ACCO 310 Lecture Notes - Lecture 5: Historical Cost, Income Tax, Accounts Receivable
7 Feb 2016
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Document Summary
Photograph of the business at a specific point in time. Helps to predict amounts, timing, uncertainty of future cash flows. Allows to compute rates of return on invested assets, business risk, future cash flows => analyze liquidity, solvency, financial flexibility (and profitability if we also use the statement of comprehensive income) Many assets and liabilities stated at historical cost (but remember debate on hc vs. fv with respect to relevance and faithful representation!) Judgments and estimates used to determine many of the items reported. List of items that are sufficiently different in nature to warrant separate presentation. Companies can add other line items when presentation is relevant to understanding the situation. Current: <12 months or within the next operating cycle. Non-current: >12 months or after the next operating cycle. Separate classifications current/non-current, except when presentation based on liquidity provides information that is reliable and more relevant (i. e. , order of liquidity)
