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Lecture Intermediate accounting (Volume 1, 11th Canadian edition) – Chapter 5: Financial position and cash flows

Chapter 5 - Financial position and cash flows. After studying this chapter, you should be able to: Understand the statement of financial position and statement of cash flows from a business perspective, identify the uses and limitations of a statement of financial position, identify the major classifications of a statement of financial position,. | 1 CHAPTER 5: FINANCIAL POSITION AND CASH FLOWS 2 2 Chapter 5: Financial Position and Cash Flows After studying this chapter, you should be able to: Understand the statement of financial position and statement of cash flows from a business perspective. Identify the uses and limitations of a statement of financial position. Identify the major classifications of a statement of financial position. Prepare a classified statement of financial position. Identify statement of financial position information that requires supplemental disclosure. Identify major disclosure techniques for the statement of financial position. Indicate the purpose and identify the content of the statement of cash flows. Prepare a statement of cash flows using the indirect method. Understand the usefulness of the statement of cash flows. Identify differences in accounting between ASPE and IFRS. Identify the significant changes planned by the IASB regarding financial statement presentation. 3 3 Financial Position and Cash Flows 4 4 Business Perspective Statement of financial position (SFP) and the statement of cash flows can be used to assess: Financial flexibility and risk of business failure Earnings quality Creditworthiness 5 5 LO1 Statement of Financial Position: Usefulness Statement of Financial Position (SFP) also known as the balance sheet SFP provides information: for evaluating the capital structure and for computing rates of return on invested assets It is also useful for assessing an enterprise’s: Liquidity (time until asset is realized or liability has to be paid) Solvency (ability to pay debts and related interest) Financial flexibility (ability to respond to unexpected needs and opportunities) 6 6 LO2 Statement of Financial Position: Limitations Many assets and liabilities are stated at historical cost Information presented is reliable, however Reporting at current fair value would result in more relevant information 2. Judgement and estimates are used in determining many of the . | 1 CHAPTER 5: FINANCIAL POSITION AND CASH FLOWS 2 2 Chapter 5: Financial Position and Cash Flows After studying this chapter, you should be able to: Understand the statement of financial position and statement of cash flows from a business perspective. Identify the uses and limitations of a statement of financial position. Identify the major classifications of a statement of financial position. Prepare a classified statement of financial position. Identify statement of financial position information that requires supplemental disclosure. Identify major disclosure techniques for the statement of financial position. Indicate the purpose and identify the content of the statement of cash flows. Prepare a statement of cash flows using the indirect method. Understand the usefulness of the statement of cash flows. Identify differences in accounting between ASPE and IFRS. Identify the significant changes planned by the IASB regarding financial statement presentation. 3 3 Financial Position and