After studying this chapter, you should be able to:
- 1 Explain the uses and limitations of a statement of financial position.
- 2 Identify the major classifications of the statement of financial position.
- 3 Prepare a classified statement of financial position using the report and account formats.
- 4 Indicate the purpose of the statement of cash flows.
- 5 Identify the content of the statement of cash flows.
- 6 Prepare a basic statement of cash flows.
- 7 Understand the usefulness of the statement of cash flows.
- 8 Determine additional information requiring note disclosure.
- 9 Describe the major disclosure techniques for financial statements.
Hey, It Doesn't Balance!
A good accounting student knows by now that Total Assets = Total Liabilities + Total Equity. From this equation, we can also determine net assets, which are determined as follows: Total Assets − Total Liabilities = Net Assets. O.K., this is simple so far. But let's look at the discussion paper by the IASB on how the statement of financial position (often referred to as the balance sheet) should be structured.
The statement of financial position is divided into five major parts, with many assets and liabilities netted against one another. Here is the general framework for the new statement of financial position:
The statement does look a bit different than the traditional balance sheet. Let's put some numbers ...