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Goodwill, Pensions, and Stock Options. Balance Sheet Thunder Inc. Assets –Cash = $100 Liabilities –None Bookvalue = $100.

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Presentation on theme: "Goodwill, Pensions, and Stock Options. Balance Sheet Thunder Inc. Assets –Cash = $100 Liabilities –None Bookvalue = $100."— Presentation transcript:

1 Goodwill, Pensions, and Stock Options

2 Balance Sheet Thunder Inc. Assets –Cash = $100 Liabilities –None Bookvalue = $100

3 Lightening Inc. Assets –Plant and equipment = $100 Liabilities –Long term debt = $50 Bookvalue = = 50

4 Thunder Buys Lightening for $100 Assets –Cash = 0 –Plant and equipment = $100 –Goodwill = $50 (purchase price - book) Liabilities –Long term debt = $50 New book value (Thunder) = = 100

5 Pension Liabilities Future cash flows owed to retired workers Similar to debt Should go on balance sheet How do you estimate? (Retirement health care trickier.)

6 Pension Liabilities NY Times article FASB (Financial Accounting Standards Board) –Rules for adding pension liabilities to balance sheets For Ford and GM, book value goes negative after adding this

7 Stock Options Payments to employees Option to purchase stock at a fixed price Technically, like a wage : labor compensation Should be on income statement, but how do you value this?


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