CONTENTS How to Use the CFA Program Curriculum vii Background on the CBOK vii Organization of the Curriculum viii Features of the Curriculum viii Designing Your Personal Study Program ix CFA Institute Learning Ecosystem (LES) x Prep Providers xi Feedback xii Financial Statement Analysis Study Session 4 Financial Statement Analysis (1) 5 Reading 9 Intercorporate Investments 7 Introduction 8 Basic Corporate Investment Categories 8 Investments In Financial Assets: IFRS 9 10 Classification and Measurement 11 Reclassification of Investments 13 Investments In Associates And Joint Ventures: Equity Method of Accounting, Basis Principles 14 Equity Method of Accounting: Basic Principles 15 Investment Costs That Exceed the Book Value of the Investee, Amortization of Excess Purchase Price, Fair Value Option and Impairment 19 Amortization of Excess Purchase Price 20 Fair Value Option 22 Impairment 23 Transactions with Associates and Disclosure 23 Disclosure 26 Issues for Analysts 27 Business Combinations: Acquisition Method and Impact of the Acquisition Method on Financial Statements Post-Acquisition 27 Acquisition Method 29 Impact of the Acquisition Method on Financial Statements, PostAcquisition 31 The Consolidation Process 34 Business Combination with Less than 100?quisition 34 Non-controlling (Minority) Interests: Balance Sheet 34 Non-controlling (Minority) Interests: Income Statement 37 Goodwill Impairment 38 Financial Statement Presentation Subsequent to the Business Combination 40 Variable Interest and Special Purpose Entities 43 Securitization of Assets 45 Additional Issues in Business Combinations That impair Comparability 47 Contingent Assets and Liabilities 47 ii Contents indicates an optional segment Contingent Consideration 47 In-Process R&D 48 Restructuring Costs 48 Summary 48 Practice Problems 50 Solutions 61 Reading 10 Employee Compensation: Post-Employment and Share-Based 67 Introduction 68 Pensions and Other Post-Employment Benefits 68 Types of Post-Employment Benefit Plans 69 Measuring a Defined Benefit Pension Plan's Obligations 71 Financial Statement Reporting of Pension Plans and Other PostEmployment Benefits: Defined Contribution Pension Plans 73 Defined Contribution Pension Plans 73 Financial Statement Reporting of Pension Plans: Balance Sheet Reporting for Defined Benefit Pension Plans 73 Balance Sheet Presentation 73 Financial Statement Reporting of Pension Plans: Periodic Pension Costs for Defined Benefit Pension Plans 74 More on the Effect of Assumptions and Actuarial Gains and Losses on Pension and Other Post-Employment Benefit Costs 77 Calculation of Defined Benefit Pension Obligation and Current Service Costs 79 Disclosures of Pension and Other Post-Employment Benefits: Assumptions 85 Assumptions 86 Disclosures of Pension and Other Post-Employment Benefits: Net Pension Liability (or Asset) and Periodic Pension Costs 91 Total Periodic Pension Costs 91 Periodic Pension Costs Recognised in P&L vs. OCI 92 Classification of Periodic Pension Costs Recognised in P&L 92 Disclosures of Pension and Other Post-Employment Benefits: Cash Flow Information 94 Share-Based Compensation 96 Stock Grants 99 Stock Options 100 Other Types of Share -Based Compensation 103 Summary 103 Practice Problems 106 Solutions 116 Reading 11 Multinational Operations 123 Introduction and Foreign Currency Transactions: Foreign Currency Transaction Exposure to Foreign Exchange Risk and Analytical Issues 124 Foreign Currency Transactions 125 Disclosures Related to Foreign Currency Transaction Gains and Losses 132 Translation of Foreign Currency Financial Statements and Translation Conceptual Issues 138 Translation Conceptual Issues 138