The CFA: Conversations, Ideas, and Approach Message Board

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To: HeyRainier who wrote (28)	12/9/1998 4:07:00 AM
From: HeyRainier	Read Replies (2) of 70

Here's another one; you may find it useful: From: Brian Gordon (BRIANYGORDON) To: ALL 1 of 1 Posted: 11/24/98 12:16 PM Reply to: New Thread Sam, Thank you for your email. Your question about capitalizing a lease vs. classifying it as an operating lease is a good one. AIMR loves to test candidates on purchase vs. pooling, equity vs. cost method, % completion vs. full cost, LIFO vs. FIFO, conservative vs. aggressive pension assumptions. The key here however is not just to be able to regurgitate the differences, but to be able to link the effects of each method to the firm's cash flows (from operations, investing, and financing). These in turn, will affect the ratios leading unsuspecting analysts to make erroneous conclusions about the firm's performance and financial health. Schweser does a great job describing each method and listing the resulting effects. If you have a weak accounting background, try to focus on how the financial statements link to eachother. For example, the Retained Earnings link to/from the income statement. The Cash position on the Balance Sheet to/from the Statement of Changes in Cash flow.

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