Financial Statement Analysis: Study Session 6
Study Session Materials
New Readings from the 2008 CFA Program
Complete List of CFA Program Readings
Topic Overview
Financial Statement Analysis: Pensions, Employee Stock Options, and Multinational Operations
Recent changes in accounting for pensions and other post-retirement
benefits have caused more obligations to be reported on the balance sheet
than in prior years. U.S. and international accounting standards have
both changed in a similar but not exactly identical fashion.
The FASB had the topic of accounting for employee stock options under
review for several years and recently voted to require the inclusion of
expenses related to the issuance of stock options in the income
statement. Employee stock options were previously excluded from the
income statement but disclosed in the footnotes. International accounting
standards also require employee stock options to be expensed.
Multinational companies often have subsidiaries in different countries that maintain their books and records in a local currency. The issue of floating exchange rates creates a challenge because one must separate the effects of these changing exchange rates from the company’s ongoing activities. The accounting method (i.e., all-current or temporal) used for the translation of foreign currency financial statements depends on the functional currency, the reporting currency, and the inflationary environment of the subsidiary company. Consequently, an analyst should know how to analyze the transactions and translations that are presented in a parent company’s financial statements to evaluate a company’s performance and financial position.
View learning outcome statements (LOS) for reading objectives.
New Readings from the 2008 CFA Program
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"Understanding Retirement Benefit Accounting and
Disclosures for Financial Analysis" Thomas R. Robinson, Paul Munter, and Julia Grant, Financial Statement Analysis: A Global Perspective (Pearson/Prentice Hall, 2004) |
View LOS |
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"FAS 123(R) — Accounting for Stock-Based
Compensation: Happy Anniversary?" Diane Doubleday, Susan Eichen, and Linda Laarman (Mercer Human Resource Consulting, 2005) |
View LOS |
Complete List of CFA Program Readings
|
"Understanding Retirement Benefit Accounting and
Disclosures for Financial Analysis" Thomas R. Robinson, Paul Munter, and Julia Grant, Financial Statement Analysis: A Global Perspective (Pearson/Prentice Hall, 2004) |
View LOS |
|
"FAS 123(R) — Accounting for Stock-Based
Compensation: Happy Anniversary?" Diane Doubleday, Susan Eichen, and Linda Laarman (Mercer Human Resource Consulting, 2005) |
View LOS |
|
“Analysis of Multinational Operations” Ch. 15, pp. 546-574 (including Box 15-1), The Analysis and Use of Financial Statements, 3rd edition, Gerald I White, Ashwinpaul C. Sondhi, and Dov Fried (Wiley, 2003) |
View LOS |