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1. Which translation method will Swift use to convert its financial statements into USD for inclusion in Sunjet’s consolidated statements?
Swift’s functional currency is the AUD because sales are generated in AUD and the company operates within the competitive and regulatory environment of Australia. Under IFRS, when the subsidiary’s functional currency is the local currency, translations are done using the current rate method. Thus, Swift will use the current rate method for converting its financial statements.
The use of the current rate method depends on the identification of the functional currency, not on the local currency. Translations from the functional currency to the presentation currency is done using the current rate method. The local currency has an impact on translation only where it differs from the functional currency. In these cases, the translation from the local to the functional currency is done using the temporal method.
Swift’s functional currency is the AUD, not the USD, because sales are generated in AUD and the company operates within the competitive and regulatory environment of Australia. If it were the USD this answer would be correct.
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2. According to the CFA Institute Research Objectivity Standards, does LeCompte’s first statement made during her television appearance most likely provide all the recommended disclosures relating to potential conflicts of interest?
. LeCompte provided all the recommended disclosures relating to potential conflicts of interest with respect to UniFlash. In addition to her small equity position in NanoMem and the firm’s market making role for NanoMem shares, LeCompte should have also disclosed the “benefit received” from NanoMem concerning the trip she took as required by Standard 2, Public Appearances. In addition, if news of the secondary offering of NanoMem had already been made public, she should have also disclosed the fact that Topaz had been appointed the lead underwriter.
LeCompte only provided recommended disclosures relating to potential conflicts of interest with respect to UniFlash.
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3. Before attending the company-sponsored event, which of the following actions is least appropriate for LeCompte to take to avoid violating any CFA Institute Standards?
Even if LeCompte discloses the cost of her attendance she may still not be permitted to take the trip depending upon her company’s policies. In addition, the dis- closure in this case is not enough to avoid a potential violation of Standard I(B) relating to independence and objectivity. By allowing the corporate issuer to pay for her travel expenses her judgment could be compromised. It is more appropriate for LeCompte to decline the invitation or have her company pay all costs for the trip in order to avoid any conflict or appearance of conflict.
The actions are appropriate and would avoid poten- tial conflicts.
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4. Does LeCompte’s second statement during her TV appearance most likely meet the CFA Institute Research Objectivity Standards recommendations?
. The recommended procedures for compliance with Research Objectivity Requirement 11, Rating System, states that firms should prohibit covered employees from communicating a rating or recommendation different from the current published rating or recommendation.
because she communicated a rating different from her current published rating contrary to Recommendation 11, which states that firms should prohibit covered employees from communicating a rating or recommendation different from the current published rating or recommendation.
because the statement alone about issuing a new report is not a viola- tion. If she disclosed her new recommendation contrary to Recommendation 8, which recommends that reports and recommendations be issued at least quarterly, with additional updates recommended when there is an announcement of significant news or events by, or that might impact, the subject company.
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5. Which of the statements made by the member of the Board of Directors is most accurate?
Initial market reaction is an important barometer for the value investors place on the gains from merging as well as an indication of future returns.
A spin-off does not generate cash for the parent company.
The more of the merger that is paid for by stock, the more that the risks and benefits of realizing these synergies (assuming they really exist) will be passed on to the target shareholders—hence a lower benefit will result if more stock is used.
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