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CFA L2 Matheus > 4. FRA > Flashcards

4. FRA Flashcards

1
Q

Impairment (IFRS)

A

1 step

  1. Carrying Unit > Recoverable Amount (FV net id)

Impair to recoverable

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2
Q

Impairment (U.S. Gaap)

A

2 step

  1. Carrying Unit + Goodwill > FV Reporting Unit
  2. Check and Impair Goodwill (Balance Sheet) c/ Goodwill implied (FV - FV net id)

Impair to FV

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3
Q

Full / Partial Goodwill

A

IFRS: Both (Partial / Full)
Gaap: Full only

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4
Q

Full Goodwill

A

(Purchase Price 100% Company - FV 100% company)

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5
Q

Partial Goodwill

A

(Price Paid 80% - FV 80% only)

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6
Q

Equity Method

A
  • Significant influence but no control (20-50%)
    One line investment in the Balance Sheet
  • NI booked by % of owned company
  • Dividends reduce Investment line
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7
Q

Goodwill (Formula)

A 
Excess = Purchase Price - Book Value
Excess = Fair Value + Goodwill
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8
Q

Equity Income (Formula)

A

Equity Income = NI % - (Amortizável/Years)

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9
Q

Business Combinations

A
  1. Purchase Method (BV A + FV B)
  2. Pooling of Interest (BV A + BV B)
  3. Acquisition (Report both balances)
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10
Q

Acquisition Method (Balance Sheet)

A
  • Book by BV A + FV B
  • Subtract Cash from Current Assets
  • Keep ORIGINAL Common Stock and Retained Earnings
  • Sum Non Controlling Interest (NCI)
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11
Q

Acquisition Method (Income Statement)

A
  • Sum Revenues and Expenses

- Discount Minority Interest

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12
Q

Non Controlling Interest (Full Goodwill)

A

NCI Full = % Not Owned * Fair Value Acquired Company

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13
Q

Non Controlling Interest (Patial Goodwill)

A

NCI Full = % Not Owned * Fair Value Net Identifiable Assets

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14
Q

ROE (Equity Method v. Acquisition)

A

Equity: ↑
Acquisition: ↓

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15
Q

Net Income (Equity Method v. Acquisition)

A

Equal

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16
Q

Defined Contribution (DC)

A

Employee’s contribution = Pension Expense

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17
Q

Defined Benefit (DB)

A

Fair Value from current contribution depends on asset performances. It produces imbalances.

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18
Q

Funding Status

A

Funding = (Assets - Liabilities)

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19
Q

Obligations hierarchy

A

Vested VBO < Vested+Unvested ABO < Projected PBO

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20
Q

Costs: Service (1) - IFRS x Gaap

A

IFRS: Current and Past @ P&L
Gaap: Current @ P&L and Past @ OCI

21
Q

Costs: Net Interest Income (2) - IFRS x Gaap

A

IFRS: @ P&L
Gaap: Int Expense - Return of Assets @ P&L separated in 2 lines

22
Q

Remeasurements

A

IFRS: G&L @ OCI
Gaap: G&L @OCI but sometimes in corridor

23
Q

Total Periodic Pension Costs (TPPC Formula)

A

TPPV = Current Service Cost + Interest Cost - Actual Return + Prior Service Cost - Perdas + Ganhos Atuariais

24
Q

Interest Cost (IFRS x Gaap Formula)

A

IFRS: Net [(Begin Funding Status * %) - Prior Cost]
Gaap: [(Begin PBO * %) + Prior]

25
Periodic Pension Cost (IFRS x Gaap Formula)
IFRS: Current Service + Past Service Cost + Net Interest Gaap: Current Service + Interest Cost - ER(A)
26
Corridor Approach (Gaap)
- If Services / Int Expenses variam muito, você pode amortizar em Y anos na DRE. Amortize: Excesso above [ 10% Higher (PBO; FV Assets) - Unrecognized já existente] Além disso, some Ganho Atuarial, Subtraia Perda Atuarial
27
PPC (Funding Formula)
PPC = Δ Funding Status - Contributions
28
CSOP v. ESOP (concept)
``` ESOP = Employee Stock Option Plan (charge to Equity accounts) CSOP = Compensatory (charge to I/S) ```
29
CSOP
- FV is calculated on the date stocks are granted - No further adjustments - Costs allocated to service period (between grant date and vesting date)
30
Stock Grants
- Outright grant (FV = Price on the grant date)
31
SAR (Concept)
- Stock Appreciation Rights - Avoid dilution - Compensation tied to Δ% Price of the Shares - FV @ Grant Date, allocated over service period
32
Current Method
Functional Currency Subsidiary ≠ Functional Currency Parent
33
Temporal Method
Functional Currency Subsidiary = Functional Currency Parent
34
Current Method (FX rates)
* IS FIRST* * TRANSLATION ADJ @ BALANCE SHEET* - Balance Sheet @ End-of-Period FX - Equity Accounts @ Historical FX - I/S @ Average FX Current Year - Find I/S Retained Earnings FIRST and put in B/S
35
Temporal Method (FX rates)
* B/S FIRST* * TRANSLATION ADJ @ INCOME STATEMENT* - Monetary Balance Sheet @ End-of-Period FX - Fixed Assets / Inventory @ Historical - Equity Accounts @ Historical FX - I/S @ Average FX Current Year - I/S COGS and Dep @ Historical FX - Find I/S FIRST in the Balance Sheet and bring into I/S
36
FX Overall Exposure (Current v. Temporal)
Current: Net Equity Temporal: Net Monetary Assets
37
Hyperinflation (IFRS v. Gaap)
IFRS: Restate for IPCA and then use Current Method - B/S @ Full IPCA - G/L Cash / A Receber @ Full IPCA - G/L Revenue / Int Expense @ Full IPCA divided by Avg IPCA Gaap: DON'T RESTATE FOR IPCA. Just use Temporal. Criteria: (1 + inflation)^3 > 100
38
Basel Requirements
CET1: 4,5% (Common Stock, Retained Earnings, OCI) AT1: 1,5% (Preferred Perpetual; Optional Dividend) Total Capital: 8% (Preferred > 5 y; Optional Dividend)
39
CAMELS
- Capital - Asset Quality - Management - Earnings - Liquidity - Sensitivity
40
NSFR (Formula)
NSRF = Actual Stable Funding / Mín Stable Funding
41
LCR (Formula)
LCR = Liquid Assets 30 days / Mín Estimated
42
Loss Expense Ratio (Insurance Formula)
Loss Ratio = (Loss Expenses / Net Premiums Earned) Operacional (Existing Business)
43
Underwriting Expense Ratio (Insurance Formula)
Underwriting Expense = (Underwriting Expenses / Net Premiums Written) Comercial (New Business)
44
Combined Expense Ratio (Insurance Formula)
Combined Ratio = Loss Expense Ratio + Underwriting Expense Ratio
45
Soft Pricing (Insurance)
High ROE = New Entrants = Prices to Fall
46
Hard Pricing (Insurance)
Low ROE = Players leave = Prices to Increase
47
Beneish Model
M-Score to predict Earnings Mgmt - Higher than -1,78 is BAD (>3,8% probability) - Accruals are important
48
Altman Model
Z-Score to predict BANKRUPTCY - The higher the better - Lower than +1,81 is BANKRUPT - Higher > 3 is GOOD credit - Between = Inconclusive

CFA L2 Matheus (9 decks)

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