Analyzing Financing Activities CHAPTER
3 CHAPTER Analyzing Financing Activities
Liabilities Definition A liability is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events the company Because of a has a for future past event. present sacrifices obligation Past Present Future
A liability is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events. Definition Liabilities Past Present Future Because of a past event... ...for future sacrifices. … the company has a present obligation
Liabilities Classification Current (short-term) Noncurrent ( Long- Liabilities Term) Liabilities Obligations whose settlement requires use of Obligations not current assets or the payable within one incurrence of another year or the operating current liability within one cycle, whichever is year or the operating longer cycle, whichever is longer
Current (short-term) Liabilities Noncurrent (LongTerm) Liabilities Obligations whose settlement requires use of current assets or the incurrence of another current liability within one year or the operating cycle, whichever is longer. Obligations not payable within one year or the operating cycle, whichever is longer. Liabilities Classification
Liabilities Alternative Classification Obligations that arise from Operating operating activities--examples Liabilities are accounts payable, unearned revenue, advance payments, taxes payable, postretirement liabilities, and other accruals of operating expenses Obligations that arise from financing activities--examples Financing are short- and long-term debt, Liabilities bonds, notes, leases, and the current portion of long-term debt
Operating Liabilities Financing Liabilities Obligations that arise from operating activities--examples are accounts payable, unearned revenue, advance payments, taxes payable, postretirement liabilities, and other accruals of operating expenses Obligations that arise from financing activities--examples are short- and long-term debt, bonds, notes, leases, and the current portion of long-term debt Liabilities Alternative Classification
Liabilities Disclosures for Current (Financing) Liabilities Compensating balance arrangements, including those not required by law Balance sheet segregation of (1)legally restricted compensating balances and(2) unrestricted compensating balances related to long-term borrowing arrangements if balances are computable at a fixed amount Short-term bank and commercial paper borrowings, including: Commercial paper borrowings separately listed in balance sheet Weighted-average interest rate and terms separately stated for short-term bank and commercial paper borrowings Weighted-average interest rate, average outstanding borrowings, and maximum month-end outstanding borrowings for short-term bank debt and commercial paper combined for the period Disclosure of amounts and terms of unused lines of credit for short-term borrowing arrangements (with amounts supporting commercial paper separately stated) and of unused commitments for long-term financing arrangements
Liabilities Disclosures for Current (Financing) Liabilities n Compensating balance arrangements, including those not required by law n Balance sheet segregation of (1) legally restricted compensating balances and (2) unrestricted compensating balances related to long-term borrowing arrangements if balances are computable at a fixed amount n Short-term bank and commercial paper borrowings, including: • Commercial paper borrowings separately listed in balance sheet • Weighted-average interest rate and terms separately stated for short-term bank and commercial paper borrowings • Weighted-average interest rate, average outstanding borrowings, and maximum month-end outstanding borrowings for short-term bank debt and commercial paper combined for the period n Disclosure of amounts and terms of unused lines of credit for short-term borrowing arrangements (with amounts supporting commercial paper separately stated) and of unused commitments for long-term financing arrangements