Thus the total liability reported on the balance

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Thus the total liability reported on the balance sheet would be $33,875 rather than $18,954 (or $18,954 + $14,921). 3. Which approach (part 1 or part 2) do you think provides more relevant information to the users of the financial statements? Most users believe that if the lease payments are non-cancelable that they represent fixed payments that the firm is obligated to pay. Thus they should be recorded on the balance sheet at the present value of the payments. On the other hand, users might not care if the information is adequately disclosed in the footnotes. Professor Notes FASB Financial Statement Presentation The solution listed above is in agreement with the discussion paper issued by the FASB in October 2008. However, in a subsequent meeting (November 2009), the FASB changed some of the aspects of the draft. The following are the changes that the FASB proposed to the original discussion paper on October 2008. 1. Equity will no longer be a separate category, but will be included within the Financing Section. 2. Cash and short-term financial assets (or financial liabilities) used as a substitute for cash will be included in the business section (rather than reported in the financing section). 11 - 14
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3. Replace the reconciliation schedule (mentioned in chapter 11) with an analysis of the changes in balances of all significant asset and liability line items. Each line item analysis should distinguish the following components: a. Changes due to cash inflows and cash outflows b. Changes resulting from noncash (accrual) transactions that are repetitive and routine in nature (for example, credit sales, wages, material purchases) c. Changes resulting from noncash transactions or events that are nonroutine or nonrepetitive in nature (for example, acquisition or disposition of a business) d. Changes resulting from accounting allocations (for example, depreciation) e. Changes resulting from accounting provisions/reserves (for example, bad debts, obsolete inventory) f. Changes resulting from remeasurements 4. Present information about remeasurements in the financial statements. FASB would require disaggregation of remeasurements on the face of the statement of comprehensive income. Remeasurements would be defined as an amount recognized in comprehensive income that reflects the effects of a change in the carrying amount of an asset or liability to a current price or value (or to an estimate of a current price or value). 11 - 15
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