Limitations of the Balance Sheet

a.   Judgments and estimates are used in determining many of the items reported in the balance sheet

b.   Most liabilities are valued at the present value of cash flows at the date the liability was incurred, not at the present value of cash flows at the current market interest rate

c.   Many assets are not reported on the balance sheet, even though they do have value and will genre-ate future cash flows.

d.   Values of certain assets are measured at historical cost, not market value, replacement cost, or their value to the firm.