balance sheet items

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Summary

Purposes of the Balance Sheet

1. A balance sheet, or statement of financial position, summarizes the financial position of a company at

a particular date by reporting the economic resources (assets), the economic obligations (liabilities), and

equity. It reports a company's resource structure (major classes and amounts of assets) and its financial

structure (major classes and amounts of liabilities and equity). It is a detailed explanation of the basic

accounting equation: Assets = Liabilities + Stockholders' Equity.

2. The balance sheet information helps external users (a) assess the company's liquidity, financial

flexibility, and operating capability, and (b) evaluate its income-producing performance during the

period. Liquidity is the speed with which assets can be converted into cash to pay bills. Information

about liquidity helps users evaluate the timing of cash flows. This is important in evaluating the amount

of future cash flows.

3. A company's capital, its assets less its liabilities, is also called its net assets or owners' equity. By

comparing beginning owners' equity with ending owners' equity, the financial statement user can tell

whether capital for the accounting period was increased or decreased.

Recognition in the Balance Sheet

4. Recognition is the process of formally recording and reporting an element in the financial statements.

To be recognized, an item must (a) meet the definition of an element as specified in FASB Statement of

Concepts No. 6, (b) be measurable, (c) be relevant, and (d) be reliable.

Elements of the Balance Sheet

5. The elements of the balance sheet are the broad classes of items comprising it. These items and their

definitions are:

a) Assets: The probable future economic benefits obtained or controlled by a company as a result of

past transactions or events.

b) Liabilities: The probable future sacrifices of economic benefits arising from the present obligations of

a company to transfer assets or provide services in the future as a result of past transactions or events.

c) Stockholders’ equity: The residual interest in the assets of a company after the liabilities has been

deducted.

Measurement (Valuation) of the Elements of a Balance Sheet

6. Assets and liabilities must have a monetary value for balance sheet presentation. The FASB has

identified five alternative valuation methods.

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a) Historical cost is the exchange price of the asset at the time of the original transaction reduced by any

recorded depreciation, amortization, or impairment to date. This is the most commonly used valuation.

b) Fair Value is the price that a company would receive to sell an asset (or transfer a liability) in an

orderly transaction between market participants on the date of measurement. Fair value may be used

on a company’s balance sheet to report the value of its “financial” assets (and liabilities), such as cash,

accounts receivable, and notes receivable. To increase consistency and comparability in fair value

measurements, the FASB established a hierarchy that prioritizes the inputs a company is to use in its

valuation method.

c) Present value is the net amount of the discounted future cash inflows less the discounted future cash

outflows relating to the asset.

Reporting Classifications on the Balance Sheet

7. The balance sheet is arranged to be useful to a company’s external users. The individual categories

(assets, liabilities, and stockholders’ equity) are further subdivided to provide useful information. These

subdivisions are briefly explained below.

8. Current assets are cash and other assets that a company expects to convert into cash, sell, or

consume within one year or the normal operating cycle, whichever is longer. An operating cycle, usually

a year or less, is the average time taken by a company to spend cash for inventory, process and sell the

inventory, and collect the cash from the sale. Current assets are presented in order of liquidity.

9. Current liabilities are obligations that a company expects to liquidate within one year or the operating

cycle (if longer) through the use of current assets or the creation of other current liabilities.

10. Working capital is the difference between a company's current assets and its current liabilities. A

company's working capital is a measure of the short-run liquidity of the company.

11. Long-term investments are investments that the company plans to hold for more than one year or

its operating cycle, if longer.

12. The property, plant, and equipment section of a company's balance sheet includes all tangible assets

(fixed assets) used in operations. Except for land, these assets are either depreciated, amortized (for

leased assets), or depleted (for natural resource assets). In these cases, a contra-asset account is

deducted from the original asset cost in order to display both the historical cost and the book value.

13. Intangible assets are noncurrent economic resources that are used in the operations but that have

no physical existence. The value of this type of asset lies in the special right of the company to its use.

Intangible assets with finite useful lives (e.g., patents) are amortized over their useful lives, and

disclosed on the balance sheet at book value. Intangible assets with indefinite lives (e.g., goodwill) are

not amortized but are reviewed for impairment at least annually. They are reported at their historical

cost or, if impaired, at their lower fair value.

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14. Long-term liabilities (noncurrent liabilities) are obligations that are not expected to require the use

of current assets or not expected to create current liabilities within one year or the operating cycle, if

longer. Bonds are usually sold for more than face value (premium) or less than face value (discount). On

a balance sheet, bonds are reported at their book value. The book value is the face value of the bonds

plus any unamortized premium or less any unamortized discount.

15. The stockholders' equity section of a corporation's balance sheet consists of three main categories:

contributed capital, retained earnings, and accumulated other comprehensive income. Contributed

capital represents amounts owners have invested in the business. Contributed capital is often separated

into capital stock and additional paid-in capital. Corporations may issue two types of capital stock,

common and preferred, each of which has distinguishing characteristics.

16. Retained earnings represent the cumulative amount of past net income kept in the business.

17. Accumulated other comprehensive income (loss) includes (a) unrealized gains or losses in the market

value of investments in available-for-sale securities, (b) translation adjustments from converting the

financial statements of a company's foreign operations into U.S. dollars, (c) certain gains and losses on

"derivative" financial instruments, and (d) certain pension liability adjustments.

Statement of Changes in Stockholders’ Equity

18. FASB Statement of Concepts No. 6 suggests that financial statements include information about (a)

investments by owners, and (b) distributions to owners. To disclose this information as well as the

retained earnings changes, a statement of changes in stockholders' equity is often presented as a

financial statement. The statement of changes reconciles beginning balances of capital stock, additional

paid-in capital, retained earnings, and accumulated other comprehensive income to their ending

balances by showing the changes in each item.

Other Disclosure Issues

19. Because all of the relevant financial information pertaining to a company's activities cannot be

disclosed directly in the body of the financial statements, a company will make additional disclosures in

the notes to the financial statements.

20. APB Opinion No. 22 requires disclosure in a company’s notes of information related to its accounting

policies. This disclosure includes revenue recognition and asset allocation principles that involve: (a) a

selection from existing alternatives, (b) principles peculiar to a specific industry, or (c) an innovative

application of an accounting principle.

21. A company discloses contingent liabilities (loss contingencies) in the notes to the financial

statements if there is only a reasonable possibility that the loss may have been incurred or if the amount

of the loss cannot be reasonably estimated. If it is probable that the loss has been incurred and if the

amount can be reasonably estimated, an estimated loss from a loss contingency is accrued and reported

directly on the balance sheet as a liability or a reduction of an asset. Gain contingencies are not reported

in the financial statements and should be judiciously explained if disclosed in the notes. Gain

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contingencies are not reported in a company’s financial statements and, if disclosed in a note, should be

carefully explained in order to avoid misleading implications as to the likelihood of future revenues or

gains.

22. Another common note to the financial statements is a description of an important event that occurs

between the balance sheet date and the date of issuance of the annual report. This is called a

subsequent event. Subsequent events must be disclosed so that users may interpret the financial

statements in light of the most recent company information. If a subsequent event provides information

about conditions that existed on the balance sheet date and significantly affect the estimates used in

the preparation of the financial statements, the company adjusts the statements themselves.

23. Most users of financial statements are interested in evaluating trends of the company over time. For

this reason, financial statements are usually prepared on a comparative basis by presenting information

for the current and preceding year side by side.

24. Through the SEC's "integrated disclosures" provision, companies regulated by the SEC now satisfy

certain Form 10-K disclosure requirements by reference to information included in the annual report.

Therefore, these companies include (a) comparative balance sheets for two years and comparative

income statements and statements of cash flows for three years; (b) a five-year summary of critical

accounting information; (c) management's discussion and analysis (MD&A) of the company's financial

condition, changes in financial condition, and results of operations; and (d) disclosures on common stock

market prices and dividends. Each company’s chief executive officer and chief financial officer both must

“certify” that the company’s annual report in the Form 10-K (or interim report within the company’s

Form 10-Q) is both complete and accurate.

25. The IASB sets international accounting standards for published financial statements that are similar

to those in the United States. Under the International Accounting Standards, a balance sheet, statement

of changes in equity, income statement, and statement of cash flows are required as well as related

notes and explanatory materials. In general, classification of items and disclosures are similar to that

required under U.S. GAAP. However, on the balance sheet, the liabilities and owners' equity sections are

usually ordered differently.

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Examples of balance sheets using 100 ftse companies:

Consolidated balance sheet

At 28 February 2013

Whitbread28 February 1 March

2013 2012

£m £m

ASSETS

Non-current assets

Intangible assets 215.4 206.6

Property, plant and equipment 2,748.9 2,580.5

Investment in joint ventures 24.0 18.7

Investment in associate 1.7 1.6

Derivative financial instruments 7.1 -

Trade and other receivables 5.3 3.6

Other financial assets - -

3,002.4 2,811.0

Current assets

Inventories 26.5 23.1


Cash and cash equivalents 40.8 40.3

Derivative financial instruments 1.4 -

170.8 148.4

Assets held for sale 1.5 0.6

Total assets 3,174.7 2,960.0

LIABILITIES

Current liabilities

Financial liabilities 9.0 14.2

Provisions 10.3 10.7

Derivative financial instruments 4.6 6.6

Income tax liabilities 37.7 15.4

Trade and other payables 347.6 321.3

409.2 368.2

Non-current liabilities

Financial liabilities 502.9 530.4

Provisions 32.6 37.1


Deferred income tax liabilities 106.7 105.9

Pension liability 541.7 598.7

Trade and other payables 17.6 16.4

1,220.2 1,308.6

Total liabilities 1,629.4 1,676.8

Net assets 1,545.3 1,283.2

Equity

Share capital 148.3 147.5

Share premium 55.1 53.7

Capital redemption reserve 12.3 12.3

Retained earnings 3,408.8 3,163.0

Currency translation reserve 4.7 3.7

Other reserves (2,094.7) (2,103.4)

Equity attributable to equity holders of the parent 1,534.5 1,276.8

Non-controlling interest 10.8 6.4

Total equity 1,545.3 1,283.2

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MARKS & SPENSER

CONSOLIDATED BALANCE SHEET

AS AT 31/03/2012As at 31

March 2012

As at 2

April 2011

£ millions

ASSETS

Non-current assets

Intangible assets 584.30 527.70


Investment Property 15.90 16.00

Investments in joint ventures & associates 14.40 13.00

Other financial assets 3.00 3.00

Retirement benefit assets 91.30 182.60



5,813.20 5,702.40

Current assetsInventories 681.90 685.30



Derivatives 67.00 18.40

Current tax assets 1.60 1.60


1,460.10 1,641.70

Total assets 7,273.30 7,344.10

Current liabilitiesTrade and other payables (1,449.10) (1,347.60)

Borrowings (327.70) (602.30)

Partnership liability to M & S Uk pension scheme (71.90) (71.90)

Derivative financial instruments (60.50) (50.70)

Provisions (8.40) (22.70)

Current tax liabilities (87.80) (115.00)

(2,005.40) (2,210.20)

Net working capital = Current assets minus current liabilities (545.30) (30.00)

Non-current liabilitiesRetirement benefit deficit (13.30) (14.10)

Trade & Other payables (280.80) (262.30)

Borrowings & other financial liabilities (1,948.10) (1,924.10)

Derivatives financial instruments (27.20) (37.50)

Provisions (24.00) (22.00)

Deferred tax liabilities (195.70) (196.50)

(2,489.10) (2,456.50)

Total liabilities (4,494.50) (4,666.70)

Net assets 2,778.80 2,677.40

EquityIssued Share Capital 401.40 396.20

Share Premium account 294.30 255.20

Capital redemption reserve 2,202.60 2,202.60

Hedging reserves 14.80 (11.30)

Other reserves (6,114.30) (6,042.40)


Total attributable to equity shareholders of the company 2,790.20 2,673.50

Non-controlling interests (11.40) 3.90

Total Equity 2,778.80 2,677.40

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KINGFISHER


AS AT 28/01/2012

£ millions 2011/12 2010/11

Non-current assetsGoodwill 2,397.00 2,395.00

Other intangible assets 123.00 86.00


Investment Property 55.00 32.00

Investments in joint ventures & associates 271.00 259.00

Post employment benefits 25.00 -

Deferred tax assets 23.00 27.00


Other receivables 17.00 15.00

6,644.00 6,508.00

Current assetsInventories 1,844.00 1,791.00



Current tax assets 1.00 45.00


2,989.00 3,095.00

Total assets 9,633.00 9,603.00

Current liabilitiesTrade and other payables (2,356.00) (2,519.00)

Borrowings (367.00) (196.00)

Derivatives (6.00) (11.00)

Current tax liabilities (305.00) (372.00)

Provisions (16.00) (27.00)

(3,050.00) (3,125.00)

(61.00) (30.00)

Non-current liabilitiesOther payables (121.00) (76.00)

Borrowings (375.00) (577.00)

Derivatives (8.00) (17.00)

Deferred tax liabilities (269.00) (238.00)

Provisions (43.00) (52.00)

Post employment benefits (40.00) (58.00)

(856.00) (1,018.00)


Net assets 5,727.00 5,460.00

EquityShare Capital 372.00 371.00

Share Premium 2,199.00 2,194.00

Own Shares held (134.00) (42.00)


Other reserves 413.00 539.00

5,719.00 5,452.00

Non-controlling interests 8.00 8.00

Total Equity 5,727.00 5,460.00

Total attributable to equity shareholders of the

company

Net working capital = Current assets minus current

liabilities

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REUTERS GROUP


AS AT 31/12/2012

£ millions 2012 2011

Non-current assetsComputer Hardware & Other Property, Net 1,423.00 1,509.00

Computer Software, Net 1,682.00 1,640.00

Other Identifiable Intangible Assets, Net 8,135.00 8,471.00

Goodwill 16,256.00 15,932.00

Other Financial assets 360.00 425.00

Other Non-current Assets 515.00 535.00

Deferred tax assets 50.00 50.00

28,421.00 28,562.00

Current assetsCash and cash equivalents 1,301.00 422.00

Trade and other receivables 1,835.00 1,984.00


Prepaid Expenses & Other current assets 641.00 641.00

Current assets Excluding Assets Held for Sale 3,849.00 3,147.00

Assets Held for Sale 302.00 767.00

Current Assets 4,151.00 3,914.00

Total assets 32,572.00 32,476.00

Liabilities and EquityCurrent Indebtedness (1,008.00) (434.00)

Payables, Accruals & Provisions (2,633.00) (2,675.00)

Deferred Revenue (1,224.00) (1,379.00)

Other financial liabilities (95.00) (81.00)

Current tax liabilities Excluding Liabilities (4,960.00) (4,569.00)

Associated with Assets Held for Sale

Liabilities Associated with Assets Held for Sale (35.00) (35.00)

Current Liabilities (4,995.00) (4,604.00)

Net working capital = Current assets minus current liabilities (844.00) (690.00)

Non-current liabilitiesLong-Term Indebtedness (6,223.00) (7,160.00)

Provisions & Other Non-current liabilities (2,514.00) (2,513.00)

Other financial Liabilities (37.00) (27.00)

Deferred tax liabilities (1,305.00) (1,422.00)


Equity Capital (10,371.00) (10,288.00)

Retained earnings (8,311.00) (7,633.00)

Accumulated Other Comprehensive Loss 1,537.00 1,516.00

Total attributable to equity shareholders of the company (17,145.00) (16,405.00)

Non-controlling interests (353.00) (345.00)

Total Equity (17,498.00) (16,750.00)

Total Liabilities and Equity (32,572.00) (32,476.00)

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ITV


AS AT 31/12/20122012

Assets and Liabilities

Non-current assetsGross Property, plant and equipment 325.00

Accumulated Depreciation (169.00)

Net Property, plaint and equipment 156.00

Goodwill 751.00

Long-Term Investments 253.00

Deferred tax Assets, Long term 93.00

Other Iong-term assets 162.00

Other financial assets 36.00

1,451.00

Current assetsCash and Equivalents 690.00

Trading Asset Securities -

Total Cash & Short term investments 690.00

Accounts receivable 278.00

Other receivables 43.00

Total receivables 321.00

Inventory 96.00

Prepaid expenses 58.00

Other current assets 179.00

Total current assets 1,344.00

Total assets 2,795.00

Current LiabilitiesCurrent portion of Capital Lease Obligations (7.00)

Other current liabilities (699.00)

Total Current liabilities (706.00)

Net working capital = Current assets minus current liabilities 638.00

Non Current liabilitiesBorrowings (632.00)

Provisions (12.00)

Other Non-current liabilities (613.00)

Other liabilities N/A

Total liabilities (1,257.00)

(1,963.00)

Net assets 832.00

Equity:Common Stock 391.00

Additional Paid in Capital 122.00

Retained earnings 1.00

Comprehensive Income & Other 303.00

Total Common Equity 817.00

Minority Interest 15.00

Total Equity 832.00

Total liabilities and Equity 2,795.00

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TESCO


AS AT 25/02/2012

£ millions 2012

Non-current assetsGoodwill & Other intangible assets 4,618.00

Property, plant and equipment 25,710.00

Investment Property 1,991.00

Investments in joint ventures & associates 423.00

Other investments 1,526.00

Loans & advances to customers 1,901.00

Derivatives financial instruments 1,726.00

Deferred tax assets 23.00

37,918.00

Current assetsInventories 3,598.00

Trade and other receivables 2,657.00

Loans & advances to customers 2,502.00

Derivative financial instruments 41.00

Current tax assets 7.00

Short-term investments 1,243.00

Cash and cash equivalents 2,305.00

12,353.00

Assets of the disposal group and non-current assets classified as held for sale510.00

12,863.00

Total assets 50,781.00

Current liabilitiesTrade and other payables (11,234.00)

Financial LiabilitiesBorrowings (1,838.00)

Derivative financial instruments & other liabilities (128.00)

Customer deposits & deposits by banks (5,465.00)

Current tax liabilities (416.00)

Provisions (99.00)

(19,180.00)

(69.00)

Net current liabilities (6,386.00)

(6,386.00)

Non-current liabilities

Financial liabilitiesBorrowings (9,911.00)

Derivative financial instruments & other liabilities (688.00)

Post employment benefits (1,872.00)

Deferred tax liabilities (1,160.00)

Provisions (100.00)

Total non current liabilities (13,731.00)

Net assets 17,801.00

EquityShare Capital 402.00

Share Premium 4,964.00

Other reserves 40.00

Retained earnings 12,369.00

Equity attributable to owner's of the parent 17,775.00

Non-controlling interests 26.00

Total Equity 17,801.00

Liabilities of the disposal group classified as held

for sale

Net working capital = Current assets

minus current liabilities

balance sheet items

Economy & Finance