Financial Reporting & Analysis - Balance Sheet Flashcards
Balance sheet - intrinsic or market value?
Neither. Balance sheet components are sometimes marked-to-market and historical cost.
Definition: current assets
Assets used, sold or traded in one year or less.
Definition: non-current
Assets used, sold or traded in > 1 year, or 1 business cycle, whichever is longer.
Definition: working capital
Current assets - current liabilities
Classified balance sheet
Separately classified as current & non-current assets
Liquidity based balance sheet
Organized by liquidity. Allowed to organize this way, if it provides relevant & reliable info (usually banks use this format)
Held to Maturity Securities
- Amortized cost.
3. Other comprehensive income, not net income.
Held for trading Securities
- Fair value
2. Net income
Available for Sale Securities
- Fair value
2. Other comprehensive income, not net income
Assets measured at fair value
- Held for trading
- Available for sale
- Derivatives
- Non-derivative instruments hedged by derivatives
Assets measured at cost or amortized cost
1 Held to maturity.
- Unlisted instruments
- Loans and receivables
- All other liabilities not mentioned as fair value
Accounts receivable
Net of realizable value (i.e. after deducting allowance for doubtful accounts).
Inventories
- GAAP: measured at the lower of cost or market value
2. IFRS: lower of cost or net realizable value
Asset: cash & cash equivalents
Reported at amortized cost or fair value.
Retail cost method
= sales value - gross average margin (for each homogenous group).
Impact of markdowns should also be considered.
Standard cost measure
Measures normal levels of materials, labor and capacity
Property Plant & Equipment (PPE)
- GAAP: cost model
2. IFRS: cost or revaluation (must be consistent within asset class.
PPE cost model
Carried at amortized cost (historical cost - depreciation/depletion/impairment)
Definition: current liabilities
expected to be settled over the course of entity’s normal operation cycle or < 12 months.
Impairment
- Loss recognized on income statement.
2. Reversals permitted under IFRS, but not GAAP.
Intangible assets
- Non-monetary assets with out physical substance.
- IFRS: cost or revaluation model (must be active market)
- GAAP: cost model
Investment property
- Land used for rental income or capital appreciation.
- IFRS: cost or revaluation models.
- GAAP: no definition
Amortization & impairment: intangible w/ finite life
- Systematically amortized over best guess of useful life
2. Tested for impairment at least annually (same as PPE)
Amortization & impairment: intangible w/ indefinite life
- Not amortized
2. Tested for impairment at least annually
