320 Lesson 3a

320 Lesson 3a - Week3 FinancialPositionand CashFlows...

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Financial Position and Cash Flows Week 3
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Balance Sheet or Statement of Financial Position Usefulness measure of financial flexibility basis for computing rates of return basis for evaluating the capital structure reflection of fair value of monetary items measure of life expectancy of amortizable assets Limitations changes in price level not reflected estimates used aggregation of data omission of information amounts reflect company’s choice of policies
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Classification Current assets liquidity Noncurrent assets Investments Fixed assets permanency Intangible assets Other assets Current liabilities liquidity Noncurrent liabilities Shareholders’ equity Capital stock preferred first Contributed surplus Retained earnings Comprehensive income Non-controlling interest ASSETS present economic resource right or access to resource LIABIILTIES economic burden or obligation present obligation which is enforceable OWNERS’ EQUITY residual interest
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Current Assets expects to realize or intends to sell or consume in normal operating cycle holds the asset primarily for trading expects to realize within 12 months Cash and cash equivalents - disclose any restrictions Short-term investments - record at market value - disclose terms and conditions, interest rates, credit risk
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Receivables - includes accounts receivable and notes receivable - estimate loss due to uncollectibles - disclose non-trade receivables separately - disclose amounts pledged or discounted Inventories - reported at the lower of cost and market (LCM) – market equaling net realizable value (NRV) - disclose costing method (weighted average, FIFO or specific identification - the same cost method must be used for similar inventory items - some inventories (e.g. some minerals or agricultural products) may be held at NRV even if higher than cost - if goods are being manufactured, disclose the stage in the manufacturing process
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Prepaid expenses - cash paid in advance of receipt of services e.g. insurance - if services not received within a year, classify as non-current Other current assets - assets expected to produce cash within the next year e.g. loans receivable - show current assets that are part of a discontinued operation as ‘other assets’ Non-Current Assets Investments and funds 1. financial instrument – any contract that gives rise to a financial asset of one entity and a financial liability or equity of another entity classification based on entity’s business model for managing financial assets and contractual cash flow characteristics IFRS 9 is a revised standard on Investment instruments that was just approved in Dec. 2009.
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1. financial asset held to collect contractual cash flows measure at amortized cost 2. all others measured at FV BUT could designate as ‘fair value through profit and loss’ 2. tangible asset not in use could leave with PP&E but segregate may be valued at MV if lower than carrying value 3. special funds e.g. bond sinking fund shown at accumulated amount of the fund
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320 Lesson 3a - Week3 FinancialPositionand CashFlows...

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