{"id":3691,"date":"2020-10-21T22:38:15","date_gmt":"2020-10-21T22:38:15","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-financialaccounting\/?post_type=chapter&#038;p=3691"},"modified":"2020-12-03T22:09:53","modified_gmt":"2020-12-03T22:09:53","slug":"why-it-matters-other-assets","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/chapter\/why-it-matters-other-assets\/","title":{"raw":"Why It Matters: Other Assets","rendered":"Why It Matters: Other Assets"},"content":{"raw":"Current assets we\u2019ve covered so far include:\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">Cash and cash equivalents<\/li>\r\n \t<li style=\"font-weight: 400;\">Accounts Receivable<\/li>\r\n \t<li style=\"font-weight: 400;\">Inventories<\/li>\r\n<\/ul>\r\nNoncurrent assets we\u2019ve covered so far include:\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">Property, plant and equipment<\/li>\r\n<\/ul>\r\nAnd we now need to cover some other common current and noncurrent assets, such as:\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">Natural Resources<\/li>\r\n \t<li style=\"font-weight: 400;\">Intangibles such as goodwill and patents<\/li>\r\n \t<li style=\"font-weight: 400;\">Long-term investments in other companies (and related short-term investments)<\/li>\r\n \t<li style=\"font-weight: 400;\">Notes receivable<\/li>\r\n \t<li style=\"font-weight: 400;\">Operating lease right-of-use assets<\/li>\r\n<\/ul>\r\nLet\u2019s take a look at the asset section of the <a href=\"http:\/\/investors.albemarle.com\/static-files\/1e6f8f35-196c-4ff9-98af-a60b4ba7bc0c\" target=\"_blank\" rel=\"noopener\">balance sheet for Albemarle Corporation (ALB:NYSE)<\/a> for the fiscal year ended December 31, 2019 from page 57 of the SEC form 10-K:\r\n\r\n[caption id=\"attachment_6171\" align=\"aligncenter\" width=\"1024\"]<img class=\"wp-image-6171 size-large\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/17215939\/Screen-Shot-2020-11-17-at-1.59.28-PM-1024x522.png\" alt=\"See caption for link to long description.\" width=\"1024\" height=\"522\" \/> See the <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Financial+Accounting\/Long+Descriptions\/Albemarle+CBS.txt\" target=\"_blank\" rel=\"noopener\">balance sheet long description<\/a> here.[\/caption]\r\n\r\nIndividual items that are too small to report separately are often lumped together in one line on the balance sheet, as you see with both other current assets and other noncurrent assets.\r\n\r\nHowever, Ablemarle discloses the composition of other current assets in a footnote on page 71 of the Form 10-K:\r\n\r\n[caption id=\"attachment_6414\" align=\"aligncenter\" width=\"1024\"]<img class=\"wp-image-6414 size-large\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/19001002\/Screen-Shot-2020-11-18-at-4.09.42-PM-1024x364.png\" alt=\"See caption for link to long description.\" width=\"1024\" height=\"364\" \/> See the <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Financial+Accounting\/Long+Descriptions\/Albemarie+Note+8.txt\" target=\"_blank\" rel=\"noopener\">note long description<\/a> here.[\/caption]\r\n\r\nIncome tax receivables are refunds from overpaying estimated taxes or from net operating losses carried back to offset prior years\u2019 income, and prepaid expenses we\u2019ve seen before; they include prepaid rent, insurance, and other expenses that we have accrued. The other category probably includes supplies and other sundry items too small to report separately.\r\n\r\nThe company also itemizes other assets listed in the noncurrent section of the balance sheet on page 74:\r\n\r\n[caption id=\"attachment_6415\" align=\"aligncenter\" width=\"1024\"]<img class=\"wp-image-6415 size-large\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/19001056\/Screen-Shot-2020-11-18-at-4.10.46-PM-1024x242.png\" alt=\"See caption for link to long description.\" width=\"1024\" height=\"242\" \/> See the <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Financial+Accounting\/Long+Descriptions\/Albemarie+Note+11.txt\" target=\"_blank\" rel=\"noopener\">note long description<\/a> here.[\/caption]\r\n\r\nThe letter references give more details for each item:\r\n<ol type=\"a\">\r\n \t<li>See Note 1, \u201cSummary of Significant Accounting Policies\u201d and Note 21, \u201cIncome Taxes.\u201d<\/li>\r\n \t<li>See Note 18, \u201cLeases.\u201d<\/li>\r\n \t<li>As of December 31, 2019 and 2018, a $28.7 million reserve was recorded against a note receivable on one of our European entities no longer deemed probable of collection.<\/li>\r\n<\/ol>\r\nIn short, letter (a) refers to deferred income taxes that arise when the tax computed on book income is different from the actual tax expense. If the tax expense based on book income is less than the actual taxes due, the difference creates a deferred tax asset. As you saw in the module on property, plant, and equipment, one of the major items that creates book\/tax difference is depreciation.\r\n\r\nLetter (b) refers to the benefit of being able to use leased assets. For instance, if a company leases a vehicle for three years, it has both a liability (the obligation to pay the lessor) and an asset (the right to use the car).\r\n\r\nLetter (c) likely refers to an underlying note receivable included in the $38 million line item. Notice that in the bigger picture of almost $10 billion in assets, even $50 million dollars is only \u00bd of a percent. In a household budget of a family with a $350,000 home and $150,000 in retirement savings, that would be the equivalent of a $2,500 asset, which might be roughly equal to the living room furniture--in other words, probably not worth reporting on a loan application.\r\n\r\nAlso, note that many companies don\u2019t give this much detail about those lines identified as \u201cother\u201d because the amounts are usually not material.\r\n\r\nThe company also includes a note on goodwill (reported by business segment) and a note on other intangibles on page 75 that lists the following intangible assets:\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">Customer lists and relationships<\/li>\r\n \t<li style=\"font-weight: 400;\">Trade Names and Trademarks<\/li>\r\n \t<li style=\"font-weight: 400;\">Patents and Technology<\/li>\r\n \t<li style=\"font-weight: 400;\">Other<\/li>\r\n \t<li style=\"font-weight: 400;\">And a statement on how these intangible assets are amortized.<\/li>\r\n<\/ul>\r\nIn this module you\u2019ll learn how companies account for natural resources, such as mineral deposits, timber, and other depletable assets, as well as intangible assets such as goodwill and patents, and finally any other common assets, such as rights under leases, notes receivable, and investments.","rendered":"<p>Current assets we\u2019ve covered so far include:<\/p>\n<ul>\n<li style=\"font-weight: 400;\">Cash and cash equivalents<\/li>\n<li style=\"font-weight: 400;\">Accounts Receivable<\/li>\n<li style=\"font-weight: 400;\">Inventories<\/li>\n<\/ul>\n<p>Noncurrent assets we\u2019ve covered so far include:<\/p>\n<ul>\n<li style=\"font-weight: 400;\">Property, plant and equipment<\/li>\n<\/ul>\n<p>And we now need to cover some other common current and noncurrent assets, such as:<\/p>\n<ul>\n<li style=\"font-weight: 400;\">Natural Resources<\/li>\n<li style=\"font-weight: 400;\">Intangibles such as goodwill and patents<\/li>\n<li style=\"font-weight: 400;\">Long-term investments in other companies (and related short-term investments)<\/li>\n<li style=\"font-weight: 400;\">Notes receivable<\/li>\n<li style=\"font-weight: 400;\">Operating lease right-of-use assets<\/li>\n<\/ul>\n<p>Let\u2019s take a look at the asset section of the <a href=\"http:\/\/investors.albemarle.com\/static-files\/1e6f8f35-196c-4ff9-98af-a60b4ba7bc0c\" target=\"_blank\" rel=\"noopener\">balance sheet for Albemarle Corporation (ALB:NYSE)<\/a> for the fiscal year ended December 31, 2019 from page 57 of the SEC form 10-K:<\/p>\n<div id=\"attachment_6171\" style=\"width: 1034px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-6171\" class=\"wp-image-6171 size-large\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/17215939\/Screen-Shot-2020-11-17-at-1.59.28-PM-1024x522.png\" alt=\"See caption for link to long description.\" width=\"1024\" height=\"522\" \/><\/p>\n<p id=\"caption-attachment-6171\" class=\"wp-caption-text\">See the <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Financial+Accounting\/Long+Descriptions\/Albemarle+CBS.txt\" target=\"_blank\" rel=\"noopener\">balance sheet long description<\/a> here.<\/p>\n<\/div>\n<p>Individual items that are too small to report separately are often lumped together in one line on the balance sheet, as you see with both other current assets and other noncurrent assets.<\/p>\n<p>However, Ablemarle discloses the composition of other current assets in a footnote on page 71 of the Form 10-K:<\/p>\n<div id=\"attachment_6414\" style=\"width: 1034px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-6414\" class=\"wp-image-6414 size-large\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/19001002\/Screen-Shot-2020-11-18-at-4.09.42-PM-1024x364.png\" alt=\"See caption for link to long description.\" width=\"1024\" height=\"364\" \/><\/p>\n<p id=\"caption-attachment-6414\" class=\"wp-caption-text\">See the <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Financial+Accounting\/Long+Descriptions\/Albemarie+Note+8.txt\" target=\"_blank\" rel=\"noopener\">note long description<\/a> here.<\/p>\n<\/div>\n<p>Income tax receivables are refunds from overpaying estimated taxes or from net operating losses carried back to offset prior years\u2019 income, and prepaid expenses we\u2019ve seen before; they include prepaid rent, insurance, and other expenses that we have accrued. The other category probably includes supplies and other sundry items too small to report separately.<\/p>\n<p>The company also itemizes other assets listed in the noncurrent section of the balance sheet on page 74:<\/p>\n<div id=\"attachment_6415\" style=\"width: 1034px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-6415\" class=\"wp-image-6415 size-large\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/19001056\/Screen-Shot-2020-11-18-at-4.10.46-PM-1024x242.png\" alt=\"See caption for link to long description.\" width=\"1024\" height=\"242\" \/><\/p>\n<p id=\"caption-attachment-6415\" class=\"wp-caption-text\">See the <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Financial+Accounting\/Long+Descriptions\/Albemarie+Note+11.txt\" target=\"_blank\" rel=\"noopener\">note long description<\/a> here.<\/p>\n<\/div>\n<p>The letter references give more details for each item:<\/p>\n<ol type=\"a\">\n<li>See Note 1, \u201cSummary of Significant Accounting Policies\u201d and Note 21, \u201cIncome Taxes.\u201d<\/li>\n<li>See Note 18, \u201cLeases.\u201d<\/li>\n<li>As of December 31, 2019 and 2018, a $28.7 million reserve was recorded against a note receivable on one of our European entities no longer deemed probable of collection.<\/li>\n<\/ol>\n<p>In short, letter (a) refers to deferred income taxes that arise when the tax computed on book income is different from the actual tax expense. If the tax expense based on book income is less than the actual taxes due, the difference creates a deferred tax asset. As you saw in the module on property, plant, and equipment, one of the major items that creates book\/tax difference is depreciation.<\/p>\n<p>Letter (b) refers to the benefit of being able to use leased assets. For instance, if a company leases a vehicle for three years, it has both a liability (the obligation to pay the lessor) and an asset (the right to use the car).<\/p>\n<p>Letter (c) likely refers to an underlying note receivable included in the $38 million line item. Notice that in the bigger picture of almost $10 billion in assets, even $50 million dollars is only \u00bd of a percent. In a household budget of a family with a $350,000 home and $150,000 in retirement savings, that would be the equivalent of a $2,500 asset, which might be roughly equal to the living room furniture&#8211;in other words, probably not worth reporting on a loan application.<\/p>\n<p>Also, note that many companies don\u2019t give this much detail about those lines identified as \u201cother\u201d because the amounts are usually not material.<\/p>\n<p>The company also includes a note on goodwill (reported by business segment) and a note on other intangibles on page 75 that lists the following intangible assets:<\/p>\n<ul>\n<li style=\"font-weight: 400;\">Customer lists and relationships<\/li>\n<li style=\"font-weight: 400;\">Trade Names and Trademarks<\/li>\n<li style=\"font-weight: 400;\">Patents and Technology<\/li>\n<li style=\"font-weight: 400;\">Other<\/li>\n<li style=\"font-weight: 400;\">And a statement on how these intangible assets are amortized.<\/li>\n<\/ul>\n<p>In this module you\u2019ll learn how companies account for natural resources, such as mineral deposits, timber, and other depletable assets, as well as intangible assets such as goodwill and patents, and finally any other common assets, such as rights under leases, notes receivable, and investments.<\/p>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-3691\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Why It Matters: Other Assets. <strong>Authored by<\/strong>: Joseph Cooke. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":90270,"menu_order":1,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Why It Matters: Other Assets\",\"author\":\"Joseph Cooke\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-3691","chapter","type-chapter","status-publish","hentry"],"part":792,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/3691","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/users\/90270"}],"version-history":[{"count":6,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/3691\/revisions"}],"predecessor-version":[{"id":6675,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/3691\/revisions\/6675"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/parts\/792"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/3691\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/media?parent=3691"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapter-type?post=3691"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/contributor?post=3691"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/license?post=3691"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}