Unlocking Financial Statements (2012) - Day 3 by Jimmy Gentry

UnlockingFinancial Statements Day 3

Balance SheetUnderstanding Financial Statements 2

Balance Sheet It balances Assets = Liabilities + Shareholders’ Equity Understanding Financial Statements 3

Assets Current assets  Cash and cash equivalents  Accounts receivable  Inventories  Prepaids Investments and other assets Understanding Financial Statements 4

Assets Property, plant and equipment, net  Land and improvement  Buildings and improvements  Equipment  Less accumulated depreciation Goodwill and other intangibles Understanding Financial Statements 5

Goodwill Difference between what a firm pays to buy another company and the book value (total assets minus total liabilities) of that company. For years had been written off over time, typically 40 years Now no longer amortize Other intangible assets will continue to be amortized over useful lives Understanding Financial Statements 6

Impairment Instead of writing off over time, now use “impairment testing” The impairment is “expensed” on the income statement Understanding Financial Statements 7

Liabilities Current liabilities  Accounts payable  Accrued liabilities  Income taxes  Current maturity of long-term debt Noncurrent liabilities  Long-term debt  Deferred income taxes Commitments and contingencies Understanding Financial Statements 8

Shareholders’ Equity Capital stock  Preferred stock  Common stock Additional paid-in capital Retained earnings Treasury stock  Total shareholders’ equity  Total L + OE Understanding Financial Statements 9

Presented by:• James K. Gentry, Ph.D.• Clyde M. Reed Teaching Professor• School of Journalism and Mass Communications• University of Kansas• jgentry@ku.edu Understanding Financial Statements 10

Unlocking Financial Statements (2012) - Day 3 by Jimmy Gentry

by Reynolds Center for Business Journalism

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