1. Balance Sheet Basics!
Purpose, elements, valuation, disclosures, loss/gain contingencies, subsequent events, IFRS highlights

2. Purpose of the Balance Sheet
Financial position of a company
Accounting equation (assets = liabilities + shareholder’s equity)
Resources controlled by company
Claims of creditors and lenders
Claims of investors
At one specific moment in time
Identify, measure, report

3. “Probable economic benefits obtained or controlled by a company as a result of past transactions or events” (statement of financial accounting concepts No. 6) monetary -- cash, receivables, investments in debt/equity securities Current- become cash or are used within one year from balance sheet date (operating cycle) – cash, short-term receivables, investments in marketable securities, inventories, prepaid items (supplies, prepaid insurance, etc.) Long-term - beyond one year – Long-term Investments – land, notes receivable, investment in debt/equity securities, bond sinking fund, Property, Plant & Equipment (PPE) – Land, buildings, equipment, leasehold improvements, Intangible with finite lives – patents, franchises, licenses, computer software, indefinite lives – goodwill, trademarks, brand names, other – deferred tax asset, long-term prepayments
Elements -- Assets

4. Elements - Liabilities
“Probable future sacrifices of economic benefits arising from present obli-gations of a company to transfer assets or provide services in the future to other entities as a result of past transactions or events.” (statement of financial accounting concepts No. 6) Monetary liabilities – Accounts payable, notes payable, bonds payable, salaries payable, interest payable Non-monetary liabilities – unearned revenue, warranty payable Current – settle or satisfy within 1 year or less from balance sheet date – accrued expenses, accounts payable, interest payable, taxes payable, current portion of long-term liabilities, deferred revenue , long-term debt due to be paid in 1 year, long-term due beyond 1 year –long-term warranties/pensions, bonds payable, mortgage payable, etc.
Elements - Liabilities

5. Elements – Shareholder’s Equity
Stockholder or shareholder’s equity =Assets – Liabilities (A residual interest in Assets) contributed capital – transactions between investor and company – common stock, preferred stock, additional paid-in capital, treasury stock earned capital – retained earnings, appropriated retained earnings, accumulated other comprehensive income/loss (unrealized gains/losses in available for sale securities(fair value), foreign currency exchange translations, pension gains/losses)
Elements – Shareholder’s Equity

6. Main rule –historical cost, adjusted historical cost (depreciation, amortization) Other valuations – fair value option level 1 – find value of identical assets level 2 – find value for similar assets or liabilities level 3 – assumptions/estimates of company – for example, present value of future cash flows Current Replacement Cost Net Realizable Value
Valuation of Assets

7. Contingent Liabilities (losses)
An event has already occurred that may result in a loss in the future Journal entry – loss, liability if material, estimatable, probable (examples, estimated warranty costs, guarantees of debt, pending litigation) Footnote –material, can’t estimate, probable or reasonably possible Do nothing – immaterial or remote
Contingent Liabilities (losses)

8. Update –between balance sheet date and date of mailing statements Losses - updates to this information creates losses or larger losses Conditions-- must have existed by the balance sheet date
Subsequent Events

9. Contingent Assets (gains)
An event has already occurred that may result in a gain in the future (example, pending litigation against another company) Footnote if probable, reasonably possible, estimatable, material Cannot journalize!
Contingent Assets (gains)

10. Differences in Balance Sheets
IFRS
US GAAP
Noncurrent assets presented before current (least liquid first)
“capital & reserves” used for stockholder’s equity (listed before liabilities, this account can be first)
“Accumulated profits/losses “used for retained earnings (first in section)
Noncurrent liabilities listed next, before current liabilities (least liquid first)
PPE can be valued at fair value instead of using historical cost
Current assets presented before noncurrent (most liquid first) stockholder’s equity is listed last after liabilities with retained earnings often at the end of the section. Retained Earnings listed after stock Current liabilities listed after assets, then noncurrent liabilities (most liquid first) PPE must be valued at historical cost or adjusted historical cost