FINANCIAL REPORTING CASE: What is it worth?

"I can't believe it. Why don't you accountants prepare relevant financial statements?" Your friend Shayne is a

finance major and is constantly badgering you about what she perceives to be a lack of relevance of financial

statements prepared according to generally accepted accounting principles (GAAP). "For example, take a look

at this statement of financial position for Under Armour (see figures below) that I just downloaded from the

Internet. The equity (or book value) of the company, according to the 2X15 statement of financial position,

was nearly $1.7 billion. But if you multiply the number of outstanding shares by the stock price per share at

the same point in time, the company's market value was about $9 billion. I thought equity was supposed to

represent the value of the company, but those numbers are not close." You decide to look at the company's

balance sheet and try to set Shayne straight.

UNDER ARMOUR INC.

Statement of Financial Position

December 31, 2X15

Assets

Cash and cash equivalents $ 128,852,000

Accounts receivable, net 433,638,000

Inventories 783,031,000

Prepaid expenses and other current assets 152,242,000

Deferred income taxes -

Total current assets 1,498,763,000

Property and equipment, net 538,531,000

Goodwill 585,181,000

Intangible assets, net 75,686,000

Deferred income taxes 92,157,000

Other long-term assets 78,582,000

Total assets $ 2,868,900,000

Liabilities and Stockholders' Equity

Accounts payable $ 200,460,000

Accrued expenses 192,935,000

Current maturities of long-term debt 42,000,000

Other current liabilities 43,415,000

Total current liabilities 478,810,000

Long-term debt, net of current maturities 352,000,000

Long-term line of credit, noncurrent 275,000,000

Other long-term liabilities 94,868,000

Total liabilities $ 1,200,678,000

Stockholders' equity

Additional paid-in capital 636,630,000

Retained earnings 1,076,533,000

Accumulated other comprehensive loss (45,013,000)

Total stockholders' equity 1,668,222,000

Total liabilities and stockholders' equity $ 2,868,900,000

Required :

1. Respond to Shayne's criticism that shareholders' equity does not represent the market value of the

company. What information does the statement of financial position provide?

2. The usefulness of the balance sheet is enhanced by classifying assets and liabilities according to common

characteristics. What are the classifications used in Under Armour's statement of financial position, and

what do those categories include?