Purpose: To help familiarize you with the financial reporting of a real company to further your understanding of the chapter material you are learning.
This case focuses on the liabilities of Bombardier Inc. Current liabilities are those obligations that will become due and payable within the next year or operating cycle (whichever is longer), while long-term liabilities are those that are due and payable more than one year from the balance sheet date. It is important to properly classify and report these liabilities because they affect liquidity. We will now consider the current and long-term liabilities of Bombardier Inc. Refer to the Bombardier Inc. financial statements found in My Accounting Lab. Also, consider Note 12 and Note 13 in the footnotes included in the annual report.
1. What was the balance of Accounts Payable and Accrued Liabilities at January 31, 2011 and January 31, 2010? Did the amount increase or decrease over the year?
2. Why does Bombardier not disclose current liabilities separately from non-current liabilities?
3. What do the Advances on Aerospace Programs represent?
4. How much is owed for long-term debt at January 31, 2011? Look at the financing activities section of the Consolidated Statements of Cash Flows. What is the amount of proceeds from issuance of long-term debt over the last year? What is the amount of repayments of long-term debt over the last year? Does it appear that Bombardier Inc. is borrowing more than it repays or repaying more than it borrows? From Note 13, determine how much of the long-term debt must be repaid in the next twelve months, i.e., during the year ended January 31, 2012?
5. What are the total liabilities that Bombardier owes at January 31, 2011? What type of liabilities represents the highest percentage of total liabilities and what is this percentage for 2011 and 2010? Is the amount of total shareholders’ equity more than or less than the total of all the liabilities at January 31, 2011? What does this result mean?