BOOK 3 - FINANCIAL REPORTING AND ANALYSIS - Free

350 Pages·2009·4.11 MB·English

BOOK 3 — FINANCIAL REPORTING
AND ANALYSIS

Readings vad Lnsepiny Qnecome Searemeats

Studly Sesion 7 - Finsoeial Reposting and Azalyesi An Introduccion

Sradly Sesion 3 — Financial Reporting and Aualyee
‘The Income Starement, Balance Sheet, and Cash Flow Statement

Seady Sersion 9 ~ Finsacial Reporting and Analysis: Inventories,
Lomg;-Teem Aoset, Deferced Taxes, and On- and Of Balance-Shect Debt

Seudy Session 10 ~ Financial Reporting and Analysis: Applications
and Trcecaatonal Standards Convergence .

Self-Test — Financial Kepottig and Analy.
ocenuas

Inds.

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Page 2

LEVEL 1 WOOK 5: STNANCIAL REPORTING AND AKS
129009 Kaplen, Ing, 8 ~ight ener
Pah asd in 2009 hy Kapa Selowase

einted in she Uncted Stars of Auneies,
ISBN 5.4977 949:
Pon; 45500107

Test gd td Urchin CIS a Car
Fe ler nant eater ems eo

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silts ita psnvota how CoA levine Ag fered

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©2009 Kaye
READINGS AND
LEARNING OUTCOME STATEMENTS

RUADINGS

‘he fog matali ese of te Bwana’ Regering and Anais pincipiee

asi tans te eas ont taementa ie ove by Cte Fala,

STUDY SESSION 7
Readiag Astiguanents
Fins! deporting and Analyt, CFA gram Cunecculare, Volume §
FCA levine, 260}

20, Pingel Satonet Aealsis Am lnrenacson

3A, Finencial Reporting Mesias

3°. Finereial Repueting Stanleels

STUDY SESSION 8
Realing Assignments
Binawiad Reporiny sod Analyt, CFA Progra Ch
(CEA Tostinue, 2010}
42, Underatgeding the Tine Statement
53. Understanding che Ealece She
Undeeraraling the Cash Flee Seicemene
3B. Financial Analyse Techniques page 152

el, Yo ane 3

pages?

STUDY SESSION 9

Reading Assignatenns
Pence’ Reprsig and J
ECT lasinte. 20108

8, CPA Program Custiculum, Voleme 3

6, Ineauares page 173
BF. laongelivcl Aes ge 108
BRL thane Tans page 229
BY, Fingers Lisi an Laser

STUDY SESSION 10

Reding Assignments

ional leporvy, end Anak, CHR Programs Carrieuan, lune 3

{CFA Instinne: 2008
40. Finercial Repwotng, Quality: Tel Hage aml Aegon Waseng Sign pags 288
4%. Auguuning Shenanigans or the Cash Flgw Satenene age 302
42. Financial Sesemene Anais Apatiations vate 208
44. Tncenatignal Senses Converge: rage a6
ool, = erase fepornng and Ansble
oniaga and earning Outoome Svterenee

Paget

be fils nstrial i
evgnel ase be faring seem sce

LRARNING OUTCOME STATEMENTS (1.08)

vine of

Binaaria Peporting nd Anofyit pronciphs
rere firth by CEM Psa

#0,

31

The pet cvoragecormypond withthe filer CPA oie

Financial Stzemene Analsie An Introduction

‘The candidate should 2 ae

a discuss the oles of oancal eporiag and fnercialsetement eaalsi.ipage 11)

1h discuss the role of ery Snancial sateen ficenteseaerben, balance shee
storerteat of cai ws, al semen ut changes im venet equ in
crluatzg 3 company’s peformance and financial poscor. (pepe 11)

discus the imporence of fnancil statement notes ced supplemeneas
information including diselosr-s of counting method, estimate,
tusumprions, ond managers dsvussion ex abs, ipage 12i

4. disse the ectve of aus of Bnencalsentemenes, the ype ot audit repons
and te importance of eee intern. corstals (page 131

densi and explain informacion sonrees other than anna Gnarctal eatemens
arc sgoplemenar ifoeroton thar analyse sein Baarcialseatement nals
page 14)

4 describe che see in the Sncecial seacement analosis Feomtewadk, (page 5

args vad

The ropcad coverage cmsponds wih she iting CTA Laver asipned siding

Financial Reporting Mecher

“The candadare shoul be able co

4. explun de relelonship of Bnencil sreremenc elements and arcounes, and
classify ccoune neo che fnanl tacinentcesnent, (page 201

b. esplte che accounsing equation in its Sane and expanded foirs. (page 21!

explain she pencese of recording busier cransactions using aa accoating
system based on the aceouaing equations. (page

dcxplaus she need for accrua'sané other adustments is pioparing fnescial
satemenc. ‘page 232

eaplin che selucionships amang rze income txerneu, bal
ft oash Aowes and auueaent of owner equi (page 241

{degre che Tow af infomation in as acchuncingspraetn. (page 26+

fg explin che ae of she reno the secounting prosats sauity eal
{png 263

Ph spina amerage crepons anh the flloxng CPA

Financial Repurting Standards

oe ead heal he able ts

splint objec nf Rata satenenns and tus importa of porting,
ftandaed ie occurty anaes sabato Gage 3

be explain che role ef ena seattg once. cic rhe Invernaonal Aevum,
Stgrdanls oul an the US. Financia. Aaouulry Sanande Board, nd
regulatory ais hots suck athe Ievereaiqnal Ongunivarign of Securitien
Commissions, the UA. Frama! Servers Authariey and the US, Securities
snd Exchange Comm'ssion in etalishng snl exloring ingneial porcine,

cds tpg 33

ats aioe residing

12000 Kay.
‘nk 3 ~Lingacial Repos ne Anas
Heading: nd Learaing Ouicwat Sessements

6 dscuie the ongoing barsets 1 developing one universe ly acepted se of
financial repocing andar, ‘page 30°

44, desetibe she Ineznational Financial Reporting Srandacds (PRS? framework,
inching che qualccive choracecsics of Anancal eacements, tee requized
reporsing elements, and che eorstsines and essarpeions in prepating nancial
stores. (rage 30

‘explain the graetal eaguiremeats for tinancial yatements. (page 38

£ somporesnd concast dey concepts of tinaacia.reporcing stnderds under LIAS,
fend altesative reporcing ascems, and decks cae implications for fnancil

‘nelyss of diering Hnancial reporting svscems, (page 891

densify he cheracsertise o x coherent financial teporcing fiemevwors and

bere ro rearing «coherent Enancis. potting nerwoti (page 4!

1, douse che mportance of motleoring development in financial eporung
srandevds and of cealueing sxsnpany ciedlosoree of ngniicane accountng
polices, (pepe <0)

32

‘Te spical covesae coverpende with se folowing CFA Tete aigned sending
Undetsianding uve Income Statemcut
‘The candidate si:0u%2 beable co

2. describe he weinponenne of the income sacemene, and comersct ani

sauemene using tke leeenanve piesenratian formats ef har statment. (page

1h caplain ize general prciphe of revenue recognition and acstua. accnancing

cmsanstate specie revenue cceogniuoa applications (aching accounting

1s neallinent sles, Bate wanisctions and g-oee and

net sepmnting of event). and discuss ube inplicatoas of revenue rogiion
principles Zu faacal analysis, ipage 48)
discuss she peneal pincer of equereereengition, sua ae she meshing
spo Ze eapunae nsgnitien applications (including dspessition
cal longrtcia ase and ineentory methedel, and che iapli
‘evngion juices For Rn cal smal. {page 543
A. enmioteate: the appopritis ethan nf dspresiatey hingterm sets
‘ating fo invcnuery, o abwortving intsmgiles, based an fics that aight
jntlacvoe ta dosision. page 58)
1 distingsidls harwurw she nperting anu wownperating enbaponen.s ofthe inoue
tater guage 6
Figans the naa n.porting tratmene anal analyse oP nas anring tewae
finaling diseostinnel operations, eaesordinary eng wl lung oF
inequct iean) and changes in xecuunigstandene. (page 60
fe deserion che coryiomenty of earnings pr share nl ealenlate x campy
casnings per share (hut: base and eile scuings per shat ow both ple
and comaiex capital steuctur, (page 63:
hy ditfeennise beseoen dlucive wad xasiilocivesecorices, al isons the
Jmplicaions of each forthe exthings pec sare celcuetion. (page 83.
i, desctibe and ealculne comprehensive income, page"?
i. ara che accounting clstfcrion or Sean char are exci from the incon
fratement boc adece owner equicy and lise the major types of ems revising
thar tecemieneipage 7)

ion of expense

(©2008 Kapa I.
su § — Png poring ane nal
[Rowdngs 2nd Lesenig Lreoe Sexerente

be apc sooengecameptde wish be flloniag Cbd Zaire eigen’ wading
435, Oaderstanding the Balauce Sheet
‘he saalidate shoul beable ws
silica an esipet ae compact nf ae balance sheet and dics ube ute
fis alice seu in Svancil analeia Cage Be
I dssribe sh various fovirate uf alanis shee pessitaton, “age HB
wea av ase ala Habis arise from the acciual proves (ge 86)
A compare and eanitan euecen and roncureent aot ad iabilit. Loage 81
fe npisia the mateubaneh hast fe. itanal wt ad fata a te
find Fables. inched suerte, wt fils, angle ass sad
evangilik sete. (ge 871
f damonstate the apponpuiaus chasfcntione and reas! acsuting satineat Fox
varatalle aud nonsnatetable fies its ups bal a ate a wv
the ccna ibis ngs 2"
hin the smnponenis nf asus ty age 4
ind atateincres of cuangse ia els. page 95)

gp and
Ih nuaypret abel

Whe pica coment soropencs wet hf
34. Unceraiing the Cast Hane Siatenent
he eka nl st 1
1 sntgane gua annie! ea Mine hor eptatings stating, an Souci

ing CK ttt oad rainy

se in sal ls ca le iss ay atateg vn ws a thes esto.
is ies ofl ns pe 188)

o. esr how wits ineasting ara Tani activities ane nyc ug VAY

ampare aa eouteiat the key diene ia exch Mose aerets pepe
virdes iteragriemal Guancal repurling stavlande ane US. generally ase

evounting plircipls. (page 194,
Eanes the iTnews dees are indice watt of
itsecing sah row perting sul ae expla thea guaent i for oF

och. page 105}

fe demoneste Ie sep in the preination ating ani ican cash Rove
steamers, juli how cash Bowes eae be eae using nome sete ent
snd bc ance sheer date page 1021

Gaui ee procens oF or vering a ens Boe staeement fom the indoecr ro he
Ener metiod of presentation, (page "133

s-ent using both tril eumrency amounts

sed corazzonvize cat How srareraenn. (pe | 18)

1, explain end calelace fee cath Hom tthe fir, fee cash Hw ce eauiey ond
‘cher eat How eaios (page 16)

he raplestervenagecorepena woth the follwye CTA
4. Biaancal Andysls Techniques
‘he candids st0uld he able co
‘3. sralnace and counpare compaciestaingrario anclys, common-tine Eman
[etemien:s an chests fneactal anaas. (page 1941
f». dessribe ce lincations of atin eaalyn. “page 147)
descie the varinuss3ciniquee of sommen-iac acalyebs and interpret the
of such atalpais. (page 1373
4. eset. classi, aad iresprot activa, quid. aaleeney, ponbial iy and
‘a tion tin, page 14

ute argued vsding

age ‘ers Kaplan Te
oul 3. Cine Reptting sags
eadinge and Loneing roe Statens

leconetrate hoor ratios a elated and hove ee valucee a comapery wing &
comkinicion ot different reios (2age 149%

emenecate ce enplisrion ef and inerprecchacges inthe compen pas of
the DuPont anc yais (se decorapovcion of rein oa equiry, ‘oage 154
caleuleze and inerprer she zaios used in equicyanalves, credit analysis, and
segraear analysis. (page 198

describe how rio analysis and exker techniques can >e used 10 mode: and
forecast ceninge,tpoge 16

OND

omsaponds thse fining CVA Pcie andguad ndag

36. Inecmiosie

The candilate should be ale

2. eaplein !2KS and U.S. GAAE rules Fer dotecainag iavontouy cet. secaing
shies cows ave extend and metkods of ellacarigenaesbeereen eset of
eds sold and iascatory. (pres 74h

Ih isc ns insentoviee ne report che Sane starcmshisacal am the
Tova feat os ac) seliveble walucis usa ane appliod. (9

6 sage sung soy esa anf goin vag the HO.
Sprite averages, ain LIEO mcikody tsuneo nny al
spin the 2 alge canard tho ueeflnes of instr ad ost of ga
sold ats prove by the FIFO. weighted owe ge cou, sued LIEO metheale
woh piece are 1) sable, 2) deancasing, or 3 rereading, page 1

lace and aes nil for ning inary manage
spas 1821

fe egal ie Seance agremunts ul oempanios using fina iuasnory
Devout mtd by comparing el desing fe of dhe lien
rertarly on cast of goaded inventary halances: gral y hee frail stated
items page 183s

1. camaure al deseibe the ects et che choice of imeemtony mtu ort
pret abi lini, arive. end ao ouncy aro Ips

fg ealsulat adjetztents eo ceportel financial slemen: slate ty inventory
su priors co ald ip conmpering and eralcacing zompesie. page 185)

1 Gisems the eennors chee a LIFO reserve might “ise or decline during 9 given

petiod andl dsxss the implicacons for financial eoali.

rpicl coverage cemerponds ob te fllowing CFE Intute iene sean

Long-Lived Ancte

“The casedae should be ah‘e to

unt staards slated the capinabzanon of esperdicues
od aes, inelndaeg scenes oss. {page 188

fm gute and esribe dhe sifocts of capitals versus expensing a act income,
tbatchedels cuit, sid Now Hoss apecainns, ced Gaze setae including

I effet oa the interes vow stage i of capiaieag Lester coat. Cpege 199)
“phir she vinaunatsesee hich wfiware develoaman: cost and seseach and

Aeschypresn canteaneepialvad. (ges 2049
‘don't edilarent sdhopracatio snide, lanp-lived tangible aera
AP ha aeeasive a sth, eri lies ane salvage value Tce 2
sumpauys Seung watering, aad HES. page 208?

5450) Kalen vg
ales

Finis RopustingaedAnyie
endings and Larsing Outsene Suess

38

das

1 the wie of fixed arse: declovarse co comzare companies average age of
AAeprecable avers aud ealeulae,neng vuch Waclosures, she werage ag: and
‘depeciebe ike of xed sess. (page 210!
describe amorsizaoa of fatangible assets with ince ure ives and che
‘esinates thar aGéet che amorczaron celculecons. (page 2129
diss the liabliy tr closure, removes and enviconmconal fees of lang
‘pecting sits and discuss che nau saesnens impact and rai
that isle. ipage 212)
he sons the imps of aks or exchang,
1. Zefine inpalmtent of lang-ived tangible and intangible asses and explas hat
(Toa such imyatineut es an a compauy’sfinzacial sa:smenus aud tsi.
page 2161
jeleular anal deseile ho che inal and sng-ived eff 7 4 tsvahations
on financial sow (page 2194

of long-lived eases ot financial

1 spins merge crests te lowing CO incr died ag
Incoe Hiner
he caine el I aie te

in the dTonancos helene aesnuniny plod tall inetwe,

fine arg ser, inchaling defense tas

feta te ibe, slain

allowance: tne payable, and income =x expen. pays 229)
Th lait how dr ie aad ats net amd th Fata sat
leserninw how company's defer oe Face ae seer snub Ireaved
For the puryoats of anil ana fae 230;
deen he te le a cen aera Fai tes, (page 2317

1. Calon nasi ti extn nau ask faa Geer van to

Aeterna aa Fabs anal lee anel teapot be
Bromeil seteruents lane ange hinge aa (phe 2334

fe ralate the inact ula rancchangs an 9 eompanyeianeial oatemient and
rats. ‘page 2361 "

distinguish verween lemparary ame prune items prtne Ramil neuane
tnd cable incance page 2371

fe Tacs abe valatin alc Tr defer ts wget en iy eared and
‘ekat impact ic hes on financial saserwite. (page 24M

be conuere ard conzest a company’s defer tx tens page 2411

iL analyze dscloraesselecog wo sleferred tx items and the effective cx rte
reconciliation, and disuse how infocrecion include“. seve dvelosuees eect:
‘company’s financial sarements and financial -wioe (page 263)

ji identity the ew prosscne of and sieeences beeen income ee arcoumting
under ITRS and U.S. GAAP ‘page 245)

a er

Tie ropca covenage cormaponde with se folownng

Long. Tee Liabilities and Leases

The caadidace should 3e able

4. saapuce dhe effec of debe scuance end sunortizaian of baud d:scousee aud
[ettiume 97 fuanealsuremeni and ratios. (page 256)

bo. spain the eae nf debt coeenante in pitectingetedinots by roving &
Tampon aig 1 ivan, poy divdeads, ou make cobs: apevatg and sategic
asinine {pags 26

ase aig reasing:

22005 Kaan
Book Func Reponing se Ansan
Reng and ring Ousoroe Scnane

fe cee he the prevention nl litsnianess¢ ating mn, Gnsning Hsin
page 265)

AA doers che oferta caging iene ae ne the market vals of le. and
fon fnucal sutemants nd ens ype 2633

se thal eo gprs of aes oi eguiay eras Gwe det ad el: with

sears neler eulte the offen inane ab aych Tnatutste nas a p's
abla oa. page 268,

1. ice le ceiestinie fr Wing arsine ol pcan hen aa the
incentives for erring he lene acepteaing leaves alee cfr
pase 268;

ie cherie the veut of Gases gal sgrvating lowes ye fanaa eee
sul cation of le estes al leave, pe 268

he linings bv teen a oxen and list Gann ese, cl ae ee
the eftens on the financial uatants alee the ese (pt. 2753

i. deserts the types ane ecenamic comsrqurnens of of balame sheet nancing ane
derermine how rake or pay contrac, thracghpt arengemers, and che sae of
resivabes flies Bngntial vate ens wud selec ance rvs, (page: 278)

The rpica covrageecemsponal wn be Plloing CPA arigned wang
40, Ginaacial Reporsing Quali: Red Flags ad Accounting Wrrning Signs
‘The canideresborld be ab. 0
a deserbs incentives shat might ind
undecrepore exeaings. page 2882

wnpary'¢ management co ovecreport OF

6 1 cotitiee thes WL esl in ¢ low quiiey oeneninge. page 289)

S) deserbe the “rand eisng.e,” “page 289!

a sine aeors thee ng; lead eo audolenc accounting ree co
T inceccves and presures,? oppore:n-vies, and 9) areincdes aa
rasenalizasons, (page 290?

* otimen scea:ariag wataing signs and snecods Hr detecting each

1. descr be the eccount.ng wauning signs toleed 19 tke Laron accounting scans

pags 294

e scsnuoting amning signs relead so the Suzbeet accouncing
scandal. (page 2953

he expe cocenige ected ea be fining CEA Incite ipa veang

41, Accounting Shonanigens on the Cash Move Seateanest
he candidere dh. dhe ale ana ps and seuss che ‘o'asing ways 1
ranulas he cash Fow naersent

fo sarcaning ont ye
+ Tinrcing nf payable,
+ sotiziatien af earicaley ane

Ws teed Inylacks off ily in of enrings.tpage 302

889 Kaplan, I Doge
Book 3~ Fail epost al us
endings ud Less Quito Susy

The tpiontcnsemge corresponds wa he
92, Binansal Statement Amato: Ar
Ticcanlidave sho be able vo

sey C8 Fserae ake reals

a. alate 4 vamparys jt rancid perkormauce and expla oe 9 euey’s
sMeaexy i reece in past Braacal prefurmanie, “page 308)
4 Oe painion of x compary’sfurare ner invame and ch Hom
3095,
. dese’oe the ole of Fracuial sarememt amass in anversing the exedie quality of
dese investment. (page 320

‘of Ezancial sesement ana ysis. screening fur potential ecuiey
met, {pase 3:1,

determine and just appropriate analyst aljsrments ro 2 company’s nancie!
starements ro ficilitae comparivun with avuthee company ‘page 311)

‘he eapeal coverage corresponds shh re flung CEA Joti
48, Inexpational Standards Convergence
ould Se

anigned wenden

2d explain the major incetational sccuansing sraadands foreach aster

and ili eategors on. che balance sbecr and ee hey dileronces fiom JS
genssally accspeed accounting principles (GAAP). fpage 316)

b. denrify and explain the mai iteraational ascoursig seacdaids far majot
sevenus aed ex ori on te Income scence de ky difesences
fio 3.3, GAAL “page $203

5p and saplaie che major diffeceness Serves
eonuniing aasdacs en

ineuatianal and US. GAY
ig che sretznent of ws
satsnant of cath Fews (page 323%
es eosssn inesuagenal and US. Gi
seca, aid the street
uty fv some cortmanly useé <acial satios page $23)

Tage

09 Kapa ba