Reporting Other Current and Noncurrent Assets

  • Demonstrate proper financial statement presentation and disclosures related to other current and noncurrent assets

 

By now you are familiar with the presentation of assets on the balance sheet, and you’ve seen several examples. Let’s end our exploration of the asset section by revisiting Albemarle Corporation and Subsidiaries.

Albemarle Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands)
Description December 31, 2019 December 31, 2018
Subcategory, Assets
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
     Inventories 768,984 700,540
     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 assets 213,061 80,135
Goodwill 1,578,785 1,567,169
Other intangibles, net of amortization 354,622 386,143
Total Assets Single line
$     9,860,863
Double line
Single line
$     7,581,674
Double line

 

Note that this is a consolidated balance sheet, meaning that Albemarle has purchased controlling interests in companies in the past, and as we saw earlier in this module, the company recently added a 60% interest in the Wodgine project, and as you read through these disclosures from the 2019 annual report, you should recognize most of the terms and concepts.

From the AICPA November 2017 Financial Reporting Framework for Small- and Medium-Sized Entities Presentation and Disclosure Checklist:

Equity, Debt, and Other Investments [chapter 11] Presentation

  1. Has the entity presented the following separately on the statement of financial position or in the notes to the financial statements:
    a. Investments in companies subject to significant influence accounted for using the equity method?
    b. Other investments accounted for at cost?
    c. Equity and debt investments held-for-sale? [11.20]
  2. Has the entity presented separately in the statement of operations or in the notes to the financial statements:
    a. Income from investments in companies subject to significant influence accounted for using the equity method?
    b. Income from other investments accounted for at cost?
    c. Equity and debt investments held-for-sale? [11.21]
  3. Has the entity grouped investments reported on the statement of financial position and investment income reported in the statement of operations in the same way? [11.22]
  4. The FRF for SMEs accounting framework requires that equity method investees normally should follow the same basis of accounting (FRF for SMEs accounting framework) as the investor. Accordingly, have the financial statements of equity- method investees been adjusted, if necessary, to conform with standards in the framework, unless it is impracticable to do so? [11.05]
  5. Has the entity’s proportionate share of any discontinued operations, changes in ac- counting policy, corrections of errors relating to prior period financial statements, or capital transactions of an equity-method investee presented and disclosed separately, according to its nature, in the entity’s financial statements? [11.13]

Disclosure

  1. Has the entity disclosed the basis used to account for investments? [11.23]
  2. When the fiscal periods of an investor and an investee are not the same and the equi- ty method is used to account for the investee, has the entity disclosed events relating to, or transactions of, the investee that have occurred during the intervening period and significantly affect the financial position or results of operations of the investor? (This disclosure is not necessary if these events or transactions are recorded in the financial statements.) [11.24]
  3. Other than for investments held for sale, has the entity disclosed the name and description of each significant investment, including the carrying amounts, and propor- tion of ownership interests held in each investment? [11.25]

In the following footnote excerpts from Albemarle Corporation’s 2019 annual report, see if you can find the required disclosures with regard to other current assets, particularly investments.

Albemarle Corporation and Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—Summary of Significant Accounting Policies:

Basis of Consolidation

The consolidated financial statements include the accounts and operations of Albemarle Corporation and our wholly owned, majority owned and controlled subsidiaries. Unless the context otherwise indicates, the terms “Albemarle,” “we,” “us,” “our” or “the Company” mean Albemarle Corporation and its consolidated subsidiaries. For entities that we control and are the primary beneficiary, but own less than 100%, we record the minority ownership as noncontrolling interest, except as noted below. We apply the equity method of accounting for investments in which we have an ownership interest from 20% to 50% or where we exercise significant influence over the related investee’s operations. All significant intercompany accounts and transactions are eliminated in consolidation.

As described further in Note 2, “Acquisitions,” we completed the acquisition of a 60% ownership interest in Mineral Resources Limited’s (“MRL”) Wodgina hard rock lithium mine project (“Wodgina Project”) on October 31, 2019 creating a joint venture named MARBL Lithium Joint Venture (“MARBL”). The consolidated financial statements contained herein include our proportionate share of the results of operations of the Wodgina Project, commencing on November 1, 2019. We are entitled to a pro rata portion of 60% of all minerals (other than iron ore and tantalum) recovered from the tenements and produced by the joint venture. The joint venture is unincorporated with each investor holding an undivided interest in each asset and proportionately liable for each liability; therefore our proportionate share of assets, liabilities, revenue and expenses are included in the appropriate classifications in the consolidated financial statements.

In addition, you’ll find, in reading the financials, a disclosures with regard to the new lease reporting rules:

Leases

Effective January 1, 2019, we adopted Accounting Standards Update (“ASU”) No. 2016-02, “Leases” and all related amendments using the modified retrospective method. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of $139.1 million as of January 1, 2019. Comparative periods have not been restated and are reported in accordance with our historical accounting. The standard did not have an impact on our consolidated Net income or cash flows. In addition, as a result of the adoption of this new standard, we have implemented internal controls and system changes to prepare the financial information.

We determine if an arrangement is a lease at inception. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term. We amortize the operating lease ROU assets on a straight-line basis over the period of the lease and the finance lease ROU assets on a straight-line basis over the shorter of their estimated useful lives or the lease terms. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and we recognize lease expense for these leases on a straight-line basis over the lease term.

On page 63, the company describes how it accounts for various investments:

Investments

Investments are accounted for using the equity method of accounting if the investment gives us the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if we have an ownership interest in the voting stock of the investee between 20% and 50%, although other factors, such as representation on the investee’s board of directors and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, we record our investments in equity-method investees in the consolidated balance sheets as Investments and our share of investees’ earnings or losses together with other-than-temporary impairments in value as Equity in net income of unconsolidated investments in the consolidated statements of income. We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period.

Certain mutual fund investments are accounted for as trading equities and are marked-to-market on a periodic basis through the consolidated statements of income. Investments in joint ventures and nonmarketable securities of immaterial entities are estimated based upon the overall performance of the entity where financial results are not available on a timely basis.

Let’s now review next how these are all put together.