1 / 12

Financial Statement Analysis

Financial Statement Analysis. Acct 592 July 17, 2003. Chapter Six Liabilities and Expenses. Three criteria for liability recognition: Obligation involves probable future sacrifice of resources The firm has little or no discretion to avoid payment

dorothy-cross
Download Presentation

Financial Statement Analysis

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Financial Statement Analysis Acct 592 July 17, 2003

  2. Chapter SixLiabilities and Expenses Three criteria for liability recognition: • Obligation involves probable future sacrifice of resources • The firm has little or no discretion to avoid payment • The transaction or event giving rise to the obligation has already occurred

  3. Contingent Liabilities • Record an obligation if • Probable loss • Reasonably estimated • Otherwise? • Footnote disclosure • Effect on financials?

  4. Hybrid Securiites • Mandatory redeemable preferred stock • Convertible bonds

  5. Off-B/S Financing • Transactions not directly portrayed on B/S • Sale of Receivables with Recourse • Sale of Receivables without Recourse • R&D Financing through joint ventures or partnerships

  6. Derivatives: SFAS 133 • Derivative - define? • Assets or Liabilities? • Rights or Obligations settled with Cash?

  7. Leases • Benefits • Shift taxes • Flexibility • Reduce risk of tech. obsolescence • Ability to “acquire” when other sources of financing are unavailable • Operating vs. capital

  8. Capital Lease • If lease is at least 75% of asset’s life • OR, if it transfers ownership to the lessee at the end of the lease term • OR, if it seems likely that the lessor will transfer ownership to the lessee because of a “bargain purchase” option • OR, if the present value of contractual minimum lease payments are at least 90% of the fair market value of the assets at the time of signing

  9. Pensions • Defined Benefit Plan • Defined Contribution Plan • Which Plan is a Liability for the Firm? • Post Retirement Benefits

  10. Defined Benefit Terminology • Service Cost • Interest Cost • Actual Return on Plan Assets (ARPA) • Unexpected Gain / Loss on Plan Assets • Amortization of net pension asset • Amortization of PBO • Actuarial Gains / Losses

  11. Corporate Income Tax • Statutory tax rate • Effective tax rate • Deferred tax assets and deferred tax liabilities

  12. Permanent and TemporaryTax Differences • Permanent differences never effect tax rate • Temporary (timing) differences effect taxes • Pay too much today, less expense in future • Create an asset • Pay too little today, more expense in future • Create a liability

More Related