Title LM03 Analyzing Balance Sheets IFT Notes.pdf ✅

LM03 Analyzing Balance Sheets 2025 Level I Notes © IFT. All rights reserved 3 Current assets are those assets that are expected to be used up or converted to cash within one year or in one operating business cycle, whichever is greater. When the entity’s normal operating cycle cannot be clearly identifiable, its duration is assumed to be one year. All assets that are not classified as current are considered to be non-current or long-term assets. Current liabilities are those liabilities which are expected to be settled within one year or in one operating business cycle, whichever is greater. All liabilities that are not classified as current are considered to be non-current or long-term liabilities This learning module covers the financial reporting and disclosure requirements related to:  Intangible assets  Goodwill  Financial instruments  Non-current liabilities Finally, we will also learn how to analyze a balance sheet using financial ratios and common- size analysis. 2. Intangible Assets Intangible assets refer to identifiable non-monetary assets that lack physical substance. Examples include patents, licenses, and trademarks. IFRS allows companies to report intangible assets using either a cost model or a revaluation model. US GAAP allows only the cost model. For each intangible asset, a company determines whether its useful life is finite or indefinite.  An intangible asset with a finite useful life is amortized on a systematic basis over the best estimate of its useful life. The amortization and useful life estimate is reviewed at least annually.  The principles of impairment for an intangible asset with a finite useful life are the same as for property, plant and equipment (PP&E).  An intangible asset with an indefinite useful life is not amortized. Instead, it is tested for impairment at least annually. Intangible Assets Developed Internally Costs to internally develop intangible assets are generally expensed when incurred, although there are exceptions. For internally developed intangible assets, there are two phases: the research phase and the development phase. Research phase refers to the period during which commercial feasibility of an intangible