The balance sheet
By the end of this lecture you will be able to
- Explain why assets always equal liabilities plus equity, and say which two lines any transaction moves
- Read every major line of a balance sheet and say where it comes from
- Compare depreciation methods and the US GAAP and IFRS impairment tests
- Account for leases under IFRS 16 and ASC 842, and for closure and rehabilitation provisions
- Define working capital, compute the cash conversion cycle and explain why an increase consumes cash
- Roll equity forward through net income, dividends, buybacks and stock-based compensation
The income statement is a film of the year. The balance sheet is a photograph taken on the last day. It tells you what the company owns, what it owes and what is left for shareholders, and every line on it has a story about how it got there.
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