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Mgmt CIMA Core > F2 > Flashcards

F2 Flashcards

(58 cards)

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1
Q

Characteristics of ordinary and preference shares and different types of long-term debt.

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2
Q

Operation of the stock and bond markets.

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3
Q

Share and bond issues.

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4
Q

Role of advisors.

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5
Q

Cost of equity using the dividend valuation model, with and without growth in dividends.

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6
Q

Post-tax cost of bank borrowings.

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7
Q

Yield to maturity of bonds and post-tax cost of bonds.

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8
Q

Post-tax cost of convertible bonds up to and including conversion.

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9
Q

WACC and its use.

A

WACC = (cost of liabilities)+(dividends and retained earnings) / (balance sheet at market value)

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10
Q

Production of:
- consolidated statement of comprehensive income
- consolidated statement of financial position
- consolidated statement of changes in equity
- consolidated statement of cash flows
including the adoption of both full consolidation and the principles of equity accounting, in accordance with the provisions of IAS 1, IAS 27, IAS 28, IFRS 3, IFRS 10 and IFRS 11.

A

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11
Q

The need for and nature of disclosure of interests in other entities, in accordance with IFRS 12.

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12
Q

The need for and nature of disclosures of contingent assets and liabilities, in accordance with IAS 37.

Recognition and measurement of:

  • revenue, in accordance with IAS 18 and the provisions of the framework
  • operating and finance leases, in accordance with IAS 17
  • financial instruments, in accordance with IAS 32 and IAS 39 (excluding hedge accounting) - provisions, in accordance with IAS 37
  • share-based payments, in accordance with IFRS 2
  • provision for deferred taxation, in accordance with IAS 12.
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13
Q

Ethics in financial reporting.

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14
Q

Additional acquisition in the period resulting in a simple investment becoming a controlling interest, in accordance with the provisions of IFRS 3.

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15
Q

Calculation of the gain/loss on the disposal of a controlling interest in a subsidiary in the year, in accordance with the provisions of IFRS 3.

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16
Q

Adjustment to parent’s equity resulting from acquiring or disposing of shares in a subsidiary, in accordance with the provisions of IFRS 3.

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17
Q

Provisions of IAS 21 in respect of consolidating a foreign subsidiary and the calculation of the foreign exchange gains and losses in the period.

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18
Q

Impact of indirect effective holdings on the preparation of group financial statements.

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19
Q

The need for and nature of disclosure of related party transactions, in accordance with IAS 2.

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20
Q

Calculate basic and diluted earnings per share, in accordance with IAS 33.

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21
Q

Ratios for profitability, performance, efficiency, activity, liquidity and gearing.

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22
Q

Interpretation of the primary financial statements and any additional information provided.

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23
Q

Action that could be realistically taken by the entity’s management to improve financial performance and strengthen financial position, taking into account ethical considerations and internal and external constraints.

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24
Q

Inter-segment comparisons.

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International comparisons.
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26
Related Parties disclosure requirements (IAS 24)
``` nature of relationship nature of transaction amount of transaction outstanding balances of transaction any provisions for doubtful debts ```
27
Consolidate Financial Statements
Non-controlling interest (NCI): less than 50% => Fair value method (market value) at acquisition => Proportion of net assets at acquisition
28
Associate Companies
Requires significant influence: 20-50+% of shares - BoD appointment - influence on policy making - material transactions between parties - interchange of managerial personnel - provision of essential tech
29
Consolidated statement of comprehensive income
CSCI: share of profit from associate - impairment loss - PUP (aka PII, meaning Provision for unrealized profit)
30
Covenants associate with taking on debt (financing)
A type of contract in which the covenantor makes a promise to a covenantee to do (affirmative covenant) or not do some action (negative covenant). ie: - dividend restrictions - financial ratios - financial reports - issuing further debt
31
Long term financing:
Securities: Fixed Charge: (Darlehen) against asset Floating Charge: against general assets Covenants: limitations associated with new debt Bank finance: Money market Revolving credit facilities Capital markets: Bonds Commercial papers (unsecured short-term loan notes) Sale and lease back (Gov'ment) Grants or Assistance Debt with attached warrants (Wandeloption) Convertible debt (Wandel) Venture capital or Business angels
32
Impairment
triggering event if there is evidence impairment loss: difference between carrying value and PV of CF from asset (which goes into the P&L)
33
Derecognise assets if:
rights to cash flow expires risk and reward of asset was transferred Factoring: substantially all risks and rewards are transferred
34
Derivate definition
value from an underlying asset, price, rate or index. Characterized by: value change in response to underlying little or no initial investment settle in the future Types: Forward: obligation to buy or sell in the future on agreed terms (specific asset, price, date) Forward RATE agreements: fixed rate for floating Futures: obligation to buy or sell std qty in future Swaps: Exchange payments of specific intervals over a specific period Options: right to buy or sell over a specific period
35
Share based payments
Equity settled: at vesting | Cash settled: fair value of the liability
36
EPS
earnings: net profit attributable to equity (after interest and tax) number of shares: time weighted average Diluted: fully diluted shares outstanding (i.e. including the impact of stock option grants and convertible bonds)
37
Operating Lease vs | Financial Lease
Operating: no transfer of risk and ownership Financial: risk and benefit of ownership is transferred to the lessee: goes into assets and liabilities (liabilities are discounted future ones) Interest considerations: Actuarial Sum of digit basis
38
Revenue reco - Services
revenue can be measured reliably probable stage of completion can be measured cost to the seller can be measured
39
Interest, royalties, dividends
probable | measurable
40
Consignment inventory | Sale and repurchase
who owns risk and reward of ownership? | Is there an obligation to buy the product back?
41
Provisions
Measurable Probable Past obligation
42
Contingent liability or asset
not recognised in financial results disclosed in a note IF not probable OR amount cannot be measured
43
Disposal of shares
Control to non-control | Control to control
44
Step acquisitions
Non-control to control: shift from investment to associate
45
FX translate or not to translate for FX receivables
Monetary items: translate | Non-monetary items: do not translate (leave historic rate)
46
Deferred tax
Future tax liability for temporary difference between accounting and taxable profit
47
Construction Contracts
% of completion (cost or certification basis) | accountancy (profitable or loss making)
48
Related parties: ARE and ARE NOT
Key mgmt personnel Family Same group ``` ...not just... sharing personnel engage in a JV conduct finance are customers or suppliers ```
49
Related parties disclosure requirements:
- nature of relation - nature of transaction - traded amounts - outstanding balance - any provisions on the balances
50
Subsidiary (50%+): | Associate (+/-20%-50%):
Acqui.Acc.: net assets, Goodwill, NCI | Equity Acc.: (no conso); only "investment in associates"
51
NCI methods
fair value: use market price for NCI value proportion net assets: fair value of entity times NCI share %
52
Impairment of Goodwill
tested each reporting date fair value proportion of net assets
53
PUP
Provision for unrealised profit (aka PII) has do be consolidated out in group accounts, same as intra company trade
54
Associate definition
significant influence: 20%+ dependent on the level of control
55
Joint Venture
equity accounting (as associate - no conso)
56
Complex groups
Vertical group Mixed group Might require indirect holding adjustment (IHA)
57
ETHICAL
Integrity, Objectivity, Professional Competence and Due Care, Confidentiality and Professional Behaviour.
58
FX Which rate for subsidiaries?
Income: average rate of the year | Goodwill of subsidiary: closing rate

Mgmt CIMA Core (2 decks)

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