© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Balance Sheet Limitations:  Most assets are recorded at historical cost rather than at market value.  Resources such as employee skills and reputation are not recorded on the balance sheet. Usefulness:  Liquidity information.  Long-term solvency information.

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Case 3-5  Which items require further disclosure?

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Resources (Assets) Claims against resources (Liabilities) Remaining claims accruing to owners (Owners’ Equity) Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Assets Cash Receivables Inventories Prepayments Cash Receivables Inventories Prepayments Converted to cash or consumed within one year or the operating cycle, whichever is longer Current Assets

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Assets Investments and Funds Property, Plant, & Equipment Intangibles Other Investments and Funds Property, Plant, & Equipment Intangibles Other Not expected to be converted to cash or consumed within one year or the operating cycle, whichever is longer Noncurrent Assets

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Liabilities are probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities as a result of past transactions or events.

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Liabilities Accounts Payable Notes Payable Accrued Liabilities Current Maturities of Long-Term Debt Accounts Payable Notes Payable Accrued Liabilities Current Maturities of Long-Term Debt Obligations expected to be satisfied through current assets or creation of other current liabilities Current Liabilities

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Liabilities Capital Leases Bonds Payable Long-Term Notes Payable Pension Liabilities Capital Leases Bonds Payable Long-Term Notes Payable Pension Liabilities Obligations that will not be satisfied within one year or operating cycle, whichever is longer Long-Term Liabilities

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Equity is the residual interest in the assets of an entity that remains after its liabilities are deducted.

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Shareholders’ Equity Capital Stock Capital Stock Retained Earnings Treasury Stock Other Contributed Capital

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Some Examples  SEARS Balance Sheet SEARS Balance Sheet  Sears Footnotes Sears Footnotes  Kohl's Balance Sheet Kohl's Balance Sheet  Kohl’s Footnotes Kohl’s Footnotes

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Disclosure Notes  Summary of Significant Accounting Policies  Subsequent Events  Noteworthy Events and Transactions

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Management Discussion and Analysis (MDA) Includes management’s views on significant events, trends, and uncertainties regarding the company’s operations, liquidity, and capital resources.

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet

© The McGraw-Hill Companies, Inc., 2001 Irwin/McGraw-Hill Coach’s Balance Sheet