Question

Discussion board information about the importance of subcategories of net assets

Answer 1

Net assets are an important source of information for funders and investors externally and for board members and management internally
to assess the financial health of a Company. Each category of net assets, depending on its purpose and its presentation, can apprise the
reader of the financial statement about the depth of the organization’s capital structure, operating sustainability, financial strength, as
well as its ability to withstand unexpected operating shocks.
For example, unrestricted net assets, temporarily restricted net assets for financing, and permanently restricted net assets for financing are an indication of the Company’s ability to meet its future debt obligations.
Alternatively, unrestricted net assets and temporarily restricted net assets for operations show the depth of the organization’s operating
sustainability and its capacity to withstand unexpected operating shocks, and invest in future growth.
Thus it is important to show Sub categories of Net asset