Compared to Confabulateds reported earnings before taxes in 2009, if Bugle had been classified as a held

Question:

Compared to Confabulated’s reported earnings before taxes in 2009, if Bugle had been classified as a held for trading security, the earnings before taxes (in € thousands) would have been:

A. the same.

B. €1,000 lower.

C. €3,000 higher.


Burton Howard, CFA, is an equity analyst with Maplewood Securities. Howard is preparing a research report on Confabulated Materials, SA, a publicly traded company based in France that complies with IFRS. As part of his analysis, Howard has assembled data gathered from the financial statement footnotes of Confabulated’s 2009 Annual Report and from discussions with company management. Howard is concerned about the effect of this information on Confabulated’s future earnings.

Information about Confabulated’s investment portfolio for the years ended 31 December 2008 and 2009 is presented in Exhibit 1. As part of his research, Howard is considering the possible effect on reported income of Confabulated’s accounting classification for fixed income investments.

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In addition, Confabulated’s annual report discusses a transaction under which receivables were securitized through a special purpose entity (SPE) for Confabulated’s benefit.

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Related Book For  book-img-for-question

International Financial Statement Analysis CFA Institute Investment Series

ISBN: 9780470287668

1st Edition

Authors: Thomas R. Robinson, Hennie Van Greuning CFA, Elaine Henry, Michael A. Broihahn, Sir David Tweedie

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