《Intermediate Accounting, 9th中级会计学 Nikolai》ch03.pptVIP

Objectives 1. Understand the purposes of the balance sheet. 2. Define the elements of a balance sheet. 3. Explain how to measure the elements of a balance sheet. 4. Classify the assets of a balance sheet. 5. Classify the liabilities of a balance sheet. 6. Report the stockholders’ equity of a balance sheet. FASB Statement of Concepts No. 5 FASB Statement of Concepts No. 5 (1) Financial position at the end of the period. (2) Net income for the period. (3) Comprehensive income for the period. (4) Cash flows for the period. (5) Investments by and distributions to owners for the period. Interrelationship of Financial Statements Basic Accounting Equation Liquidity Financial Flexibility Operating Capability Three-Stage Process for Disclosing Information on the Balance Sheet 1. Identification of what items meet the definition of the elements. 2. Measurement (valuation) of the elements. 3. Reporting (classification) of the elements. Elements of the Balance Sheet — Assets Elements of the Balance Sheet — Assets 1. The resource must be able to contribute directly or indirectly to the company’s future net cash inflows. 2. The company must be able to obtain the future benefit and control others’ access to it. 3. The transaction or event giving the company the right to or control over the benefit must have occurred. Elements of the Balance Sheet —Stockholders’ Equity Measurement of the Elements of the Balance Sheet Limitations of the Balance Sheet Use of historical cost to value assets and liabilities does not help assess the likely amounts of future cash flows. “Human resources” or “intellectual capital,” such as high-quality management or highly creative employees are not included as assets. Many of the amounts that a company reports are based on estimates. In periods of inflation, the amounts listed do not show the “purchasing power” of its assets and liabilities. Current Assets Operating Cycle Current Liabilities Current Liabilities Long-Term Investments Long-Term Investment