Intercorporate investments, pensions, multinational operations, quality of earnings and financial modeling.
40 cards · basic cards · AI-written, checked twice. Edit anything.
- When do you use the equity method to account for investments?
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When the investor has significant influence over the investee, typically 20-50% ownership under U.S. GAAP or 20-50% under IFRS- What is goodwill in a business combination?
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The excess of the purchase price over the fair value of the identifiable net assets acquired- How are available-for-sale (AFS) securities reported on the balance sheet?
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At fair value, with unrealized gains and losses recorded in other comprehensive income (OCI)- What is the consolidation method for financial statements?
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Combining the financial statements of a parent and its controlled subsidiaries as if they operate as a single economic entity- How should dividends received from an equity-method investee be treated?
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As a reduction in the investment account on the balance sheet, not as investment income- What is an associate under IFRS standards?
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An entity over which an investor has significant influence but not control- What intra-entity transactions must be eliminated in consolidation?
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All sales, purchases, receivables, payables, and profits between consolidated entities must be eliminated to avoid double-counting- What does significant influence typically represent in terms of ownership?
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20% to 50% of voting shares, though it can exist outside this range based on facts and circumstances- What is the projected benefit obligation (PBO) in pension accounting?
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The present value of pension benefits attributed to employee service earned to date, using assumptions about future salary levels- Define service cost in pension accounting.
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The increase in the PBO during the current period from one additional year of employee service- What is interest cost on a pension obligation?
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Interest accrued on the beginning balance of the PBO for the period, using the discount rate- What are actuarial gains and losses in pension accounting?
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Changes in the PBO or pension asset values from differences between actual and assumed experience, such as wage inflation or investment returns- Explain the corridor approach in U.S. GAAP pension accounting.
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Actuarial gains/losses are only amortized if cumulative unrecognized gains/losses exceed 10% of the greater of the PBO or fair value of plan assets- What is the funded status of a pension plan?
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The difference between the fair value of pension plan assets and the projected benefit obligation, shown as an asset or liability on the balance sheet- What is a defined benefit pension plan?
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A plan in which the employer guarantees a specific retirement benefit amount to employees, bearing the investment and longevity risk
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