Reading 36: Equity: Concepts and Techniques-LOS a 习题精选 standards, accounting, 2010, following, investing

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Session 11: Equity Valuation: Industry and Company Analysis in a Global Context
Reading 36: Equity: Concepts and Techniques

LOS a: Discuss common issues that arise when investing internationally (e.g., differences in accounting standards).

 

 

 

Which of the following methods of business combinations is the generally preferred method under International Accounting Standards (IAS)?

A) Acquisition Method.

B) Purchase method.

C) Pooling method.

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Pooling and uniting of interests are no longer permitted. The acquisition method has replaced the purchase method of accounting.

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Which of the following items is least likely to have major differences between national accounting standards and International Accounting Standards (IAS)?

A) Consolidation.

B) Employee benefits.

C) Revenue.

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Consolidations and employee benefits are more subject to accounting manipulation and have considerably different treatments amongst different countries.

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Which of the following methods is a valid method of accounting for goodwill?

A) Subject to a monthly impairment test.

B) Amortized over a specified period of time.

C) Fully deducted against equity immediately.

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The impairment test is annual, not monthly. Both remaining methods are possible, including not amortizing goodwill if it can be reasonably shown that goodwill has not lost its value (i.e. revenue-generating ability).

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Blair Kennedy, CFA, investment director for Sable Capital, is discussing some of the company’s international investments with a client and mentions the “information problem.” Kennedy is most likely referring to:

A) complexities inherent in adjusting financial statements to reflect different exchange rates.

B) inconsistencies in financial statements from one country to another.

C) the difficulty her U.S. analysts have in determining how cultural differences affect investment strategy.

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Foreign firms can be tougher to analyze than U.S. firms because of differences in the presentation of financial statements, as well as delays in the release of information and, in some cases, financial statements printed only in the home country’s language. Both of the other answers reflect challenges related to international investing, but are not part of the “information problem.”

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Which of the following procedures in a global industry analysis is least important to perform? Analysts should examine:

A) all of the firms in the industry.

B) the level of cooperation along the value chain.

C) how changes in gross domestic product (GDP) affect sales.

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It is usually not feasible to examine all the firms in a particular industry. Both remaining statements are standard procedures to perform in a global industry analysis.

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