Week 2: Statement of Financial Position Flashcards
statement of financial position
provides users w into on position (amount) of an entity’s:
-assets (what firm owns/has control over)
-liabilities (what the firm owes to others)
-(shareholders’) equity (what portion of the entity the owners financed
-for a specific point in time (eg, (as at) December 31, 2022)
assets
resources a company owns or controls that will provide future economic benefit
current assets
expected to be converted into cash or used in the business within one year or one operating cycle, whichever is longer
usually listed in order of liquidity (conversion to cash):
-cash
-short term investments (trading)
-receivables (usually accounts receivable)
-invesntories
-prepaid assets (also called prepaid expenses)
non-current assets
assets not expected to be converted to cash or used in the business within one year or one operating cycle; therefore not a current asset
eg, (separate groups)
-investments (LT) (LT loans receivable or shares owned in other companies)
-property, plant, and equipment (PP&E)
-intangible assets and goodwill
-other (long term) assets
property, plant, and equipment (PPE)
-tangible (physical) assets with relatively long useful lives
-used in operating the business
-eg,
–land (property) - listed first indefinite life
–buildings (plant) - usually next, long life
–equipment
–furniture
0usually listed in order of permanency (as shown)
depreciation
allocation of the cost of long term assets with limited lives:
-companies assign a portion of the cost of a long term asset to an expense each year
-under IFRS, this is called:
–depreciation for property, plant, and equipment, and
–amortization for intangible assets
-some assets have indefinite lives and are not depreciated (eg, land)
depreciation expense
the yearly “expense” associated with using up the asset’s value
accumulated depreciation (of a specific asset)
total amount of all depreciation “used”, up to the current date (usually multiple years)
carrying amount (book value or net book value)
the original cost of the asset less its accumulated depreciation (= what has not been depreciated)
intangible assets
-non current assets that do not have physical substance and represent a privilege or a legal right held (owned) by the company
-generate a future value to the company
eg
-patents, copyrights, trademarks, licenses
-goodwill
–excess price paid on purchase of another company (presumed to be extra value, and therefore to provide future economic benefit)
–intangible asset but treated as separate category (IFRS)
-“amortized” if they have a definite/estimable life span
current liabilities
obligations to be paid within one year or the business cycle if longer
examples
-indebtedness (overdrafts or line of credit)
-accounts payable
-unearned revenue
-other short-term payables
-short term notes (loans) payable
-current portion of long term debt
non current liabilities
-debts expected to be paid or settled after (beyond) one year from date of SFP
examples
-bank loan/notes payable (longer term)
-lease obligations
-pension and other employee benefit obligations
-deferred income tax liabilities
-usually accompanied by extensive notes to the financial statements
-often listed by maturity (due date)
shareholders equity
-share capital
–will have common shares (voting shares)
–might have other share classes (eg, preferred shares)
-retained earnings
–accumulated other comprehensive income
–amount of adjustments to specific accounts as a result of IFRS standards (firm may or may not have this account)
-other equity accounts (covered CH11)
review sheets on this link
https://bright.uvic.ca/d2l/le/content/237507/viewContent/1916682/View
