In view of the COVID-19 situation, selected ISCA’s CPE courses/sessions will be conducting via Live Webinar.
Please do check the details before confirmation your registration for the course/session.
Introduction
Information contained in financial statements is generally determined based on established economic theories. These theories underpinned the mathematics used to measurement financial value of elements of financial statements. A sound understanding of practical economic theories and mathematical models used in measuring assets and liabilities are essential to practicing accountants. Much of these theories and mathematics are now being incorporated into FRS/IFRS in areas such as financial instruments, impairment of assets, share-based payments, fair value measurement etc.
Programme Objective
This course introduces you to the essential financial mathematics as well as certain important economic theories that are commonly used in the financial reporting. The course illustrates the complex mathematics used in the measurement of assets and liabilities in accordance with FRS/IFRS. After attending the course you should have a better understand of the practical aspect of economic theories that influence financial reporting environment and the ability to use the essential mathematical models in practice
Programme Outline
The fundamental concepts and tools of financial mathematics
- Relationship between economic, finance and financial reporting
- Time value of money: The mathematical relationship between risk and return
- Using single period model
- Multi period financial market model
- The use of net present value concept in practice
- Development of formulae for calculating present values and future values
- Case studies: Calculation of present value for various types of cash flow patterns
Understanding structures of interest rates
- The theories of term structure of interest rates
- Constructing a yield curve
- Determining Spot interest rate
- Finding forward interest rates
Understanding the mathematics for contractual cash flows
- Basic character of bonds
- How to calculate yield to maturity
- Finding fair value of bonds
- Bond price sensitivity (the credit risk factor)
- Price/yield relationship
- Applying to IAS39/FRS39 Financial Instruments:
- Determining original effective interest rate
- The mathematical relationship between fair value and amortised cost
- The effect of transaction cost on calculation of original effective interest rates
Understanding inflation, interest rates and foreign exchange rates
- The Theory of one price
- Purchasing power parity (inflation rate)
- Interest rate parity
- International Fisher parity
- Foreign exchange rate expectation
- Fisher effect
- Application to IAS29/FRS29 Financial Reporting in Hyperinflationary Economies
- How inflation affects cash flow projection and its relationship with discount rate used in present value calculation in IAS36/FRS36.
Cost of capital
- Discount rate determination
- The required return and risk
- Capital Assets Pricing Model
- How to use beta
- Gearing and ungearing beta
- Risk adjusted beta
- Determining and using weighted average cost of capital
- Handling inflation by adjusting discount rate
- Applying to IAS36/FRS36 Impairment of Assets:
- Determining discount rate (finding value in use)
Introduction to the fundamental mathematics used in pricing derivatives
- Basic understanding of pricing derivatives
Training Methodology
Lecture style, with practical illustrations, technical flow-charts, conceptual “mind maps” and interactive discussions.
Closing Date for Registration
1 week before programme or until full enrolment
Intended For
This programme is suitable for all Finance Professionals, Audit Professionals, Members of Audit Committee, Finance Directors and Regulators. Those who are keen on attending a practical course that provides a basic understanding of economic theories that underpinned the various mathematical models used in practice to value assets and liabilities are welcome to attend.
Schedule & Fees
Testimonial
Funding
No funding Available!
Programme Facilitator(s)
In view of the COVID-19 situation, selected ISCA’s CPE courses/sessions will be conducting via Live Webinar.
Please do check the details before confirmation your registration for the course/session.
Introduction
Information contained in financial statements is generally determined based on established economic theories. These theories underpinned the mathematics used to measurement financial value of elements of financial statements. A sound understanding of practical economic theories and mathematical models used in measuring assets and liabilities are essential to practicing accountants. Much of these theories and mathematics are now being incorporated into FRS/IFRS in areas such as financial instruments, impairment of assets, share-based payments, fair value measurement etc.
Programme Objective
This course introduces you to the essential financial mathematics as well as certain important economic theories that are commonly used in the financial reporting. The course illustrates the complex mathematics used in the measurement of assets and liabilities in accordance with FRS/IFRS. After attending the course you should have a better understand of the practical aspect of economic theories that influence financial reporting environment and the ability to use the essential mathematical models in practice
Programme Outline
The fundamental concepts and tools of financial mathematics
- Relationship between economic, finance and financial reporting
- Time value of money: The mathematical relationship between risk and return
- Using single period model
- Multi period financial market model
- The use of net present value concept in practice
- Development of formulae for calculating present values and future values
- Case studies: Calculation of present value for various types of cash flow patterns
Understanding structures of interest rates
- The theories of term structure of interest rates
- Constructing a yield curve
- Determining Spot interest rate
- Finding forward interest rates
Understanding the mathematics for contractual cash flows
- Basic character of bonds
- How to calculate yield to maturity
- Finding fair value of bonds
- Bond price sensitivity (the credit risk factor)
- Price/yield relationship
- Applying to IAS39/FRS39 Financial Instruments:
- Determining original effective interest rate
- The mathematical relationship between fair value and amortised cost
- The effect of transaction cost on calculation of original effective interest rates
Understanding inflation, interest rates and foreign exchange rates
- The Theory of one price
- Purchasing power parity (inflation rate)
- Interest rate parity
- International Fisher parity
- Foreign exchange rate expectation
- Fisher effect
- Application to IAS29/FRS29 Financial Reporting in Hyperinflationary Economies
- How inflation affects cash flow projection and its relationship with discount rate used in present value calculation in IAS36/FRS36.
Cost of capital
- Discount rate determination
- The required return and risk
- Capital Assets Pricing Model
- How to use beta
- Gearing and ungearing beta
- Risk adjusted beta
- Determining and using weighted average cost of capital
- Handling inflation by adjusting discount rate
- Applying to IAS36/FRS36 Impairment of Assets:
- Determining discount rate (finding value in use)
Introduction to the fundamental mathematics used in pricing derivatives
- Basic understanding of pricing derivatives
Training Methodology
Lecture style, with practical illustrations, technical flow-charts, conceptual “mind maps” and interactive discussions.
Closing Date for Registration
1 week before programme or until full enrolment
Intended For
This programme is suitable for all Finance Professionals, Audit Professionals, Members of Audit Committee, Finance Directors and Regulators. Those who are keen on attending a practical course that provides a basic understanding of economic theories that underpinned the various mathematical models used in practice to value assets and liabilities are welcome to attend.
Programme Facilitator(s)
