accounting reports as currently prepared is to present fairly the
results of operations and the financial condition of the firm. Both
U.S. GAAP and IFRS require reporting that results in a more
conservative measurement of earnings.
4.3 One justification relates to the requirement that an asset or
liability be measured with suficient reliability. When there is an
exchange between a firm and some other entity, there is market
evidence of the economic efects of the transaction. The
independent auditor verifies these economic efects by referring to
contracts, canceled checks, and other documents underlying the
transaction. If accounting recognized events without such a
market exchange (for example, the increase in market value of a
firm’s assets), increased subjectivity would enter into the
preparation of the financial statements.
4.4 The underlying principle is that acquisition cost includes all costs
required to prepare an asset for its intended use. Assets provide
future services. Costs that a firm must incur to obtain those
expected services add value to the asset and are included in the
acquisition cost measurement of the asset
4.5 The justification relates to the uncertainty as to the ultimate
economic efects of the contracts. One party or the other may pull
out of the contract. The accountant may not know the benefits and
costs of the contract at the time of signing. Until one party or the
other begins to perform under the contract, accounting usually
gives no recognition. Accountants often disclose significant
contracts of this nature in the notes to the financial statements.
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Cash and Short-Term Investments ………………………….$
579,643
Accounts R
ecei
vab
l
e ……………………………………………….
285,795
Inventories
…………………………………………………………….202,70
4
Other Current A
ss
et
s
……………………………………………..
13
2
, 78
2
Total Current Assets …………………………………………. $
1
, 20
0
, 92
4
Noncurrent Assets:
Property, Plant, and Equipment,
N
et
……………………….
$
2,151,212
G
ood
will
……………………………………………………….
……….
Other Noncurrent Assets
………………………………………..
45
1
, 75
Total Noncurrent A
ss
et
s
……………………………………..
$
2
, 79
5
, 00
4
Total Assets
$
Liabilities and Shareholders’ Equity
Current
Liabilities
…………………………………………………….
$
28
6
, 81
Noncurrent Liabilities:
Long-Term Debt
…………………………………………………….
$
1,155,050
Other Long-Term
Liabilities……………………………………
35
0
, 76
Total Noncurrent Liabilities
Shareholders’ Equity:
Common Stock (No
Par)………………………………………….
$ 295,50
1
Preferred
S
t
ock
………………………………………………………
Retained
Earnings………………………………………………….
1
, 29
3
, 30
1
Total Shareholders’
Equity
………………………………….
$
2
, 20
3
, 29
8
Total Liabilities and Shareholders’
Equity……………
$
3
, 99
5
, 92
8
4-5 Solutions
4.12 continued.
b. IFRS Balance Sheet. Note that IFRS permits firms discretion
as to how they list assets and liabilities on their balance sheet.
One acceptable format is identical to that shown in Part a., the
other is to list assets and liabilities in increasing order of
liquidity, as shown here.
ARACE
L
Ba
l
a
nce
S
hee
t
For Fiscal Year
6
(amounts in thousands of
U
S
$)
A
sse
t
s
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Noncurrent Assets:
Other Noncurrent Assets ……………………………………….. $
451,757
G
ood
will
………………………………………………………………..192,03
5
Property, Plant, and Equipment,
N
et ……………………….
2
, 15
1
, 21
2
Total Noncurrent A
ss
et
s
…………………………………….. $
2
, 79
5
, 00
4
Current Assets:
Other Current A
ss
et
s
…………………………………………….. $
132,782
Inventories
…………………………………………………………….202,70
4
Accounts R
ecei
vab
l
e ……………………………………………….
285,795
Cash and Short-Term Investments ………………………….
57
9
, 64
3
Total Current Assets …………………………………………. $
1
, 20
0
, 92
4
Total Assets ……………………………………………………… $
3
, 99
5
, 92
8
Liabilities and Shareholders’ Equity
Shareholders’ Equity:
Common Stock (No
Par)………………………………………….
$ 295,
50
1
Preferred
S
t
ock
………………………………………………………
Retained
Earnings………………………………………………….
1
, 29
3
, 30
1
Total Shareholders’
Equity
$
Noncurrent Liabilities:
Other Long-Term
Liabilities……………………………………
$ 350,76
1
Long-Term Debt
…………………………………………………….
1
, 15
5
, 05
0
Total Noncurrent Liabilities
……………………………….
$
1
, 50
5
, 81
1
Current
Liabilities
…………………………………………………….
$
28
6
, 81
Total Liabilities and Shareholders’
Equity……………
$
3
, 99
5
, 92
8
Solutions4-6
4.13 (Delicious Foods Group; balance sheet formats.)
DELICIOUS FOODS G
R
OU
P
Balance
S
hee
t
For Fiscal Year
7
(amounts in millions of
eur
o
s)
Current Assets:
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Assets
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Cash and Short-Term Investments ………………………….$
579,643
Accounts R
ecei
vab
l
e ……………………………………………….
285,795
Inventories
…………………………………………………………….202,70
4
Other Current A
ss
et
s
……………………………………………..
13
2
, 78
2
Total Current Assets …………………………………………. $
1
, 20
0
, 92
4
Noncurrent Assets:
Property, Plant, and Equipment,
N
et
……………………….
$
2,151,212
G
ood
will
……………………………………………………….
……….
Other Noncurrent Assets
………………………………………..
45
1
, 75
Total Noncurrent A
ss
et
s
……………………………………..
$
2
, 79
5
, 00
4
Total Assets
$
Liabilities and Shareholders’ Equity
Current
Liabilities
…………………………………………………….
$
28
6
, 81
Noncurrent Liabilities:
Long-Term Debt
…………………………………………………….
$
1,155,050
Other Long-Term
Liabilities……………………………………
35
0
, 76
Total Noncurrent Liabilities
Shareholders’ Equity:
Common Stock (No
Par)………………………………………….
$ 295,50
1
Preferred
S
t
ock
………………………………………………………
Retained
Earnings………………………………………………….
1
, 29
3
, 30
1
Total Shareholders’
Equity
………………………………….
$
2
, 20
3
, 29
8
Total Liabilities and Shareholders’
Equity……………
$
3
, 99
5
, 92
8
4-5 Solutions
4.12 continued.
b. IFRS Balance Sheet. Note that IFRS permits firms discretion
as to how they list assets and liabilities on their balance sheet.
One acceptable format is identical to that shown in Part a., the
other is to list assets and liabilities in increasing order of
liquidity, as shown here.
ARACE
L
Ba
l
a
nce
S
hee
t
For Fiscal Year
6
(amounts in thousands of
U
S
$)
A
sse
t
s
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Noncurrent Assets:
Other Noncurrent Assets ……………………………………….. $
451,757
G
ood
will
………………………………………………………………..192,03
5
Property, Plant, and Equipment,
N
et ……………………….
2
, 15
1
, 21
2
Total Noncurrent A
ss
et
s
…………………………………….. $
2
, 79
5
, 00
4
Current Assets:
Other Current A
ss
et
s
…………………………………………….. $
132,782
Inventories
…………………………………………………………….202,70
4
Accounts R
ecei
vab
l
e ……………………………………………….
285,795
Cash and Short-Term Investments ………………………….
57
9
, 64
3
Total Current Assets …………………………………………. $
1
, 20
0
, 92
4
Total Assets ……………………………………………………… $
3
, 99
5
, 92
8
Liabilities and Shareholders’ Equity
Shareholders’ Equity:
Common Stock (No
Par)………………………………………….
$ 295,
50
1
Preferred
S
t
ock
………………………………………………………
Retained
Earnings………………………………………………….
1
, 29
3
, 30
1
Total Shareholders’
Equity
$
Noncurrent Liabilities:
Other Long-Term
Liabilities……………………………………
$ 350,76
1
Long-Term Debt
…………………………………………………….
1
, 15
5
, 05
0
Total Noncurrent Liabilities
……………………………….
$
1
, 50
5
, 81
1
Current
Liabilities
…………………………………………………….
$
28
6
, 81
Total Liabilities and Shareholders’
Equity……………
$
3
, 99
5
, 92
8
Solutions4-6
4.13 (Delicious Foods Group; balance sheet formats.)
DELICIOUS FOODS G
R
OU
P
Balance
S
hee
t
For Fiscal Year
7
(amounts in millions of
eur
o
s)
Current Assets:
© 2013 Cengage Learning. All
r
ights reserved. No
d
is
t
r
ibution allowed without express
a
u
t
hor
ization.
Assets