8
Financial Statement AnalysisModule 8 of 9

Topics in Long-Term Liabilities and Equity

4

Concepts

2

Formulas

1

Decisions

3

Quiz Questions

Key Concepts

4 concepts covered in this module.

Finance Lease (Lessee)

Recognize right-of-use asset and lease liability on BS. Depreciate asset, record interest on liability. Front-loaded expense.

Operating Lease (US GAAP)

US GAAP: right-of-use asset and liability on BS, but single straight-line lease expense. IFRS: treats nearly all leases as finance.

Defined Benefit Pension

Employer promises specific retirement benefit. Pension obligation and plan assets on BS. Net funded status = Plan assets - PBO.

Share-Based Compensation

Stock options: fair value at grant date expensed over vesting period. Dilutes EPS. Stock grants vest based on time/performance.

Formulas

2 essential formulas for this module.

Net Pension Liability

Net Pension = PBO - Fair Value of Plan Assets

Where: Positive = underfunded, Negative = overfunded

Pension Expense

Pension Exp = Service Cost + Interest Cost - Expected Return on Plan Assets + Amortization of prior items

Where: Per income statement

Decision Frameworks

1 decision frameworks to guide your analysis.

Finance vs Operating lease impact?

  • Finance: higher assets/liabilities, higher early expense (front-loaded), EBITDA appears higher
  • Operating (GAAP): same BS treatment but straight-line expense, lower EBITDA

Mind Map

Visual overview of how concepts connect in this module.

LT Liabilities & Equity
Leases
Finance: asset + liability on BS
Operating (GAAP): same BS, SL expense
IFRS 16: all finance for lessee
Depreciation + interest vs rent
Pensions
Defined benefit: employer risk
PBO vs plan assets
Net funded status
Assumptions matter
Share-Based Comp
Stock options
Restricted stock
Fair value at grant
Expense over vesting

Study Topics in Long-Term Liabilities and Equity

This module has 7 flashcards and 3 quiz questions to test your knowledge.

Open the study dashboard to access interactive flashcards, timed quizzes, and track your progress.

Open Study Dashboard

No signup required. Create an account anytime to save progress.

Previous Module

Analysis of Long-Term Assets

Next Module

Analysis of Income Taxes