1. Home
  2. /
  3. Support
  4. /
  5. Support Portal (Equity Research)
  6. /
  7. Balance sheet

Balance sheet

Calculation Paths between Income Statement

How the Balance sheet is made even?

When you estimate Balance sheet for current and future years, it is very usual that the bottom lines do not equal. You do not, however need to correct the imbalance yourself; the model makes it for you.

Let us see how the correction is made in both situations, i.e when assets are bigger or when liabilities are bigger.

1. Assets are estimated to be bigger

There are three parameters that you have to input:
1.    Minimum level of interest bearing long-term liabilities
2.    Minimum level of interest bearing current liabilities
3.    Share of debt allocated to long-term (interest bearing) liabilities

You may also leave the first two parameters to be zero. In this case the company do not necessary have any interest bearing debt at all. If you leave the third parameter to zero, all the generated debt are allocated to interest bearing current liabilities.
At first, the model calculates the difference of assets and liabilities. In this phase your minimum level requirements have already been taken into account. Then the model simply allocates the balance sheet differences to long-term and current liabilities according to what you have determined the share to be.

Here is an example what happens when assets are estimated to be bigger. You do not actually see this happening, it is just the logic behind the model.

2. Liabilities are estimated to be bigger

When liabilities are bigger than assets, the process is simpler. The balance sheet difference is totally allocated to Generated interest bearing financial assets. They are an item in Total financial assets.

Here is an example what happens when assets are estimated to be bigger. You do not actually see this happening, it is just the logic behind the model.

3. What happens when the situation changes?

Let’s say that first the assets are estimated to be bigger and the model has allocated the balance sheet differences to long-term and current liabilities like in example one. Then the profitability decreases rapidly and the estimates will be adjusted downwards. What happens in this situation:

The model will first reverse the adjustment it has made before, so basically opposite of the example number one will happen. While the cash generated will decrease, also the generated debt will decrease. If the model still cannot find balance with these operations, it will continue to add Generated interest bearing financial assets. The model will continue this until the balance sheet is again even.

In the opposite situation the liabilities are first estimated to be bigger, but then assets grow bigger for some reason. Again the model will first reverse the adjustments made before: It will decrease the debt to the minimum level (set by the analyst) and only after will start generating cash.

Parameter allocation – Balance sheet liabilities

Usage instructions and tips

  1. If you have any doubts about any item, you can always ask from us. Very often a parameter with same name should be allocated to different item depending on company and situation. I.e., even though there are many common rules, there are many situations that have to be solved case-by-case.
  2. Sometimes it is difficult to say only based on balance sheet information how to handle an item. In these cases Notes to financial statements may tell you the answer.
  3. Size matters, especially relative size. It is not very relevant where to put 10 millions in the balance sheet if it totals to 10 billions. So the bigger the item, the more it has relevance and more you should consider it.

Parameters

Item in shareholders’ equity and liabilities Most probable target in Excel model Note
Accounts and notes payable Non-interest bearing current liabilities
Accounts payable Non-interest bearing current liabilities
Accrual liabilities Non-interest bearing current liabilities
Accrued expenses Non-interest bearing current liabilities
Accrued liabilities Non-interest bearing current liabilities
Accrued taxes payable Non-interest bearing current liabilities Do not confuse this with deferred tax liabilities.
Accumulated deficit Retained earnings
Accumulated other comprehensive income Retained earnings
Additional paid in capital Other equity
Advances received Non-interest bearing current liabilities (Advances received) In Excel there is an own row for advances received outside of balance sheet so that we can calculate equity ratio. However, in balance sheet you should include this in Non-interest bearing current liabilities.
Borrowings Long-term / Short-term debt
Capital lease obligations Other long-term (current) liabilities
Capital reserves Other equity
Capital stock Share capital
Common Stock Share capital
Cumulative translation adjustment Other equity
Currency translation adjustments Other equity
Current liabilities Either this is a sum item that is not imputted to Excel or you have to allocate it to different current liabilities.
Current portion of long-term debt Short-term debt
Deferred income Non-interest bearing current liabilities
Deferred income taxes Deferred tax liabilities
Deferred tax liabilities Deferred tax liabilities
Deferred tax liability Deferred tax liabilities
Deferred taxes Deferred tax liabilities
Employee related liabilities Other long-term / current liabilities
Financial lease commitments Other long-term / short-term liabilities
Financial liabilities Long-term / Short-term debt
Group equity This is most probably a sum item that is not imputted to Excel.
Income tax payable Deferred tax liabilities
Issued and paid-in share capital Share capital
Legal and statutory reserves Other equity
Liabilities Either this is a sum item that is not imputted to Excel or you have to allocate it to different liabilities.
Loans Long-term / Short-term debt
Loans payable Long-term / Short-term debt
Long-term debt Long-term debt
Long-term financial liabilities Long-term debt
Long-term interest-bearing liabilities Long-term debt
Long-term liabilities Either this is a sum item that is not imputted to Excel or you have to allocate it to different long-term liabilities.
Long-term provisions Provisions
Minority interest Minority interest
Minority interests Minority interest
Minority interests in consolidated companies Minority interest
Minority stockholder’s interest Minority interest
Miscellaneous long-term liabilities Other long-term liabilities
Miscellaneous short-term liabilities Other current liabilities
Negative goodwill Other equity
Net income Retained earnings
Net income (loss) Retained earnings
Net income for the year Retained earnings
Non-current liabilities Either this is a sum item that is not imputted to Excel or you have to allocate it to different short-term liabilities.
Notes and loans Long-term / Short-term debt
Notes and loans, current portion Short-term debt
Other accounts payable Non-interest bearing current liabilities
Other accumulated comprehensive income Retained earnings
Other comprehensive income Retained earnings
Other current liabilities Other current liabilities
Other debt Other long-term / current liabilities
Other liabilities Other long-term / current liabilities
Other long-term liabilities Other long-term liabilities
Other long-term provisions Provisions
Other non-current liabilities Other long-term liabilities
Other provisions Provisions
Other reserves Other equity
Other reserves of the parent company Other equity
Paid-in surplus Other equity
Payroll taxes, social security and VAT Non-interest bearing current liabilities
Pensions and other retirement benefits Other long-term / current liabilities Usually long-term
Pensions costs Other long-term / current liabilities Usually long-term
Preferred stock Share capital
Provisions Provisions
Provisions for contingencies and long-term liabilities Provisions
Provisions for pensions and other post-employment benefits Provisions
Refundable deposits Long-term / Short-term debt
Reserves of consolidated companies Other equity
Restatement reserves Other equity
Restructuring provisions Provisions
Retained earnings Retained earnings
Salaries Non-interest bearing current liabilities
Share capital Share capital
Share issue premium Other equity
Shareholders’ equity Share capital
Shareholders’ equity, group share Share capital
Shares authorized Share capital
Shares issued Share capital
Shares outstanding Share capital
Shares repurchased Shares repurchased
Short-term borrowings Short-term debt
Short-term debt Short-term debt
Short-term financial liabilities Short-term debt Or sum item that is not directly imputted to Excel.
Short-term liabilities Short-term debt Or sum item that is not directly imputted to Excel.
Short-term provisions Provisions
Stockholders equity Share capital
Subsidies and deferred revenues Non-interest bearing current liabilities
Total current liabilities Either this is a sum item that is not imputted to Excel or you have to allocate it to different short-term liabilities.
Total debt Either this is a sum item that is not imputted to Excel or you have to allocate it to different liabilities.
Total group equity This is most probably a sum item that is not imputted to Excel.
Total liabilities Balance sheet total Not imputted in Excel (calculated automatically).
Total liabilities and group equity Balance sheet total Not imputted in Excel (calculated automatically).
Total liabilities and stockholders’ equity Balance sheet total Not imputted in Excel (calculated automatically).
Total long-term debt Long-term debt Or sum item that is not directly imputted to Excel.
Total long-term liabilities Long-term debt Either this is a sum item that is not imputted to Excel or you have to allocate it to different long-term liabilities.
Total non-current liabilities Either this is a sum item that is not imputted to Excel or you have to allocate it to different long-term liabilities.
Total provisions Provisions
Total shareholders’ equity This is most probably a sum item that is not imputted to Excel.
Total shareholders’ equity and liabilities Balance sheet total Not imputted in Excel (calculated automatically).
Trade accounts payable Non-interest bearing current liabilities
Trade liabilities Non-interest bearing current liabilities
Trade payables Non-interest bearing current liabilities
Translation differences Other equity
Treasury shares Share capital
Treasury stock Share capital

Company does not tell the share of interest bearing debt

Case

A company reports long-term and short-term debt, but not how they are divided into interest and non-interest bearing debt.
Solution

Even though there would be no information about the interest bearing debt in the balance sheet, the company usually tells the total interest bearing debt or the net debt in the texts of interim report or fiscal year announcement. Using these parameters you are able to estimate the needed values. So you should search (Ctrl+F) for these terms in the text.

Long-term debt

If you get the net debt figure, simply add cash & equivalents (from the assets’ side) to it in order to have total interest bearing liabilities.

Interest bearing debt = Net debt + Cash & cash equivalents

Then it is reasonable to assume that all the long-term liabilities are interest bearing. And what remains from them, can be allocated to short-term debt.

Short-term debt = Interest bearing debt – Long-term debt 

On the other hand, you may directly find total interest bearing debt. Again, assume that all long-term debt is interest bearing and allocate the rest to the short-term debt.

Short-term liabilities

The part of total short-term debt that is thus not allocated to short-term interest bearing debt can be allocated to short-term non-interest bearing liabilities.

This allocation would perhaps not be exactly true, but it is fair enough because the most important thing is that total interest bearing debt is correct even though the allocation of them to short-term and long-term would be a bit inaccurate.

Detailed information in notes

Often the more detailed information can be found from “notes to the financial statements” which can be found from the annual report only. Thus normally from late January up till mid-March there is only rough information available from the balance sheet items and the analyst has to do some assumptions, which can be later on refined with annual report information.

Parameter allocation – Assets

Usage instructions and tips

  1. If you have any doubts about any item, you can always ask from us. Very often a parameter with same name should be allocated to different item depending on company and situation. I.e., even though there are many common rules, there are many situations that have to be solved case-by-case.
  2. Sometimes it is difficult to say only based on balance sheet information how to handle an item. In these cases Notes to financial statements may tell you the answer.
  3. Size matters, especially relative size. It is not very relevant where to put 10 millions in the balance sheet if it totals to 10 billions. So the bigger the item, the more it has relevance and more you should consider it.

Parameters

Item in balance sheet assets Most probable target in Excel model Note
Accounts receivable Receivables
Accounts receivable trade Receivables
Allowance for doubtful accounts Receivables
Available-for-sale investments Investments / Cash and cash equivalents Depends on the liquidity.
Bank and cash Cash and cash equivalents
Capitalized development costs Other intangible rights
Cash and cash equivalents Cash and cash equivalents
Cash on hand and at banks Cash and cash equivalents
Cash, cash equivalents and short-term investments Cash and cash equivalents
Construction in progress Tangible assets / Inventories Inventories if the company is e.g. in construction business.
Current assets Either this is a sum item that is not imputted to Excel or you have to allocate it to different current assets.
Deferred charges Other non-current / current assets
Deferred expenses Other non-current / current assets
Deferred income taxes Deferred tax assets
Deferred tax assets Deferred tax assets
Deferred taxes Deferred tax assets
Equipment on operating leases Tangible assets
Financial assets Either this is a sum item that is not imputted to Excel or you have to allocate it to different current assets (usually to receivables and cash).
Fixed and other noncurrent assets Either this is a sum item that is not imputted to Excel or you have to allocate it to different non-current assets.
Fixed assets Tangible assets This can also be a sum item that is not imputted to Excel.
Fixed assets and other non-current assets Tangible assets This can also be a sum item that is not imputted to Excel.
Goodwill Goodwill
Goodwill arising on consolidation Goodwill
Intangible assets Other intangible assets
Inventories Inventories
Inventory Inventories
Investments Investments
Investments and long-term financial assets Investments
Investments in affiliates and other financial assets Investments
Investments in associated companies Investments
Investments in joint ventures and equity investees Investments
Land Tangible assets
Liquid assets Cash and cash equivalents
Long-term Investments Investments See where this is in assets (non-current or current). If the amount is big, you should try to find out a true nature of this item (notes to financial statements). This may require case-by-case consideration so please ask from us.
Long-term loans receivable Other non-current assets
Machinery and equipment Tangible assets
Marketable securities and other instruments Cash and cash equivalents
Marketable securities and short-term investments Cash and cash equivalents
Non-fixed assets Other intangible assets
Other accounts receivable Receivables
Other assets Other non-current assets / Other current assets See where this is in assets (non-current or current). If the amount is big, you should try to find out a true nature of this item (notes to financial statements). This may require case-by-case consideration so please ask from us.
Other current assets Other current assets
Other financial assets Cash and cash equivalents See where this is in assets (non-current or current). If the amount is big and this is located in current assets, then you should try to find out a true nature of this item (notes to financial statements). This may require case-by-case consideration so please ask from us.
Other intangible Assets Other intangible assets
Other non-current assets Other non-current assets
Other receivables Receivables / Other non-current / current assets
Other receivables and assets Other non-current / current assets
Prepaid expenses Other current assets
Prepaid expenses and accrued income Other current assets
Prepaid expenses and deferred collections Other current assets
Property and equipment Tangible assets
Property, plant and equipment Tangible assets
Receivables Receivables
Receivables and other assets Receivables
Securities Cash and cash equivalents
Short-term investments Cash and cash equivalents / Other current assets Depends on liquidity
Short-term loan receivable Receivables / Other current assets
Start-up expenses Other intangible assets
Tangible fixed assets Tangible assets
Tax receivables Deferred tax assets
Temporary cash investments Cash and cash equivalents
Total accounts receivable Receivables / Sum item Either this is a sum item that is not imputted to Excel or receivables.
Total assets Balance sheet total Not imputted in Excel (calculated automatically).
Total current assets Either this is a sum item that is not imputted to Excel or you have to allocate it to current assets.
Total financial assets Either this is a sum item that is not imputted to Excel or you have to allocate it to cash and receivables.
Total fixed and other noncurrent assets Either this is a sum item that is not imputted to Excel or you have to allocate it to non-current assets.
Total intangible assets Other intangible assets
Total non-current assets Either this is a sum item that is not imputted to Excel or you have to allocate it to non-current assets.
Trade Receivables
Trade accounts receivable Receivables
Trade and suppliers receivables Receivables
Trade receivables Receivables