This study session covers investments in other companies, post-employment benefits, and foreign currency transactions. Intercorporate investments take the form of investments in 1) financial assets, 2) associates, 3) joint ventures, 4) business combinations, and 5) special purpose and variable interest entities. Current and new reporting standards for these investments are examined. The valuation and treatment of postemployment benefits follows, including share-based compensation (grants, options). Differences in valuation methods between defined-contribution and defined-benefit plans are described. The effect of foreign currency on a business’s financials and methods to translate foreign currency from operations for consolidated financial statement reporting is examined. Analysis of financial institutions, including factors for consideration and an analysis approach (CAMELS), concludes the session.

This study session focuses on evaluating financial reporting quality and applying financial analysis techniques to investment decisions. A conceptual framework for assessing the quality of a company’s financial reports, including the quality of earnings, is provided. Indicators of low-quality reporting, including quality of earnings, cash flow, and balance sheet are examined. The session concludes with mini-cases, which demonstrate the value in applying financial statement analysis to inform practical investment decisions.