CMA Final Paper 17 flashcards

33 cards. Read the term and the definition here. The deck at the top of this page is optional.

Control under Ind AS 110

Investor controls investee when it has power over relevant activities, exposure to variable returns, and ability to use power to affect returns. Reassess when facts change.

Goodwill formula

Goodwill = consideration transferred + NCI + previously held interest − fair value of net identifiable assets acquired. NCI measured at fair value or proportionate share.

Bargain purchase gain

Excess of fair value of net assets acquired over consideration after reassessment is recognised as gain in profit or loss in the acquisition period.

Translation of foreign subsidiary

Assets and liabilities at closing rate, income and expenses at average rate, exchange differences to OCI translation reserve, recycled on disposal.

Ind AS 115 five steps

Identify contract, identify performance obligations, determine transaction price, allocate price to obligations, recognise revenue when control transfers.

Expected credit loss model

Measure loss allowance at 12-month ECL unless credit risk increased significantly, then lifetime ECL. Simplified approach for trade receivables using provision matrix.

Target costing formula

Target cost = competitive market price − desired profit margin. Cost gap = current estimated cost − target cost; close gap through value engineering.

Throughput accounting ratio

Throughput = sales − direct material cost. Throughput per bottleneck minute = throughput / bottleneck minutes. Prioritise products with highest ratio.

Transfer pricing general rule

Minimum transfer price = incremental cost + opportunity cost per unit. When external market exists, use market price less internal cost savings.

Material price variance

Material price variance = (standard price − actual price) × actual quantity purchased. Favourable if actual price below standard.

Break-even sales

Break-even sales = fixed costs / contribution margin ratio. Contribution margin ratio = contribution / sales. Margin of safety = actual sales − break-even sales.

Balanced Scorecard perspectives

Four perspectives: financial, customer, internal business process, learning and growth. Each has objectives, measures, targets, and initiatives linked by cause and effect.

Reportable segment threshold

Operating segment reportable if revenue, profit/loss, or assets are 10% or more of combined total. Reportable segments must cover at least 75% of external revenue.

Basic EPS formula

Basic EPS = profit attributable to ordinary shareholders / weighted average number of ordinary shares outstanding during the period. Diluted EPS adjusts for dilutive potential shares.

Adjusting events after reporting period

Events providing evidence of conditions at reporting date require adjustment of financial statements. Non-adjusting events are disclosed if material.

Related party disclosure

Disclose relationships, transactions, outstanding balances, and commitments. Key management personnel compensation disclosed by category under Ind AS 24.

Interim financial reporting minimum

Ind AS 34 requires condensed balance sheet, income statement, cash flow statement, and explanatory notes. Apply same accounting policies as annual statements.

Residential status individual

Resident if stay ≥182 days in previous year, or ≥60 days and ≥365 days in preceding four years. Resident but not ordinarily resident if non-resident in 9 of 10 prior years.

Section 115BAA corporate rate

Domestic company may opt for 22% tax rate (plus 10% surcharge and 4% cess) if it forgoes specified incentives and exemptions. Irrevocable option.

GST place of supply

Place of supply determines whether IGST or CGST plus SGST applies. For goods, generally location where goods are delivered; for services, location of recipient or supplier per rules.

TDS interest on late deposit

Interest for non-deduction is 1% per month; for late deposit after deduction is 1.5% per month from date deductible to date actually paid.

GAAR under Chapter X-A

General anti-avoidance rules allow tax authorities to disregard arrangements lacking commercial substance whose main purpose is tax benefit. Taxpayer may seek advance ruling.

WACC formula

WACC = (E/V) × Ke + (D/V) × Kd × (1 − tax rate), using market value weights. Ke from CAPM = risk-free rate + beta × market risk premium.

Modigliani-Miller with taxes

Firm value increases with leverage by tax shield = Tc × D. Trade-off theory balances tax shield against financial distress and agency costs.

Modified duration

Modified duration measures percentage change in bond price for a small change in yield: percentage price change ≈ − modified duration × yield change.

Expected credit loss formula

Expected loss = probability of default × exposure at default × loss given default. Used to assess counterparty credit risk and price credit exposure.

Free cash flow to firm

FCFF = EBIT × (1 − tax) + depreciation − capital expenditure − increase in working capital. Discount at WACC to get enterprise value.

Terminal value Gordon growth

Terminal value = final year free cash flow × (1 + g) / (WACC − g). Growth rate g must be sustainable and below WACC.

Value of synergy

Synergy value = combined firm value − (acquirer standalone value + target standalone value). Sources include cost savings, revenue enhancement, and financial economies.

Exchange ratio in merger

Exchange ratio = offer price per target share / acquirer share price. Determines number of new shares issued and post-merger ownership dilution.

ICAI fundamental principles

Integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. Apply conceptual framework to identify and address threats.

Threat categories in ethics

Self-interest, self-review, advocacy, familiarity, and intimidation threats. Safeguards include firm policies, engagement quality review, and rotation.

CSR spending requirement

Companies meeting section 135 thresholds must spend at least 2% of average net profits of preceding three years on CSR and disclose in board report.