FSA 2

Effective interest rate method

interest income = carrying amount time interest. The rest is recognised as amortisation

3 types of methods for acquisition

• Equity method

• proportionate consolidation method

• acquisition method

Full Vs Partial Goodwill

Full is required by USGAAP and gives higher goodwill through Fair Value measurment of NCI

Rules of impairment

Impairment for Full consolidation

If impairment exceed goodwill, it is allocated to the non cash assets

Interco in Consolidation

Eliminate interco for revenue

DB obligation

Service Cost + interest cost - benefits paid + actuarial gain or loss

net interest income expense for pension

( discount rate x benefits obligation) - (discount rate x fair value of asset)

Operating expense in P&L for pension

current and past service cost

Operating outflow for pension

employer s plan contribution

Income statement recognition for pension (USGAAP)

Past service cost - (Expected return x plan) + (Discount rate x obligation)

RSU income statement recognition

(grant date fair value x vested - grant date fair value x forfeited)

Tax windfall for RSUs (US GAAP, in ifrs it is directly in equity gain)

tax rate x (vested x fair value at vest date - vested x fair value at grant date)

Diluted share outsanding using TSM

Basic share outstanding + Unvested stuf - unrecognised share base compensation

CAMELS

• Capital Adequacy

• Asset Quality

• Management abilities

• earnings sufficiency

• liquidity position

• sensitivity to market risk

underwriting expense ratio (efficiency in obtaining new premium)

Underwriting expenses/net premium written

Criteria for T1 capital

securities with no fixed maturity and cash flow at the discretion of the bank

hard insurance markets

Big premiums

hyperinflationary IFRS & USGAAP

• translate and current

• Temporal

Exposure to translation effect for current method

net assets of a subsidiary

Beneish M scores for earning manipulation probability

earning manipulation if M score is lower than -1,78

Altman’s score

• more than 3 is ok

• less than 1,81 is bankrupcy

Impairment under equity method IFRS / USGAAP

• triggered by, test carrying amount - recoverable, higher sale or pc of cf

• triggerd, no test, fair value

total share outstanding RSU

• Share outstanding + unvested Rsu - Average share unrecognised share based expense/average share price