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CCFC 511 - Chapter 5 (Part 3)

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6 views

CCFC 511 - Chapter 5 (Part 3)

Uploaded by

michi.berto.2020
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Intermediate

Accounting
13th Canadian Edition, Volume 1
Kieso ● Weygandt ● Warfield ● Wiecek ● McConomy

Chapter 5

Financial Position and Cash Flows

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Copyright ©2022 John Wiley & Sons, Canada, Ltd.


Learning Objective 3
Identify the major classifications of a
statement of financial position.

Chapter 5
Financial Position and Cash Flows
Intermediate Accounting
13th Canadian Edition, Volume 1
Kieso ● Weygandt ● Warfield ● Wiecek ● McConomy

Copyright ©2022 John Wiley & Sons, Canada, Ltd.


Classification in the Statement of
Financial Position
• Similar items are classified (grouped together)
• To arrive at significant subtotals
• Some parts and subsections are more informative than the
whole
• Items with different characteristics are separated to
provide additional information, for example
• Assets with different functions
• Long-term and current liabilities
• Debt and equity
• Property used and property held for sale (different liquidity
characteristics)
• Items that can be measured or valued easily
LO 3 Copyright ©2022 John Wiley & Sons, Canada, Ltd. 3
Separate Reporting of SFP Items
• Assets that differ in their type or expected function (e.g.,
inventory versus capital assets)
• Liabilities with different implications for the entity’s financial
flexibility (e.g., long term debt versus current debt)
• Assets and liabilities with different general liquidity
characteristics (e.g., cash versus receivables)
• Assets, liabilities, and equity instruments with characteristics
that allow for easy measurement or valuation

LO 3 Copyright ©2022 John Wiley & Sons, Canada, Ltd. 4


Monetary versus Nonmonetary Items
• Monetary assets and liabilities
o Money or claims to future cash and cash outflows
o Fixed or determinable in amount and timing
o Easy to measure
o Carrying values approximate net realizable values
o Such as accounts and notes receivable and payable, long-term
debt
• Non-monetary assets and liabilities
o Measurement uncertainty
o Frequently recorded at historical cost (amortized cost)
o Such as inventory, PPE, certain investments, intangibles

LO 3 Copyright ©2022 John Wiley & Sons, Canada, Ltd. 5


Financial Instruments
• Contracts that create a financial asset for one party and
a financial liability or equity instrument for the other
o Marketable (or tradeable) and easy to measure
o Many are monetary assets or liabilities
o Current standards require fair value accounting where
market values are readily available
o IFRS and ASPE allow the fair value option—choice to
value financial instruments at fair value as an accounting
policy
o Normally should not be offset against each other on the
SFP

LO 3 Copyright ©2022 John Wiley & Sons, Canada, Ltd. 6


Classes of Items on the Statement of
Financial Position
• Assets: present economic resources controlled by an entity as
a result of past transactions or events with the potential to
produce future economic benefits
• Liabilities: present duty or responsibility that obligates the
entity to transfer an economic resource, arising from past
transactions or events and which cannot be avoided
• Equity/Net Assets: residual interest in an entity’s assets after
deducting its liabilities
• SFP shows classes in order: assets, liabilities, equity; IFRS
allows the order to be reversed

LO 3 Copyright ©2022 John Wiley & Sons, Canada, Ltd. 7


Elements of the Statement of Financial
Position
Assets Liabilities and Equity
• Current assets • Current liabilities
• Long-term investments • Long-term debt
• Property, plant, and • Shareholders’ equity
equipment o Capital shares
• Intangible assets o Contributed surplus
• Other assets o Retained earnings
o Accumulated other
comprehensive income / other
surplus

LO 3 Copyright ©2022 John Wiley & Sons, Canada, Ltd. 8


Copyright
Copyright © 2022 John Wiley & Sons, Canada, Ltd.
All rights reserved. Reproduction or translation of this work beyond that permitted by
Access Copyright (The Canadian Copyright Licensing Agency) is unlawful. Requests for
further information should be addressed to the Permissions Department, John Wiley &
Sons Canada, Ltd. The purchaser may make back-up copies for his or her own use only
and not for distribution or resale. The author and the publisher assume no
responsibility for errors, omissions, or damages caused by the use of these programs or
from the use of the information contained herein.

Copyright ©2022 John Wiley & Sons, Canada, Ltd. 9

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