1. Goodwill, Pensions, and Stock Options

2. Balance Sheet Thunder Inc. Assets –Cash = $100 Liabilities –None Bookvalue = $100

3. Lightening Inc. Assets –Plant and equipment = $100 Liabilities –Long term debt = $50 Bookvalue = 100-50 = 50

4. Thunder Buys Lightening for $100 Assets –Cash = 0 –Plant and equipment = $100 –Goodwill = $50 (purchase price - book) Liabilities –Long term debt = $50 New book value (Thunder) = 150-50 = 100

5. Pension Liabilities Future cash flows owed to retired workers Similar to debt Should go on balance sheet How do you estimate? (Retirement health care trickier.)

6. Pension Liabilities NY Times article FASB (Financial Accounting Standards Board) –Rules for adding pension liabilities to balance sheets For Ford and GM, book value goes negative after adding this

7. Stock Options Payments to employees Option to purchase stock at a fixed price Technically, like a wage : labor compensation Should be on income statement, but how do you value this?