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CFA Book 3 Lesson 43
lesson 43
9
Finance
Post-Graduate
05/22/2010

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Cards

Term
Held-for-trading securities are reported...
Definition
at fair value on the balance sheet and any unrealized gains or losses are recognize int he income statement.
Term
The equity method is used...
Definition
for business combinations when the investor can significantly influence the investee (between 20% and 50% ownership interest). The consolidation method is used when the investor can control the investee (greater than 50% ownership interest). In the case of joint control, proportionate consolidation is preferred under IFRS, but the equity method is required under U.S. GAAP.
Term
Inventory is reported on the balance sheet...
Definition
at the lower of cost or net realizable value under IFRS and at the lower of cost or market under U.S. GAAP. A recovery of value subsequent to a writedown can be recognized under IFRS but not under US GAAP. Under IFRS, the value of property and equipment and identifiable intangible assets can be revalued upward, but under US GAAP, they cannot.
Term
When the firm cannot reliably estimate the outcome of a project...
Definition
it recognizes costs as revenue to the extent they are likely recoverable, but firms reporting under US GAAP must use the competed contract method. The LIFO inventory cost method is permitted by US GAAP but is prohibited under IFRS. 
Term
IFRS requires the depreciation method...
Definition
to allocate an asset's cost systematically over its useful life and reflect the pattern of asset consumption.
Term
IFRS does not permit firms to treat items...
Definition
as "extraordinary items" on the income statement as they can under US GAAP
Term
Under the US GAAP, dividends paid are...
Definition
financing activities, while interest paid or received and dividends paid or received are operating activities.
Term
Under IFRS, dvidends and interest paid...
Definition
can be reported as either operating activities or financing activities. Interest received or dividends received can be reported as either operating activities or financing activities.
Term
To compare financial statement ratios of firms reporting under US GAAP or IFRS...
Definition
an analyst must adjust the data for one of the firms to make the financial statements comparable
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