Balance Sheet.ppt

Balance Sheet Assets, Liabilities Shareholders’ Equity The Balance Sheet Also called the statement of condition or statement of financial position Assets Should provide probable future economic benefits Owned or controlled by the entity As a result of past transactions/events Cost/value should be determinable Generally presented in order of liquidity A Few Definitions Current Assets-Cash or other assets expected to be converted into cash within one year or one operating cycle, whichever is longer Operating Cycle-Time required to purchase or manufacture inventory, sell the product, and collect the cash Current Assets-1 Cash and Cash Equivalents Valued at fair value- nominal amounts Short-term Investments a.k.a-TRADING SECURITIES a.k.a-FINANCIAL ASSETS a.k.a-MARKETABLE SECURITIES Valued at fair value or amortized cost Current Assets-2 RECEIVABLES Trade Receivables Accounts Receivable Notes Receivable Post dated cheques receivable Due From Related Parties Receivable from Employees Others Valued at amortized cost (net of interest) and reported at NET REALIZABLE VALUE A Word on the “Allowance…” Management must estimate the dollar amount of accounts receivable they expect to be uncollectible Affects balance sheet valuation AND bad debt expense on income statement Can be important in assessing earnings quality--changes should be analyzed Analysis of Receivables Current Assets-3 Inventories Measured by FIFO or Weighted Average Valued at Lower of Cost or Net Recoverable Amount Biological Assets (at fair value until the point of harvest) Assets Held for Sale Other Current Assets Deferred Tax Assets Long-term Assets-1 Trade Receivables Other Receivables Biological Assets Long-term Financial Investments Valued at fair value or amortized cost or equity method of accounting Deferred Tax Assets Long-term Assets-2 Property, plant and equipment Option: Property, plant equipment are valued at cost less accumulated depreciation and allowance for impairment Option: Proper