It must confer expected future economic benefits that

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It must confer expected future economic benefits that result from a past transaction or event. - first requirement, owning or controlling an asset, implies that a company has legal title to the . such as the title to property, or has the unrestricted right to use the asset, such as a lease on property. The second requirement implies that a company expects to realize a benefit from the ~L Benefits can be cash inflows from the sale of an asset or from sales of products produced _ the asset. Benefits also can refer to the receipt of other assets such as an account receivable a credit sale. Or, benefits can arise from future services the company will receive, such as ying for a year-long insurance policy. This requirement also implies that we cannot record asset such as a brand name without a transaction to acquire it. Asset Section of Apple's Balance Sheet ($ millions) APP),.E INC. Balance Sheet September 25,2010 Assets Current assets Cash and cash equivalents ......................... .......... Short-term investments . Accounts receivable, net _.. Inventories ................... ............................. Other current assets . Total current assets . Long-term assets Property, plant and equipment, net . Other long-term assets . Total assets ....................................... ........... $11,261 14,359 5,510 1,051 9,497 41,678 Current Assets Assets used up or converted to cash within one year 4,768 28,737' $75,183 } Assets used up or Long-Term. converted to cash Assets over more than one year 'Includes $25,391 million of long-term marketable securities rrent Assets The balance sheet lists assets in order of decreasing liquidity, which refers to the ease of convert- - g noncash assets into cash. The most liquid assets are called current assets and they are listed
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2-5 Module 2 I Overview of Business Activities and Financial Statements first. A company expects to convert its current assets into cash or use those assets in operations within the coming fiscal year.' Typical examples of current assets follow: Cash-currency, bank deposits, and investments with an original maturity of 90 days or less (called cash equivalents); Short-term investments-marketable securities and other investments that the company expects to dispose of in the short run; Accounts receivable, net-amounts due to the company from customers arising from the sale of products and services on credit ("net" refers to the subtraction of uncollectible accounts); Inventories- goods purchased or produced for sale to customers; Prepaid expenses-costs paid in advance for rent, insurance, advertising and other services. Apple reports current assets of $41,678 million in 2010, which is 55% of its total assets. The amount of current assets is an important measure of liquidity, which relates to a company's ability to make short-term payments. Companies require a degree of liquidity to operate effectively, as they must be able to respond to changing market conditions and take advantage of opportunities.
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