Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 6, Problem 16PC
To determine
Explain the proper treatment for each of the proposed arrangement from the viewpoint of the auditor, and discuss the person with respect to the Country U.S GAAP in deciding whether the transaction will result in a liability to be recorded or whether note disclosure will be sufficient. Identify whether Country U.S GAAP reporting result in a precise portrayal of the economics of the arrangement in every case.
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1. A bank has deposits of 100 billion and leverage ratio of 12. Assume that it has a reserve ratio of 20 percent, and it holds no excess reserves. Further suppose that bank capital is $36 billion. Lump all assets besides ‘reserves’ into a category labeled ‘other’.a) Write down a t-account for the bank. Briefly explain how you come up with any number.b) Suppose the new legislation requires banks to have a reserve ratio of at least 30 percent. The bank meets this requirement by issuing new debt. There is no change in the amount of deposits. Show the new t-account. What is the new leverage ratio?
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You have been promoted to head of Treasury and Investment Management at Ecobank and have been handed information on a number of issues for which immediate answers are required. For each excerpt from the issues presented below answer the associated question(s):
Ecobank holds ¢500 million T-Bill but is in short of cash. It needs cash to meet the requirement of a customer who has come to withdraw ¢400 million. You have been asked to approach Barclays Bank to sell the T-Bill for ¢495 million with agreement to repurchase within 4 working days.
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Financial Reporting, Financial Statement Analysis and Valuation
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