分析Assets資產(chǎn)andliabilities負債

分析Assets資產(chǎn)andliabilities負債MANG6269

FundamentalsofFinancialAccounting

Session3Accountingforassets:Property,plantandequipmentinventoriesreceivablesToday’slecture:RecapfromlasttimeMeasurementissuesandestimatesinfinancialstatements:NoncurrentassetsanddepreciationCurrentassets:InventoriesReceivablesprepaymentsCurrentliabilitiesAccrualsNON-CURRENT(ORFIXED)ASSETSANDDEPRECIATIONWhatisaNonCurrentAsset?WhatisMeantby: ‘Property,plantandequipment’ IntangibleFixedAssets InvestmentsheldforlongtermWhatismeantby“Cost”ofafixedasset?WhatismeantbyDepreciation?MethodsofDepreciationDefinitions-AssetAsset:AresourcecontrolledbytheenterpriseandTheremustbeanexclusiverightofcontrolafutureeconomicbenefitassociatedwiththeitemisexpectedtoflowtotheenterpriseThebenefitmusthavearisenfromsomepasttransactionoreventstheitemhasacostorvaluethatcanbemeasuredwithreliabilityAdaptedfrom

InternationalAccountingCommittee,FrameworkforthePreparationandPresentationofFinancialStatements,1989Non-currentassetAssetsacquiredforuseintheenterpriseonacontinuingbasisnotforresaleUsemaybeintheproductionorsupplyofgoodsorservicesforrentaltoothersorforadministrativepurposesIAS16ExlesTangibleIntangibleCostofproperty,plantandequipmentincludes:

itspurchaseprice+importdutiesandnon-refundablepurchasetaxes-tradediscountsandrebates.anycostsdirectlyattributabletobringingtheassettothelocationandconditionnecessaryforittobecapableofoperatinginthemannerintendedbymanagement.Anyobligationsforcoststobeincurredfordismantlingetc.ExlesofattributablecostRepairsandimprovementsCostofRepairs–arechargedtotheincomestatemente.g.Costofimprovements-addedtothecostofabuildinge.g.DepreciationNon-current(fixed)assetsaregraduallyusedupinprovidinggoodsandservicesovertime.Purposeofaccountingdepreciationistospreadthecostofanon-current(fixed)assetoveritsexpectedusefullife.Depreciationisamethodofallocatingcost.Achievesamatchingofcostsagainsttherelatedrevenues.?WeetmanEffectonAccountingEquationAssets= Liabilities + Owners’FundsDepreciation:“Themeasureofthecostorrevaluedamountoftheeconomicbenefitsofthetangiblefixedassetthathavebeenconsumedduringtheperiod”.Consumptionincludesthewearingout,theusinguporotherreductionintheusefuleconomiclifeofatangiblefixedassetwhetherarisingfromuse,effluxionoftime,orobsolescencethrougheitherchangesintechnologyordemandforthegoodsandservicesproducedbytheasset.”“Thefundamentalobjectiveofdepreciationistoreflectinoperatingprofitthecostofuseofthetangiblefixedassets(i.e.theamountofeconomicbenefitsconsumedbytheentity)intheperiod.FRS15Depreciableamountisthecostofanasset,lessitsresidualvalue.”“Depreciationisthesystematicallocationofthedepreciableamountofanassetoveritsusefullife.” IAS16Note:influenceofaccrualsconcept.Netbookvalueis

Costlessaccumulateddepreciation(i.e.Theportionofcostthathasnotyetbeen‘usedup’)MethodsofDepreciationinclude:

StraightlineReducingBalanceMachinehoursExle

Amachineisboughtfor￡20,000.Itsexpectedusefullifeis3yearsor60,000machinehoursofuse,anditsestimatedresidualvalueis￡8,000.FortheReducingbalancemethod,use25%.Actualhoursused:Year119,000;year221,000;year319,500.Profitbeforedepreciationinyear1is￡4,500.Whatisnetprofitundereachof3depreciationmethods?Exle

Asmallbusinessbuysamachinefor￡20,000.Theownerexpectsittolastforfouryearsandtobescrappedfornothingattheendofthattime.Shedecidestousestraightlinedepreciation.WhatwillbeshownintheIncomestatementeachyear?Whatwillbeshowninthebalancesheeteachyear?LandandBuildingsatValuation

Mostfixedassetsareshownintheaccountsatcost(lessaccumulateddepreciation).Howeversomecompaniesmaychoosetoincludelandandbuildingsatrevaluedamount(lessdepreciation).Ifacompanymakesthischoice,alltheassetsinthecategorymustberevalued,andtheymustberevaluedatregularintervals.RevaluationreserveLookoutfortheaccountingpolicy.IAS16referstoopenmarketvaluewhereasFRS15requiredvaluationtobeatexistingusevalue,Impairment

Ifcircumstanceschange,directorsneedtoreviewtheirnon-currentassetsandseeiftheirvalueintheaccounts(thenetbookvalue)hasbeenimpaired.Ifnecessary,theywillneedtoreducethevalueofthefixedassetstothehigherofthenetrealisablevalue(whatitcanbesoldforlessexpenses)orthevalueinuse(the“present”valueofestimatedfuturecashflows).Inventories

(Stocksandwork-in–progress)Whatareinventories?AccountingforinventoriesObjectivesofinventoriesvaluationNormalvaluation:LowerofcostandnetrealisablevalueWhatisthecostofinventories? costflowassumptions costofmanufacturedgoods,orofservicesWhatisnetrealisablevalue?Whatareinventories?Exlesfromdifferenttypesofbusiness:

CornershopCrispmanufacturerToymanufacturerBuilderSolicitorWHATAREINVENTORIES?Assets:heldforsaleintheordinarycourseofbusiness;intheprocessofproductionforsuchsale;orintheformofmaterialsorsuppliestobeconsumedintheproductionprocessorintherenderingofservices.(IAS2)Commoncategories:“a) goodsorotherassetspurchasedforresaleb) consumablestoresc) rawmaterialsandcomponentspurchasedforincorporationintoproductsforsaled) productsandservicesinintermediatestagesofcompletion(Work-in-Progress)longtermcontractbalancesfinishedgoods.”

SSAP9Accountingforinventories

inventoriesislikelytobeavery‘material’figurei.e.largerelativetoprofit.Considertheimpacton A-L=C+ProfitsExleForaretailerorwholesaler:Openinginventories+Purchases=Costoftheinventories availableduringtheyearHowmuchofthiscosthasbeen“usedup”andshouldbechargedagainstprofitasCostofSales?Howmuchofthiscosthasnotbeenusedupandshouldbecarriedforwardasclosinginventorieswithfutureeconomicbenefit?Note:Accrualsconcept:matchingsalesrevenueofgoodssoldwithcostofgoodssold.Practicalities

Wheretherearenodetailedrecordsofcostofsalesthen: Step1: Physicalstocktake Step2: ValueatcostWheredetailedrecordsofcostofsalesandinventoriesarekeptaftereverysale,thenPhysicalstocktake(eitherallatonceoralittleatatime)tocheckrecordstoactualinventories.UseinventoriesfigurefromtheaccountingrecordsExleOpeninginventory ￡5,000Purchases ￡60,000Closinginventory ￡8,000CostofSales?Openinginventory ￡8,000Purchases: ￡90,000Costofsales ￡88,000Closinginventory?ValuationofinventoriesLowerofCostandNetrealisablevalueNBPrudenceconceptObjectivesofinventoriesvaluationatfullcost

TodetermineprofitForfinancialstatementsbasisfor‘cost+’pricing(sometimes)Cost:

Comprises:Allcostsofpurchase,costsofconversionandothercostsincurredinbringingtheinventoriestotheirpresentlocationandcondition.IAS2Costofpurchasethepurchaseprice,importdutiesandothertaxestransport,handlingandothercostsLessTradediscounts,rebatesandothersimilaritemsSSAP9CostFlowModelsFIFOWeightedAverageLIFONB:LIFOisnotacceptableunderIAS2(revised2003)orSSAP9Exles-Widgets

Jan10Bought200widgets@￡10eachJan17 Bought300widgets@￡11eachJan25Sold270widgetsWhatistheCostofSales?CostofconversionDirectlabour.

Directexpensesasystematicallocationoffixedandvariableproductionoverheadsthatareincurredinconvertingmaterialsintofinishedgoods.

Exle1:ToyManufacturermakingTeddyBears

CostofFinishedBear:DirectMaterials(fluffymaterial,glassbuttoneyes,stuffingetcetc) ￡3perunitDirectLabour(piecerate) ￡4perunitandashareofindirectcosts: Power: ￡3,000RentandBusinessrates 1,800Foreman’ssalary 2,000Depreciationofmachines 900Other 300Totalforthemonth ￡8,000

?perunitDuringthemonth,1000bearshavebeenmade.Thereforeareasonableshareofproductionoverheadswouldbe:

8,000 = perunit. 1,000CostofFinishedBear:DirectMaterials ￡3perunitDirectLabour(piecerate) ￡4perunitshareofindirectcosts: perunit Total perunit

NB Theestimatesandjudgementswhichhavebeenused. ValuationofPartlyMadeBear,atcost:

Ashareofproductionoverheadscouldbebasedondirectlabourcost:Costofdirectlabour=1000bearsat￡4each=Productionoverhead=￡8,000inthemonthProductionoverhead/costofdirectlabour=

Costsofpartlymadebear: Materials ￡2.30 Actual Labour ￡2.00 Actualatpiecerate Overheads 2xDirectlabourcost Total NetRealisableValue:

“Theestimatedsellingpriceintheordinarycourseofbusinesslesstheestimatedcostsofcompletionandtheestimatedcostsnecessarytomakethesale.”IAS2NBNormallyCost<NRV.Theninventoriesisvaluedatcost. Accruals(Realisation)andPrudenceconceptsOccasionallyNRV<Cost.TheninventoriesisvaluedatNRV PrudenceconceptNetRealisableValue:Foraretailerorwholesalerorforthefinishedgoodsofamanufacturer,normally:Sellingpricelesssellinganddistributioncosts.Exle–retailerCost NRV LowerofCostandNRVLineA￡5,0007,000LineB￡2,0003,000LineC20080001,000IrreparablydamagedLineD1500750OutoffashionTotal12,500NetRealisableValue:Forworkinprogress(orrawmaterials)ofamanufacturerorofaserviceindustry:Normalsellingpricelesscoststocompletionandsellinganddistributioncosts

inthenormalcourseofbusiness.Exle3

ValuationofPartlyMadeBear:CostssoFar(Seeexle1): Materials ￡2.30 Labour ￡2.00 Overheads ￡4.00 Total ￡8.30EstimatedCoststoComplete: FurtherMaterials plusfurtherLabour plusfurtherOverheads at2xdirectlabourcost) Total NetRealisableValue: SellingPricelessestimatedCoststoCompletion ￡25-￡6.70=￡18.30LowerofCostandNRV =Lowerof￡8.30and￡18.30 =￡8.3044Receivables(Debtors)Thesearetheamountsofmoneyowedtothebusinessbyitscustomers.Normally,whenbusinessesmakesalesoncredit,theyexpecttheircustomerstopay!ChecksoncreditratingBEFOREsaleismadeIftheyareunsure,mayaskfordepositsorfullpaymentinadvance.ImportanceofcreditcontrolproceduresNormallyitisexpectedthatcustomerswillpayreasonablypromptly,andthereceivableisvaluedatinvoiceamount45BadandDoubtfulDebtsSometimescustomerswillnotpay:Theymaygobankrupt,orhavesignificantfinancialdifficultiesTheymaydisputethedebt.ThedebtcanonlybeshownasanassetifthereisanexpectedfutureeconomicbenefitTherefore,whenbusinessknowsthatacustomerwillnotpay,thedebtis“writtenoff”asa“baddebt”:Theaccountreceivable(asset)balanceisreducedtozeroThebaddebtwrittenoffistreatedasanexpense.DoubtfulDebts–impairmentofreceivablesWilltheentitygetallitsmoneyback?Attheendoftheaccountingperiod,isthereevidencethatthevalueofthereceivablesisimpaired?e.g.SignificantfinancialdifficultyofthedebtorLatepaymentsProbablebankruptcyGrantingconcessionstothedebtore.g.reschedulingrepaymentsObservabledatarelatingtofuturecashflowsforagroupofreceivablese.g.IncreaseinrateofDelayedpaymentsorpaymentsonaccountUnemploymentratesintheareagoingupDoubtfulDebts–impairmentofreceivablesIfreceivablesareimpaired,Businessesmakeanallowance(orprovision)fordoubtfuldebts:DeductedfromaccountsreceivabletotalonbalancesheetIncreasechargedasanexpenseintheincomestatementExleReceivablesatinvoicevalueat31Dec2012amountto￡12,500.Includedinthisamountis￡3,500owingfromBloggsBuildersLtd.Thiscustomerhasbeenverylateinitspaymentsandisinfinancialdifficulty.Thecompanyisstillaskingforallthemoneysbutitisestimatedthatonlyhalfofthedebtwillberecovered.Whatamountshouldbeshowninthebalancesheet?WeirGroupplc-accountingpolicyTradereceivables,whichgenerallyareofashortdatednature,arerecognisedandcarriedatoriginalinvoiceamountlessanallowanceforestimatedirrecoverableamounts.ProvisionismadewhenthereisobjectiveevidencethattheGroupwillnotbeabletorecoverbalancesinfull.Balancesarewrittenoffwhentheprobabilityofrecoveryisassessedasbeingremote.Longertermreceivablese.g. Acustom