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SESSION 3A: BALANCE SHEET COMPARISONS Accounting for Finance - - PowerPoint PPT Presentation
SESSION 3A: BALANCE SHEET COMPARISONS Accounting for Finance - - PowerPoint PPT Presentation
SESSION 3A: BALANCE SHEET COMPARISONS Accounting for Finance Balance Sheet: A Life Cycle Perspective 2 A Young Company: Pelotons Balance Sheet (2019) in its Prospectus 3 1 2 3 A Growth Company: Netflixs Balance Sheet (2019) 1 2
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A Young Company: Peloton’s Balance Sheet (2019) in its Prospectus
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A Growth Company: Netflix’s Balance Sheet (2019)
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A Mature Company: Coca Cola’s Balance Sheet (2019)
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Coca Cola’s Debt in 2019
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Coca Cola’s Accounting Intangibles: Small- bore?
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An Aging Company: Toyota’s Assets in 2020
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An Aging Company: Toyota’s Liabilities in 2020
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Sector and Industry Differences
¨ As with income statements, there are differences in
what shows up on balance sheets in different sectors, though the accounting standards governing all companies may be the same.
¨ In particular, the divergences play out on both sides
- f the balance sheet:
¤ On the asset side, it can show up in how much of the value
comes from tangible as opposed to intangible assets.
¤ For acquisitive companies, it can also show up as uniquely
accounting items like goodwill.
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A Commodity Company: Total’s Assets in 2020
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A Commodity Company: Total’s Liabilities in 2020
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A Financial Service Company: HSBC in 2019
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A Pharmaceutical Company: Dr. Reddy’s
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Bottom Line
¨ A balance sheet is the financial statement that most reflects the
history of a company, since constructed correctly it is the cumulated result of all of the company’s activities during its existence.
¨ That said, there is disagreement even among accountants as to
what the history should reveal, with old-time accounting arguing that it should reflect what the company has invested in its existing assets, not what they are worth today, and fair-value accounting arguing that it should reflect its current value.
¨ The end result is that balance sheets today are a mess, measuring
neither invested capital nor fair value. The most useful items on a balance sheet now are
¤ Cash & marketable securities, since it is not subject to nuance ¤ Debt, since it measures closely what is owed (at least on interest bearing