CHAPTER 3: Accounting and Finance 3.

1 The Statement of Financial Position or Balance Sheet Canada now uses International Financial Reporting Standards (IFRS): procedures for preparing financial statements The financial statement that shows the value of the firms assets and liabilities at a particular time To promote clarity about a companys financial performance, financial statements must be created according to their countrys accounting standards Canada switched to IFRS in January 2011 It shows the firms: o Current assets: most liquid forms of assets o Noncurrent assets: assets of an investment nature o Current liabilities: short term and current portion of long term debts o Noncurrent liabilities: long term borrowings o Shareholders equity: difference between total assets and total liabilities A subsidiary is a business that is owned by another corporation, called the parent, who controls the business. The parent company must own at least 50% plus 1 off its voting shares.

The statement of financial position (SFP) or balance sheet: financial statement that shows the book value of the firms assets, liabilities and equity as of a specific date (a snapshot of the firms assets and the source of the money that was used to buy those assets (liabilities and equity( as of a specific date. Book value or carrying value: value of assets or liabilities shown on the statement of financial positions (balance sheet) Liquid assets: assets that can be turned more easily into cash than others. Canada works from most liquid to least liquid in the list Current Assets o These are the most liquid assets. These could be: Cash and cash equivalents Accounts receivable Inventories Other current assets Income taxes receivable

Non-current assets: o Long term assets which are unlikely to bed turned into cash soon. These could be: Property, plant and equipment (PP&E) Net fixed assets Intangible assets Other assets Calculating fair value: estimated market value of something if it were sold to another user Depreciation is an expense that allocates the cost of the asset over its useful life (based on the assets original cost)