Fra Mindmap
Fra Mindmap
Fra Mindmap
Held-to-maturity
IFRS ok
Debt
USGAAP no
Reversal of impairment
Intercorporate Equity Both IFRS & USGAAP no
investment
Defect misclassification
the
increase/decrease
proportionate
the investment
share of
account If decrease to 0 ->
investee's
Equity method earning/loss is recognized in the investor's IS ->
not operating income
Upstream
Transaction with investee ->
deduct unconfirmed profit from Downstream
equity income
investee's debt
Analytical issues for investment in associates Ignore
investee's revenue
Merger: A +B = A
Acquisition: A+B = AB
Categories Under US GAAP:
Consolidation
SPE
Full goodwill =
partial goodwill =
must consolidate
Items
Effect on financial ratio
Ratio
Beginning PBO
Underfunded
+interest cost
Both
PBO _____
e.g..
Without conditions
determined by management
Parent company
Presentation (reporting) currency
USGAAP: functional =
presentation, use temporal
methods
GAAP compliance?
Condition 1
Decision useful?
Conceptual
framework
Condition 2 high quality earning?
Channel stuffing
Aggressive accounting
assumptions
Use of SPE
Capitalized expenditures
Warning signs
Sales & leaseback of asset
overstate GW
Understand management
(compensation & independence)
DSRI =
GMI =
M-score = -4.84 + 0.92
AQI =
(DSRI)+0.528 (GMI)+0.404 (AQI)+
0.892 (SGI)+0.115 (DEPI)-0.172 SGI
(SGAI)+4.67 (Accruals)-0.327 (LEVI)
DEPI
Accrual =
LEVI =
NWC/total asset
RE/Total asset
Sales/total asset
Alman model
Higher Z-score -> lower
probability of bankruptcy -> good
low volatility
Strategic provision
Earning (t+1)=
3. Capital structure
Accrual =
Balance sheet approach
Accrual ratio =
Integration of FS analysis techniques
Accrual
Accrual =
Income statement approach
5. Earning quality & CF analysis Accrual ratio =
6. Mkt value
decomposition
7. OBS financing