Interest Rate Risk Explained With Relevant Examples
Interest is basically a reward paid by a borrower for the use of an asset, usually capital, belonging to a lender. It’s the compensation paid for the loss of use of the asset. We could also describe it as the…
Time Value of Money Explained With Relevant Examples
Time value of money is a concept that refers to the greater benefit of receiving a given amount of money at present rather than in the future due to its earning potential. For example, money could be invested in a…
Current and Non-current Assets – Liabilities
The classified balance sheet distinguishes between current and non-current assets and between current and non-current liabilities. It classifies them separately. Current Assets vs. Non-current Assets Current assets are assets that are primarily held for trading or which are expected to…
Measurement Bases – Assets and Liabilities
Financial assets are measured and reported either at fair value or amortized cost. IFRS defines fair value as the amount at which an asset could be exchanged or a liability settled in an arm’s length transaction between knowledgeable and willing…
Components of Shareholders’ Equity
Shareholders’ equity represents the owners’ residual claim on a business entity’s assets after deducting its liabilities. This includes all funds that were directly invested in an entity by its owners, earnings that have been reinvested over time, and unrealized gains…
Costs Included in Inventories and Costs Recognised as Expenses
The amounts reported as ‘inventories’ and ‘cost of goods sold’ are two significant items that can appear on a company’s financial statements, especially for manufacturing and merchandising companies. Some costs are included in the asset ‘inventories,’ while others are recognized…
Describe Different Inventory Valuation Methods
The allocation of total inventory costs between ‘cost of sales on the income statement and ‘inventory’ on the balance sheet can vary depending on a company’s choice of inventory valuation method (also known as cost formula or cost flow assumption…
Examining a Company’s Inventory Disclosures and Other Sources of Information
Financial statement analyses that fail to consider the impact of differences in methodologies adopted, disclosures made, and presentation formats are likely to result in faulty conclusions. An analyst has to have a critical mind and give consideration to the information…
