Balance Sheet Flashcards
Asset recognition
- probably future flow of economic benefit
- measurable with reliability
Components of the balance sheet
Current assets
Long-lived assets
Current liabilities
Long term liabilities
Owners equity
Liability recognition
- probably sacrifice of future economic benefit
- amts received but not reported as revenue (deferred/unearned)
- amts reported as expenses that haven’t been paid
Assets
Cash Inventories Trade and other receivables Prepaid expenses Financial assets Deferred tax assets PP&E Investment property Intangible assets Equity AC investments Natural resources Assets held for sale
Liabilities
Bank borrowings Notes payable Provisions Unearned revenues Accts payable Financial liabilities Accrued liabilities Deferred tax liabilities
Current Assets
*converted into cash or used up within one year
Cash and cash equivalents short-term investments accounts receivable notes receivable inventory prepaid expenses deferred tax assets
Long-Lived Assets
*held for continuing use within the business, not resale
Investments
Property, Plant & Equipment
Other (Inv property, assets held for sale, natural resources)
Short-Term Investments
Held-to-Maturity
Trading
Available for Sale
Held to Maturity ST Investment
reported at cost
Trading ST Investment
reported at fair market value
Available for Sale security
reported at fair market value
Accounts Receivable
reported at net realizable value
Notes receivable
a promissory note with a maturity date and interest rate, reported at net realizable value
Inventory
reported at lower of cost and net realizable value
use FIFO, LIFO, ave cost, or specific ID
overstated closing inventory –> overstated income
Prepaid Expenses
Reported at cost
Property, Plant &Equipment
land = at cost
plant, bldgs, equp = historic cost less accum depreciation
Intangible assets = historic cost less accum amort
Long-Lived Investments
intention to hold > 1 year
valued at cost or market value
equity accumulated investments
Stockholder’s Equity
Contributed Capital Treasury Stock Retained Earnings comprehensive income items Minority (non-controlling) interests
Contributed Capital
= common stock at par + additional paid-in capital
Retained Earnings
= accumulated net income - dividends
Current Liabilities - Criteria
- Expected to settle in operating cycle
- Held for trading
- settlement due within 12 months
- no right to defer past 12 months
Current Liabilities
accounts payable & other payables accruals notes payable provisions deferred/unearned revenue dividends payable current portion of long-term debt/capital leases deferred tax liabilities
Long-Term Liabilities
paid after more than one year notes and bonds (PV of future CFs) capital leases provisions deferred tax liabilities
Net Realizable Value
= estimated selling price - estimated cost of completion - selling costs
US GAAP Inventory Reporting
lower of costs or market value (replacement cost)
Items to be Expensed as Incurred
start-up and training costs administrative overhead advertising and promotion costs relocation and reorganization costs termination costs
Goodwill
excess of purchase price over the fair value of the identifiable net assets acquired in a business acquisition
- not amortized
- must be tested for impairment annually
Assets valued at Historical Cost
unlisted equity investments
loans and receivables
Assets valued at Amortized Cost
held-to-maturity securities
Assets valued at Fair Value
Trading Securities
Available-for-sale securities
derivatives
historical cost
= purchase price + cost to get asset ready for use
amortized cost
= original issue price - principal payments \+ amortized discount - amortized premium - impairment losses
Fair Value
= current market value
Held-to-Maturity Security
- reported on balance sheet at amortized cost
- interest income is reported on income statement
trading security
- reported at fair value on balance sheet
- unrealized loss/gain and interest income reported on income statement
available-for-sale security
- reported on balanced sheet at fair value
- interest income reported on income statement
- unrealized loss/gain reported as change in stockholders’ equity
