Finance Asset Information
Essay Preview: Finance Asset Information
Report this essay
ASSET INFORMATIONCurrent assets : short term. Resources or claims to resources that are expectednto be sold, or used within one year or the operating cycle, whichever is longer. => Cash and equivalents / accounts receivables ( the customer pays within a year) / inventory/ Prepaid expensesCash, cash equivalents and liquidityFor a company, liquidity means : amount of cash and cash equivalents that the company has on hand ( ability to react to strategic opportunities etc). Cash equivalent : Short term, highly liquid investments that are : Readily convertible to a known cash amount. Close to maturity date and note sensitive to interest rate changes. ReceivablesReceivables are amounts due from others that arise from the sale of goods or services, or the loaning of money. Accounts receivable refer to oral promises of indebtedness due from customers.Notes receivable refer to formal written promises of indebtedness due from others. Valuation of receivables : Receivables are reported at their net realizable value ( total amount of receivables less an allowance for uncollectible accounts). Management estimates the allowance for uncollectibles based on experience, customer fortunes, economy and industry expectations and collection policies. Cf accounting for bad debt on BB.Analysing inventories Inventories are goods produced and held for sale, or goods acquired for sale, as part of a company’s normal operations. Inventories is a sum of costs. In order to determine whicht cf Slide. Prepaid expenses Prepaid expenses are advance payments for services or goods not yet received that extend beyond the current accounting period, examples are advance payments for rent, insurance, utilities and property taxes. EX : You have an asset because a company owes you ten months of insurance. Non current assets : long term. Resources or claims to resources that are expected to yield benefits that extend beyond one year or the operating cycle, whichever is longer. => Fixed Assets / Intangible / Deferred charges Long lived asset IntroductionLong lived assets are resources that are used to generate revenues ( or reduce costs ) in the long run.
Tangible fixed assets such as property, plant and equipment ( PPE).Intangible assets such as patents, trademarks, copyrights, and goodwillDeferred charges such as research and development expenditures and natural resources. Capitalization : Process of deferring a cost that is incurred in the current period and whose benefits are expected to extend to one or more future periods.For a cost to be capitalized, it must meet each of the following criteria ( cf slide).Allocation : Process of periodically expensing a deferred cost ( asset) to one or more future expected benefit periods; determined by benefit period, salvage value, and allocation method. Terminology : Depreciation for tangible fixed assetsAmortization for intangible assetsDepletion for natural ressources Impairment Process of writing down asset value when its expected ( undiscounted) cash flows are less than its carrying book value. We decrease the value of the asset more than the depreciation. Most of the assets are : plant assets, tangible, actively used in operations; expected to benefit future periods, property plant and equipment.Plant assets costing rules : cf slide. Valuation analysis Analysing depreciation and depletionCf slideIntangible assets Non current assets without physical substance, often provide exclusive rights or privileges, usually acquired for operational use.