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Chapters 5 & 22 - Handouts

Chapters 5 & 22 - Handouts - Mervat Saleh CA...

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Unformatted text preview: Mervat Saleh, CA Chagters 5 & 22 FINANCIAL POSITION AND CASH FLOWS l— STATEMENT OF FINANCIAL POSITION (BZSI: ASSETS LIABILITIES OWNERS’ EQUITY , ‘ Share Cagital Current Assets Current Liabilities Preferred Shares Non-current ‘ Long-Term Liabilities Investments Property, Plant And Equipment Common Shares Contributed Surplus f Retained Earnings ‘ Accumulated Other Intangible Comprehensrve Income Assets Present economic benefits that the entity has rights or access to where others do not. ‘ Present economic burden or Residual interests in the obligation that is ‘ ‘ assets of an entity are those ‘ enforceable that remain after deducting its liabilities. ‘ A. Usefulness and Purgose of the Balance Sheet 1. Liquidity and financial flexibility. 2. Assessing risk 3. Predicting future cash flows. B. Limitations of the Balance Sheet 1, Current value 2. Estimates 3. Omits many items that are of financial value to the business. Mervat Saleh, CA C. Classifications in the Balance Sheet 1. Current Assets: 0 Definition: Resources that are expected to be turned into cash, sold, or consumed within a year or the operating cycle, whichever is longer 0 intent and marketability. 0 items included in the current asset section: 1. Cash — Restricted 2. Short term investments — debt and equity securities 3. Receivables - Non-trade receivables - accounts pledged or discounted 4. inventories - the basis of valuation - stage of completion 5. Prepaid expenses 2. Non-current assets: 1. Non-current investments: . Debt securities - measured at amortized cost) . Equity investments- consolidation, Equity method, fair value or cost . Other —vaiued at cost 2. Property, plant, and equipment: . Tangible assets: i. iFRS: fair value (rather than historical cost) using a revaluation or fair value method ii. Written down if impaired. . intangible assets: i. High degree of uncertainty exists regarding realization of future benefits. n. Finite lives - cost less accumulated amortization iii. indefinite lives — cost iv. Written down if impaired. v. Expenditures for intangible assets - expensed as incurred. . Other assets: i. Unusual items - deferred charges Mervat Saleh, CA . Classification: i. Nature of the item and use to which it is put ii. Land used as factory site - property, plant and equipment. iii. Land owned by a realty company and held for sale - current asset. iv. Land held for speculation - long-term investment. v. ldle land and facilities that have been withdrawn from production - other assets. 3. Current Liabilities: 0 Definition: Obligations that are reasonably expected to be liquidated through the use of current assets or the creation of other current liabilities . The order they will be paid . ltems included in the current liabilities section: Short-term debt Accounts payable Advances from customers income taxes payable Current portion of long-term debt 91:599.”? 4. Long- Term Liabilities: . Definition: Obligations that are not reasonably expected to be liquidated within the normal operating cycle, but instead, are payable at some date beyond that time. . Three types: i. Specific financing situations where additional assets are acquired ii. Ordinary operations of the enterprise iii. Occurrence or non-occurrence of one or more future events . Supplementary information — covenants and restrictions 5. Shareholders' eguity: . Share capital - Authorized, issued, and outstanding. o Contributed surplus - Premiums on shares issued and capital donations. o Retained earnings - Unrestricted and restricted . Accumulated other comprehensive income - Unrealized gains and losses on certain investments - Gains or losses from hedging activities — Gains or losses on revalue property, plant and equipment. Mervat Saleh, CA 6. Notes: 1. Contingencies - Events that involve uncertainty that will ultimately be resolved by a future event. - Typical loss contingencies relate to litigation, environmental issues, and possible tax assessments. 2. Valuations and accounting policies - A description of all significant accounting principles and methods that involve selection. - This disclosure is usually given in the first note in the HS. 3. Contractual situations. - Contracts, provisions and commitments - Examples: Lease contracts, pension obligations, and stock option plans be clearly stated. 4. Subsequent events. - Events that occur after the fiscal year end but before F/S are prepared. - Conditions that existed at the balance sheet date - adjust F/Ss. - Conditions that did not exist at the 8/8 date - disclose in notes. 7. IFRS: . Additional disclosure: - Investment property - Biological assets - Provisions - Disclose date that F/Ss were authorized for issue ignore Appendix 5 A Mervat Saleh, CA II - Cash Flow Statement CASH INFLOWS Beginning Cash ' And Cash Operating Investing , Equivalent Activities Activities Balance CASH OUTFLOWS Change in Cash and Cash Equivalents for the Period A. Usefulness and Purpose of Cash Flow Statement: 0 Information about the amount, timing, and uncertainty of cash flows. Ending Cash and Cash Financing Activities Equivalent Balance . Summarize the operating, investing, and financing activities. . Free cash flow: - Net cash provided by: operating activities — (capital expenditures + dividends). — The amount of cash flow free for purchasing additional investments, retiring its debt, or re- purchasing treasury shares. . Non-cash transactions are not reported a. Conversion of long-term debt to common shares. b. Acquisition of property through issuance of shares or through exchange for other property. . Disclosure: - Preferred shares - interest and dividends received- classifications - Restriction on the use of cash — Cash flow per share - Each interest and dividends received / paid - Income tax paid - Significant non—cash investing and financing transactions - Cash and cash equivalents - Cash restrictions. Mervat Saleh, CA B. Classification of cash flows: 1. Operating activities: A- indirect Method: Net income +/— Adjustment to reconcile net income to net cash provided + Depreciation and losses - Gaines +/- Changes in Current assets and current liabilities 8- Direct Method: + Cash received from: - Customers: Sales revenue +/— change in AIR — investors ‘- Cash gaid to: - Suppliers: +/- change in inventory +/- change in A/P - Employees: wages exp. +/- change in wages payable - Creditors: supplies expenses +/- any change in supplies - Government: Taxes exp. +/— any change in taxes payable - Others: expenses +/- any change in related payable or prepaid expenses 2. Investing activities . Sale of non-current assets 0 Sale of investments 0 Collection of loans 0 Purchase of non-current assets . Loans to other entities 3. Financing activities: 0 Issuance of equity securities 0 Issuance of debt . Payment of dividends . Retirement of debt or shares ignore Appendix 22 A ...
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