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Basic Question 0 of 5
Which of the following observations signal(s) poor quality of figures provided in the income statement and the balance sheet?
II. Use of special purpose entities (SPEs).
III. Short depreciable lives.
IV. Low pension discount rate.
I. Bill-and-hold sales.
II. Use of special purpose entities (SPEs).
III. Short depreciable lives.
IV. Low pension discount rate.
User Contributed Comments 4
| User | Comment |
|---|---|
| johnnybee | good question |
| ssradja | agreed |
| ashish100 | "The discount rate refers to the level at which future pension obligations are discounted to their present value. A higher discount rate reduces the reported benefit obligation, while a lower discount rate raises the obligation" - danger zone |
| Levancho | Why not III and IV? I understand they are not part of an aggressive accounting practices, but does not conservative assumptions also contribute to the lower quality of the statements? |
Your review questions and global ranking system were so helpful.
Lina
Learning Outcome Statements
contrast absolute and relative valuation models and describe examples of each type of model;
describe sum-of-the-parts valuation and conglomerate discounts;
explain broad criteria for choosing an appropriate approach for valuing a given company.
CFA® 2025 Level II Curriculum, Volume 3, Module 20.