Balance Sheet Thunder Inc. Goodwill, Pensions, and Stock Options
• Assets
– Cash = $100
• Liabilities
– None
• Bookvalue = $100
Lightening Inc.
• Assets
– Plant and equipment = $100
Thunder Buys Lightening for $100
• Assets
– Cash = 0 – Plant and equipment = $100 – Goodwill = $50 (purchase price - book)
• Liabilities
– Long term debt = $50
• Liabilities
– Long term debt = $50
• Bookvalue = 100-50 = 50
• New book value (Thunder) = 150-50 = 100
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Pension Liabilities
• Future cash flows owed to retired workers • Similar to debt • Should go on balance sheet • How do you estimate? • (Retirement health care trickier.)
Pension Liabilities
• NY Times article • FASB (Financial Accounting Standards Board)
– Rules for adding pension liabilities to balance sheets
• For Ford and GM, book value goes negative after adding this
Stock Options
• Payments to employees • Option to purchase stock at a fixed price • Technically, like a wage : labor compensation • Should be on income statement, but how do you value this?
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