Ch05 - Chapter 5 BALANCE SHEET/STATEMENT OF FINANCIAL POSITION STATEMENT OF CASH FLOWS Financial Position and Cash Flows Balance Balance Sheet

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Chapter 5 BALANCE SHEET/STATEMENT OF FINANCIAL POSITION STATEMENT OF CASH FLOWS
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Financial Position and Cash Flows Balance Balance Sheet Sheet Usefulness Usefulness Limitations Limitations Classification Classification Format Format Additional Additional information information Techniques Techniques of disclosure of disclosure Terminology Terminology Statement of Statement of Cash Flows Cash Flows Purpose Purpose Content and Content and format format Preparation Preparation of the of the statement of statement of cash flows cash flows Usefulness Usefulness Perspectives Perspectives International International Appendix 5A Appendix 5A Ratio Analysis- Ratio Analysis- A Reference A Reference Using ratios to Using ratios to analyse financial analyse financial performance performance Appendix 5B Appendix 5B Specimen Specimen Financial Financial Statements Statements Stantec Inc. Stantec Inc.
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Section 1 Statement of Financial Position/ Balance Sheet
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SFB/Balance Sheet: Usefulness IFRS refers to Statement of Financial Position/GAAP PE maintains Balance Sheet The statement provides information for evaluating the capital structure and for computing rates of return on invested assets It is also useful for assessing an enterprise’s Liquidity (ability to pay current and maturing liabilities) Solvency (ability to pay debt and related interest) Financial flexibility (ability to respond to unexpected needs and opportunities)
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SFB/Balance Sheet: Limitations 1 Assets and liabilities are recorded under a mixed measurement model Information presented is reliable (historical cost), however Reporting at current fair value would result in more relevant information 2. Judgement and estimates are used in determining many of the items reported 3. Many “soft” numbers (estimates) are included which may be uncertain 4 . The balance sheet does not report items that cannot be recorded objectively (e.g. internally generated intangibles ie goodwill)
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Similar items are grouped together, with sub-total Items with different characteristics are separated Individual balance sheet items should be: Reported separately, and in Sufficient detail in order to: Allow users to assess amounts, timing, and uncertainty of future cash flows Allow users to evaluate liquidity, financial flexibility, profitability, and risk Helps to calculate important ratios (e.g. current ratio to assess liquidity) IFRS provides flexibility in presentation (reverse liquidity) SFP/Balance Sheet:  Classification
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7 SFP/Balance Sheet: SFP/Balance Sheet: Classification Classification Considerations for reporting items separately: 1 Assets that differ in their type or expected function in the central operations (e.g. inventory vs. capital assets)
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This note was uploaded on 12/16/2011 for the course ACCOUNTING 400 taught by Professor Jason during the Spring '10 term at Ranger.

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Ch05 - Chapter 5 BALANCE SHEET/STATEMENT OF FINANCIAL POSITION STATEMENT OF CASH FLOWS Financial Position and Cash Flows Balance Balance Sheet

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