Current assets we’ve covered so far include:
- Cash and cash equivalents
- Accounts Receivable
Noncurrent assets we’ve covered so far include:
- Property, plant and equipment
And we now need to cover some other common current and noncurrent assets, such as:
- Natural Resources
- Intangibles such as goodwill and patents
- Long-term investments in other companies (and related short-term investments)
- Notes receivable
- Operating lease right-of-use assets
Let’s take a look at the asset section of the balance sheet for Albemarle Corporation (ALB:NYSE) for the fiscal year ended December 31, 2019 from page 57 of the SEC form 10-K:
|Description||December 31, 2019||December 31, 2018|
|Subcategory, Current Assets:|
|Cash and cash equivalents||$ 613,110||$ 555,320|
|Total accounts receivable, less allowance for doubtful amounts (2019–$3,1711; 2018–$4,460)||612,651||605,712|
|Other accounts receivable||67,551||52,059|
|Other current assets||162,813||84,790|
|Total current assets||Single line2,225,109||Single line1,998,421|
|Property, plant and equipment, at cost||Single line6,817,843||Single line4,799,063|
|Less accumulated depreciation and amortization||1,908,370||1,777,979|
|Net property, plant and equipment||Single line4,909,473||Single line3,021,084|
|Investments||Single line579,813||Single line528,722|
|Other intangibles, net of amortization||354,622||386,143|
|Total Assets||Single line
Individual items that are too small to report separately are often lumped together in one line on the balance sheet, as you see with both other current assets and other noncurrent assets.
However, Ablemarle discloses the composition of other current assets in a footnote on page 71 of the Form 10-K:
|NOTE 8 – Other Current Assets:|
|Other current assets consist of the following at December 31, 2019 and 2018 (in thousands):|
|Income tax recievables||$ 72,246||$ 40,116|
Income tax receivables are refunds from overpaying estimated taxes or from net operating losses carried back to offset prior years’ income, and prepaid expenses we’ve 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.
The company also itemizes other assets listed in the noncurrent section of the balance sheet on page 74:
|NOTE 11 – Other Assets:|
|Other assets consist of the following at December 31, 2019 and 2018 (in thousands):|
|Deferred income taxes(a)||$ 15,275||$ 17,029|
|Assets related to unrecognized tax benefits(a)||26,127||12,984|
The letter references give more details for each item:
- See Note 1, “Summary of Significant Accounting Policies” and Note 21, “Income Taxes.”
- See Note 18, “Leases.”
- 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.
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.
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).
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 ½ 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.
Also, note that many companies don’t give this much detail about those lines identified as “other” because the amounts are usually not material.
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:
- Customer lists and relationships
- Trade Names and Trademarks
- Patents and Technology
- And a statement on how these intangible assets are amortized.
In this module you’ll 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.