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Flashcards in F2-1 Deck (86):
1

SFP NCI

Proportional - NCI @ acq + share of post acq reserves Full - NCI @ acq + share of post acq reserves + share of goodwill impairment

2

Cost of business combination

cash, deferred consideration (discounted), contingent consideration, quoted shares

3

Intragroup balances

Cancel all revenue and cost associated. Remove PUP in books of company making the sale. Cancel loans

4

Consolidated retained earnings

Share of post acq reserves - share of goodwill impairment - PUP + share of profit - dividends + adjustments

5

Transfer of PPE

Profit x (remaining life at y/e / remaining life at date of sale)

6

Consolidated dividends

Ignore dividends received from subs and associates. Dividends paid by parent go in statement of change in equity

7

PUP

Dr Group CoS, Cr Group Inventories (SFP)

8

Associate

Entity over which the investor has significant influence

9

Significant influence

power to participate in financial and operating poliy decisions

10

Consolidating associate

Don’t cancel intragroup but do cancel PUP

11

Parent sells to Associate

Dr COS and P's RE (A% x PUP) Cr Inv in Associate (A% x PUP)

12

Associate sells to Parent

Dr "Share of As Profit" and P's retained earnings (A% x PUP) Cr Group Inventories (A% x PUP)

13

Investment in assiciate

Cost + Share of post acq resrves - PUP - impairment losses

14

Joint arrangement

two or moree parties have joing control

15

joint operation

joint control have rights to assets and obligations but no separate entity. Each operator will recognise in its own statements

16

joint venture

separate entity established so separate records kept. Treated same as associate with equity accounting

17

Bonds (loan stock or debentures)

Negotiable instruement offereing a fixed interest rate (coupon rate) over a fixed period of time and with a fixed redemption value. May be secured or unsecured

18

Ordinary shares

Paid dividends at discretion of directors

19

Preference shares

Fixed dividend with limited or no voting rights. Rank before ordinary shares in liquidation. Participating preference carry right to additional preferred dividend when ordinary shareholders are paid a dividend exceeding a pre-determined level

20

Equity warrant

Security issued by a company giving the holder the rights to be allocated ordinary shares in company on terms specified in the warrant

21

Money markets

short term (less thn 12 months) for lending and borrowing

22

Capital markets

Long term debt (e.g. bonds) and equity (shares)

23

Rights issues

Invitation to existing shareholders to purchase extra

24

Offer for sale

Shares offered via issuing house to public. Requires advery

25

Public issue

Shares offereed direct to public

26

Placing

Shares issued to select group of institutional investors

27

Cost of equity - zero growth in div

Ke = d / P0

28

Cost of equity - constant growth in div

Ke = d1 / P0 + g or Ke = d0(1+g)/ P0 + g

29

Cost of preference shares

constant div therefore no growth

30

Cost of irredeemable debt

kd= i(1-t) / P0 where P0 is current ex-interest price

31

Cost of redeemable debt

IRR calc. Y0 ex interest market value. Y1 - YX interest net of tax. YX redemption amount. Need to check if it is convertible and what the investor would do

32

Weighted average cost of capital (WACC)

hurdle rate for appraising future projects

33

Deferred revenue

Discount to the fair value. Difference between FV and nominal sales value is accounted for as interest revenue and accrued over the period until payment is due

34

Deferred income

Payment in advance: credit deferred income, release to profit or loss over time as revenue is recognised

35

Prefence shares presentation

redeemable - liability, Cumulative (div not paid in a year must be paid subsequently) - always liability

36

Initial measurement of Financial instruement

FV +/- any transaction costs. Exception is assets or liablities held for short term trading or derivatives. These are recorded at FV excluding transaation costs, movement in FV passes to SFPL as do transaction costs

37

Y/e for financial asset held to maturity

amortised cost

38

Y/e for loans and receivables

amortised cost

39

Y/e for financial asset through PorL (short term, held for trading, all derivatives)

FV, with movement in FV passing through SPL

40

Y/e for available for sale financial assets

Cash flows not certain therefore FV with movement passing through reserves / OCI

41

Financial liabilities

held at amortused cost using effective interest method unless held for trading then FV with movement & transaction cost through SPL

42

Compound instruments

E.g. convertible debt. Split the components

43

Impairment of financial assets

E.g. financial difficulty of issuer or high probability of bankruptcy of borrower. Impairment loss held at amortised cost and is different between assets carrying value and present value of future expected cash flows discounted using the assets original effective interest rate

44

Finance lease

lease transfers ownership at end, ledee has option to purchase at price below fv at exercise date, lease term Is for major part of assets economic life, PV of minimum lease payments amounts to assets FV at inception, leased asset so specialised that it could only be used by lessee without major modifications being made

45

Actuarial method

uses interst rate implicit in the lease

46

Sum of digits method

n(n+1)/2

47

Operating lease

Operating lease other than a finance lease. Recognised in SPL on a straight line basis over lease term

48

Sale and finance leaseback

no sale therefore

49

Provision

A liability of uncertain timing or amount

50

Provision regonition

present obligation as a result of a past event, probable that an outflow of economic resources will be required to settle the obligation and a reliable estimate can be made of the amount of obligation

51

Obligating event

A past event which leads to a present obligation - no realistic alternative

52

Legal obligation

dervies from contract, legislation or other operation of law

53

Constructive obligation

dervies from an entity's actions where, from an established pattern of past practice, published policies or a specific statement, the entity has indicated to other parties that it will accpet certain responsibilities and has created a valid expectation

54

Restructuring

Provision needed when there is a detailed formal plan and a valid expectation in those affected that it will carrying out the plan or announincg it

55

Warranty provisions

When selling goods under warranty needs to make provision on best estimate of repair costs

56

Contingent liablities

not recognised but disclosed. Not probable, not reliable

57

Contingent asset

possible asset arising from past events whose existnece will only be confirmed by the occurrence of one or more uncertain future events not wholly within the control of the firm. A disclosure

58

Deferred tax

Liability for future possible tax payable. Arises due to difference between tax and accounting tratment.

59

Unused tax losses

Deferred tax asset when entiy has unused tax losses / credits. Acts as future tax sacing but amount can only be recorded for expected profit levels

60

Functional currency

curency of primary economic enviornment in which the entity operates. It is a fact

61

Presentation currency

choice by management

62

Translation of SPL

subsids translated @ average rate

63

Translation of SFP

Assets and liability @ closing rate. GW at closing rate (exchange loss to reserves). Share capital and pre-acq reserves @ historic rate. Post acq reserves not translated but treated as balancing figure

64

Cash equivalents

Short term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificatn risk of changes in value

65

Cash acquistion and disposal

account for PPE, Cash etc. gained / lost

66

ROCE

PBIT / TALCL x 100%

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Gross profit margin

Gross profit / revenue x 100%

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Operating profit margin

PBIT / Revenue x 100%

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Net Profit margin

PAT / Revenue x 100%

70

Return on Equity

Profit after tax and pref dividends / Equity SC + reserves x 100%

71

Asset turnover

Revenue / TALCL

72

Current Ratio

current assets / current liabilities

73

Quick Ratio

current assets - inventory/ current liabilities

74

Inventory turnover

cost of sales / inventories

75

Non-current asset turnover

revenue / non-current assets

76

receivables period

TR/credit turnver x 365

77

Payables period

TP / Purchases or COS x 365

78

Debt / equity

long-term debt / equity

79

Interest cover

PBIT / Interest payable

80

Earning per share

Profit after tax after NCI / weighted av no of shares

81

Dividend yield

Dividend per share / market share price

82

Dividend cover

EPS / Dividend per share

83

P/E

Market share price / EPS

84

Related party transaction

Transfer of resources / goods between parties which would appear to the outside world to be linked in some way. Regardless of whether a price is charged

85

EPS @ full market

Time aportion as not had cash for whole year

86

EPS for right issue

Bonus fraction = old share price / new share price