M.Sc Financial Reporting & Analysis II Sep 2024

Description

Financial Analysis & Reporting II

September 2024 Examination

 

 

1. If a British Company is setting up a new Branch at USA and want to set up for their Employees Defined Benefit Pension Obligation (DBPO) with recent IFRS implementation as per guidelines of IASB. Kindly specify respective intricacies under IAS 19 for their US branch. (10 Marks)

Ans 1.                                                                 

Introduction

When a British company plans to establish a new branch in the USA and wishes to set up a Defined Benefit Pension Obligation (DBPO) for its employees, it must carefully navigate the intricacies of international financial reporting standards (IFRS) as guided by the International Accounting Standards Board (IASB). The adoption of IFRS, particularly IAS 19, presents a detailed framework for accounting for employee benefits, including pension obligations. IAS 19 outlines the principles for recognizing, measuring, and disclosing post-employment benefits, ensuring that financial statements provide a true and fair view of the company’s obligations. Given the diverse regulatory environments between the UK and the USA, the British company must adapt its DBPO structure to comply with IFRS, while also considering the specific legal, tax, and

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2. A German Company has appointed an external Statutory Auditor as they suspect being their CFO & Corporate Finance Team has manipulated their last FY Turnover & few other Numbers. The Auditor has decided to apply Beneish Model for detection of Manipulation. Explain the instrumental factors & steps. (10 Marks)

Ans 2.

Introduction

In today’s global business environment, financial integrity is paramount, and any suspicion of financial manipulation warrants thorough investigation. A German company’s appointment of an external statutory auditor to review its financial statements, particularly in light of suspected manipulation by the CFO and Corporate Finance Team, underscores the seriousness of maintaining accurate and truthful financial reporting. The Beneish Model, a statistical tool used to detect earnings manipulation, is particularly effective in such scenarios. Developed by Professor Messod

 

 

3a. Explain ALTMAN Model Cruciality in prediction of Bankruptcy for Financial Institutes along with its respective Mathematical Formulae. (5 Marks)

Ans 3a.

Introduction

The Altman Model, also known as the Altman Z-Score, is a widely recognized tool for predicting the likelihood of bankruptcy among companies, including financial institutions. Developed by Edward Altman in 1968, this model combines various financial ratios to create a single composite score that indicates the probability of bankruptcy. The model is particularly crucial for financial institutions, where the ability to predict financial distress early can prevent significant losses and systemic risks. By applying the Altman Model, stakeholders can assess the

 

1. Elaborate how CAMEL Model can be useful in Analysis of a recognized Insurance Company? (5 Marks)

Ans 3b.

Introduction

The CAMEL Model is a widely used framework for assessing the overall health and performance of financial institutions, including insurance companies. Originally developed for banks, the model has been adapted for other financial entities due to its comprehensive analysis of key performance areas. CAMEL stands for Capital Adequacy, Asset Quality, Management Quality, Earnings, and Liquidity, each of which provides insights into different aspects of an institution’s stability and efficiency. When applied to a recognized insurance company, the CAMEL