tailieunhanh - Lecture Intermediate accounting: IFRS edition - Chapter 3: The statement of financial position and financial disclosures

Chapter 3 - The statement of financial position and financial disclosures. The purpose of this chapter is to provide an overview of the balance sheet and financial disclosures and to explore how this information is used by decision makers. | THE STATEMENT OF FINANCIAL POSITION AND FINANCIAL DISCLOSURES Chapter 3 © 2013 The McGraw-Hill Companies, Inc. Chapter 3: The Statement of Financial Position and Financial Disclosures The Statement of Financial Position Limitations: The Statement of Financial Position does not portray the market value of the entity as a going concern nor its liquidation value. Resources such as employee skills and reputation are not recorded in the Statement of Financial Position. Usefulness: The Statement of Financial Position describes many of the resources a company has for generating future cash flows. It provides liquidity information useful in assessing a company’s ability to pay its current obligations. It provides long-term solvency information relating to the riskiness of a company with regard to the amount of liabilities in its capital structure. Reports a company’s financial position on a particular date. The purpose of the Statement of Financial Position is to report a company’s financial position on a particular date. It is a freeze frame or snapshot of financial position at the end of a particular day marking the end of an accounting period. A limitation of the Statement of Financial Position is that Assets minus liabilities, measured according to accounting standards, is not likely to be representative of the market value of the entity. Many assets, like land and buildings, are measured at their historical costs rather than their market values. Relatedly, many company resources including its trained employees, its experienced management team, and its reputation are not recorded as assets at all. However, despite these limitations, the Statement of Financial Position does have significant value. The Statement of Financial Position provides information useful for assessing future cash flows, liquidity, and long-term solvency. Resources (Assets) Claims against resources (Liabilities) Remaining claims accruing to owners (Owners’ Equity) The Statement of Financial | THE STATEMENT OF FINANCIAL POSITION AND FINANCIAL DISCLOSURES Chapter 3 © 2013 The McGraw-Hill Companies, Inc. Chapter 3: The Statement of Financial Position and Financial Disclosures The Statement of Financial Position Limitations: The Statement of Financial Position does not portray the market value of the entity as a going concern nor its liquidation value. Resources such as employee skills and reputation are not recorded in the Statement of Financial Position. Usefulness: The Statement of Financial Position describes many of the resources a company has for generating future cash flows. It provides liquidity information useful in assessing a company’s ability to pay its current obligations. It provides long-term solvency information relating to the riskiness of a company with regard to the amount of liabilities in its capital structure. Reports a company’s financial position on a particular date. The purpose of the Statement of Financial Position is to report a company’s .