BooK 2- FINANCIAL REPORTING AND ANALYSIS AND CoRPORATE FINANCE Readings and Learning Outcome Statements Study Session - Financial Reporting and Analysis: Inventories and Long-lived Assets 10 Study Session - Financial Reporting and Analysis: Intercorporate Investments, Post-Employment and Share-Based Compensation, and Multinational Operations 67 Study Session - Financial Reporting and Analysis: Earnings Quality Issues and Financial Ratio Analysis 163 Self-Test - Financial Reporting and Analysis 221 Study Session - Corporate Finance 229 Study Session - Corporate Finance: Financing and Control Issues 320 Self-Test- Corporate Finance 387 Formulas 391 Index 397 SCHWESERNOTES™ 2012 CFALEVELII BOOK2: FINANCIAL REPORTING AND ANALYSIS AND CORPORATE FINANCE ©2011 Kaplan, Inc All rights reserved Published in 20 II by Kaplan Schweser Printed in the United States of America ISBN: 978-1-4277-3619-2/1-4277-3619-7 PPN: 3200-1730 If this book does not have the hologram with the Kaplan Schweser logo on the back cover, it was distributed without permission of Kaplan Schweser, a Division of Kaplan, Inc., and is in direct violation of global copyright laws Your assistance in pursuing potential violators of this law is greatly appreciated Required CFA Institute® disclaimer: "'CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute CFA Institute (formerly the Association for Investment Management and Research) does not endorse, promote, review, or warrant the accuracy of the products or services offered by Kaplan Schweser."' Certain materials contained within this text are the copyrighted property of CFA Institute The following is the copyright disclosure for these materials: "'Copyright, 2012, CFA Institute Reproduced and republished from 2012 Learning Outcome Statements, Level I, II, and III questions from CFAIZ Progtam Materials, CFA Institute Stand.ard.s of Professional Conduct, and CFA Institute's Globallnvesnnent Perfotmance Standards with permission from CFA Institute All Rights Reserved." These materials may not be copied without wtitten permission from the author The unauthorized duplication of these notes is a violation of global copytight laws and the CFA Institute Code of Ethics Your assistance in pursuing potential violatots of this law is greatly appreciated Disclaimer: The Schweser Notes should be used in conjunction with the original readings as set forth by CFA Institute in their 2012 CFA Level II Study Guide The information contained in these Notes covers topics contained in the readings refetenced by CFA Institute and is believed to be accutate However, their accuracy cannot be guaranteed nor is any wartanty conveyed as to yout ultimate exam success The authors of the referenced readings have not endorsed or sponsored these Notes READINGS AND LEARNING OuTCOME STATEMENTS READINGS The following material is a review ofthe Financial Reporting and Analysis, and Corporate Finance principles designed to address the learning outcome statements set forth by CPA Institute STUDY SESSION Reading Assignments Financial Reporting and Analysis, CFA Progtam Curriculum, Volume 2, Level II (CFA Institute, 20 12) 20 Inventories: Implications for Financial Statements and Ratios 21 Long-lived Assets: Implications for Financial Statements and Ratios page 10 page 34 STUDY SESSION Reading Assignments Financial Reporting and Analysis, CFA Progtam Curriculum, Volume 2, Level II (CFA Institute, 20 12) 22 Intercorporate Investments 23 Employee Compensation: Post-Employment and Share-Based 24 Multinational Operations page 67 page 101 page 128 STUDY SESSION Reading Assignments Financial Reporting and Analysis, CFA Progtam Curriculum, Volume 2, Level II (CFA Institute, 20 12) 25 The Lessons We Learn 26 Evaluating Financial Reporting Quality 27 Integration of Financial Statement Analysis Techniques page 163 page 172 page 200 STUDY SESSION Reading Assignments Corporate Finance, CFA Progtam Curriculum, Volume 3, Level II (CFA Institute, 20 12) 28 Capital Budgeting 29 Capital Structure 30 Dividends and Share Repurchases: Analysis ©20 11 Kaplan, Inc page 229 page 275 page 294 Page3 Book - Financial Reporting and Analyms and Corporate Finance Reading< and Learning Outcome Statements STUDY SESSION Reading Assignments Corporatt Finance, CFA Program Curriculum, Volume 3, Level II (CFA Institute, 2012) page 320 page 337 31 Corporate Governance 32 Mergers and Acquisitions LEARNING OUTCOME STATEMENTS (LOS) Th< CPA lnstitutt L