balance sheet

assets
liabilities
equity = net assets
liquidity: the ability to meet short-term obligations
solvency: the ability to meet long-term obligations

formats of balance sheet

classified balance sheet: both IFRS and U.S. GAAP current/noncurrent
liquidity-based format: under IFRS present assets and liabilities in the order of liquidity

current assets 流动资产

cash and other assets that will likely be converted into cash or used up within one year or one operating cycle

cash and cash equivalents

marketable securities

accounts receivable = gross receivables - allowance for doubtful accounts

• net realizable value

inventories

• inventory costs
  • standard costing
  • retail method: retail prices - gross profit
• lower of cost or net realizable value under IFRS
  • realizable value = selling price - any completion costs and disposal costs
• lower of cost or market under U.S. GAAP
  • market = replacement cost
  • net realizable value - normal profit margin ≤ market ≤ net realizable value
• realizable value or market is less than the inventory's carrying value: written down
• subsequent recovery in value: can be written back up under IFRS, no written-up under U.S. GAAP

other current assets: prepaid expenses, deferred tax assets

current liabilities 流动负债

obligations that will be satisfied within one year or one operating cycle

working capital = current assets - current liabilities

accounts payable

notes payable and current portion of long-term debt

accrued liabilities eg: texes payable, interest payable, wages payable, accrued warranty expense

unearned revenue

non-current assets 固定资产

do not meet the definition of current assets

property, plant, and equipment

• under IFRS: cost model or revaluation model
• under U.S. GAAP: cost model
• cost model: reported at amortized cost
  • amortized cost = historical cost - accumulated depreciation, amortization, depletion, and impairment losses
  • land is not depreciated
  • historical cost = purchase price + any cost necessary to get the asset
    ready for use (delivery and installation costs)
  • tested for impairment (carrying value > recoverable amount)
  • recoverable amount = max(fair value - selling costs, value in use) (IFRS)
  • value in use: the present value of the asset's future cash flow stream
  • loss recoveries: allowed under IFRS but not under U.S. GAAP
• revaluation model: reported at fair value - any accumulated depreciation

investment property

• under IFRS: reported at amortized cost or fair value
• under U.S. GAAP: no specific definition

intangible assets

• identifiable intangible assets: can be acquired separately or are the result of rights or privileges conveyed to their owner (patents, trademarks, copyrights)
  • under IFRS: reported using the cost model or the revaluation model
    research costs are expensed as incurred and development costs are capitalized
  • under U.S. GAAP: only the cost model
    both research and development costs are expensed as incurred
• unidentifiable intangible assets: cannot be acquired separately and may have an unlimited life (goodwill)

goodwill
the excess of purchase price over the fair value of the identifiable net assets

• not amortized but must be tested for impairment at least annually

financial assets

• measured at historical cost: unquoted equity investments, loans to and receivables from other entities
• measured at amortized cost: held-to-maturity securities 持有到期证券
  amortized cost = original issue price - principal payments + amortized discount - amortized premium - impairment losses
• measured at fair value: trading securities, available-for-sale securities, and derivatives
  • trading securities and derivatives: unrealized gains and losses are recognized in the income statement
  • available-for-sale securities: unrealized gains and losses are not recognized in the income statement but in other comprehensive income (shareholder's equity)

non-current liabilities 固定负债

do not meet the definition of current liabilities

long-term financial liabilities

• not issued at face amount: reported at amortized cost
• held-for-trading liabilities: reported at fair value

deferred tax liabilites

owners' equity 所有者权益

contributed capital

• authorized shares
• issued shares
• outstanding shares = issued shares - treasury stock

preferred stock

• non-redeemable: equity 不可赎回
• mandatory redemption: liability 强制赎回

noncontrolling interest

retained earnings

treasury stock reduce stockholders' equity

accumulated other comprehensive income

common-size balance sheet

the balance sheet as a percentage of total assets

liquidity ratios 流动性比率

current ratio = current assets / current liabilities 流动比率
quick ratio = (cash + marketable securities + receivables) / current liabilities 速动比率
cash ratio = (cash + marketable securities) / current liabilities 现金比率

solvency ratios 偿债能力比率

long-term debt-to-equity = long-term debt / total equity 长期债务权益比
total debt-to-equity = total debt / total equity 债务权益比
debt ratio = total debt / total assets 负债比率
financial leverage = total assets / total equity 财务杠杆