On apples balance sheet consider another example

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on Apple's balance sheet. Consider another example. Apple's software engineers write code and create software that will generate profits for Apple in the future. While this represents a valuable resource to Apple, it is not reported on the balance sheet because Apple expenses the software engineers' salaries when the code is written. Finally, Steve Jobs himself was a valuable unrecorded asset for Apple. We discuss these and other issues relating to asset recognition and measurement in this module. Sources: Apple 2010 10-K; Apple 2010 Annual Report; BusinessWeek, 2006; Fortune, 2006 and 2012. 03: lJO "C l>c: Zr- N m l> -I - o Z t'$- Overview of Business Activities and Financial Statements l&. II ", --,~ -,~; •.0fH:~ "::::::m'l': :""" I I "S ')":li'''' ," "i "" ~ '" .,' ~~: ;;-·J'?l , ~ Analyzing Components of Analyzing Transactions and .. " Financial Statements AccguntingAdj.ustments <Ii ~ ~ - - -"'-- ,. ',-, ... _,'"" ...• ~.,. Balance Sheet Analyzing Transactions and Assessing Income Statement Financial Statement Effects Statement of Stockholders' Equity Interpreting Accounting Adjustments Statement of Cash Flows Constructing Financial Statements Retained Earnings Reconciliation Closing Process The first section of this module defines and explains key elements of financial statements. Our analysis of financial statements is enhanced when we know what is measured and what is not measured by financial statements. This section also discusses some analysis insights that are help- ful in our assessment of company performance and financial condition. 2-3
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L01 Describe and interpret the elements of and the information conveyed by financial statements. Module 2 I Overview of Business Activities and Financial Statements 2-4 ERPRETING A BALANCE SHEET balance sheet is divided into three sections: assets, liabilities, and stockholders' equity. It pro- information about the resources avaiJableto management and the claims against those resourc- _-creditors and shareholders. The balance sheet reports the assets, liabilities and equity at a point - e. Balance sheet accounts are called "permanent accounts" in that they carry over from period period; that is, the ending balance from one period becomes the beginning balance for the next. ets panies acquire assets to yield a return for their shareholders. Assets are expected to produce mic benefits in the form of revenues, either directly, such as with inventory, or indirectly, as with a manufacturing plant that produces inventories for sale. To create shareholder value, must yield income that is in excess of the cost of the funds used to acquire the assets. The asset section of the Apple balance sheet is shown in Exhibit 2.1. Apple reports $75,183 'on oftotal assets as of September 25, 2010, its year-end. Amounts reported on the balance sheet _at a point in time- that is, the close of business on the day of the report. An asset must possess haracteristics to be reported on the balance sheet: • It must be owned (or controlled) by the company.
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