UNDERSTANDING BALANCE SHEET
In this reading, we will be discussing the balance sheet and what it contains. The
balance sheet provides information on a company's resources which are the
assets and its sources of capital liability and equity. Different items of assets and
liabilities may be measured differently. Some items might be shown at fair value
other items may be shown as historical cost. Current assets are those assets held
primarily for trading or expected to be sold used up or otherwise realized in cash
within one year or one operating business cycle. Longterm investments property
plant and equipment are noncurrent assets liabilities are also shown as current
liabilities. Current assets include prepaid expenses and prepaid expenses such as
prepaid expenses.
ASSETS
All assets that are not current are by definition noncurrent. They are also called
long term or long lived assets. Property plant and equipment is obviously
tangible, and it is expected that this asset will provide an economic benefit over
more than one fiscal period.
The choice between cost model and revaluation model is only provided by IFRS
U.S. GAAP. When company A purchases company T, what really matters is the
fair values and not the book values.
A financial asset for a given company such as Microsoft in this case is the financial
liability or an equity instrument of another entity. The fair value of an asset is
simply the arms length transaction price. The other way of measuring financial
assets is amortized cost. The value shown on the balance sheet is the historical
cost and then the amortized adjustment which happens every period. If Microsoft
plans to hold the bond till maturity then it uses amortized cost. The fair value or
the market price does not really matter here because the bond will be held to
maturity ultimately, Microsoft will get the power value.
In this reading, we will be discussing the balance sheet and what it contains. The
balance sheet provides information on a company's resources which are the
assets and its sources of capital liability and equity. Different items of assets and
liabilities may be measured differently. Some items might be shown at fair value
other items may be shown as historical cost. Current assets are those assets held
primarily for trading or expected to be sold used up or otherwise realized in cash
within one year or one operating business cycle. Longterm investments property
plant and equipment are noncurrent assets liabilities are also shown as current
liabilities. Current assets include prepaid expenses and prepaid expenses such as
prepaid expenses.
ASSETS
All assets that are not current are by definition noncurrent. They are also called
long term or long lived assets. Property plant and equipment is obviously
tangible, and it is expected that this asset will provide an economic benefit over
more than one fiscal period.
The choice between cost model and revaluation model is only provided by IFRS
U.S. GAAP. When company A purchases company T, what really matters is the
fair values and not the book values.
A financial asset for a given company such as Microsoft in this case is the financial
liability or an equity instrument of another entity. The fair value of an asset is
simply the arms length transaction price. The other way of measuring financial
assets is amortized cost. The value shown on the balance sheet is the historical
cost and then the amortized adjustment which happens every period. If Microsoft
plans to hold the bond till maturity then it uses amortized cost. The fair value or
the market price does not really matter here because the bond will be held to
maturity ultimately, Microsoft will get the power value.
