Burton Howard, CFA, is an equity analyst with Maplewood Securities. Howard is preparinga research report on Confabulated Materials, SA, a publicly traded company based in Francethat complies with IFRS. As part of his analysis, Howard has assembled data gathered fromthe fi nancial statement footnotes of Confabulated’s 2009 Annual Report and from discussionswith company management. Howard is concerned about the eff ect of this information onConfabulated’s future earnings.Information about Confabulated’s investment portfolio for the years ended 31 December2008 and 2009 is presented in Exhibit 1. As part of his research, Howard is considering thepossible eff ect on reported income of Confabulated’s accounting classifi cation for fi xed incomeinvestments.EXHIBIT 1 Confabulated’s Investment Portfolio (€ Th ousands)Characteristic Bugle AG Cathay Corp Dumas SAClassifi cation Available-for-sale Held-to-maturity Held-to-maturityCost* €25,000 €40,000 €50,000Market value, 31 December 2008 29,000 38,000 54,000Market value, 31 December 2009 28,000 37,000 55,000*All securities were acquired at par value.In addition, Confabulated’s annual report discusses a transaction under which receivables weresecuritized through a special purpose entity (SPE) for Confabulated’s benefi t. 18 . Confabulated’s special purpose entity is most likely to be:A . held off -balance sheet.B . consolidated on Confabulated’s fi nancial statements.C . consolidated on Confabulated’s fi nancial statements only if it is a “qualifying SPE.”
Burton Howard, CFA, is an equity analyst with Maplewood Securities. Howard is preparing
a research report on Confabulated Materials, SA, a publicly traded company based in France
that complies with IFRS. As part of his analysis, Howard has assembled data gathered from
the fi nancial statement footnotes of Confabulated’s 2009 Annual Report and from discussions
with company management. Howard is concerned about the eff ect of this information on
Confabulated’s future earnings.
Information about Confabulated’s investment portfolio for the years ended 31 December
2008 and 2009 is presented in Exhibit 1. As part of his research, Howard is considering the
possible eff ect on reported income of Confabulated’s accounting classifi cation for fi xed income
investments.
EXHIBIT 1 Confabulated’s Investment Portfolio (€ Th ousands)
Characteristic Bugle AG Cathay Corp Dumas SA
Classifi cation Available-for-sale Held-to-maturity Held-to-maturity
Cost* €25,000 €40,000 €50,000
Market value, 31 December 2008 29,000 38,000 54,000
Market value, 31 December 2009 28,000 37,000 55,000
*All securities were acquired at par value.
In addition, Confabulated’s annual report discusses a transaction under which receivables were
securitized through a special purpose entity (SPE) for Confabulated’s benefi t.
18 . Confabulated’s special purpose entity is most likely to be:
A . held off -balance sheet.
B . consolidated on Confabulated’s fi nancial statements.
C . consolidated on Confabulated’s fi nancial statements only if it is a “qualifying SPE.”
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