In this Balance Sheet Tour, we review several “less travelled”, yet very important, balance sheet categories, including some terms that you have heard about, but might not quite know how they work. This course goes above and beyond what textbooks would provide you, by addressing concepts, definitions, and journal entries, as well as practical use. Many of the course sections feature multiple real-life examples of well-known companies, both illustrating the terms and relating the financial terms to a company’s business model and “financial footprint”.
The balance sheet, or statement of financial position, is an overview of what a company owns and owes at a point in time. Some areas of the balance sheet get a lot of attention in business discussions, especially when they relate strongly to the company’s cash flow performance. There are other areas on the balance sheet that are less explored territory. These should become common terms that every finance professional has a thorough understanding of! After taking the Balance Sheet Tour, terms like capital expenditures (CapEx), goodwill, intangibles, accruals, pre-paids and deferrals will make sense to you. Also covered are: prepaid expenses, accumulated depreciation, intangible assets, deferred tax assets, deferred tax liabilities, deferred revenue, retained earnings, treasury stock
Philip de Vroe, The Finance Storyteller, is your guide on this insightful tour of the balance sheet.
Learning Objectives
- Explore balance sheet terminology such as capital expenditures (CapEx), goodwill, intangibles, accruals, prepaid expenses and deferrals
- Identify Capital Expenditures (CapEx) and Operating Expenditures (OpEx)
- Discover how deferred tax assets and deferred tax liabilities work
- Discover how goodwill and intangible assets are created
- Recognize how treasury stock and retained earnings impact equity
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Prerequisites
No advanced preparation or prerequisites are required for this course.
What is the date that this class was published? Is goodwill still not amortized under GAAP? Is it amortized under IFRS?
We published the "Balance Sheet Tour" on the illumeo site in March 2018, and the goodwill video that is part of it was researched and written in March 2017.
Under US GAAP and IFRS, goodwill is never amortized. Instead, management is responsible for valuing goodwill every year and to determine if an impairment is required. If the fair market value goes below historical cost, an impairment must be recorded to bring it down to its fair market value. See FASB statement 142 (issued in June 2001).
I do remember the days when goodwill was amortized over a period of maximum 40 years, back when I joined a large multinational company in the 90s. When the rules changed from yearly amortization of goodwill to annual impairment test (US GAAP 2001, IFRS 2005), companies that had done or were planning to do acquisitions involving significant goodwill were (obviously) relieved as that was no longer a drag on earnings. Goodwill impairments (if they occur) are generally represented as one-off, recurring, non-cash write-offs. Still painful, but "framed" as an unusual item.
Please note that other intangible assets that occur during an acquisition (trade names, etc., see the intangible assets video) are subject to amortization over the useful life of the assets. However, if companies focus mostly on EBITDA, then that amortization charge is outside their main performance metric.
After completing a couple of other courses - I wish I could go back to improve my rating, here! I would like to continue taking courses presented by this instructor!
Thank you so much, Lorri! That is a wonderful compliment. I have 5 courses in total on illumeo that cover a wide variety of topics, so you have 4 to go! ;-)