Ifrs Edition: Prepared by Coby Harmon University of California, Santa Barbara Westmont College

WILEY
IFRS EDITION
Prepared by
Coby Harmon
University
4-1
of California, Santa Barbara
Westmont College
PREVIEW OF CHAPTER 4
Financial Accounting
IFRS 3rd Edition
Weygandt ● Kimmel ● Kieso
4-2
Statement of Financial Position
Learning
 Presents a snapshot at a point in time. Objective 6
Identify the sections of
a classified statement
 To improve understanding, companies of financial position.
group similar assets and similar liabilities

together.
Standard Classifications
Assets Equity and Liabilities

Intangible assets Equity
Property, plant, and equipment Non-current liabilities
Long-term investments Current liabilities
Current assets
Illustration 4-16
Standard statement of financial position classifications
4-3 LO 6
Illustration 4-17
Classified statement
of financial position
4-4 LO 6
Illustration 4-17
Classified statement
of financial position
4-5 LO 6
Intangible Assets
 Assets that do not have physical substance.
Illustration 4-18
Intangible assets section
4-6 LO 6
Property, Plant, and Equipment
 Long useful lives.
 Currently used in operations.
 Depreciation - allocating the cost of assets to a number

of years.
 Accumulated depreciation - total amount of depreciation

expensed thus far in the asset’s life.
4-7 LO 6
Property, Plant, and Equipment
Illustration 4-19
Property, plant, and equipment section
4-8 LO 6
Long-Term Investments
 Investments in ordinary shares and bonds of other

companies.
 Investments in non-current assets such as land or buildings
that a company is not using in its operating activities.
Illustration 4-20
Long-term investments section
4-9 LO 6
Current Assets
 Assets that a company expects to convert to cash or use

up within one year or the operating cycle, whichever is
longer.
 Operating cycle is the average time it takes from the

purchase of inventory to the collection of cash from
customers.
4-10 LO 6
Current Assets
Illustration 4-21
Current assets section Accounts usually listed in the reverse order they
expect to convert them into cash.
4-11 LO 6
Equity
 Proprietorship - one capital account.

 Partnership - capital account for each partner.
 Corporation – Share Capital and Retained Earnings.
Illustration 4-22
4-12 Equity section LO 6
Non-Current Liabilities
 Obligations a company expects to pay after one year.
Illustration 4-23
Non-current liabilities section
4-13 LO 6
Current Liabilities
 Obligations company is to pay within the coming year or

its operating cycle, whichever is longer.
 Usually list notes payable first, followed by accounts

payable. Other items follow in order of magnitude.
 Liquidity - ability to pay obligations expected to be due

within the next year.
4-14 LO 6
Current Liabilities
Illustration 4-24
Current liabilities section
4-15 LO 6
Question
The correct order of presentation in a classified statement of
financial position for the following current assets is:
a. accounts receivable, cash, prepaid insurance, inventories.
b. cash, inventories, accounts receivable, prepaid insurance.
c. prepaid insurance, inventories, accounts receivable, cash.
d. inventories, cash, accounts receivable, prepaid insurance.
4-16 LO 6
Question
In a classified statement of financial position, assets are usually
classified using the following sequence of categories:
a. current assets; non-current assets; property, plant, and
equipment; intangible assets.
b. tangible assets; property, plant, and equipment; long-term
investments; current assets.
c. current assets; long-term investments; tangible assets;
intangible assets.
d. intangible assets; property, plant, and equipment; long-
term investments; current assets.
4-17 LO 6
> DO IT!
The following accounts were taken from the financial statements of Callahan
Company.
Match each of the following accounts to its proper statement of financial

position classification, shown below. If the item would not appear on a
statement of financial position, use “NA.”
Current assets (CA) Current liabilities (CL)
Long-term investments (LTI) Non-current liabilities (NCL)
Property, plant, and equipment (PPE) Equity (E)
Intangible assets (IA)
4-18 LO 6

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group similar assets and similar liabilities

Assets Equity and Liabilities

 Assets that do not have physical substance.

 Long useful lives.

 Currently used in operations.

 Depreciation - allocating the cost of assets to a number

 Accumulated depreciation - total amount of depreciation

 Investments in ordinary shares and bonds of other

 Assets that a company expects to convert to cash or use

 Operating cycle is the average time it takes from the

 Proprietorship - one capital account.

 Obligations a company expects to pay after one year.

 Obligations company is to pay within the coming year or

 Usually list notes payable first, followed by accounts

 Liquidity - ability to pay obligations expected to be due

a. accounts receivable, cash, prepaid insurance, inventories.

b. cash, inventories, accounts receivable, prepaid insurance.

c. prepaid insurance, inventories, accounts receivable, cash.

d. inventories, cash, accounts receivable, prepaid insurance.

Match each of the following accounts to its proper statement of financial

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