $28,500
Part C:
期初计量: $80,000
增加：accumulated net profit of the investee×share percent=$28,500
减少: declared dividend×share percent=$60,000×0.3=$18,000
期末计量=$80,000+$28,500-$18,000=$90,500
2.3 减值处理
GAAP：如果股权投资的账面价值持续低于市场价值，则需要进行减值处理，之间的价值差即为
减值损失，IS中列示
IFRS：如果有事件证明股权投资的账面价值会低于市场价值，则需要进行减值处理
IFRS和GAAP均不允许回调（no reversal）
2.4 投资方与被投资方之间的交易
指导思想：投资方与被投资方之间的交易利润不计入投资方的投资收益
只有将货物销售给第三方才将交易利润计入投资方的投资收益
 Upstream逆流交易：Target to acquirer 是被投资方向投资方销售
 Downstream顺流交易：Acquirer to target 是投资方向被投资方销售
无论顺流投资还是逆流投资投资方需要按照自己的持股份额调减投资收入
For investor, reduce in equity income = unconfirmed profit × share percent.
其中unconfirmed profit指的就是还没有销售给第三方的产品所对应的利润
例如：Investor owns 30% percent of investee. During the year, the investee sold goods to investor and
recognized $15,000 of profit. At the year end, half of the goods are still in the investor’s inventory
答案：Acquirer: 投资收益调减金额 = $2,250 (15,000×0.5×0.3)
一旦货物销售给第三方，$2,250的投资收益即可确认
Target: 账面上可以确认所有的销售利润
例如：Investor owns 30% percent of investee. During the year, the investor sold goods to investee and
recognized $10,000 of profit. At the year end, 10% of the goods are still in the investee’s inventory
答案：Acquirer: 投资收益调减金额 = $300 (10,000×0.1×0.3)
一旦货物销售给第三方，$300的投资收益即可确认
Target: 账面上无需调整
2.5 分析师需要考虑的问题
问题一：对比Investments in financial assets
对于Investments in associates，投资收益为被投资方的NI与持股比例之积；
对于Investments in financial assets，投资收益为被投资方的dividend与持股比例之积；
通常情况下，前者确认的金额较高
问题二：对比Business combination
对于Investments in associates，记账方法为one-line consolidation
对于Business combination，记账方法为consolidation
前者只确认net asset，而没有确认债务等，因此前者会导致leverage较低
前者只确认投资收益，而没有确认收入、费用等，因此前者会导致net income margin比较高
问题三：不以股利形式发放的投资收益未来是否可以收到是未知数
Dagmar AG is a European-based manufacturing firm that prepares its financial statements according to International
Financial Reporting Standards (IFRS). Two members of Dagmar’s treasury group, Henrik Ferdinand and Adele Christoph,
are reviewing Dagmar’s portfolio of investments. They are particularly interested in the investment income reported
during the year and whether any of the investments should be considered impaired. Exhibits 1 and 2 contain information
about the first two investments on their review list.
EXHIBIT 1 SELECTED INFORMATION ON INVESTMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 (€
THOUSANDS, EXCEPT PER SHARE DATA)
Elbe AG (Additional information in
Company Name Alme AG Exhibit 2)
Security description Bonds maturing 31 December Common shares
2022, 5% coupon payable
Q1 Q2
annually, 6% effective market
rate when issued 1 January
2012
Classification at purchase Held to maturity Associated company
Date of purchase 1-Jan-12 28-Feb-02
Amount owned by Dagmar Face value €4,000 1.8 million shares
Total number of shares outstanding n.a. 6.0 million shares
Market value on 1 January 2013 € 3,600.60 €31.92 per share
Market value on 31 December 2013 € 3,634.76 €30.20 per share
Net earnings of investee company in 2013 n.a. € 12,375
Dividends paid by investee company in 2013 n.a. €0.50 per share
n.a. = not applicable

EXHIBIT 2 ADDITIONAL INFORMATION ON INVESTMENT IN ELBE (€ THOUSANDS, EXCEPT PER

SHARE DATA)
At the date of acquisition (28 February 2002)
Price paid €17 per share
Total net book value of Elbe € 90,000
Q3
Excess of fair market value of plant and equipment above book value € 5,250
Expected useful life remaining on plant and equipment 15 years
Elbe uses straight-line depreciation for all of its tangible assets
At 31 December 2013
Book value of investment on Dagmar’s statement of financial position €59,022
Ferdinand opens the meeting with the following statement:
“Before we consider impairment, let us calculate what each investment will contribute to Dagmar’s net earnings this year.”
Turning to the issue of impairment, Christoph says:
“I believe the decline in Elbe’s share price is related to uncertainty surrounding the current status of the company’s
defined-benefit pension plan. I have obtained Elbe’s most recent filing with regulators, and it includes data relating to the
revaluation of its pension plan. I have summarized some of the key information related to the pension plan in Exhibit 3.”
EXHIBIT 3SELECTED DATA FROM ELBE’S PENSION PLAN AS OF 31 DECEMBER 2013 (€ THOUSANDS)
Pension Plan Data before Pension Plan Data after
Revaluation Revaluation
Present value of defined benefit obligation 40,060 45,200
Fair value of plan assets Q4 29,522 29,522
Actuarial losses 1,500 4,250
Past service costs 433 433
Furthermore, Christoph states:
“I think we should consider the investment in Elbe impaired because with the decline in the share price, the market
value has recently fallen below our book value.”
Ferdinand responds:
Q5
“I do not think we have to consider it impaired because
 despite the pension plan problems, Elbe has been able to maintain its dividends at their historical rate; and
 the remaining goodwill from the acquisition has not been fully written off.”
Christoph concludes the meeting by reviewing the events surrounding another fixed-income investment Dagmar holds.
The company owns bonds of Bergenfeld AG, which have a face value of €5 million and a coupon rate of 6% payable
semiannually. The bonds have been held for five years and are classified as held to maturity. She notes:
“I am concerned about whether the investment in Bergenfeld is impaired for the following reasons:
 In August 2013, Standard and Poor’s lowered its credit rating for Bergenfeld from A to BB. Q6
 In October 2013, the bonds of Bergenfeld were no longer publicly traded because of low volume.
 In November 2013, Bergenfeld asked bondholders if they would forgo the coupon payment due on 31 December
2013 in exchange for an increase in the annual coupon rate to 7.5% on future payment dates. The bondholders
agreed to the change.”
1. The contribution from the investment in Alme to Dagmar’s net earnings (in thousands) for 2013 is closest to:
A. €222.
B. €234.
C. €200.
1. The contribution from the investment in Alme to Dagmar’s net earnings (in thousands) for 2013 is closest to:
A. €222.
B. €234.
C. €200.
Solution
A is correct. The interest revenue (in thousands) for 2013 can be calculated in two ways:
1. Market rate at issue × Book value at the beginning of the year (see supporting calculations for the book value):
6.0% × €3,705.6 = €222.3
2. Interest coupon payment received + Amortization of the bond discount (see supporting calculations)
€200 + €22.3 = €222.3
Inputs Calculations Value
Book value of the bond at 1 Face value = €4,000 Coupon = 5% × Using a financial calculator: FV = €3,705.6
January 2013 €4,000 = 200 Market interest rate = 6% €4,000, PMT = €200 I = 6%, N = 10
Number of years = 10 Compute PV
Book value of the bond at 31 Face value = €4,000 Coupon = 5% × FV = €4,000, PMT = €200 I = 6%, N = €3,727.9
December 2013 (1 January 14) €4,000 = 200 Market interest rate = 6% 9 Compute PV
Number of years = 9
Bond amortization for 2013 Difference in book value = €3,727.9 − €22.3
€3,705.6 =
1.1 金融资产的分类
例如：
At the beginning of the year, Midland Corporation purchased a 9% bond with a face value of $100,000 for
$96,209 to yield 10%. The coupon payments are made annually at year-end. Let’s suppose the fair value of the
bond at the end of the year is $98,500. The bonds are called on the first day of the next year for $101,000.
Determine the impact on Midland’s balance sheet and income statement if the bond investment is classified as
held-to-maturity, held-for-trading (or fair value through profit or loss), and available-for-sale.
答案：
Interest revenue = $96,209 beginning bond investment × 10% market rate at issuance = $9,621
这其中包括$9000的coupon revenue和$621的amortized discount
 HTM
期末BS表中体现的价值= ($96,209 beginning bond investment + $621 amortized discount= $96,830
本期利润表中确认的Interest revenue = $9,621
出售时 realized gain = $101,000 - $96,830 = $4,170
例如：
 AFS
期末BS表中体现的价值= $98,500
本期IS表中确认的Interest revenue = $9,621
本期BS表中确认的OCI = $98,500 - $96,209 - $621= $1,670
出售时确认的realized gain = $101,000 - $98,500 = $2,500
出手时需要将OCI转入NI，金额为$1,670
例如：
 Held-for-trading
期末BS表中体现的价值= $98,500
本期IS表中确认的Interest revenue = $9,621
本期IS表中确认的Unrealized gain = $98,500 - $96,209 - $621= $1,670
出售时确认的realized gain = $101,000 - $98,500 = $2,500
2. The contribution to Dagmar’s 2013 net earnings (in thousands) from its investment in Elbe is closest to:
A. €4,507.5.
B. €3,607.5.
C. €3,712.5.
2. The contribution to Dagmar’s 2013 net earnings (in thousands) from its investment in Elbe is closest to:
A. €4,507.5.
B. €3,607.5.
C. €3,712.5.
Solution
B is correct. Dagmar would use the equity method to account for its investment in Elbe because of its classification as
an associated company. Therefore, Dagmar will include its proportionate share of Elbe’s net earnings, minus the
amortization of the excess purchase price from the initial acquisition. Dagmar owns 30%: (1.8/6.0, in millions of shares)
of Elbe.
Calculations
Percentage of Elbe’s net income (in thousands) 30% × €12,375 €3,712.5
Minus amortization of the excess value (in thousands) of tangible €5,250 × 30% = €1,575 –€105.0
assets at acquisition (from Exhibit 2) €1,575/15 years
Investment income (in thousands) from Elbe in 2013 €3,607.5
3. Which of the following best describes the accounting for goodwill in the Elbe investment?
A. €2,025,000 included in the investment in Elbe account
B. There is no goodwill arising from an investment in an associated company
C. €3,600,000 included in the investment in Elbe account
3. Which of the following best describes the accounting for goodwill in the Elbe investment?
A. €2,025,000 included in the investment in Elbe account
B. There is no goodwill arising from an investment in an associated company
C. €3,600,000 included in the investment in Elbe account
Solution
A is correct. Under the equity method, goodwill is calculated at the date of acquisition and included in the carrying
amount of the investment. It is not amortized. Using data in Exhibit 2:
Price per share €17.00

Number of shares × 1,800,000
Total price paid for 30% €30,600,000
30% of net book value of Elbe €27,000,000 (0.30 × €90,000,000)
Excess purchase price paid €3,600,000
Allocated to plant and equipment €1,575,000 (0.30 × €5,250,000)
Goodwill €2,025,000
4. After the actuarial revaluation of the pension plan, the net pension liability (in thousands) Elbe will report on its
statement of financial position is closest to:
A. €11,428.
B. €15,245.
C. €15,678.
4. After the actuarial revaluation of the pension plan, the net pension liability (in thousands) Elbe will report on its
statement of financial position is closest to:
A. €11,428.
B. €15,245.
C. €15,678.
Solution
C is correct. Under IFRS, service costs (current and past service) are recognized as an expense in profit and loss,
and re-measurement amounts (actuarial gains and losses) are recognized in other comprehensive income. The net
pension liability reported when actuarial gains and losses are recognized immediately is calculated as follows:
Present value of defined benefit obligation €45,200

Minus fair value of plan assets –29,522
Net pension liability €15,678
5. Which of the statements concerning whether the investment in Elbe should be considered impaired as at the end of
2013 is most appropriate? The statement made by:
A. Ferdinand about the dividends.
B. Ferdinand about the remaining goodwill.
C. Christoph about market value.
5. Which of the statements concerning whether the investment in Elbe should be considered impaired as at the end of
2013 is most appropriate? The statement made by:
A. Ferdinand about the dividends.
B. Ferdinand about the remaining goodwill.
C. Christoph about market value.
Solution
A is correct. Under IFRS, there must be objective evidence of impairment as a result of one or more events after the
initial recognition that have an effect on the investment’s future cash flows and that can be reliably measured. Ferdinand
is correct in his statement that Elbe has been able to maintain dividend payments. Current dividends are €0.50 on
earnings per share of €12,373/6,000 = €2.06, for a payout ratio of 24%, implying that cash flows do not appear to be
impaired. Therefore, the investment should not be considered impaired for that reason. If the investment’s fair market
value is below its carrying (book) value and the decline is deemed other than temporary, an impairment loss must be
recognized. According to Christoph, however, the market value “has just now fallen” below the book value, and there is
no indication that the situation of fair value below carrying value is other than temporary. Under the equity method, the
investment is not carried at market value. Goodwill is not tested separately for impairment for investments using the
equity method.
B is incorrect because under IFRS the goodwill is not tested separately from the investment as it is with investments
being accounted for by consolidation.
C is incorrect because the fact that book value is greater than share value alone is not evidence of impairment.
6. During which month in 2013 would it have been most appropriate for Dagmar to consider the value of its investment
in Bergenfeld to be impaired?
A. August
B. October
C. November
6. During which month in 2013 would it have been most appropriate for Dagmar to consider the value of its investment
in Bergenfeld to be impaired?
A. August
B. October
C. November
Solution
C is correct. The earliest point at which it would have been appropriate for Dagmar to consider the investment in
Bergenfeld to be impaired is November, at which time the borrower encountered financial difficulty and received a
concession from lenders as a result. The downgrading of debt (in August) or the disappearance of an active market for a
security (October) alone are insufficient evidence of an impairment.
A is incorrect because the downgrading of debt alone is not evidence of impairment.
B is incorrect because the disappearance of an active market alone is not evidence of impairment.
Case 3
Suburban Publishers Case Scenario
79
Re a d i n g 2 1
I n te r c o r p o r a te I n ve s t m e n t E t h i c s
考点三 Business combination

□ 记账方法
□ Partial goodwill和Full goodwill
□ Goodwill的减值测试
□ Bargain purchase
IFRS对于Business combination没有进一步分类，GAAP将business combination进一步分为以下三类：

merger：A+B A
acquisition：A+B  A+B
consolidation：A+B C
80 80
3.1 记账方法
3.1.1 过去的记账方法（目前均不采用）
 Pooling-of-interest method
Combine the ownership of two firms using historical book value基于历史账面价值合并
Operating results for prior periods are restated as though they were always combined 视作两个公司自始至终
是合并的
Former accounting bases are maintained 保留过去的记账方法
 Purchase method
3.1 记账方法
3.1.2 Acquisition method
 对于Business combination，Parent company需要准备两套报表
（1）合并财务报表Consolidated Financial Statements
（2）母公司财务报表
 如何编制Consolidated Financial Statements？
（1）基于Fair value
（2）The BS and IS of the Subsidiary and Parent are included
（3）Investment in the subsidiaries (母公司财务报表中列示) are eliminated
（4）Intercompany transactions are excluded.
（5）如果不是100%持股，Minority Interests (MI) are recognized in IS and BS

3.1 记账方法
例如：Suppose that on January 1, 2010, Company P acquires 80% of the common stock of Company S by
paying $8,000 in cash to the shareholders of Company S. The preacquisition balance sheets of Company P and
Company S are shown below.
Preacquisition Balance Sheets
January 1, 2010 Company P Company S

Current assets $48,000 $16,000
Other assets 32,000 8,000
Total $80,000 $24,000
Current liabilities $40,000 $14,000
Common stock 28,000 6,000
Total $80,000 $24,000
3.1 记账方法
Balance Sheet Comparison of the Acquisition and Equity Methods
January 1, 2010 Acquisition method Equity method

Current assets $56,000 $40,000
Investment in S 8,000
Other assets 40,000 8,000
Total $96,000 $80,000
Current liabilities $54,000 $40,000
Minority interest 2,000
Total $96,000 $80,000
3.1 记账方法
Preacquisition income statements
For year 2010 Company P Company S

Revenue $60,000 $20,000
Expenses 40,000 16,000
Net income $20,000 $4,000
Dividend $1,000
Income Statement Comparison of the Acquisition and Equity Methods
For year 2010 Acquisition method Equity method

Revenue $80,000 $60,000
- Expenses 56,000 40,000
Operating income $24,000 $20,000
+ Equity in income of S 3,200
- Minority interest 800
Net income 23,200 23,200
3.2 Partial goodwill和Full goodwill
GAAP：只允许Full goodwill
IFRS：允许Full goodwill & Partial goodwill
Full goodwill = Acquisition value of the whole subsidiary – Fair value of net identifiable assets
Partial goodwill = Acquisition value of share percent
- Fair value of net identifiable assets×share percent
Full goodwill情况下的MI = Acquisition value of the whole subsidiary × （1- share percent）
Partial goodwill情况下的MI = Fair value of net identifiable assets × （1- share percent）
3.2 Partial goodwill和Full goodwill
接下来，我们进行推导的演示
Parent简称为P，Subsidiary简称为S，P
购买S的股份占比为 ω%
P购买S的 ω%股份支付的对价为Cash
paid = Acquisition value of share percent
则 Acquisition value of the whole
subsidiary = Cash paid /ω%
𝐸𝑆 代表Fair value of net identifiable assets
3.3 Goodwill的减值测试
（1）IFRS
 one-step
 如果BV of the cash generating unit > FV of cash generating unit则发生减值
 减值数额= BV of cash generating unit – FV of cash generating unit
（2）GAAP
 two-step
 第一步判断是否减值，如果BV of the cash generating unit > FV of cash generating unit则发生减值
 第二步计算减值金额 = carrying value of good will – implied value of goodwill
Claire Munroe, the senior publishing analyst at North Star Securities, has begun to review the recent financial
performance of Suburban Publishers, Inc. Suburban, which reports under US GAAP, has a history of purchasing
community news groups from around the country and holding them for several years even if they are not initially
profitable. The growth of the internet has been difficult on many major newspapers, but community newspapers
have been particularly resilient.
At the start of 2013, Suburban purchased 24% of the 1 million outstanding shares of West Reach Community News
Group for $12,000 thousand. West Reach’s income and dividends through the end of 2016 are shown in Exhibit 1.
EXHIBIT 1 WEST REACH COMMUNITY NEWS GROUP INCOME AND DIVIDENDS, 2010–2013 ($ THOUSANDS)
2013 2014 2015 2016
Net income 2,400 1,800 1,850 2,000 Q1
Dividends 500 120 48 418
As Munroe reviewed her working papers, she came across a notation that she had made following the acquisition: “A
very strange long-term acquisition for Suburban. West Reach’s majority holder, William French (who is now 81 years
old), holds 62% of the shares and controls the board with an iron hand. Dividends are paid out according to his needs
and preferences. Suburban was unsuccessful in getting any of its preferred candidates elected to the board or exerting
any influence on West Reach’s dividend policy.” Just before Monroe closed her file on this firm, she added, “Nothing
has changed since 2013, except, of course, that Mr. French is now a few years older”.
At the start of 2014, Suburban purchased 32.5% of the outstanding 2 million shares of Great Lakes Free Press, Inc.,
for $1,365 thousand. Great Lakes owned community newspapers in most of the northeastern states. Although the
majority of these papers were provided free of charge, they had historically maintained strong revenue streams with
their focus on personal interest stories about local individuals and local business advertising. Exhibit 2 provides details
of this acquisition (Part A) and subsequent results (Part B). Great Lakes struggled in 2015 and 2016 with mounting
losses and the elimination of its dividend.
Q2
EXHIBIT 2
GREAT LAKES FREE PRESS VALUES AT ACQUISITION AND SUBSEQUENT PERFORMANCE
Part A: Values at Acquisition, 1 January 2014 ($ thousands)
Book Value Fair Value
Current assets 120 120 Q2
Plant and equipment (P&E)* 2,280 2,964
Land 1,440 1,476
3,840 4,560
Liabilities 1,200 1,200
Net assets 2,640 3,360
* Estimated useful life remaining as of the date of acquisition is 10 years, with straight line depreciation to be
used.
Part B: Performance since Acquisition ($ thousands)
2014 2015 2016
Net Income 1,200 –200 –600 Q2
Dividends 504 0 0
Munroe’s calculations for Suburban’s holdings of Great Lakes at the end of 2016 are summarized in Exhibit 3. She
believed that Great Lakes’ share of local advertising would continue to decline with the growth of regional based
mobile and social media advertising. With little chance of a permanent recovery in the investment, Munroe
believed that Suburban would most likely have to treat the investment as being impaired.
EXHIBIT 3
BASIS OF MUNROE’S OPINION OF IMPAIRMENT IN GREAT LAKES, AS OF YEAR-END 2016 ($
THOUSANDS)
Book value of Great Lakes 3,256.00
Fair value of Suburban’s investment in Great Lakes Q3 940
Carrying value of Suburban’s investment in Great Lakes 1,264.51
At the start of 2016, Suburban decided to provide its publications with a new, fresh look and include more high-
quality colored images. To meet this need, Suburban purchased HiQ Printers, which had high speed production
printing presses in all of Suburban’s distribution areas. Suburban purchased 60% of the company’s shares in exchange
for its own shares. At the time of the purchase, there were 8 million shares of HiQ Printers outstanding trading at $14
per share. The fair value of HiQ Printers’ net identifiable assets at that time was $99 million. Exhibit 4 shows the
shareholders’ equity of both companies prior to the business combination.
EXHIBIT 4 SHAREHOLDERS’ EQUITY FOR SUBURBAN PUBLISHERS AND HIQ PRINTERS PRIOR TO THE
COMBINATION IN JANUARY 2016 ($ THOUSANDS)
Suburban Publishers HiQ Printers

Capital stock (no par) 280,000 40,000
Q4
Knowing that HiQ’s workforce is unionized, Munroe asked her assistant, Adeleke Carter, to review HiQ’s labor
agreements and report to her anything that that would impact the value of the acquisition. Carter sent Munroe the email
shown in Exhibit 5.
EXHIBIT 5 EMAIL FROM CARTER TO MONROE

To: Claire Munroe From: Adeleke Carter Subject: HiQ Pensions
Hi Claire, HiQ has two post-retirement plans—here’s a summary of what I found.
Present value of available
Defined-benefit Fair value of refunds and reductions in
Plan Members and Terms obligation pension assets future contributions
Unionized workforce: 60% of an average of their highest $15.500 million $16.600 million $500,000
five years of service Q6
Management: matching contributions by HiQ and
Q5 $8.222 million
employees of 8% of salary per annum.
Looks like HiQ was trying to hide some liabilities from Suburban by not reporting the obligations for management’s
plan, but the additional $24.822 million of assets will be a nice boost to reported assets for HiQ and Suburban.
Let me know if you have any questions.
Best, AC
1 The most appropriate way for Suburban to account for changes in the value of its West Reach holdings is to:
A. ignore them unless there is an impairment.
B. include them on the income statement.
C. include them in shareholders’ equity.
1 The most appropriate way for Suburban to account for changes in the value of its West Reach holdings is to:
A. ignore them unless there is an impairment.
B. include them on the income statement.
C. include them in shareholders’ equity.
Solution
C is correct. Although Suburban’s ownership interest (24%) in West Reach exceeds the amount that is normally
deemed sufficient to presume significant influence (20%), the inability to elect directors or influence the firm’s policy
making indicates a lack of significant influence. It would thus be inappropriate to account for its holdings under the
equity method, but given the long-term duration of the planned investment, an available-for-sale investment (or fair
value through other comprehensive income) would seem to be the most appropriate. The investment should be
remeasured and recognized at fair value on the balance sheet with any unrealized gains or losses arising from the
difference between the carrying amount and fair value reported in shareholders’ equity (other comprehensive income).
A and B are incorrect because the investment should be accounted for as available-for-sale, with changes in value
reflected in equity (other comprehensive income).
解析
各类金融产品的计量
Held-to-maturity Available-for-sale Fair value through P/L
不满足其余两项条件的其他为交易而持有或者
含义有意愿&有能力持有至到期
金融资产指定以公允价值计价
对应的资产类型 Debt Debt/Equity Debt/Equity
BS中计价基础 Amortized cost Fair value Fair value
对收益的记账
Interest/ dividend NI NI NI
Realized G/L NI NI NI
Unrealized G/L 不涉及 OCI NI
2. At the end of 2014, the balance in the investment in the associates account for Great Lakes Free Press (in thousands)
was closest to:
A. $1,591.20.
B. $1,567.80.
C. $1,568.97.
2. At the end of 2014, the balance in the investment in the associates account for Great Lakes Free Press (in thousands)
was closest to:
A. $1,591.20.
B. $1,567.80.
C. $1,568.97.
Solution
C is correct.
Calculation of investment in associates account, in thousands as at end of 2014

Start of year investment $1,365.00 Amount paid
+ Share of net income 390.00 32.5% × 1,200
– Share of dividends received (163.80) 32.5% × 504
– Amortization of excess amount (22.23) 32.5% ×684/10 years
paid for PPE
End of year investment $1,568.97
3. With regard to Munroe’s opinion about the possible impairment of the investment in Great Lakes Free Press, the
impairment loss (in thousands) is closest to:
A. $324.51.
B. $118.20.
C. $425.00.
3. With regard to Munroe’s opinion about the possible impairment of the investment in Great Lakes Free Press, the
impairment loss (in thousands) is closest to:
A. $324.51.
B. $118.20.
C. $425.00.
Solution
A is correct. Under US GAAP, if the fair value of the investment falls below the carrying amount, and assuming
the decline is considered to be permanent (as Munroe expects), the impairment loss is recognized on the income
statement and the carrying value of the investment is reduced to its fair value; the impairment loss is the difference
between the carrying amount and the fair value (i.e., $1,264.51 thousand – $940.00 thousand = $324.51 thousand).
B is incorrect because it ignores the stated carrying value and incorrectly recalculates the equity in the subsidiary
based on FV of net assets at acquisition plus/minus income/loss – dividends from acquisition (same as BV), and
deducts the current fair value from it: Incorrect carrying value based on GL book value: 0.325 ×3,256 = 1,058.2
Impairment loss: 1,058.2 – 940 = 118.2
C is incorrect because the loss has also not been calculated properly: $425 = Price paid – FV investment = 1,365 – 940,
but should be $324.51 (see A).
解析
 Investment in associate的减值
GAAP：如果股权投资的账面价值持续低于市场价值，则需要进行减值处理，之间的价值差即为减值损失，
IS中列示
IFRS：如果有事件证明股权投资的账面价值会低于市场价值，则需要进行减值处理
IFRS和GAAP均不允许回调（no reversal）
4. Immediately following its business combination with HiQ Printers, the total shareholders’ equity (in thousands) on
Suburban’s consolidated financial statements is closest to:
A. $532,200.
B. $577,000.
C. $571,800.
4. Immediately following its business combination with HiQ Printers, the total shareholders’ equity (in thousands) on
Suburban’s consolidated financial statements is closest to:
A. $532,200.
B. $577,000.
C. $571,800.
Solution
B is correct. The shareholders’ equity section of the post-acquisition consolidated balance sheet will consist of the
capital stock and retained earnings account of the parent and the non-controlling interest of the minority shareholders.
Under US GAAP, the value of the non-controlling interest is equal to the non-controlling interest’s proportionate share of
the subsidiary’s fair value.
A: Amount paid for 60% interest = 60% × $14/share× 8,000,000 shares = $67,200 thousand
Fair value of subsidiary = 8 million shares ×$14/share = $112,000 thousand
B: Non-controlling interest = $112,000 × (1 – 0.60) = $44,800 thousand
Shareholders’ Equity ($ thousands) Calculation
Non-controlling interest 44,800 See B above
Capital stock 347,200 280,000 + 67,200: Original + Issued in
acquisition (see A.above)
Retained earnings 185,000 Suburban’s retained earnings
Total equity 577,000
5. Based on Exhibit 5, Carter’s conclusion about the impact of HiQ’s pension plans is best described as:
A. incorrect because Suburban will only report the $8.222 million of management’s plan.
B. correct because Suburban will report the $24.822 million of pension assets.
C. incorrect because there is no defined obligation for management’s plan.
5. Based on Exhibit 5, Carter’s conclusion about the impact of HiQ’s pension plans is best described as:
A. incorrect because Suburban will only report the $8.222 million of management’s plan.
B. correct because Suburban will report the $24.822 million of pension assets.
C. incorrect because there is no defined obligation for management’s plan.
Solution
C is correct. Carter’s conclusion is incorrect because there is no defined obligation for the pension plan for
management. The plan for management is a defined contribution plan, HiQ’s obligations are limited to its annual
contribution. The pension assets for the defined contribution plan do not appear on HiQ’s (or Suburban’s) financial
statements. For the plan for the unionized workforce the amount reported will be the net over or underfunded status, not
the separate assets and obligation.
A is incorrect because the pension assets for the defined contribution plan do not appear on HiQ’s (or Suburban’s)
financial statements.
B is incorrect because the pension assets for the defined contribution plan do not appear on HiQ’s (or Suburban’s)
financial statements. For the plan for the unionized workforce, the amount reported will be the net over or underfunded
status, not the separate assets and obligation.
解析
DC DB OPB
Amount of benefit Not determined Pre-determined Depends
Investment risk employee承担 employer承担 Depends
make periodic Make pre-determined Similar to DB

Employer’s obligation
contributions payment to retiree Usually unfunded
6. Based on Exhibit 5, the asset amount reported on HiQ’s balance sheet related to the unionized workforce pension
plan is closest to:
A. $1,100,000.
B. $500,000.
C. $600,000.
6. Based on Exhibit 5, the asset amount reported on HiQ’s balance sheet related to the unionized workforce pension
plan is closest to:
A. $1,100,000.
B. $500,000.
C. $600,000.
Solution
B is correct. The unionized plan is a defined-benefit plan, and the amount reported on the balance sheet is
normally the net of the fair value of plan assets less the present value of defined-benefit obligation ($16.6 – $15.5 =
$1.1 million). However, if the plan has a surplus, as this one does, the net pension asset is subject to a ceiling defined
as the present value of available refunds and reductions in future contributions, which in this plan is $500,000.
A is incorrect because it calculates the surplus but doesn’t consider the ceiling.
C is incorrect because it incorrectly adds the present value of available refunds and reductions in future contributions
to the defined-benefit obligation: 1.1 – 0.500 = 600,000.
解析：该题目比较特别，通常情况下题目中没有明确提出ceiling不需要考虑
Case 4
Masson Enterprises Case Scenario
110
Peter Langer, a credit analyst with a national credit rating agency, is preparing a credit rating for a new client, Masson
Enterprises Inc (Masson). Masson operates a chain of 250 retail stores specializing in the hardware and home renovation
market. The mid-sized stores are located in suburban malls in the northwestern portion of America. In 2012 Masson built
a large distribution center, near Seattle, that the company uses to supply the stores with its products, many of which are
made in China. In 2013 Masson made an acquisition of a small regional chain of stores, which resulted in an increase in
both assets and debt.
The home renovation industry had been hard hit by an economic slowdown that started in mid-2013. Because Masson’s
year-end is October 31, the slowdown only had a small impact on 2013 results, but the full effect will be reflected in the
2014 results. Masson prepares its financial statements according to US GAAP.
In late September 2014 Langer is meeting with his assistant, Evelyn Aubry, who brings to Langer’s Q1
attention two transactions undertaken by Masson in fiscal 2014:
1. Masson has started sourcing more of its inventory from China. In September, it took delivery of a large purchase of
outdoor Christmas decorations from a Chinese supplier, with payment due on November 15. The company has not
hedged the transaction, and our economic group forecasts that the Chinese Yuan will strengthen against the US dollar
between now and the company’s year-end (October 31).
2. Masson has announced that at the end of the final quarter of fiscal 2014 it will sell its distribution center to Sequoia
Corporation (Sequoia), an enterprise established, but not owned, by Masson. Masson stated that it will be using the
proceeds from the sale to pay down long-term debt.
Aubry has prepared projected results for 2014 for Masson based on third-quarter results and other information she
obtained from the company. She and Langer are discussing how she reflected the sale of the distribution center in
her financial projections and its impact on Masson’s ratios. Q2
Aubry explains:
 Masson is selling the distribution center for $200 million. The net book value of the center would have been
$170 million at year-end therefore the company will record a $30 million gain. I reflected the gain in my
projections as an increase in net income in 2014. There will be no taxes on this gain due to the availability of
loss carry forwards.
 Because the sale will occur at the end of the fiscal year I took a full year’s depreciation for 2014. The $10
million in annual rent expense Masson will pay to Sequoia for the use of the center
 is the same as the annual depreciation expense they had been taking on the center. Q3
 Given Masson’s stated use for the proceeds, I reduced the total liabilities.
 Assuming the sale goes through, the removal of the net book value of the center from the balance sheet will
result in an increase in the company’s asset turnover and ROA.
Langer summarizes key information for the last two years along with Aubry’s projections for 2014, see Exhibit 1.
Masson Enterprises Case Scenario Q6
EXHIBIT 1 MASSON ENTERPRISES INC. YEARS ENDED OCTOBER 31 (ALL FIGURES $ MILLIONS,
EXCEPT ROE)
Total
Year Sales Net Income Total Assets Liabilities Total Equity ROE
2014p* 4,820 160 2,410 945 1,465 10.90%
2013 4,720 170 2,482 1,177 1,305 13.00%
2012 4,605 175 2,110 975 1,135 15.40%
p* Aubry’s projections including the expected sale of the distribution center

Langer is concerned that the sale of the distribution center may not go through. He instructs Aubry to investigate the
following ratios under her projections compared to what they would be if the sale doesn’t go through:
1. the ratio of cash flow from operations to net income.
2. the total debt to assets ratio.
Q4
Langer notes:
“If the sale does go through, I believe, based on the terms of the agreement, that Sequoia will qualify as a variable
interest entity (VIE), and Masson will be considered the primary beneficiary.”
He summarizes the anticipated terms of sale as follows:
1. Masson will sign a 14-year lease for the center with Sequoia. Incidentally, I agree with your assessment of the
selling price of the center and the subsequent use of the proceeds.
2. Sequoia will finance the purchase of the center through borrowing arrangements totaling $192 million with a group
of financial institutions. The land and building will be pledged as collateral against these loans and Masson will
provide unconditional guarantees as well.
3. In return for the guarantees, Masson will be eligible to appoint the majority of the directors to Sequoia’s board.
4. Masson will receive the majority of the profits of Sequoia and absorb the majority of the losses, if any.
Langer finishes:
“If it is a VIE, I believe that means Masson would have to consolidate Sequoia. I wonder how that would affect your
projections and our ratio calculations (which are all based on year-end balances).”
Q5
1. Which of the following statements about the accounting for the inventory purchase from China is most accurate?
A. All gains or losses on the payable will be reported in fiscal 2015 net income.
B. The final value of the inventory will be determined on November 15.
C. Based on the economic forecast, Masson will report a foreign exchange loss in fiscal 2014 net income.
1. Which of the following statements about the accounting for the inventory purchase from China is most accurate?
A. All gains or losses on the payable will be reported in fiscal 2015 net income.
B. The final value of the inventory will be determined on November 15.
C. Based on the economic forecast, Masson will report a foreign exchange loss in fiscal 2014 net income.
Solution
C is correct. The inventory was received in September but will not be paid for until November 15, after the 2014
year-end, therefore Masson will have an outstanding accounts payable related to the purchase at year-end. The
economic forecast is for the Yuan to strengthen and the dollar to weaken during that period. A liability in
strengthening currency will result in a foreign exchange loss. The payable is revalued at the balance sheet date and
any gains or losses to that point are recognized in the net income for that period, fiscal 2014, and not deferred until
settlement.
A is incorrect because accounts payable (a monetary item) are revalued at the balance sheet date and any gains or
losses to that point are recognized in the net income for that period and not deferred until settlement (fiscal 2015).
B is incorrect because the value of the inventory (a non-monetary item) is determined the day it is received. Only the
payable is adjusted for changes in foreign exchange rates.
2. If Aubry’s projected information needed to be adjusted because the distribution center was not sold, her revised
estimate of Masson’s ratio of cash flow from operations to net income ratio for 2014 would most likely be:
A. the same.
B. higher.
C. lower.
estimate of Masson’s ratio of cash flow from operations to net income ratio for 2014 would most likely be:
A. the same.
B. higher.
C. lower.
Solution
B is correct. Comparison of the net income and CFO under both scenarios:
Aubry’s Projections If Center Is Not Sold Effect on CFO/NI

CFO The gain is deducted from the higher Same CFO Aubry’s projected ratio
NI to determine CFO is higher(same CFO but lower NI)
Net income Includes $30 million gain Lower NI (no gain included)
Additional information: The full proceeds from the sale of an asset would be reported as an investing cash inflow.
Because the sale occurs at the end of the year there is no difference in depreciation expense for the year: the center would
have a full year’s deprecation whether sold or not, so it does not affect either cash flow or net income.
B and C are incorrect because see table.
estimate of Masson’s 2014 total debt to assets ratio would be closest to:
A. 36.6%.
B. 47.5%.
C. 44.4%.
estimate of Masson’s 2014 total debt to assets ratio would be closest to:
A. 36.6%.
B. 47.5%.
C. 44.4%.
Solution
C is correct. Aubry’s projections assume the sale of the distribution center and include a reduction in the liabilities
by the full proceeds of $200 million and a reduction in the assets by the $170 million book value; therefore, if the
center is not sold, the liabilities and the assets would be higher by these amounts respectively.
Total debt to assets would be: D/A = (945 + 200)/(2,410 + 170) = 44.4%
A is incorrect because it adjusts the assets but forgets to adjust the debt. D/A = 945/(2,410 + 170) = 36.6%.
B is incorrect because it adjusts the debt but not the assets. D/A = (945 + 200)/2,410 = 47.5%.
4. Which of the terms of the sale for the distribution center outlined by Langer is least likely a reason that Sequoia
would qualify as a variable interest entity (VIE) of Masson?
A. 1
B. 3
C. 2
4. Which of the terms of the sale for the distribution center outlined by Langer is least likely a reason that Sequoia
would qualify as a variable interest entity (VIE) of Masson?
A. 1
B. 3
C. 2
Solution
A is correct. The sale and leaseback of an asset does not automatically make Sequoia a VIE. It is the inability of
Sequoia to finance itself without financial support from others (Masson has provided unconditional guarantees) and
the fact that the equity investors will not be able to make the decisions, as Masson controls the board, that would make
the enterprise a VIE.
B is incorrect because the fact that the equity investors do not control Sequoia (because Masson controls the board) is
another factor in defining a VIE.
C is incorrect because the financing of Sequoia would make it a VIE. Masson has provided unconditional guarantees,
and the equity investors only have a very small investment in Sequoia, so they could not have obtained financing on
that minimal amount of equity.
5. Langer’s belief about Masson’s accounting treatment of Sequoia is best described as:
A. correct.
B. incorrect because Masson would use the equity method to report its proportional interest in the enterprise.
C. incorrect because Masson only needs to disclose the arrangements in the notes to the financial statements.
5. Langer’s belief about Masson’s accounting treatment of Sequoia is best described as:
A. correct.
B. incorrect because Masson would use the equity method to report its proportional interest in the enterprise.
C. incorrect because Masson only needs to disclose the arrangements in the notes to the financial statements.
Solution
A is correct. Langer is correct. If Sequoia is a VIE and Masson is considered the primary beneficiary, then Masson
must fully consolidate Sequoia regardless of the amount of its equity investment.
B is incorrect because if Sequoia is a VIE and Masson is the primary beneficiary of it, then Masson must fully
consolidate Sequoia regardless of the amount of its equity investment.
C is incorrect because note disclosure is not enough. If Sequoia is a VIE and Masson is the primary beneficiary of it,
then Masson must fully consolidate Sequoia regardless of the amount of its equity investment.
6. If Langer is correct in his belief about Masson’s required accounting treatment of Sequoia, the revised projected
ROE for Masson in 2014 would be closest to:
A. 10.9%.
B. 8.9%.
C. 9.1%.
6. If Langer is correct in his belief about Masson’s required accounting treatment of Sequoia, the revised projected
ROE for Masson in 2014 would be closest to:
A. 10.9%.
B. 8.9%.
C. 9.1%.
Solution
C is correct. If Langer is correct and Sequoia is a VIE, then on consolidation net income would be reduced by the
$30 million gain, and retained earnings (and total equity) would also decrease by the same amount.
($ millions) As projected Including Consolidation of VIE Adjustment
Net income 160 130 Deduct gain included in NI
160 − 30 = 130
Total equity 1,465 1,435 Deduct gain included in NI (and retained
earnings)
1,465 − 30 =1,435
ROE 130/1,435 = 9.06%
Case 5
Trana Case Scenario
127
Translation issues in hyperinflationary economies
恶性通胀的定义：三年内的累计通胀超过100% or 连续3年每年的通胀率超过26%
对于恶性通胀的环境，如果直接用current rate method将会低估非货币性资产的价值，因为随着通胀
的发生，除去汇率会大幅下跌外，这些非货币资产的价格也会一定程度上上涨，因此如果想直接能用
current rate method需要对非货币资产的价格进行调整。
对于GAAP：不允许调整非货币资产的价格——直接采用Temporal method
对于IFRS：根据价格指数调整非货币资产的价格，随后运用current rate method
IFRS方法的具体应用主要包括如下步骤：
1) Non-monetary assets and liabilities are restated for inflation using a price index根据价格指数调整非货币资产
和负债的价格
2) Not necessary to restate monetary assets and liabilities 货币资产和负债的价格不需要调整
3) Components of equity are restated by applying the change in the price index from the beginning of the period
or the date of contribution if late 调整Equity时候的价格指数起始点要么是年初，要么是公司成立日，以
两者较晚的日期为准
4) The I/S items are restated by multiplying by the changes in the price index from the date the transactions occur;
IS科目调整的价格指数起始点为交易发生日
5) The net purchasing power G/L is recognized in the I/S based on the net monetary asset or liability exposure. IS
中需要增设net purchasing power G/L
6.3 Translation issues in hyperinflationary economies
例题：Imagine that a foreign subsidiary was created on December 31, 2014. The LC is the currency of the
country where the foreign subsidiary is located. The subsidiary’s balance sheets for 2014 and 2015, and income
statement for the year-ended 2015, are shown below:
in LCs 2014 2015

Cash 5,000 8,000
Supplies 25,000 25,000
Total assets 30,000 33,000
Also, use the following price indices:
Accounts payable 20,000 20,000
December 31, 2014 100
December 31, 2015 150
Retained earnings 0 3,000
Liabilities and equity 30,000 33,000 Average for 2015 125
Revenue 15,000 Prepare an inflation adjusted balance sheet and income
Expenses (12,000) statement for 2015.
Net income 3,000
答案：
in LCs 2015 Adjust factor inflation adjusted （a）Retained earnings = Liabilities and equity - Accounts payable -
Cash 8,000 8,000 Common stock
Supplies 25,000 150/100 37,500 = 45,500 – 20,000 – 15,000 = 10,500
Total assets 33,000 45,500 （c）NI = 10,500，这是因为公司2014年底RE=0且2015年的
Accounts payable 20,000 20,000 dividend=0
Common stock 10,000 150/100 15,000 （b）倒推Net purchasing power gain = 10,500 – (18,000 – 14,400) =
Retained earnings 3,000 （a） 6,900
Liabilities and equity 33,000 45,500 其实Net purchasing power gain的来源来自于三方面：
Revenue 15,000 150/125 18,000 （1）存量现金损失 = 5,000×（150-100）/100 = 2,500
Expenses (12,000) 150/125 (14,400) （2）增量现金损失 = 3,000×（150-125）/125= 600
Net purchasing power gain （b）（3）AP的收益 = 20,000×（150-100）/100= 10,000
Net income 3,000 （c）
所以整体的Net purchasing power gain =10,000 –2,500 –600 = 6,900
分析公司的跨国经营
 如何比较不同公司的translation G/L
对于具有多国子公司的母公司而言，其财务报表中可能同时存在运用Current rate method和运用
Temporal method方法进行换算的子公司，因此会同时存在Equity中的CTA和IS中的re-measurement G/L，
在比较不同公司的translation G/L的时候，通常是将CTA与re-measurement G/L进行加总，比较不同公司
的两者之和。
 比较跨国经营对tax rate的影响
Effective tax rate is the tax expense in the income statement divided by pretax profit. 有效税率
Statutory tax rate is provided by the tax code of the home country. 法定税率
公司effective tax rate的变动的原因可能是以下两点
• 不同国家的法定税率变动
• 在不同国家之间的收入结构发生变动
例如：The reconciliation between the statutory tax rate and effective tax rate for two companies (Alpha &
Beta) for the year 2013 is provided below:
Item Alpha Beta
Statutory tax rate 25.0% 30.0%
Effect of disallowed expenses 3.0% 1.0%
Effect of exempt income (2.0%) (0.5%)
Effect of taxes in foreign jurisdictions 3.4% (1.2%)
Effect of recognition of prior losses (0.8%) (3.0%)
Effective tax rate 28.6% 26.3%
Which company benefited from the lowering of tax expense on account of its foreign operations?
答案：Beta, 因为Effect of taxes in foreign jurisdictions对于Beta为负，对于Alpha为正
 比较跨国经营对sales growth的影响
对于跨国经营的公司，
如果sales growth是由于sales volume growth或者sales price increase，则是比较优质的
如果sales growth是由于foreign exchange rate的变动，则是比较不持续的
Organic growth in sales：defined as growth in sales excluding the effects of acquisitions/divestitures and
currency effects.去除掉并购的影响和汇率影响的收入增长
Trana Case Scenario
Marcus Eriksson, chief financial officer of Trana AB, and Katrina Lars, director of financial reporting, are preparing
the company’s 2015 annual report. Today’s meeting is to discuss the transactions and disclosures related to Trana’s
foreign operations. Trana, which reports under International Financial Reporting Standards (IFRS), is a Sweden-based
retailer operating stores in three geographic locations: Sweden, the eurozone (with a current presence only in France,
Germany, and Italy), and the United States. The stores in the eurozone and the United States are operated through a
wholly owned subsidiary in each region. Consistent with Swedish accounting practice, the annual report includes
separate financial statements for the parent company (Trana) and consolidated, or group, financial statements. The
income statements are presented in Exhibit 1.
Trana Case Scenario
EXHIBIT 1TRANA AB INCOME STATEMENTS FOR THE YEARS ENDED 31 DECEMBER

Consolidated Income Statement Parent Income Statement
(SEK millions) (SEK millions)
2015 2014 2015 2014
Sales 30,200 26,892 4,700 4,653
Cost of goods sold 13,590 12,639 2,600 2,650
Gross profit 16,610 14,253 2,100 2,003
Selling expenses 10,872 9,143 1,500 1,525
Admin. expenses 1,510 1,076 260 200
Operating profit 4,228 4,034 340 278
Net other costs/losses 10 15 2 3
Earnings before taxes 4,218 4,019 338 275
Income taxes 1,122 1,071 74 61
Net profit 3,096 2,948 264 214
Trana Case Scenario
Eriksson and Lars start the meeting by reviewing some of the relevant currency exchange rates, shown in Exhibit 2.
The functional currency for the euro zone and US subsidiaries is the local currency (EUR and USD, respectively),
thus the financial statements of both are translated using the current rate method. Both subsidiaries are consistently
profitable.
EXHIBIT 2 EXCHANGE RATES

SEK per EUR SEK per USD
Beginning 2014 8.43 6.32
Average 2014 8.555 6.35
End of 2014 8.88 6.38
Average 2015 9.125 7.595
End of 2015 9.31 8.81
Trana Case Scenario
Next, they review the performance and related disclosures by region. The number of stores operated in each region is
shown in Exhibit 3.
EXHIBIT 3 NUMBER OF STORES BY REGION

Year Eurozone Sweden United States Total
2014 340 99 80 519
2015 400 100 80 580
In preparation for the meeting, Lars looked at the US region and calculated the effect of the change in the SEK/USD
exchange rate on the increase in sales from 2014 to 2015. Her notes include the following:
 In 2014, the sales per store, in SEK, were the same for both US and Swedish stores. Q1
 The sales per US store in USD remained constant in 2015.
Eriksson reminds Lars that Trana defines organic growth in retail as coming from two factors:
1. increasing the number of stores, and Q2
2. increasing the sales per store in the local currency.
He says that he wants to provide disclosures related to the organic growth rate in domestic sales per store, by region, and
asks Lars to calculate it for the eurozone region where the sales figures (in millions) were SEK18,394 in 2014 and
SEK21,640 in 2015.
Trana Case Scenario
In 2012, at the start of Trana’s expansion into North American markets, the company established a subsidiary, Anart
Inc., in a South American country to benefit from lower labor and shipping costs.
The details of the Anart investment are as follows: Q3
 Anart is 80% owned by Trana with 20% local investment.
 It sells all of its production to Trana and Trana’s other subsidiaries and determines the transfer price as full cost
plus 5%.
 In 2015, sales (in millions) from Anart to Trana companies were SEK4,485 with net profit of SEK204.
 The corporate tax rate in the country is 10%.
Q4
Throughout 2013, the South American country experienced high rates of inflation, approaching 30% per year. Trana
had originally assumed that the high inflation rate was temporary, but it has shown no signs of decreasing and is now a
concern. Eriksson and Lars discuss the impact of Anart on Trana’s financial statements and Eriksson asks Lars:
“Is the same accounting method being used this year to account for Anart in the consolidated financial statements as
in prior years?”
Trana Case Scenario
Eriksson reminds Lars that there is a proposal in Sweden to reduce the corporate tax rate from the current 22% to
16.5%. He would like to provide pro-forma disclosures related to the potential change in net income this change could
provide for Trana. He reminds Lars that the average tax rate for the eurozone countries where Trana operates is 30%
and 25% in the United States. Sweden operates under a tax treaty with all countries in which it has subsidiaries, such
that it will owe taxes on foreign earned income to the extent that the Swedish rate exceeds the foreign rate.
In closing the meeting, Eriksson mentions that Trana is undertaking a comprehensive review of its operations in 2016,
and its objectives include reducing overall tax costs by lowering its effective tax rate and reducing foreign exchange
gains and losses reported on the income statement.
Q5 Q6
Trana Case Scenario
1. Using Exhibits 1, 2, and 3 and Lars’s notes about the US operations, the change in sales reported for the US region (in
SEK millions) explained by the change in the SEK/USD exchange rate in 2015 isclosest to:
A. SEK737.
B. SEK813.
C. SEK1,432.
Trana Case Scenario
1. Using Exhibits 1, 2, and 3 and Lars’s notes about the US operations, the change in sales reported for the US region (in
SEK millions) explained by the change in the SEK/USD exchange rate in 2015 isclosest to:
A. SEK737.
B. SEK813.
C. SEK1,432.
Solution
A is correct. The number of stores in the United States is the same in 2014 and 2015 (80). The average sales per US
store in 2014 is the same as the Swedish stores, and the USD sales are the same in both years. But when sales are
converted into SEK, the values reflect the change in the exchange rate over the period.
Trana Case Scenario
Calculations SEK (millions)

Number of stores in the United States 80
(Exhibit 1)
Average sales / US store in 2014 SEK4,653/99 stores = 47/Store
(same as the Swedish stores in 2014)
Sales / US store (in USD millions) based (SEK47/Store) / (SEK6.350/USD)

onaverage exchange rate in 2014 = USD7.40/Store
Total USD sales (in USD millions) in 2014 80 stores × (USD7.40 / Store)
and 2015 = USD592.13
(same both years in USD)
Total USD sales in 2014 in SEK USD592.13 × (SEK6.350 / USD) = 3,760
Sales in USD in 2015 (the same as 2014), USD592.13 × (SEK7.595 / USD) = 4,497
converted at the 2015 average rate
Increase in sales because of change in exchange rate 737
Trana Case Scenario
2. Using Eriksson’s definition, the organic growth rate in sales per store in the euro zone region between 2014 and
2015 that Lars calculates is closest to:
A. 0%.
B. –6.2%.
C. 10.3%
Trana Case Scenario
2. Using Eriksson’s definition, the organic growth rate in sales per store in the euro zone region between 2014 and
2015 that Lars calculates is closest to:
A. 0%.
B. –6.2%.
C. 10.3%
Solution
B is correct. To reflect the growth in domestic sales per store, it is necessary to eliminate the foreign exchange
effect.
2014 2015
European sales (given) (in millions) SEK18,394 SEK21,640
Exchange rate (average rate used for sales SEK8.555/EUR SEK9.125/EUR
under current method)
Sales EUR2,150 EUR2,372
Number of stores 340 400
Sales/Store EUR6.32/Store EUR5.93/Store
Growth rate (5.93 – 6.32)/6.32 –6.2%
Trana Case Scenario
3. The best estimate of the proportion of Anart’s sales that is reflected in Trana’s consolidated income statement is:
A. 0%.
B. 100%.
C. 80%.
Trana Case Scenario
3. The best estimate of the proportion of Anart’s sales that is reflected in Trana’s consolidated income statement is:
A. 0%.
B. 100%.
C. 80%.
Solution
A is correct. Trana owns 80% of Anart. Because this is a controlling interest, Trana would consolidate Anart into
the group financial statements. Even though Trana owns only 80%, consolidation requires the inclusion of 100% of
the subsidiary’s assets, liabilities, revenues, and expenses (excepting intercompany sales, which are eliminated on
consolidation to prevent double counting). Therefore, because Anart sells all of its production to Trana and Trana’s
other subsidiaries, none of Anart’s sales would be included in the consolidated income statement.
B is incorrect because Even though Trana only owns 80%, consolidation requires 100% inclusion of the subsidiary’s
assets, liabilities, revenues, and expenses. Intercompany sales (here 100%), however, must be eliminated.
C is incorrect because Even though Trana only owns 80%, consolidation requires 100% inclusion of the subsidiary’s
assets, liabilities, revenues, and expenses. Intercompany sales (here 100%), however, must be eliminated.
Trana Case Scenario
4. Which of the following is Lars’s most appropriate answer to Eriksson’s question concerning the accounting method
used for Anart in 2015?
A. No, the current rate method is being used, after restating nonmonetary items for inflation.
B. No, the current rate method is being used, after restating all accounts for the general price index.
C. Yes, the temporal method is being used, as in past years.
Trana Case Scenario
4. Which of the following is Lars’s most appropriate answer to Eriksson’s question concerning the accounting method
used for Anart in 2015?
A. No, the current rate method is being used, after restating nonmonetary items for inflation.
B. No, the current rate method is being used, after restating all accounts for the general price index.
C. Yes, the temporal method is being used, as in past years.
Solution
A is correct. Because Anart is an extension of Trana (Anart sells 100% of its production to the group) its functional
currency would be the Swedish krona, not the local currency, and it would be considered an integrated foreign
operation. As an integrated foreign operation, Trana would normally, and historically, have accounted for Anart using
the temporal method. But the country in which Anart operates is experiencing high inflation; three years (2013–2015)
of rates near 30% would exceed the 100% indicator of hyperinflation. Therefore, under IFRS, the nonmonetary items
must be adjusted for the loss in purchasing power to better reflect economic reality. Note that only the nonmonetary
items are adjusted because monetary ones would already be expressed in the monetary unit current at the balance
sheet date.
B is incorrect because only nonmonetary items are affected by the loss of purchasing power and must be restated.
C is incorrect because now that the high inflation has lasted at least three years it can be considered hyperinflation,
and different translation methods must be used to reflect economic reality.
Trana Case Scenario
5. If the proposed reduction in Swedish tax rates had been in effect in 2015, the increase in Trana’s net profit (in SEK
millions) would have been closest to:
A. SEK31.2.
B. SEK18.6.
C. SEK29.8.
Trana Case Scenario
5. If the proposed reduction in Swedish tax rates had been in effect in 2015, the increase in Trana’s net profit (in SEK
millions) would have been closest to:
A. SEK31.2.
B. SEK18.6.
C. SEK29.8.
Solution
A is correct. The proposed change in Swedish tax rates would have affected the income earned in Sweden (SEK338
before tax) and the pre-tax income earned in the South American subsidiary (SEK227, see calculation in following table)
because the tax rate there is lower than in Sweden and hence subject to tax at Swedish rates. The income earned in tax
jurisdictions with rates higher than Sweden’s (Europe and the United States) are not subject to tax in Sweden and thus
would not have been affected.
Tax Effect as Reported Under Proposal Difference
(22%) (16.5%)
Swedish earnings SEK338 74.4 55.8 SEK18.6
before taxes (EBT)
South American EBT* SEK227 50.0 37.4 SEK12.6
Total SEK31.2
* To calculate EBT, divide net profit of SEK204 by (1 – tax rate): 204/(1 – 0.10) = SEK227.
Trana Case Scenario
6. Which of the following strategies would be most likely to help Trana achieve at least one of the objectives mentioned
by Eriksson for 2016?
A. Raise the price at which Anart sells its goods to other group members
B. Increase the number of stores in the US region
C. Initiate a hedge on the net asset position of the eurozone subsidiary
Trana Case Scenario
6. Which of the following strategies would be most likely to help Trana achieve at least one of the objectives mentioned
by Eriksson for 2016?
A. Raise the price at which Anart sells its goods to other group members
B. Increase the number of stores in the US region
C. Initiate a hedge on the net asset position of the eurozone subsidiary
Solution
A is correct. Anart operates in a South American country with the lowest tax rate of the group—10% versus 25% in the
United States, 30% in the eurozone, and 22% (or 16.5%) in Sweden. If more of the corporate profits are earned by
Anart, the effective tax rate will decrease.
 Anart currently earns a return of 204/4,485 = 4.5%, whereas the overall corporate profit rate is 10.3%
(3,096/30,200).
 Any income taxed in South America would be eligible for a tax credit in Sweden, and Trana would be liable for the
tax difference between the local 10% rate and the rate in Sweden (22% or 16.5%).
 To the extent that taxable income can be diverted from the US or eurozone operations (where the rates are higher
than Sweden’s), it would result in an overall tax saving for Trana.
 By increasing the price at which Anart sells goods to the US and eurozone subsidiaries, it would increase the
taxable income earned in South America and reduce the taxable income (through higher cost of goods sold) in the
United States and the eurozone. Because of the tax treaty with Sweden, there would be no net tax savings on the
goods sold to US and eurozone stores by Anart if the prices change.
Case 6
Rhine Case Scenario
154
Rhine Case Scenario
Claus Petersen, a pension fund equity analyst, is preparing an analysis of Rhine AG for the upcoming quarterly fund
meeting. Rhine is a Germany-based manufacturer that operates three distinct divisions: children’s products (infant car
seats, strollers, cribs, etc.), recreational products (bicycles, bicycle trailers, etc.), and home furnishings (contemporary
furniture). All three divisions sell through retail outlets around the world.
The company has been pursuing an aggressive growth strategy, achieved through both foreign acquisitions and
organic growth. Petersen is interested in determining how well Rhine is allocating its resources between the three
divisions and the effects of the foreign acquisitions on overall performance. Exhibit 1 summarizes selected divisional
and corporate data for 2013 and 2012.
Rhine Case Scenario
EXHIBIT 1
RHINE AG SELECTED DIVISIONAL AND CORPORATE DATA (€ MILLIONS)
Total for Three Recreational

Children’s Products Home Furnishings
Divisions Products
2013 2012 2013 2012 2013 2012 2013 2012

Revenues 2,837.1 2,775.5 1,176.2 1,236.2 1,034.1 930.0 626.8 609.3
Gross profit Q2 621.4 640.8 296.6 337.6 246.0 220.3 78.8 82.9
Operating profit 172.7 219.4 64.7 115.7 72.9 62.2 35.1 41.5
Earnings before taxes (EBT) 136.6 170.0
Net earnings after tax 109.9 132.3
Total assets 2,498.0 2,479.5 1,270.9 1,249.6 961.5 948.5 265.6 281.4
Capital expenditures
Q1
32.7 42.3 22.1 30.0 6.7 8.6 3.9 3.7
Proportion of capital expenditures 100% 100% 67.6% 70.9% 20.5% 20.3% 11.9% 8.7%
Proportion of total assets 100% 100% 50.9% 50.4% 38.5% 38.3% 10.6% 11.3%
Rhine Case Scenario
Petersen’s preferred method to determine which division is becoming less significant over time is to review the
relationship between capital expenditures and total assets by operating division. He plans to base his conclusion on the
assumption that 2013’s investment behavior is representative of future investment patterns.
Petersen knows that revenues in the children’s products division have suffered because of declining birth rates in Europe
and North America, but he believes that if Rhine can maintain the operating margin for this division then overall
company profitability should not be affected.
Q3
Corinna Berg, another analyst with the fund, reminds Petersen that during 2013, the US dollar weakened against the euro
by 4% and that 50% of the sales in the recreational products division are sold in the United States.
Q4
Petersen recalls that some of the recent global expansion was aimed at establishing operations in Ireland because its
statutory corporate tax rate is lower than the German rate of 29.8%. If Petersen assumes that other tax credits were the
same in 2013 as 2012, he can analyze changes in Rhine’s effective tax rate to determine whether the geographic mix of
the company’s profits has changed in 2013.
.
Rhine Case Scenario
Petersen finally examines the company’s liquidity ratios, which are shown in Exhibit 2. Even though the company’s
current and quick ratio have improved, his interpretation of the changes in the company’s cash conversion cycle is
that the company’s liquidity position has deteriorated
EXHIBIT 2 RHINE AG SELECTED RATIOS

Ratio 2013 2012 2011
Current ratio 2.31 2.17 1.16
Quick ratio 1.06 0.89 0.53 Q5
Accounts receivable turnover 5.82 6.08 6.11
Inventory turnover 3.78 3.91 4.09
Accounts payable turnover 5.71 5.78 5.60
Cash conversion cycle 95 days 90 days 84 days
Worried that the balance sheet–based and cash flow–based accruals ratios (not shown) raise some concerns about
the possible use of accruals to manage earnings, Petersen asks Berg for advice on what further type of analysis he
Q6
should do as a follow-up on this issue.
Rhine Case Scenario
1 Using Petersen’s preferred method and 2013 divisional data, the best conclusion Peterson can make about which
division will potentially become less significant in the future is that it will be:
A. children’s products.
B. recreational products.
C. home furnishings.
Rhine Case Scenario
1 Using Petersen’s preferred method and 2013 divisional data, the best conclusion Peterson can make about which
division will potentially become less significant in the future is that it will be:
A. children’s products.
B. recreational products.
C. home furnishings.
Solution
B is correct. Petersen prefers to use the relationship between capital expenditures and total assets by operating division
and thus would use the ratio of capital expenditure proportion to total asset proportion for each division. This ratio for the
recreational products division is less than 1 (see table), indicating that Rhine is allocating a lower proportion of capital
expenditures to that division relative to asset proportions. If this trend continues, the recreational products division will
become less significant over time.
Children’s Recreational Home Total for the
Products Products Furnishings Three
Divisions
Proportion of capital expenditures (Exhibit 1) 67.6% 20.5% 11.9% 100.0%
Proportion of total assets (Exhibit 1) 50.9% 38.5% 10.6% 100.0%
Ratio: Proportion of capital expenditures to proportion of 1.3 0.5 1.1 1.0
total assets
Rhine Case Scenario
2 If the children’s products division had been able to maintain its 2012 operating margin in 2013, the company’s overall
operating margin in 2013, compared to 2012, would have been:
A. higher.
B. the same.
C. lower.
Rhine Case Scenario
2 If the children’s products division had been able to maintain its 2012 operating margin in 2013, the company’s overall
operating margin in 2013, compared to 2012, would have been:
A. higher.
B. the same.
C. lower.
Solution
C is correct. Apply the 2012 operating margin for the children’s products division to the 2013 revenues for the
division to determine what the 2013 overall operating profit margin would have been if the margin had been maintained,
and then compare it with the 2012 overall operating profit margin.
Rhine Case Scenario
Operating margin in children’s products in 2012 = Operating 115.7/1,236.2 9.4%

profit/revenues
Apply the 9.4% margin to 2013 revenues for division 0.094 ×1,176.2 110.6
Increase in 2013 operating profit for division, had the margin 110.6 – 64.7 45.9
been maintained
Revised 2013 company operating profit with increase in 172.7 + 45.9 218.6
children’s products operating profit
Revised 2013 company operating margin 218.6/2,837.1 7.7%
2012 company operating margin 219.4/2,775.5 7.9%
Even if the children’s products division had maintained its operating margin in 2013, the overall company operating
margin would still have decreased slightly (7.7% versus 7.9%).
A is incorrect because if they incorrectly add the full 110.6 to the operating profit (and not just the incremental change)
then it would be higher: (172.7 + 110.6)/2,837.1 = 10%.
B is incorrect because it is not the same
Rhine Case Scenario
3 Which of the following is the most appropriate use of Berg’s reminder about the US dollar versus euro exchange rate in
2013? Peterson should use the information:
A. when evaluating management’s historical performance.
B. to determine the exchange gains or losses included in net income.
C. to confirm that the division’s organic growth was less than 11.2%.
Rhine Case Scenario
3 Which of the following is the most appropriate use of Berg’s reminder about the US dollar versus euro exchange rate in
2013? Peterson should use the information:
A. when evaluating management’s historical performance.
B. to determine the exchange gains or losses included in net income.
C. to confirm that the division’s organic growth was less than 11.2%.
Solution
A is correct. Analysts should consider the foreign currency effect on sales growth for evaluating management’s
historical performance. Foreign currency fluctuations are out of management’s control, so management should not be
held accountable for the fluctuations when their performance is evaluated.
C is incorrect because the unadjusted growth is 11.3%. If the currency devalued on 50% of the sales, then organic growth
must have been greater than 11.3%.
B is incorrect because whether the FX gains/losses are included in net income depends on the type of foreign subsidiary.
The calculation of the FX gains and losses considers more than just the devaluation on sales.
Rhine Case Scenario
4 The best conclusion Petersen can make about the geographic mix of Rhine’s profit in 2013 is that compared with
2012 the mix is:
A. more domestic.
B. more international.
C. about the same.
Rhine Case Scenario
4 The best conclusion Petersen can make about the geographic mix of Rhine’s profit in 2013 is that compared with
2012 the mix is:
A. more domestic.
B. more international.
C. about the same.
Solution
B is correct. The 2013 effective tax rate on earnings is lower than in 2012 (see table), implying that more profits
were earned in a lower tax jurisdiction. The foreign operations are in lower tax regimes, so it is reasonable to conclude
that more of the profits were earned internationally.
(€ millions) 2013 2012
Earnings before taxes 136.6 170.0
Net earnings after tax 109.9 132.3
Income taxes 26.7 37.7
Effective tax rate (Income taxes/EBT) 19.6% 22.2%
Rhine Case Scenario
5 Compared with 2011, the change in which working capital account most likely had the largest effect on Petersen’s
observed deterioration in liquidity?
A. Accounts payable
B. Accounts receivable
C. Inventory
Rhine Case Scenario
5 Compared with 2011, the change in which working capital account most likely had the largest effect on Petersen’s
observed deterioration in liquidity?
A. Accounts payable
B. Accounts receivable
C. Inventory
Solution
C is correct. Petersen interprets that the changes in the cash conversion cycle (CCC) indicate a deterioration in
liquidity. The CCC has increased since 2011, from 84 days to 95 days (see the following table). The working capital
account that had the largest effect on the increase was inventory because the holding period has increased 6.4 days.
2013 2011
Working Capital Turnover Days (365/Turnover) Turnover Days
Account
Accounts receivable 5.82 62.7 6.11 59.8
Inventory 3.78 96.6 4.09 89.2

Accounts payable 5.71 63.9 5.60 65.2
Cash conversion cycle* 95.4 83.8
* CCC = Days in sales + Days in inventory – Days in payables.

Rhine Case Scenario
6 Berg’s best answer to Petersen’s question about further analysis is that he should conduct a:
A. Discounted cash flow analysis.
B. DuPont analysis.
C. Cash flow ratio analysis.
Rhine Case Scenario
6 Berg’s best answer to Petersen’s question about further analysis is that he should conduct a:
A. Discounted cash flow analysis.
B. DuPont analysis.
C. Cash flow ratio analysis.
Solution
C is correct. Concerns about earnings manipulation are best addressed by cash flow ratios, such as operating cash
flow before interest and taxes to operating income.
A is incorrect because cash flow projections would be more useful for determining valuation.
B is incorrect because DuPont provides useful information about the components of a company’s ROE but would not
detect earnings management.
Case 7
Wright Aerospace Case Scenario
172
5.7 Share-based compensation
 简介
cash compensation的处理是比较简单的，通常是发生的时候费用化
share-based compensation的处理是比较难的，主要在于两点：
（1）如果公司股票没有上市，需要对公司股权的价值进行估计
（2）如果share-based compensation是有条件的，往往涉及到在几年内进行摊销
 优势
Provide employees the opportunity to receive stock tied to firm performance
将员工的利益和公司的价值进行捆绑，激励员工
 劣势
managers may have limited influence over the market value 管理层的工作对公司的市场价值影响较小
Lead managers to be risk averse or excessive risk-taking可能导致管理层风险厌恶或风险偏好
May dilute the shareholders’ interests 稀释现有股东收益
 分类
𝑆𝑡𝑜𝑐𝑘 𝑜𝑝𝑡𝑖𝑜𝑛𝑠
𝑒𝑞𝑢𝑖𝑡𝑦 𝑠𝑒𝑡𝑡𝑙𝑒𝑑
𝑆𝑡𝑜𝑐𝑘 𝑔𝑟𝑎𝑛𝑡𝑠
𝑠ℎ𝑎𝑟𝑒 − 𝑏𝑎𝑠𝑒𝑑 𝑐𝑜𝑚𝑝𝑒𝑛𝑠𝑎𝑡𝑖𝑜𝑛
𝑆𝑡𝑜𝑐𝑘 𝑎𝑝𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 𝑟𝑖𝑔ℎ𝑡𝑠
𝑐𝑎𝑠ℎ 𝑠𝑒𝑡𝑡𝑙𝑒𝑑
𝑃ℎ𝑎𝑛𝑡𝑜𝑚 𝑠𝑡𝑜𝑐𝑘𝑠
（1）Stock options 股票期权

记账：每份期权的价值 = fair value on the grant date
期权的份数 = number of options that are expected to vest (vest date就是行权日)
费用需要在grant date和vest date之间进行摊销
确认费用的过程中NI下降，因此RE下降，但是paid in capital增加，所以Equity不变
影响因素：σ ↓，expected term↓，𝑟𝑓 ↓，dividend yield of stock↓
会导致value of option↓，compensation expense ↓
（2）Stock grants 股票授予
分为三类
stock grants without condition 直接授予股票，没有交易限制
restricted stock grants一定期间内授予的股票不可进行交易
performance stock grants 只有当公司的经营情况达到某一指标才会授予股票
（3）Stock appreciation rights 股票增值权
股票增值权是指公司授予激励对象的一种权利，如果公司股价上升，激励对象可通过行权获得相应数量的股价
升值收益，激励对象不用为行权付出现金，行权后获得现金奖励。
（4）Phantom stocks虚拟股票
虚拟股票模式是指公司授予激励对象一种“虚拟”的
股票，激励对象可以据此享受一定数量的分红权和股价升
值收益，多用于非上市公司。
Phil Henderson, an independent equity analyst, is reviewing his file on Wright Aerospace Inc. (WAI) and its 2016
financial results. His goal for today is to examine the events related to WAI’s investments during the year and its
executive compensation plans.
WAI is a designer and manufacturer of executive and regional jets. Based in Kitty Hawk, North Carolina, USA, the
company caters to the corporate market for executive jets and operators of private charters, as well as airlines that
require smaller planes (20–100 seats) for regional routes. WAI prepares its financial statements according to US GAAP.
On 1 January 2016, WAI acquired 20% of the voting shares of Aurora Aerospace Inc. (Aurora). Aurora manufactures
the landing gear used in WAI’s planes. Details about the investment and Aurora are in Exhibit 1.
EXHIBIT 1 INFORMATION ON WAI’S INVESTMENT IN AURORA (ALL AMOUNTS IN US$)
January 1, 2016 Purchases 4 million voting shares (20%) Market price per share: $35.00
Book value of Aurora’s net assets $500 million
Value of Aurora’s unrecorded identifiable intangible $60 million
assets with an estimated useful life of 10 years
Net earnings for 2016 $93.0 million

 During the latter half of 2016 Aurora delivered
landing gear to WAI worth $30 million.
Q1  $15 million worth of the landing gear is still in WAI’s
ending inventory as of 31 December 2016.
 Aurora earned a net profit of $12 million on the
original sale.
Q2
Dividends paid in 2016 $1.20 per share
31 December 2016 Market price per share: $37.60
Q3
During 2016, WAI entered into a contract with a Russian engineering company to build and sell its jets in Russia. WAI
had to agree to both build a second manufacturing facility and assemble the planes in Russia if it wanted to sell jets in
that market. WAI is investing 60% of the capital, but the undertaking will be controlled equally by the two parties.
Q4
The contract also calls for as many of the components as possible to be sourced in Russia, as well as using local labor.
During the first few years, WAI will provide the management personnel and all sales will be in Russia. WAI hopes that
in the future the jets can be sold to European-based customers as well.
Henderson next turns to the executive compensation. He reviews the information in Exhibit 2 from WAI’s MD&A.
Henderson next turns to the executive compensation. He reviews the information in Exhibit 2 from WAI’s MD&A.
EXHIBIT 2 WRIGHT AEROSPACE INC. SELECTED EXCERPTS FROM MANAGEMENT’S DISCUSSION AND
ANALYSIS, 31 DECEMBER 2016 (ALL FIGURES IN US$ THOUSANDS)
1. Executive Compensation – Stock Options
On January 1, 2016, the company granted 250,000 options on its common shares to its top managers. The options have the following
features:
Q5
 The exercise price for all company stock options is the stock price on the date of the grant.
 Options cannot be exercised for four years after the grant date and expire in ten years from the grant date.
 Based on prior experience, it is estimated that options will be exercised, on average, in five years.
 Option prices are estimated using the Black–Scholes model based on assumptions contained in the Notes to the Financial
Statements.
2. Executive Compensation – Stock Awards
 In fiscal year 2017, the company will begin granting employees stock awards (SAs) rather than stock options as part of its
executive compensation plans. SAs are grants that entitle the holder to shares of company stock as the award vests
(normally a four-year period) with the award being based on accounting performance metrics as determined by the
Compensation Committee of the Board of Directors.
To assist him in determining the effect of the option grants in 2016, Henderson collects the stock information and
estimated option prices during 2016 in Exhibit 3.
EXHIBIT 3 WRIGHT AEROSPACE INC. STOCK PRICE AND ESTIMATED OPTION PRICES THROUGHOUT 2016
Date Stock Price Option Price
January 1 $36.00 $8.76
July 1 $42.00 $12.80
December 31 $46.00 $15.56
Average for year $41.34 $12.26
In reviewing the change in the company’s executive compensation, Henderson makes the following three observations:
1. Management will have the same downside risk exposure from the stock awards plan as they currently face with
the stock options plan.
2. Because both the stock awards and stock options have the same vesting period, they will also have the same total
effect on net income.
3. The issuance of new shares under the new stock awards plan should improve the company’s debt/equity ratio. Q6
1 If WAI uses the equity method, the income ($ millions) from its investment in Aurora for 2016 will be closest to:
A. 17.4.
B. 16.2.
C. 18.6.
1 If WAI uses the equity method, the income ($ millions) from its investment in Aurora for 2016 will be closest to:
A. 17.4.
B. 16.2.
C. 18.6.
Solution
B is correct. Investment income using the equity method will include WAI’s share of Aurora’s net income adjusted
for the amortization of the identifiable intangible recognized at acquisition and the unrealized profit in ending inventory.
Calculation of Investment Income
WAI’s share of Aurora’s net income for the year: 20% × $93 million = 18.6
Less amortization of the identifiable intangible: (20% × $60 million)/10 years (1.2)
Less unrealized profit after tax on the unsold landing gear in WAI’s ending inventory. One half (1.2)
of the inventory is unsold, therefore one half of the $12 million profit should not be recognized:
0.5 × $12 million × 20% share
Investment income 16.2
2 If WAI uses the fair value method, the income ($ millions) from its investment in Aurora for 2016 will be closest to:
A. 4.8.
B. 10.4.
C. 15.2.
2 If WAI uses the fair value method, the income ($ millions) from its investment in Aurora for 2016 will be closest to:
A. 4.8.
B. 10.4.
C. 15.2.
Solution
C is correct. US GAAP allows the option of recording an equity method investment at fair value with the gains and
losses going to profit and loss.
Unrealized gain from the change in fair value:
($37.60 – $35.00) × 4 million shares = $10.4
Dividend income:
$1.20/share × 4 million shares = 4.8
Total investment income = $15.2
B is incorrect because it is only the change in FV.
A is incorrect because it is only the dividends.
3 Which of the following methods is the most appropriate way for WAI to account for its undertaking with the Russian
engineering firm to build jets in Russia?
A. Equity
B. Consolidation
C. Fair value
3 Which of the following methods is the most appropriate way for WAI to account for its undertaking with the Russian
engineering firm to build jets in Russia?
A. Equity
B. Consolidation
C. Fair value
Solution
A is correct. Even though WAI is investing 60% of the capital, the arrangement will be considered a joint venture
because it requires that all decisions be made jointly. Under US GAAP, joint ventures must be accounted for using the
equity method.
B is incorrect because even though WAI is investing 60% of the capital, the arrangement will be considered a joint
venture because it requires all decisions be made jointly. Therefore they do not have control and would not consolidate. C
is incorrect because under US GAAP, joint ventures must be accounted for using the equity method.
4 From WAI’s perspective, the Russian ruble is least accurately described as:
A. the local currency of the Russian operation.
B. its presentation currency.
C. the functional currency of the Russian operation.
4 From WAI’s perspective, the Russian ruble is least accurately described as:
A. the local currency of the Russian operation.
B. its presentation currency.
C. the functional currency of the Russian operation.
Solution
B is correct. The local or functional currency of the Russian operation would be the Russian ruble. The sales are
made, initially, in Russia, the components and manufacturing labour will be locally sourced, and Russia is the primary
economic environment of the operation. The presentation currency of WAI would likely be the US dollar.
A is incorrect because the Russian ruble would be the local currency of the Russian operation.
C is incorrect because the ruble is most likely the functional currency of the Russian operation because the sales, costs,
and economic environment are in Russia.
5 From Exhibits 2 and 3, the compensation expense for 2016 arising from the executive stock options granted in 2016
is closest to:
A. $547,500.
B. $766,250.
C. $438,000.
5 From Exhibits 2 and 3, the compensation expense for 2016 arising from the executive stock options granted in 2016
is closest to:
A. $547,500.
B. $766,250.
C. $438,000.
Solution
A is correct. Compensation expense arising from executive stock options is based on the estimated fair value of the
options on the grant date and amortized on a straight-line basis over the service period.
The service period is the period between the grant date and the vesting period.
The vesting date is the first date on which the options can be exercised.
Total compensation expense: 250,000 options × $8.76/option = $2,190,000
Vesting period 4 years
Annual compensation expense $2,190,000/4 years = $547,500
6 Which of Henderson’s observations about the new executive compensation plan is most accurate?
A. 1
B. 2
C. 3
6 Which of Henderson’s observations about the new executive compensation plan is most accurate?
A. 1
B. 2
C. 3
Solution
A is correct.
Observation 1 Correct The downside risk is the same under both plans, namely zero: management is not penalized if the
share price falls or if the accounting metrics are missed; they simply don’t receive a bonus.
Observation 2 Incorrect Although the vesting period for both plans is the same, the expenses will differ because the total
amount to be expensed is determined differently under stock options and stock grants. The
expense under the current option plan is based on the estimated fair value of the option, but the
expense under the proposed stock grant plan is based on the actual current share price.
Observation 3 Incorrect The new stock awards plan will have no effect on the debt to equity ratio as there will be no
change in equity: retained earnings will be decreased by the amount of the expense and paid-in
capital increased by an equivalent amount.
Case 8
Silver Maple College Case Scenario
193
Anish Shah is doing a credit analysis on Silver Maple College (SMC), a mid-sized private university seeking to place a
bond issue to finance a new sports facility on campus. Today, Shah is interested in determining the full extent of SMC’s
obligations and its ability to support those obligations from operating cash flows. SMC is established as a not-for-profit
organization and prepares its financial statements using IFRS (International Financial Reporting Standards).
Shah starts his analysis by looking at SMC’s post-employment plans. He has found the following description of the
plans offered (Exhibit 1) and has prepared summary information about the plans from the university’s 2015 notes to the
financial statements (Exhibits 2, 3, and 4). To assess the long-term credit risk of SMC, Shah wants to determine the
potential risk exposure presented from each post-employment plan and the associated future cash flows expected as
well as the current level of funding for each plan.
EXHIBIT 1
DESCRIPTION OF POST-EMPLOYMENT PLANS AT SILVER MAPLE COLLEGE (SMC)
Q1
Pension Plan A:
All employees who started employment with the university before 1 January 2012 are eligible to be members of
this plan. Employee contributions are 5% of annual salary. The benefits paid on retirement are a lifetime annuity of
2% × Number of years of service × Highest average salary measured over a five-year period during service.
Pension Plan B:
All employees who started employment with the university on or after 1 January 2012 are eligible to be members
of this plan. Employee contributions are 5% of salary and are matched by equivalent annual contributions by SMC.
The combined contributions are accumulated in the plan’s fund based on asset allocation options selected by the
employee. Upon retirement, the accumulated amount per employee is available for the retiree to purchase a life
annuity or make other investment choices.
Health Care Plan:
All employees of the university are eligible to be members of this plan. The plan entitles employees to purchase Q2
supplemental health coverage, after retirement, up to a maximum insurance premium of $5,000 per year. No
employee contribution is required.
Upon studying the information in Exhibits 2 and 3 on SMC’s health care plan, Lucy Zhang, Shah’s assistant, asks him
why the plan is unfunded.
EXHIBIT 2 POST-EMPLOYMENT PLAN ASSETS ($ THOUSANDS)
31 December 2015
Pension Plan A Health Care Plan
Fair value, beginning of year 40,900 0
Interest income on plan assets 1,636
Re-measurement gains recognized in 1,841
other comprehensive income
Employer contribution 3,150 950
Participant contribution 1,250
Benefits paid (2,080) (950)
Fair value, end of year 46,697 0
Total expense under Pension Plan B was $2,400,000, and employer contributions made under that plan in 2015 were
$2,750,000.
Reviewing the present value of the defined obligations (Exhibit 3), Shah notices that SMC has made changes in
underlying assumptions of the plans. He instructs Zhang to prepare an analysis of the changes in each assumption and
its impact on the obligation.
Zhang asks Shah, “Where will I find the information for that analysis?” Q3
EXHIBIT 3 PRESENT VALUE OF THE DEFINED OBLIGATIONS ($ THOUSANDS)

31 December 2015
Balance, beginning of year 58,700 6,900
Current service cost 1,850 300
Interest cost 2,348 276
Participant contributions 1,250 0
Benefits paid (2,080) (950) Q4
Re-measurement losses recognized in other comprehensive income 3,460 2,400
because of changes in assumptions
Balance, end of year 65,528 8,926
EXHIBIT 4 POST-EMPLOYMENT PLAN EXPENSES AND OTHER INFORMATION ($ THOUSANDS)
31 December 2015
Current service cost 1,850 300
Net interest expense 712 276
Net retirement expense for the year 2,562 576
Actual return on plan assets 3,477 0
Shah starts his cash flow analysis by determining the total cash outflow from the post-employment plans for SMC
in 2015. He explains to Zhang that from an economic perspective, sometimes a portion of a company’s
contribution to a plan should be considered similar to a principal repayment and not included in cash from
operations. He intends to make this adjustment if appropriate. Q5
Q6
Shah’s credit rating will also consider the quality of SMC’s cash flows. With the planned issuance of a bond, Shah is
concerned that attempts may have been made by SMC to increase cash flow from operations. He decides to use a
conceptual framework to assess the quality of the financial reports. He starts by reviewing the statement of cash flows
and notes that SMCs principal sources of operating cash inflows arise from tuition fees, investment income from the
school’s large endowment fund, and in 2015, the receipt of a significant donation from a graduate in return for the
naming rights to the proposed new sports facility. He also notes that investment income was classified as an investing
activity in the previous years’ financial statements, which were not restated.
1 Which of the three post-retirement plans should be of the greatest concern to Shah in assessing the long-term credit
risk of SMC?
A. Health Care Plan
B. Pension Plan A
C. Pension Plan B
1 Which of the three post-retirement plans should be of the greatest concern to Shah in assessing the long-term credit
risk of SMC?
A. Health Care Plan
B. Pension Plan A
C. Pension Plan B
Solution
B is correct. Pension Plan A is a defined-benefit plan and possesses the greatest risk to SMC because the university will
have to make up any shortfall in the promised benefits of the plan. Therefore, it should be of the greatest concern to
Shah because the duration and amount of future cash flows required as benefit payments are very difficult to forecast
and the plan is currently underfunded (using Exhibits 2 and 3: PVBO – Plan assets = $65,528 – $46,697 = $18,831).
Although the Health Care Plan is also a form of defined-benefit plan, the future annual benefit cash outflows are capped
(at $5,000 per employee), and the potential outlay per employee is much smaller than the defined benefit plan (Plan A).
Pension Plan B is a defined-contribution plan, and the cash outflows for SMC are predictable and limited to its annual
contributions.
A is incorrect because although the Health Care Plan is also a form of defined-benefit the future benefit cash outflows
are capped and the potential outlay per employee much smaller than the defined-benefit plan (Plan A).
C is incorrect because pension Plan B is a defined-contribution plan, and the cash outflows for SMC are predictable and
limited to its annual contributions.
2 The least accurate explanation that Shah can give to Zhang’s question about the funded status of the Health Care
Plan is that:
A. the associated costs relate to future periods.
B. the plan could be eliminated if the costs become a burden.
C. funding is not normally required by government regulation.
2 The least accurate explanation that Shah can give to Zhang’s question about the funded status of the Health Care
Plan is that:
A. the associated costs relate to future periods.
B. the plan could be eliminated if the costs become a burden.
C. funding is not normally required by government regulation.
Solution
A is correct. The future benefits of the Health Care Plan are costs of current employee service, not of future
periods, and therefore, they might be expected to be funded. However, companies are not normally required by
regulation to pre-fund plans involving other post-employment benefits, and therefore, they do not. It is possible that
the plan could be eliminated if the costs become burdensome and the company would prefer to use those assets for
current operations.
C is incorrect because it is true that the company could cancel those plans as they are usually optional and hence they
would not want to pre-fund them and lose access to those funds now.
B is incorrect because this is true—those optional plans are not usually regulated by governments.
3 Shah’s best answer to Zhang’s question on where to find the information for the analysis of Exhibit 3 is in the:
A. notes to the financial statements.
B. university’s pension plan documents.
C. management discussion and analysis.
3 Shah’s best answer to Zhang’s question on where to find the information for the analysis of Exhibit 3 is in the:
A. notes to the financial statements.
B. university’s pension plan documents.
C. management discussion and analysis.
Solution
A is correct. Disclosures about pensions and post-employment benefits, including actuarial assumptions, are
normally disclosed in the notes to the financial statements.
B is incorrect because the pension plan documents would define the terms and benefits but not the assumptions used to
value the assets and liabilities.
C is incorrect because although many risks are discussed in the MD&A, the actuarial assumptions are not one of the
required disclosures.
4 In 2015, SMC’s total cash outflow related to post-employment costs (in thousands) is closest to:
A. $5,780.
B. $4,100.
C. $6,850.
4 In 2015, SMC’s total cash outflow related to post-employment costs (in thousands) is closest to:
A. $5,780.
B. $4,100.
C. $6,850.
Solution
C is correct. The total cash outflow is the sum of the contributions made by SMC for all three plans:
Source
Pension Plan A $3,150 Exhibit 2: Employer contributions
Health Care Plan 950 Exhibit 2: Employer contributions
Pension Plan B 2,750 Exhibit 4: Employer contributions
Total cash outflow $6,850
5 If Shah adopts the economic perspective (versus the traditional approach for determining cash from operations) as
explained to Zhang for Pension Plan A, the cash from operations will most likely be:
A. higher by $588.
B. unchanged.
C. higher by $1,838.
5 If Shah adopts the economic perspective (versus the traditional approach for determining cash from operations) as
explained to Zhang for Pension Plan A, the cash from operations will most likely be:
A. higher by $588.
B. unchanged.
C. higher by $1,838.
Solution
A is correct. From an economic perspective, if the sponsoring company’s contributions exceed the total pension costs
for the period, it can be viewed as a reduction in pension obligation, similar to a principal payment on a loan. Because
the university is a not-for-profit organization, there are no tax consequences to consider.
2015 ($ thousands)
University contributions (Exhibit 2) 3,150
Total pension expense (Exhibit 4) 2,562
Excess payment over expense 588
Because the contributions exceed the expense, the $588,000 excess paid should be reclassified from cash from operations
to cash from financing activities. Therefore, cash from operations will increase because of the lower amount classified in
operations.
解析
DB pension plan中如何调整现金流
 contribution > total periodic pension costs  相当于prepayment
CFO + (Contribution − TPPC) × (1 − t)
CFF − (Contribution − TPPC) × (1 − t)
 contribution < total periodic pension expenses  相当于a source of borrowing
CFO − (TPPC − Contribution ) × (1 − t)
CFF + (TPPC − Contribution ) × (1 − t)
total periodic pension cost TPPC

total periodic pension cost = employer contributions - ∆ funded status
total periodic pension cost = current service cost + interest cost - actual return on plan assets +/ - actuarial
losses/gains due to changes in assumptions affecting PBO + past service cost
6 Based on his review of the statement of cash flows and the classification of investment income, themost appropriate
conclusion Shah can reach on his assessment of the quality of SMC’s financial report is that the report is:
A. within GAAP (generally accepted accounting principles) but contains biased choices.
B. non-compliant accounting.
C. GAAP and decision useful.
6 Based on his review of the statement of cash flows and the classification of investment income, themost appropriate
conclusion Shah can reach on his assessment of the quality of SMC’s financial report is that the report is:
A. within GAAP (generally accepted accounting principles) but contains biased choices.
B. non-compliant accounting.
C. GAAP and decision useful.
Solution
A is correct. SMC follows IFRS, which allows investment income to be classified as either an operating activity or
an investing activity; therefore, the choice is GAAP compliant. But the change in classification could be considered a
biased, or opportunistic, choice if the university were trying to increase its cash flow from operations in a year when it
was issuing debt. The fact that the previous years were not restated would not be very decision useful.
B is incorrect because SMC follows IFRS which allows investment income to be classified as either an operating
activity or an investing activity, therefore the choice is GAAP compliant.
C is incorrect because SMC follows IFRS, which allows investment income to be classified as either an operating
activity or an investing activity, therefore the choice is GAAP compliant. But the change in classification could be
considered a biased choice if the university was trying to increase its cash flow operations in a year when it was issuing
debt. The fact that the previous years were not restated would not be very decision useful.
解析：GAAP体系下的分类
Inflows Outflows 说明
Cash collected from customers Cash paid to employees and suppliers 销售商品&购进原材料
Sale proceeds from trading securities Acquisition of trading securities 买卖trading security
CFO
Interest received Interest paid 支付&收到利息
Dividend received 收到股息
Taxes paid 支付税收
Sale proceeds from fixed assets Acquisition of fixed assets 买卖固定资产
CFI Acquisition of debt & 股&债的投资
Sale proceeds from debt & equity investments
equity investments 不包括trading security
Principal received from loans made to others Loans made to others 发放贷款&收到还本
Principal amounts of debt issued Principal paid on debt【本金！利息是CFO】借钱&还钱
CFF
Proceeds from issuing stocks Payments to reacquire stock 发股&回购股票
Dividends paid to shareholders 发dividend
解析： IFRS和GAAP的差别
Items U.S. GAAP IFRS

Interest received CFO CFO or CFI
Interest paid CFO CFO or CFF
Dividends received CFO CFO or CFI
Dividends paid CFF CFO or CFF
Taxes paid CFO CFO, CFI or CFF
Bank overdrafts CFF Cash equivalents
Case 9
Austell Industries Case Scenario
215
5.3 DB pension plan funded status
对于DB plan，企业因退休金所产生的负债为PBO，企业为支付养老金进行的储存是Plan assets，IFRS和GAAP均要
求对于DB plan汇报net金额，即funded status
funded status = fair value of plan assets – PBO
如果fair value of plan assets > PBO，叫做overfunded， DB plan体现为net assets
如果fair value of plan assets < PBO，叫做underfunded， DB plan体现为net liabilities
需要注意的是，当DB plan为overfunded的情况时，汇报的net assets是有ceiling的。
如果计算出的net assets of DB plan > ceiling，则在BS报表中列示= ceiling
如果计算出的net assets of DB plan < ceiling，则在BS报表中列示= net assets of DB plan
5.3 DB pension plan funded status
5.4 Periodic pension cost
Gordon Rowland, a non-executive (independent) director of Austell Industries PLC, is reviewing information related to
the company’s executive compensation prior to an upcoming meeting of the Remuneration Committee of the Board.
Austell is a large public company with revenues of approximately £8,500 million, trading on the London Stock Exchange.
Austell prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) and has a
December 31 year-end.
The existing executive remuneration has four components:
1. fixed compensation that includes base salary and benefits
2. short-term performance-linked bonus
3. long-term performance-linked incentives, and
4. post-employment benefits.
The purpose of the upcoming meeting is to approve changes to the long-term incentive plan (LTIP) and review the
policies and performance related to the post-employment benefits plans.
The current LTIP provides for management to receive options, as determined by the Board, on ordinary (common) shares.
The exercise price of the options is 10% above the market price of the shares on the grant date, and the options require a
service period of 6 years after the grant date before vesting.
Q1
The two proposed changes to the LTIP are as follows:
1. The company would have to meet certain financial performance metrics, in addition to the current conditions, before
the options could be exercised. The proposed performance metrics relate to earnings before interest, tax, depreciation
and amortization (EBITDA) and a target growth in earnings per share.
2. The assumptions used in the application of the option pricing model used to value the stock options were to be
updated. These assumptions are reviewed every three years, based on economic factors and share price history. The
company currently uses the Black–Scholes model to determine the fair value of granted stock options, and Exhibit 1
contains the current and proposed assumptions.
EXHIBIT 1 INPUT ASSUMPTIONS USED BY AUSTELL INDUSTRIES PLC IN THE VALUATION OF STOCK OPTIONS
USING BLACK–SCHOLES MODEL
Current Assumptions Proposed Assumptions
Risk-free rate 5.0% 4.5%
Volatility 20% 18%
Expected life of options 6 years 6 years Q2
Dividend yield 4% 3.5%
Rowland reviews the information in Exhibit 2 concerning the stock options granted this year under the LTIP.
EXHIBIT 2 STOCK OPTION INFORMATION FOR AUSTELL INDUSTRIES PLC FOR 2014
Number of Options Weighted Average Exercise Price

Balance, start of year 3,666,500 £3.06
Granted during the year 872,000 £3.30
Q3
Exercised during the year –278,400 £2.88
Forfeited during the year –123,700 £2.96
Balance, end of year 4,136,400 £3.13
Exercisable at end of the year 827,280 £2.90
All option grants in 2014 were made on 1 July 2014. The market price of the shares at key dates during the year and the
fair value of stock options on those dates are shown in Exhibit 3.
EXHIBIT 3
SHARE PRICES AND OPTION VALUES IN 2014
Share Price Option Fair Value
January 1, 2014 £2.85 £0.370
July 1, 2014 £3.00 £0.390
December 31, 2014 £3.06 £0.400
Average for 2014 £2.97 £0.386
Austell Industries Case Scenario Q5
Rowland now turns his attention to the information provided about the company pension plan. Increasing pension costs
have been a concern for several years. The increasing pension costs combined with the impact on pension assets from
poor investment performance had resulted in a funding deficit in the plan during 2014. In an attempt to better control
pension costs, Austell had made the following changes to the plan over the past two years:
 During 2013 the company had changed the early retirement benefits for members who joined the plan before 2000.
 During 2014 Austell capped the salary increases that were eligible for pensionable benefits to 1%.
These changes were reported as plan amendments in the year made. Information concerning the company’s pension plan
as of 31 December 2014 is shown in Exhibit 4. Rowland wanted to review the pension expense, cash flows, and the
plan’s funding position. He was also aware that accounting policies allowed for some pension related costs to be
smoothed and was concerned about whether the poor fund performance was appropriately reflected in the amounts
recorded for the year.
EXHIBIT 4 AUSTELL PENSION PLAN INFORMATION, 31 DECEMBER 2014 (VALUES IN £MILLIONS)
2014 2013
Employer contributions 74 89.0
Employee contributions 1.5 1.0
Current service cost 57.4 85.0

Plan amendments (189.0) (78.4)
Actuarial gain 274.7 817.0 Q4
Plan assets at start of year 4,038.00 4,182.00

Plan assets at end of year 3,307.50 4,038.00
Q6
Benefit obligation at start of year 3,651.20 4,408.60
Benefit obligation at end of year 3,432.30 3,651.20
Actual return on plan assets –18.6% –1.4%

Expected return on plan assets 7.2% 6.6%
Discount rate used to estimate plan liabilities 6.6% 5.2%
1. Which of the following statements regarding the first proposed change for the LTIP is mostaccurate? The proposed
change will:
A. result in the expense being recognized at the end of the service period when the performance metrics become known.
B. no longer require the use of an option pricing model to value the compensation expense.
C. increase the incentive for management to intervene in the external financial reporting process.
1. Which of the following statements regarding the first proposed change for the LTIP is mostaccurate? The proposed
change will:
A. result in the expense being recognized at the end of the service period when the performance metrics become known.
B. no longer require the use of an option pricing model to value the compensation expense.
C. increase the incentive for management to intervene in the external financial reporting process.
Solution
C is correct. The change requires certain metrics to be met before the option can be exercised and therefore introduces
the potential for management to select accounting policies or estimates that may increase the metric and hence increase
their compensation. The change does not alter the fact that the compensation is based on the option’s value, thereby
necessitating the use of an option pricing model. The expense is to be recognized over the estimated service period.
A is incorrect because the expense is allocated over the expected service period (as opposed to the service period when
vesting is unconditional).
B is incorrect because the change still requires the use of an option pricing model.
2. In the second proposed change for the LTIP, which individual change in the assumptions summarized in Exhibit 1
will most likely result in an increase in compensation expense? The change in the:
A. dividend yield.
B. risk-free rate.
C. volatility.
2. In the second proposed change for the LTIP, which individual change in the assumptions summarized in Exhibit 1
will most likely result in an increase in compensation expense? The change in the:
A. dividend yield.
B. risk-free rate.
C. volatility.
Solution
A is correct. A decrease in dividend yield increases the estimated fair value of a call option when using the Black–
Scholes model and hence would increase the related compensation expense.
B is incorrect because a decrease in the risk-free rate decreases the fair value of an option and would therefore
decrease the compensation expense.
C is incorrect because a decrease in volatility decreases the fair value of an option and would therefore decrease the
compensation expense.
4. The portion of the compensation expense related to the stock option component of the LTIP awarded in 2014
is closest to:
A. £56,680.
B. £66,816.
C. £28,340.
3. The portion of the compensation expense related to the stock option component of the LTIP awarded in 2014
is closest to:
A. £56,680.
B. £66,816.
C. £28,340.
Solution
C is correct. The expense for the year = Options granted × Option price on grant date/6-year service period, but
only for half the year (1 July to 31 December).
The expense for the year = 872,000 × £0.390/6 × 0.5 = £28,340
A is incorrect because it forgets to only take half the year: 872,000 × £0.39 × 1/6 = £56,680.
B is incorrect because it uses the number of options exercised during the year × exercise price × half year: 278,400 ×
£2.88/6 × 0.5 = £66,816.
4. The benefits paid (in millions) from Austell’s pension plan in 2014 is closest to:
A. £55.0.
B. £53.5.
C. £74.0.
4. The benefits paid (in millions) from Austell’s pension plan in 2014 is closest to:
A. £55.0.
B. £53.5.
C. £74.0.
Solution
A is correct. Benefits paid can be determined either from focusing on the change in pension plan assets or from the
change in the benefit obligation over the year, as follows:
(£ millions) Calculations
From the change in plan assets:
Assets at start of year £4,038.0
Actual return on assets –751.0 –18.6% × 4,038.0
Employer contributions 74
Employee contributions 1.5
Benefits paid –X To be solved for
Asset at end of year £3,307.5
Solve for X: £55.0
Alternatively, from the change in the benefit obligation:

Benefit obligation at start of year £3,651.2
Current service cost 57.4
Plan amendments –189.0
Interest cost 240.9 6.6% × 3,651.2
Employee contributions 1.5
Benefits paid –X To be solved for
Actuarial gain –274.7
Benefit obligation at end of year £3,432.3
Solve for X: £55.0
5. The poor investment performance of the pension plan in 2014 most likely caused the periodic pension cost (in £
millions) reported in the income statement to be:
A. unaffected.
B. higher by £460.
C. higher by £751.
5. The poor investment performance of the pension plan in 2014 most likely caused the periodic pension cost (in £
millions) reported in the income statement to be:
A. unaffected.
B. higher by £460.
C. higher by £751.
Solution
A is correct. Under IFRS, the components of periodic pension cost that are reported in P&L (income statement)
are the service cost and the net interest expense or income (calculated by multiplying the net pension liability or net
pension asset by the discount rate used to measure the pension liability). The actual return (negative in 2014) has no
effect on the periodic pension cost reported in P&L. The actual return on plan assets will affect the net return on plan
assets (part of the re-measurement component), which is recognized in OCI and not subsequently amortized to P&L.
C is incorrect because this is the amount of the actual negative ROA and assumes that amount is used in the
calculation of pension expense: –18.6% × 4,038 = –751.
B is incorrect because the difference between actual and expected: –18.6% + 7.2% × 4,038 = –460.
6. From an economic perspective, in 2014, the most appropriate interpretation of Austell’s contribution to the pension
plan relative to its total pension cost (excluding income tax effects, in £millions) results in a(n):
A. operating cash outflow of £585.6.
B. financing cash inflow of £511.6.
C. investing cash inflow of £74.
6. From an economic perspective, in 2014, the most appropriate interpretation of Austell’s contribution to the pension
plan relative to its total pension cost (excluding income tax effects, in £millions) results in a(n):
A. operating cash outflow of £585.6.
B. financing cash inflow of £511.6.
C. investing cash inflow of £74.
Solution
B is correct. The company’s contribution of £74 is £511.6 less than the total periodic pension cost of £585.6, and
from an economic perspective, can be thought of as a source of financing (borrowing).
End of year net pension asset (liability) (£124.8) £3,307.5 – £3,432.3
Start of year net pension asset £386.8 £4,038.0 – £3,651.2

Net change in funding status over year –£511.6
Less Employer contribution –£74.0

Total periodic pension cost –£585.6
Case 10
AdOre Ventures Case Scenario
238
Albert Strong, a junior metals analyst at Goodson Funds, was reviewing the history of AdOre Ventures, a Peruvian
gold mining company. Cupernico, Inc., Strawberry Mines Corp., and Glace, S.A., were global gold mining
companies. Cupernico and Strawberry were both headquartered in the United States and complied with US GAAP.
Glace was a French company that followed International Financial Reporting Standards (IFRS). All companies’
fiscal years ended on 31 December.
On 1 January 2011, the three companies combined their Peruvian operations into a separate company, AdOre
Ventures. The fair value of assets contributed by each company was in proportion to its ownership interest as shown
in Exhibit 1. Cupernico was considered to have control over AdOre because of its ownership interest and
representation on AdOre’s board of directors. Both Strawberry Mines and Glace were considered to have significant
influence. At the time the operations were combined, the fair value of each company’s assets was equal to their
respective reported (book) values.
Q1
EXHIBIT 1
ADORE OWNERSHIP STRUCTURE
Cupernico: 50%
Strawberry Mines: 32%
Glace: 18%
AdOre Ventures Case Scenario Q5
On 1 January 2012, Glace acquired Strawberry Mines. Given AdOre’s relatively brief operating history, Glace
determined that the fair value of assets remained equal to the value at which they were carried on AdOre’s books.
Because the merger left Glace and Cupernico with equal economic interests in AdOre, the two companies negotiated a
joint control agreement.
Selected financial data related to AdOre are presented in Exhibit 2. Because gold prices are set globally in US dollars,
AdOre’s functional currency is the US dollar.
EXHIBIT 2 SELECTED FINANCIAL RESULTS FOR ADORE ($ THOUSANDS)
2012 2011
Revenue 103,448 63,546
Q2
Net income 30,000 18,182
Annual dividend (paid on 31 December) 16,000 10,000
Q3
Cash flow from operations 35,466 21,818
Long-term debt (31 December) 40,000 40,000
Beginning equity (1 January) 47,378 39,196
Q4
Ending equity (31 December) 61,378 47,378

Strong wondered how the 2012 merger might have affected Cupernico’s financial statements and ratios. He compared
its actual ratios with what they would have been had the merger not taken place.
On 1 January 2013, anticipating much higher gold prices in the future, Kinkaid Gold purchased 80% of AdOre’s
shares in exchange for its own shares. Kinkaid Gold complies with IFRS. It recognizes goodwill using the partial
goodwill method. Details of the acquisition are shown in Exhibit 3.
Q6
EXHIBIT 3 DETAILS OF ACQUISITION OF ADORE BY KINKAID GOLD, 1 JANUARY 2013
Percent of shares acquired 80%
Consideration paid ($ thousands) $54,400
Fair value of AdOre’s net assets ($ thousands) $68,000
Fair value of AdOre’s identifiable net assets ($ thousands) $65,000
Book value of AdOre’s net assets ($ thousands) $61,378
Note: The difference between the fair value and book value of AdOre’s net assets is because of its inventory being
understated as well as a patent for a new gold extraction technique for low-grade ores.
In mid-August 2013, the price of gold had fallen almost 25% since the beginning of the year.
Goodson Funds’ gold forecast was for prices to fall another 10% by the end of 2013, but they expected a full
recovery and substantially higher prices by the end of 2015.
1 For the year 2011, the most appropriate method for Glace to use to account for its investment in AdOre was:
A. fair value through profit and loss.
B. available for sale.
C. the equity method.
1 For the year 2011, the most appropriate method for Glace to use to account for its investment in AdOre was:
A. fair value through profit and loss.
B. available for sale.
C. the equity method.
Solution
C is correct. In 2011, although Glace had less than 20% ownership interest in AdOre, it was considered to have
significant influence, which required the equity method.
A is incorrect because in 2011 Glace was considered to have significant influence (even though less than 20%
ownership) and had to use the equity method.
B is incorrect because in 2011 Glace was considered to have significant influence (even though less than 20%
ownership) and had to use the equity method.
2 On its 2011 income statement, the amount of AdOre’s net income that Strawberry Mines reported was closest to
(in thousands):
A. $2,618.
B. $5,818.
C. $3,200.
2 On its 2011 income statement, the amount of AdOre’s net income that Strawberry Mines reported was closest to
(in thousands):
A. $2,618.
B. $5,818.
C. $3,200.
Solution
B is correct. In 2011, Strawberry Mines used the equity method because it exercised significant influence and
owned 32% of AdOre. Under the equity method, it should recognize its percentage share (32% × 18,182 = 5,818.2)
of AdOre’s net income.
A is incorrect because it represents the adjustment to the carrying value of the investment in AdOre: 32% ×($18,182
– $10,000) = $2,618 (share of income – share of dividends).
C is incorrect because this is Strawberry’s share of dividends (32%× 10,000 = $3,200) rather than net income, and
would only be reported as income if a passive asset.
3 In 2011, Strawberry Mines’ share of the dividends received from AdOre was most likely reported as a(n):
A. addition to net income.
B. deduction from its investment in AdOre.
C. addition to other comprehensive income.
3 In 2011, Strawberry Mines’ share of the dividends received from AdOre was most likely reported as a(n):
A. addition to net income.
B. deduction from its investment in AdOre.
C. addition to other comprehensive income.
Solution
B is correct. In 2011, Strawberry Mines owned 32% of AdOre's stock and had significant influence; therefore, it
should have used the equity method. It will not report any dividends received from AdOre as income but would have
deducted the dividends received from the carrying value of the investment in AdOre.
A is incorrect because this would only apply if classified as a financial asset where ownership is less than 20% and no
significant influence exists.
C is incorrect because dividends from subsidiaries are not one of the items that affect this account.
4 Which of the following amounts (in thousands) from AdOre would most likely be included on the 2011 financial
statements of Cupernico?
A. $31,773 of revenue
B. $23,689 of equity
C. $40,000 of long-term debt
4 Which of the following amounts (in thousands) from AdOre would most likely be included on the 2011 financial
statements of Cupernico?
A. $31,773 of revenue
B. $23,689 of equity
C. $40,000 of long-term debt
Solution
C is correct. In 2011, Cupernico had a controlling interest in AdOre and would have used the consolidation method.
In consolidation, companies combine all of the assets, liabilities, revenues, and expenses of subsidiaries with the parent.
Therefore, Cupernico would have included $40,000 (100%) of AdOre's long-term debt.
A is incorrect because it is only 50% of AdOre’s revenue: 50% × $63,546= $31,773; Cupernico should include 100% of
the revenue under consolidation.
B is incorrect because it represents 50% of AdOre’s end equity: 50% × $47,378 = $23,689
5 The best conclusion Strong can make about the effect of the ownership change of AdOre in 2012 was Cupernico
reporting a:
A. higher return on equity (ROE).
B. lower return on assets (ROA).
C. lower net profit margin.
5 The best conclusion Strong can make about the effect of the ownership change of AdOre in 2012 was Cupernico
reporting a:
A. higher return on equity (ROE).
B. lower return on assets (ROA).
C. lower net profit margin.
Solution
A is correct. In 2012, Cupernico and Glace shared joint control. Cupernico must use the equity method under US
GAAP; if the ownership structure had not changed, Cupernico would have continued to use the consolidation method.
Equity Method (Joint Control) Consolidation (Control) Comparison
Net income (NI) Includes 50% of AdOre’s net income Once non-controlling interest is Same
as investment income deducted, the net effect is that 50% of
AdOre’s net income is included
Revenues Includes only Cupernico’s Includes 100% of AdOre’s plus Lower under equity
Cupernico’s
Net profit margin = Higher under equity method
NI/Revenues because of lower revenues
(after the change)
Equity Includes only Cupernico’s Includes Cupernico’s plus the non- Lower under equity
controlling interest of AdOre
ROE = NI/Equity Higher under equity method
because of lower equity
Total assets Includes 50% of net assets of AdOre Includes 100% of AdOre’s assets Lower under equity
as Investment added to Cupernico’s
ROA = NI/Assets Higher under equity method
because of lower assets
6 The value of the goodwill recognized by Kinkaid Gold in its 2013 acquisition of AdOre is closest to (in $ thousands):
A. 3,000.
B. 5,298.
C. 2,400.
6 The value of the goodwill recognized by Kinkaid Gold in its 2013 acquisition of AdOre is closest to (in $ thousands):
A. 3,000.
B. 5,298.
C. 2,400.
Solution
C is correct.
Fair value of consideration for 80% $54,400

Minus 80% of fair value of identifiable net assets 52,000 80%× $65,000
Goodwill, under partial goodwill method $2,400
Case 11
Cooper Creek Cable Case Scenario
255
Hannah Treadway is an analyst at Knight Investment Management (Knight). Knight holds Cooper Creek Cable
Limited (CCCL) as part of its AFE (Australian and Far East) investment portfolio. CCCL is a diversified cable and
communications company operating in Western Australia. The company consists of three divisions:
Cable: Provides subscription television services and high speed internet to residential customers.
Media: Owns and operates a group of radio stations and publishes several magazines.
Wireless: Is engaged in wireless voice and data communications services.
Treadway is just starting her annual review of the company based on its most recent financial statements, excerpts of
which are in Exhibits 1 and 2. The financial statements for CCCL are prepared in accordance with Australian
Accounting Standards (AASB), which comply with IFRS. All figures are in Australian dollars ($).
EXHIBIT 1 COOPER CREEK CABLE LIMITED STATEMENT OF EARNINGS FOR YEARS ENDING
DECEMBER 31 (ALL FIGURES IN $ THOUSANDS)
2016 2015
Revenue 711,200 674,600
Programming and communication expenses 312,900 317,000
Gross margin 398,300 357,600
Depreciation expense 98,750 78,650
Amortization of intangibles 7,250 8,150
Reversal of impairment loss –12,500
Gain on sale of assets held for sale –14,400
Operating costs 185,900 173,000
Interest expense 64,100 65,900
Income from investments in associates 1,200 850
Profit before tax 70,400 32,750
Tax benefit (expense) 17,600 –8,187
Net profit for the year 88,000 24,563
EXHIBIT 2
COOPER CREEK CABLE LIMITED BALANCE SHEET AS OF DECEMBER 31 (ALL FIGURES IN $ THOUSANDS)
2016 2015 2016 2015
Q1
Cash 95,600 74,400 Trade payables 92,100 104,200
Accounts receivable, net 35,700 33,500 Interest bearing loans 49,700
Assets held for sale 23,500 Short-term unearned revenue 12,500 21,250
Total current assets 131,300 131,400 Other liabilities 23,800 23,000
Investments in associates 42,700 42,300 Total current Liabilities 178,100 148,450
Capital assets, net 221,800 241,200 Interest bearing debt 703,800 814,300
Intangible assets, net 43,250 24,500 Long-term unearned revenue 6,500 13,500
Goodwill 11,000 6,500 Total liabilities 888,400 976,250
Deferred tax assets 185,500 169,900 Issued capital 556,400 536,800
Total assets 635,550 615,800 Accumulated losses –809,250 –897,250
Total equity –252,850 –360,450
Total liabilities and equity 635,550 615,800
CCCL sustained substantial losses in its start-up period (2001–2005) (from which it is still benefiting for tax purposes) but
has been profitable since 2005, reporting a record profit after tax in 2016. However, Treadway is wondering if CCCL’s
revenues in general are supported by cash flows and if the company might be trying to increase the appearance of
profitability in order to increase the share price, which remains low.
The Wireless division was acquired by CCCL in a share purchase in late 2015. Treadway wants to review the accounting
policies CCCL has adopted for both revenue and expenses incurred on long-term wireless contracts (Exhibit 3).
EXHIBIT 3 EXCERPTS OF ACCOUNTING POLICY NOTES (ALL FIGURES IN THOUSANDS)

Note 1 d) Long-Term Wireless Contracts Q3
Customers who enter into long-term service contracts for wireless services can obtain their mobile devices for a nominal amount. Commencing
in 2016, the discount offered on the devices, relative to the regular price, is capitalized as a customer acquisition cost and amortized straight-
line over the life of the contract, or a minimum of three years. Previously this amount was recognized in income immediately.
Note 1 g) Unearned Revenue Q2
Unearned revenue for subscriptions, or for services paid in advance, was historically recognized on a straight-line basis over the term of the
contract or subscription, which was typically three years. After reviewing the historical pattern of usage and cancellations for service contracts
in 2016, the pattern of recognition was changed to recognize the majority of the revenues in the first 12 months after the service contract is
signed with the remainder recognized in the following year.
Note 12) Broadcast Licenses
Q4
During 2016, the company successfully disposed of broadcast licenses that were held for sale for $37,900 (net book value of $23,500). Based
on the successful completion of that sale the impairment losses taken in 2014 on other licenses have been reversed, restoring those intangible
assets to their amortized historical cost. Broadcast licenses are amortized over a period of 15 to 25 years.
On reading the note about the rapid reversal of the impairment loss related to the Broadcast licenses (Exhibit 3, Note 12)
Treadway strongly believes that it arose as an attempt by management to manage earnings. She realizes that both her
2014 and 2015 analyses were impacted by these actions and now need to be reconsidered.
As part of her annual review, Treadway determines the Altman’s Z-scores for CCCL. The results for the current and
past years are reported in Exhibit 4.
EXHIBIT 4
COOPER CREEK CABLE LIMITED ALTMAN Z-SCORES
2016 2015
Altman Z-score* 2.14 1.82
* Critical values: 1.81 and 3.0

Finally, Treadway noted that during 2016 CCCL acquired 100% of MusicMusic (MM), a specialty cable music
channel in an all-stock deal. At the time of the acquisition MM reported intangible assets for broadcast licenses at a
value of $2,500. CCCL estimated the fair value of those licenses to be $5,500 at that date and estimated the value of
the MusicMusic brand name to be $2,000, all figures in thousands. The acquisition did not give rise to any goodwill.
1. The cash received (in thousands) from CCCL’s investments in associates in 2016 is closest to:
A. $1,200.
B. $400.
C. $800.
1. The cash received (in thousands) from CCCL’s investments in associates in 2016 is closest to:
A. $1,200.
B. $400.
C. $800.
Solution
C is correct. Investments in associates are accounted for using the equity method. Only the dividends received from
associate companies would be cash, not the amount reported as income from investments in associates. When using the
equity method to account for an investment, the investment account on the balance sheet increases by the amount of
accrued investment income recognized and decreases by the amount of dividends received. Therefore, analysis of the
balance sheet account changes will solve for dividends (the cash):
Opening balance investment account 42,300

Plus investment income recognized (from Statement of Earnings) +1,200
Deduct dividends received (solve for X) –X
Closing balance investment account 42,700
Solving for X, dividends, and cash, received = $800.

2. The change in which of the following items most likely indicates that CCCL might be recognizing revenue early?
A. Unearned revenue
B. Deferred tax assets
C. Days sales in receivables
2. The change in which of the following items most likely indicates that CCCL might be recognizing revenue early?
A. Unearned revenue
B. Deferred tax assets
C. Days sales in receivables
Solution
A is correct. In the past, revenue from service contracts had been recognized on a straight-line basis over the (typical)
three-year period of the contract (Note 1 g in Exhibit 3). Under the new policy, most of the revenue is recognized in the
first year and all of it within the two-year time frame. This represents a much more aggressive revenue recognition policy.
An increase in DSO could be an indicator of early revenue recognition but for CCCL the ratio did not change significantly
(18.1 days in 2015 to 18.3 days in 2016 using year-end receivables). Deferred tax assets (Exhibit 2) can arise from
differences in revenue recognition for taxes and financial statement purposes (they would rise with increases in unearned
revenue), but there is no indication here that revenue is the reason for the increase in deferred tax assets DTA (in fact,
unearned revenue decreased). The deferred tax assets most likely arise from the loss carry forwards generated from earlier
losses.
3. The new accounting policy adopted in 2016 for the customer acquisition cost related to long-term wireless contracts
(Exhibit 3, Note 1 d) most likely increases CCCL’s:
A. quality of earnings.
B. cash from operations.
C. debt to asset ratio.
3. The new accounting policy adopted in 2016 for the customer acquisition cost related to long-term wireless contracts
(Exhibit 3, Note 1 d) most likely increases CCCL’s:
A. quality of earnings.
B. cash from operations.
C. debt to asset ratio.
Solution
B is correct. In 2016, CCCL started capitalizing the discount offered (from selling the mobile devices at a lower
price) instead of recording it in the period it is incurred. This change in the policy would increase net income (by
lowering expenses) and cash from operations. The amounts capitalized would be recorded as cash outflows for
investing activities, compared to cash from operations if they were expensed.
C is incorrect because the total assets would increase by the amount capitalized (as opposed to expensed) (be higher)
hence the D/A ratio would decrease.
A is incorrect because capitalizing decreases the quality of earnings because it would be more conservative and closer
to cash flow to expense the losses in the period. The future benefit and the ability to match these costs to revenues are
uncertain, particularly given CCCL’s new policy to accelerate the recognition of revenue on long-term contracts.
4. If Treadway’s belief about management’s motivation behind the 2014 treatment of the broadcast licenses is correct,
compared to the actual economic results in 2015, her original 2015 analysis wouldmost likely have:
A. understated fixed asset turnover.
B. overstated net profit margin.
C. understated ROA.
4. If Treadway’s belief about management’s motivation behind the 2014 treatment of the broadcast licenses is correct,
compared to the actual economic results in 2015, her original 2015 analysis wouldmost likely have:
A. understated fixed asset turnover.
B. overstated net profit margin.
C. understated ROA.
Solution
B is correct. The broadcast licenses were written down in 2014, but the write-down was reversed in 2016.
Therefore, during 2015 the intangible assets were understated, which would have understated amortization expense
for the year and increased profit. Thus in 2015, net profit margin was overstated.
C is incorrect because in 2015 the intangible assets were understated and net profit was overstated (due to the lower
amortization expense), so ROA would have been overstated in 2015, not understated.
A is incorrect because in 2015 the intangible assets were understated, which would have increased asset turnover
(Sales/Average total assets), so it would have been overstated during the year.
5. From her Altman Score results, Treadway is most likely to conclude that the probability of bankruptcy for CCCL has:
A. remained uncertain.
B. decreased.
C. increased.
5. From her Altman Score results, Treadway is most likely to conclude that the probability of bankruptcy for CCCL has:
A. remained uncertain.
B. decreased.
C. increased.
Solution
A is correct. Altman scores in excess of 3.0 indicate low probability of bankruptcy; those below 1.81 indicate a high
probability of bankruptcy. Scores within the 1.81 to 3.0 range do not provide a clear indication of bankruptcy.
B is incorrect because the Altman score has increased, which might suggest less bankruptcy risk, but it is still in that zone
of uncertainty.
C is incorrect because the Altman score has increased, which might suggest less bankruptcy risk, but it is still in that zone
of uncertainty.
解析
The Altman Model
Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 0.99X5
X1 = net working capital as a proportion of total assets,
X2 = retained earnings as a proportion of total assets,
X3 = operating profit as a proportion of total assets,
X4 = market value of equity relative to book value of liabilities,
X5 = sales relative to total assets.
注意：a higher Z-score is better (less likelihood of bankruptcy)
如果Z-score<1.81，大概率会破产
如果Z-score>3，基本不会破产
如果1.81<Z-score<3，无法判断
请下课及时复习
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CFA二级 财务报表 习题 PDF

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2018 CFA二级课程

探讨的是用外币进行的业务business transactions that are denominated in a foreign currency

Export sales Asset (A/R) Gain Loss

Import purchase Liability (A/P) Loss Gain

注意：IFRS和GAAP均没有说明transaction G/L是计入Operating income还是Non-Operating income

过程名称 方法名称 适用对象

问：哪种子公司的local currency = functional currency ≠ presentation currency？

6.2.4 Current rate method 和Temporal method的处理方法

Current rate，Average rate和Historical rate分别简写为C，A，H

 Current rate method

Equity中增设CTA（cumulative translation adjustment）来反应translation G/L

ending inventories COGS ending inventories COGS

Historical e more recent older older more recent

Temporal method Current rate method

Martonia Vibrant was acquired by FlexCo on Accumulated depreciation (100) (700)

shown in the following two figures. Total liabilities LC1,800 LC1,650

* Retained earnings on December 31, 2014, were $50.

Vibrant 2015 Income Statement

方法一 current rate method

2015(LC) Rate 2015($)

Revenue LC5,000 0.4762 $2381.0

（2）换算BS表 Cash LC100 0.4545 45.5

（a）ending RE = Beginning RE + NI – dividend = $50+$333.3 – 0= $383.3

方法二 temporal method 2015(LC) Rate 2015($)

Cash LC100 0.4545 45.5

(a) RE = total equity – common stock = 400.7

Revenue LC5,000 0.4762 $2381.0

6.2.6 Current rate method 和Temporal method的处理结果

6.2.7 Current rate method处理前后财务指标对比

income statement item A

end−of−period balance sheet item C

6.2.8 Current rate method和Temporal method处理后财务指标对比

LC Depreciation Temporal Current Rate

Gross profit margin Lower Higher

EXHIBIT 1 SELECTED EXCHANGE RATE DATA

GBP/USD Close GBP/EUR Close

考点二 Investments in associates

例如：Suppose that we are given the following:

shares of Company S (the investee).

During 20X6, Company S earns $400 and pays dividends of $100.

During 20X7, Company S earns $600 and pays dividends of $150.

20X6 and 20X7.

 fair value appreciation

Part A: Calculate the goodwill created as a result of the purchase.

Red Company基于自身的book value计算的NI= $100,000

然而对于Blue而言，其资产以收购时的fair value来记账，因此需要将fair value appreciation进行摊

因此对于Blue，其计算的Red company的收入 = ($100,000 - $5,000) ×30% = $28,500

增加：accumulated net profit of the investee×share percent=$28,500

减少: declared dividend×share percent=$60,000×0.3=$18,000

 Upstream逆流交易：Target to acquirer 是被投资方向投资方销售

 Downstream顺流交易：Acquirer to target 是投资方向被投资方销售

For investor, reduce in equity income = unconfirmed profit × share percent.

对于Investments in financial assets，投资收益为被投资方的dividend与持股比例之积；

对于Investments in associates，记账方法为one-line consolidation

前者只确认投资收益，而没有确认收入、费用等，因此前者会导致net income margin比较高

n.a. = not applicable

EXHIBIT 2 ADDITIONAL INFORMATION ON INVESTMENT IN ELBE (€ THOUSANDS, EXCEPT PER

Turning to the issue of impairment, Christoph says:

Furthermore, Christoph states:

Price per share €17.00

Present value of defined benefit obligation €45,200

考点三 Business combination

CFA二级财务报表习题 PDF

CFA二级财务报表习题 PDF

过程名称方法名称适用对象