---
title: "ACCT 101, Session 7: Liabilities; Sustainability Reporting"
author: 
  - name: Dr. Richard M. Crowley
    email: rcrowley@smu.edu.sg
    affiliation: https://rmc.link/
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  data-background-video-loop: "true"
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---

# Front matter {data-background-video="../Backgrounds/section.mp4" data-background-video-loop="true"}


<!--# Note that the downlit and xml2 pacakges are required to compile -->
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```{r helpers, echo=FALSE, warning=FALSE, message=F}
library(knitr)
library(kableExtra)

#' Pretty formatted HTML tables
#' 
#' @param df The dataframe to format as a table
#' @param names Names to use for columns if not using the df column names. Vector
#' @param highlight_cols Columns to highlight. Default is c(1) for highlighting the first row. Use c() to remove.
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#' @param highlight_end_rows Rows to highlight. Uses a reverse indexing where 1 is the last row, 2 is second to last, etc.
#' @param full Use to span the full width of a slide. FALSE by default.
#' @param fixed_header Whether the first row should be treated as a header row. TRUE by default.
html_df <- function(df, names=NULL, highlight_cols=c(1), highlight_rows=c(), color_rows=c(), highlight_end_rows=c(), full=F, fixed_header=T) {
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  kbl(df,"html", col.names = names, align = c("l",rep('c',length(cols)-1))) %>%
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    {if(length(highlight_end_rows)) row_spec(., nrow(df) + 1 - highlight_end_rows,bold=T, background = "#ffffff99") else .}
}

library(tidyverse)
```

<!--# List packages here that are not being correctly highlighted -->
<!--# The usual cause is calling the library from a echo=FALSE cell -->

```{r}
#| include: false
options(downlit.attached = c("knitr", "kableExtra", "tidyverse"))
```

<!-- "reveal_plugins:..." and "chalkboard:" are handled by prep.py -->
```{r setup, include=FALSE}
library(reticulate)  # To use python in R Markdown
# Python to use is specified in the .Renviron file
```

## Group project {data-background="../Backgrounds/people.jpg" class="present-only" visibility="hidden"}

> Record your group preferences at https://rmc.link/101groupsG_

- The form asks for your preference of up to 2 classmates to work with
- If you both choose each other, you are highly likely to be allocated to the same group
- Groups of 4-5 will be constructed based on your preferences
    - Based on a **game theory** algorithm for fair group allocation

> Timeline

- Project groups will be announced today by 7 PM
- A form for selecting project choices will be available Thursday at 10 AM
    - Once a choice has been selected, it will be removed from the form


## Learning objectives {data-background="../Backgrounds/default.jpg"}

:::: {.columns}

::: {.column width="50%"}
![](../Course_Diagrams/ACCT_101_course_map_7.png){width="450px" fig-align="center"}
:::

::: {.column width="50%"}

Current liabilities (Chapter 8)

1. Account for current liabilities
2. Become familiar with "time value of money"
    - We'll need this for Bonds

Sustainability reporting

1. Understand the components of a sustainability report
2. Recognize challenges and benefits of sustainability reports
3. Identify sustainability as a core business value

:::

::::





# Current Liabilities {data-background-video="../Backgrounds/section.mp4" data-background-video-loop="true"}

## Review of liabilities {data-background="../Backgrounds/default.jpg"}

> Obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits. (FRS 37:10)

- Current liability: Something you owe within the span of one year (the current accounting term)
- Non-Current liability: Something you owe after the current accounting term

> Example current liabilities: Accounts payable, Unearned revenue, Salaries payable, Taxes payable, Notes payable, Interest payable, ________ payable

## Sales tax payable {data-background="../Backgrounds/default.jpg"}


:::: {.columns}

::: {.column width="50%"}

- Also known as GST
- Generally paid quarterly
    - Can pay monthly as well
- Retailers collect this from customers to pass to tax authorities (IRAS)

:::

::: {.column width="50%"}

![](../Figures/iras.png){width="150px" fig-align="center"}

:::

::::

![](../Diagrams/JE_7-3.png){width="800px" fig-align="center" .lightbox}


## Notes payable {data-background="../Backgrounds/default.jpg"}

:::: {.columns}

::: {.column width="50%"}

- Notes payable is a small, short-term loan
- Similar to A/P, but:
    + More formal
    + Has a stated interest rate
- Can be provided by any party
    + Banks
    + Suppliers

:::

::: {.column width="50%"}

![](../Figures/Note.jpg){width="600px" fig-align="center"}

:::

::::

> This is included in Chapter 5 in the book

## Notes payable terms {data-background="../Backgrounds/default.jpg"}

- *Creditor*: the lender
- *Debtor*: the party that owes money
- *Term*: length of time of the note
- *Maturity date*: when the note is due
- *Principal*: amount of money borrowed
    - We'll record this at the start
- *Interest*: additional payments for borrowing
    - We'll record these as they occur
        - Or when doing adjusting entries
- *Maturity value*: amount owed at maturity
- Interest is usually all paid at the end
    - The interest rate will be given as the *annual* rate

## Notes payable debtor {data-background="../Backgrounds/default.jpg"}

> Received a $2,000 note payable with 9% interest due in 3 months payable to our supplier.

![](../Diagrams/JE_7-5.png){width="800px" fig-align="center" .lightbox}

## The other side: Notes receivable {data-background="../Backgrounds/default.jpg"}

> Gave $2,000 with 9% interest due in 3 months payable to our customer as a note receivable.

![](../Diagrams/JE_7-6.png){width="800px" fig-align="center" .lightbox}

## Current long term debt {data-background="../Backgrounds/default.jpg"}

- We consider any payment owed in the coming fiscal year as a current liability
    - This includes payments on long term debt
- We shift these payments to short term debt when we do our balance sheet
    - Call it "current portion of long term debt"

![](../Diagrams/Current_portion_LTD.png){width="700px" fig-align="center"}

## Check {data-background="../Backgrounds/question1.jpg"}

> Coffee Co. gives $1,000 to Latte Inc. on November 1st, 20X8 as a note with 6% interest over 6 months.  Record the journal entries for *both companies*, i.e., the note receivable and the note payable. Assume December 31st is both companies' fiscal year end.

>- Hints:
>     - Money changes hands on November 1
>     - Interest accrues on December 31
>     - The note is paid back on April 30th

## {data-background="../Backgrounds/graph_paper.png" class="print-only"}

## Check: Note payable {data-background="../Backgrounds/answer.jpg" class="default exclude"}

![](../Diagrams/JE_7-P1.png){width="800px" fig-align="center" .lightbox}

## Check: Note receivable {data-background="../Backgrounds/answer.jpg" class="default exclude"}

![](../Diagrams/JE_7-P2.png){width="800px" fig-align="center" .lightbox}

# Time value of money {data-background-video="../Backgrounds/section.mp4" data-background-video-loop="true"}

## What's a dollar worth? {data-background-image="../Backgrounds/hershey.jpg" class="present-only" visibility="hidden"}

>- Everyone should have 1 card: write your name on it
>- If you give me the card during the next break, I'll give you 1 chocolate
>- If you give me the card at the end of class, I'll give you 2 chocolates
>- Which do you prefer?
>- What if it was 2 now and 1 later?
>- What if it was 1 now and 1 later?
>- How many chocolates would you need later to not take one now? (Decimals are fine)
>- <span style="color:blue">We'll do 1 now or 2 later</span>

## Source {data-background-image="../Backgrounds/books.jpg"}

<div class="alignleft">
This section is based on:

**Corporate Finance: An Introduction**

by Ivo Welch

Pearson: Boston, MA. 2009.
</div>

> It's a good finance textbook!

## The perfect market {data-background="../Backgrounds/default.jpg"}

- No taxes
- No transaction costs
    - Can find buyers/sellers costlessly
    - Can deliver costlessly
- Everyone has identical beliefs
- Many buyers and sellers (liquid)

> We'll use these assumptions in this class

## Basic perspectives: Why we have *time value of money* {data-background="../Backgrounds/default.jpg"}

1. You can earn interest on \$1 today, so it's worth more than $1 tomorrow.
2. Inflation means that \$1 tomorrow can buy less than \$1 today.
3. \$1 today gives me the option to spend today or tomorrow, but \$1 tomorrow can only be spent tomorrow.  If that option to use the \$1 today is valuable to me, \$1 today is worth more than \$1 tomorrow.

> All three of these are equivalent: a dollar today is worth more than a dollar tomorrow

## Consequences {data-background="../Backgrounds/default.jpg"}

- When we talk about returns, we'll talk about *compounded* returns
    - If \$1 today is \$1.10 next year...
        - then \$1.00 in two years is \$1.21, not \$1.20
            - Return scales with capital
- More explicitly: if the interest rate, $r$ is 10%, and the principal, $P_0$ is \$1, then:
    - Tomorrow $P_0$ is worth $P_1=P_0\cdot (1+r) = 1\cdot 1.10 = 1.10$
    - Flipping the equation implies: $P_0 = \frac{P_1}{(1+r)} = \frac{1.10}{1.1} = 1$

## Extension: Going forward {data-background="../Backgrounds/default.jpg"}

- What is $1 worth in two years?  Three years? ...
    - $P_2 = \left(1\cdot 1.1\right)\cdot 1.1 = 1.21$
    - $P_3 = \left(\left(1\cdot 1.1\right)\cdot 1.1\right)\cdot 1.1 = 1.331$
    - $\ldots$
    - $P_{50} = \left(\ldots \left(1\cdot 1.1\right)\cdot 1.1\ldots\right)\cdot 1.1 \approx 106.72$
    - $\ldots$
    - $P_n = P_0\cdot (1+r)^n$

## Extension: Going forward {data-background="../Backgrounds/default.jpg"}

```{r pander, echo=FALSE, warning=FALSE}
suppressPackageStartupMessages(library(plotly))
m <- list(
  l = 60,
  r = 50,
  b = 60,
  t = 100,
  pad = 4
)
a <- 0:50
b <- 1.1^(0:50)
df <- data.frame(Year=a,Value=b)
plot_ly(df, x=~Year, y=~Value, type="scatter", mode="markers", name="Cash flows", width = 800, height = 500) %>%
  layout(autosize = F, margin = m, title = "Future value of a dollar", xaxis=list(title="Year",rangemode="tozero"), yaxis=list(title="Value of $1", range=c(0,120)))
```

## Extension: Going backward {data-background="../Backgrounds/default.jpg"}

- What is the current value of \$1 in two years?  Three years? ...
    - $P_0'' = \left(1/1.1\right)/1.1 = 0.83$
    - $P_0''' = \left(\left(1/1.1\right)/1.1\right)/1.1 = 0.75$
    - $\ldots$
    - $P_0^{(50)} = \left(\ldots\left(1/ 1.1\right)/ 1.1\ldots\right)/ 1.1 \approx 0.0085$
    - $\ldots$
    - $P_0^{(n)} = \frac{P_n}{(1+r)^n}$

## Extension: Going backward {data-background="../Backgrounds/default.jpg"}

```{r pander2, echo=FALSE, warning=FALSE}
suppressPackageStartupMessages(library(plotly))
m <- list(
  l = 60,
  r = 50,
  b = 60,
  t = 100,
  pad = 4
)
a <- 0:50
b <- 1/1.1^(0:50)
df <- data.frame(Year=a,Value=b)
df <- data.frame(Year=a,Value=b)
plot_ly(df, x=~Year, y=~Value, type="scatter", mode="markers", name="Cash flows", width = 800, height = 500) %>%
  layout(autosize = F, margin = m, title = "Present of a future dollar", xaxis=list(title="Year",rangemode="tozero"), yaxis=list(title="Value of $1", range=c(0,1.2)))
```

## Check {data-background="../Backgrounds/question1.jpg"}

<ol>
<li style="margin-bottom:3em"> What is \$10 worth in 20 years, if the interest rate is 5\%?
<li style="margin-bottom:3em"> What is \$10 received 20 years from now worth today, if the interest rate is 5\%?
</ol>



Answers:

>1. $10\times (1+0.05)^{20}=\$26.53$
>2. $\frac{10}{(1+0.05)^{20}}=\$3.76$

# Net Present Value {data-background-video="../Backgrounds/section.mp4" data-background-video-loop="true"}

## What is Net Present Value? (NPV) {data-background="../Backgrounds/default.jpg"}

- What we just did!
- Determine the price *today* of some future (expected) cash flows
- Numerator is the future cash flow, $CF$
- Denominator is the *discount factor*, $R$
    - That is, we discount cash flows by the return to get today's value

$$
NPV_0 = CF / R
$$

- What if there are multiple cash flows?

> $NPV_0 = \sum_{i=0}^{n} \frac{CF_i}{R_i}$

> NPV at time 0 (today) is the sum of all discounted cash flows

## Discount factors {data-background="../Backgrounds/default.jpg"}

- The discount factor is the amount of *cumulated* return or interest you would expect to receive between two period of time.
- We often assume a fixed discount rate for each year of $1+r$
- Let $R_i$ denote the discount factor from time $0$ to time $i$
    - $R_1=1+r$
    - $R_2=(1+r)\cdot(1+r)$
    - $R_3=(1+r)\cdot(1+r)\cdot(1+r)$
    - $\ldots$
    - $R_n=(1+r)^n$

## Simple Example {data-background="../Backgrounds/default.jpg"}

- A project costs \$500 today, and is expected to pay out the following:
    - \$100 in one year
    - \$600 in two years.
- If the interest rate is 10\%, what is the NPV of the project?<br><br>

>- $NPV = \frac{-500}{(1+0.1)^0} + \frac{100}{(1+0.1)^1} + \frac{600}{(1+0.1)^2}$
>- $NPV = -500 + 90.91 + 495.87$
>- $NPV = 86.78$
>- What if the interest rate was 5%?
>- $NPV = \frac{-500}{(1+0.05)^0} + \frac{100}{(1+0.05)^1} + \frac{600}{(1+0.05)^2}$
>- $NPV = -500 + 95.24 + 544.22$
>- $NPV = 139.46$


## Calculating {data-background="../Backgrounds/default.jpg"}

```{r npv1, echo=FALSE, warning=FALSE}
suppressPackageStartupMessages(library(plotly))

m <- list(
  l = 60,
  r = 50,
  b = 60,
  t = 100,
  pad = 4
)

a <- 1:100
b <- c(100/1.01^(1:100))
df <- data.frame(Year=a,Value=b)
v <- sum(df$Value)
```

- Easy to do a few cash flows with a calculator
- Easy to do any number of cash flows with spreadsheets
- What is the NPV of a project that pays out \$100 each year for 100 years, assuming the interest rate is 1%?
    - Value is `r v`


```{r npv3, echo=FALSE, warning=FALSE}
plot_ly(df, x=~Year, y=~Value, type="scatter", mode="markers", name="Cash flows", width = 800, height = 400) %>%
  layout(autosize = F, margin = m, title = "Cash flows per year", xaxis=list(title="Year",rangemode="tozero"), yaxis=list(title="Discounted cash flow", range=c(0,100)))
```

## What about for... {data-background="../Backgrounds/code.jpg"}

- 10 years?  100 years? 1,000 years? 10,000 years?
- Pretty hard by hand
- Trivial to brute force on a computer

```{r}
NPV <- data.frame(Years=c(10, 100, 1000, 10000),
                  NPVs=c(sum(c(100/1.01^(1:10))),
                         sum(c(100/1.01^(1:100))),
                         sum(c(100/1.01^(1:1000))),
                         sum(c(100/1.01^(1:10000)))))
html_df(NPV)
```

## What about by hand? Formulas! {data-background="../Backgrounds/reference.jpg"}

- An *Annuity* is a repeated cashflow at a fixed discount rate for $T$ periods
    - $Annuity~NPV = \frac{CF}{r}\left[1-\frac{1}{(1+r)^T}\right]$

> Revisiting the 10,000 figures

$$\begin{align*}
NPV &= \frac{100}{0.01} \cdot \left[1-\frac{1}{(1+0.01)^{10,000}}\right] \\
&\approx 10,000 \cdot 1 \\
&\approx 10,000 \\
\end{align*}$$

>- What about for 70 periods?
>     - $NPV = \frac{100}{0.01} \cdot \left[1-\frac{1}{(1+0.01)^{70}}\right]$
>     - $NPV = 5,016.85$

## Derivation -- for those interested in the math {data-background="../Backgrounds/default.jpg" .never visibility="hidden"}

You can derive the other 3 formulas from the fourth:

- Growing perpetuity:
    - $\lim_{T\rightarrow\infty} \frac{CF}{r-g} \left[1 - \frac{(1+g)^T}{(1+r)^T}\right] = \frac{CF}{r-g} \left[1 - 0\right] = \frac{CF}{r-g}$
- Annuity:
    - $\left.\frac{C}{r-g} \left[1 - \frac{(1+g)^T}{(1+r)^T}\right]\right|_{g=0} = \frac{C}{r} \left[1 - \frac{1}{(1+r)^T}\right]$
- Perpetuity
    - $\left.\lim_{T\rightarrow\infty} \frac{CF}{r-g} \left[1 - \frac{(1+g)^T}{(1+r)^T}\right]\right|_{g=0} = \frac{CF}{r-0} \left[1 - 0\right] = \frac{CF}{r}$

> You don't need to know this for this class

## In class work {data-background="../Backgrounds/group.jpg"}

1. An investment costs \$100 today, and pays out $10 per year for the next 10 years.  In the 10th year, it also pays back the original \$100.  If the interest rate is 10%, what is the NPV?
2. What if the interest rate was 8% instead of 10% in #1?

## {data-background="../Backgrounds/graph_paper.png" class="print-only"}

## Question 1 {data-background="../Backgrounds/answer.jpg" class="default exclude"}

> An investment costs \$100 today, and pays out $10 per year for the next 10 years.  In the 10th year, it also pays back the original \$100.  If the interest rate is 10%, what is the NPV?

## Question 1 {data-background="../Backgrounds/answer.jpg" class="default exclude"}

> An investment costs \$100 today, and pays out $10 per year for the next 10 years.  In the 10th year, it also pays back the original \$100.  If the interest rate is 10%, what is the NPV?

$$\begin{align*}
NPV &= -100 + \sum_{i=1}^{10} \frac{10}{(1+0.1)^i} + \frac{100}{(1+0.1)^{10}} \\
&= -100 + \frac{10}{0.1}\left[1-\frac{1}{(1+0.1)^{10}}\right] + \frac{100}{(1+0.1)^{10}} \\
&= -100 + 61.45 + 38.55\\
&=0
\end{align*}$$

> Use NPV and the *annuity* formula!

## Question 2 {data-background="../Backgrounds/answer.jpg" class="default exclude"}

- An investment costs \$100 today, and pays out $10 per year for the next 10 years.  In the 10th year, it also pays back the original \$100.  If the interest rate is 10%, what is the NPV?
    - The NPV would be 0.

> What if the interest rate was 8%?

## Question 2 {data-background="../Backgrounds/answer.jpg" class="default exclude"}

> What if the interest rate was 8%?

$$\begin{align*}
NPV &= -100 + \sum_{i=1}^{10} \frac{10}{(1+0.08)^i} + \frac{100}{(1+0.08)^{10}} \\
&= -100 + \frac{10}{0.08}\left[1-\frac{1}{(1+0.08)^{10}}\right] + \frac{100}{(1+0.08)^{10}} \\
&\approx -100 + 67.10 + 46.32\\
&\approx 13.42
\end{align*}$$

> Use NPV and the *annuity* formula!



# Sustainability {data-background-video="../Backgrounds/section.mp4" data-background-video-loop="true"}

## CSR or ESG? {data-background="../Backgrounds/ESG.png"}

:::: {.columns}

::: {.column width="50%"}
**CSR**

- *C*orporate *S*ocial *R*esponsibility
- The precursor to ESG


**ESG**

- *E*nvironmental, *S*ocial, & *G*overnance
- Blends governance, CSR, and a broader focus on climate and its risks

**ESD**

- *E*ducation for *S*ustainable *D*evelopment
- [Up]Skilling future leaders

:::

::: {.column width="50%"}

**ESD: UNESCO**

ESD is a lifelong learning process and an integral part of quality education. It enhances the cognitive, socio-emotional and behavioural dimensions of learning and encompasses learning content and outcomes, pedagogy and the learning environment itself. 

:::

::::

## The three pillars of ESG {data-background="../Backgrounds/ESG.png" .small}

> **E**nvironmental

- Climate change, effluents and waste, clean energy, energy consumption, carbon emissions, biodiversity degradation, water, ...

> **S**ocial

- Diversity, human rights, everyone’s health & safety, child & enforced labour, product responsibility, anti-corruption, ...

> **G**overnance

- Management structure, employee relations, executive compensation, Board diversity, ethical culture, Board and management competence


::: {.callout-tip}
## TCFD

The above comes from the Task Force on Climate-related Financial Disclosures (TCFD)

:::


## How firms should act {data-background="../Backgrounds/ESG.png"}

:::: {.columns}

::: {.column width="50%"}

1. Guided by strong *moral* and *ethical* standards in daily interactions with **all** stakeholders
2. Carefully balance *shareholders'* needs with the needs of **other stakeholders**
3. Constantly consider the **environmental impact** of its business operations


:::

::: {.column width="50%"}
![](../Figures/Nexus.png){width="600px" fig-align="center"}
:::

::::

## U.N. SGDs {data-background="../Backgrounds/ESG.png"}

<iframe width="1200" height="675" src="https://www.youtube.com/embed/cBxN9E5f7pc?si=05b7NEC1fhqjnOfW" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen></iframe>

## U.N. SDGs {data-background="../Backgrounds/ESG.png"}

![](../Figures/S7_SDG.jpg){width="1200px" fig-align="center"}


# Sustainability reporting {data-background-video="../Backgrounds/section.mp4" data-background-video-loop="true"}

## What must be reported? {data-background="../Backgrounds/ESG.png" .small}

::: {.callout-note}
## Factors to consider

What needs to be reported often varies by jurisdiction, company size, ownership structure, and industry. In Singapore, rules are determined by [SGX](https://www.sgx.com/sustainable-finance/sustainability-reporting)

:::

- In Singapore, the following must be reported by *public* companies:
    - Starting FY 2025 (public firms) or 2030 (large private firms): Greenhouse gas emissions from their own or controlled operations (*Scope 1*) and from purchasing electricity, heat, or steam (*Scope 2*)
    - Starting FY 2026 (30 STI index firms): Greenhouse gas emissions from the rest of their supply chain (*Scope 3*)
    - Starting FY 2029 (public firms) or 2032 (large private firms): Scope 1 and 2 need an audit

> Material risks must be disclosed already

- Some adjustments to disclosures to align with ISSB starting in 2025 (STI firms) / 2028 (large public firms) / 2030 (everyone else)

## Materiality and ESG {data-background="../Backgrounds/ESG.png"}

Materiality goes two ways

:::: {.columns}

::: {.column width="50%"}

**Company $\Rightarrow$ World**

- What is the impact of the firm on...
    - The local environment
    - Climate
    - Nearby communities
- What risks does the company's actions pose on the environment and local communities?

:::

::: {.column width="50%"}

**World $\Rightarrow$ Company**

What environmental risks does the company face?
Does climate change pose a risk for the company's operations?

:::

::::

## Reporting frameworks {data-background="../Backgrounds/ESG.png"}

![](../Figures/ESG_frameworks.png){width="1200px" fig-align="center"}

::: {.callout-important}
## Singapore

SGX' reporting choices are generally in line with TCFD

:::

## TCFD reporting {data-background="../Backgrounds/ESG.png"}

![](../Figures/TCFD_summary.png){width="1200px" fig-align="center"}

## Risks and Opportunities: Company to World {data-background="../Backgrounds/question.jpg"}

:::: {.columns}

::: {.column width="50%"}
**Singapore airlines**
<br><br><br><br><br><br><br><br><br><br><br><br>
:::

::: {.column width="50%"}
**A lumber farm in the Nordics**
<br><br><br><br><br><br><br><br><br><br><br><br>
:::

::::



## Risks and Opportunities: World to Company {data-background="../Backgrounds/question.jpg"}

:::: {.columns}

::: {.column width="50%"}
**Singapore airlines**
<br><br><br><br><br><br><br><br><br><br><br><br>
:::

::: {.column width="50%"}
**A lumber farm in the Nordics**
<br><br><br><br><br><br><br><br><br><br><br><br>
:::

::::


## TCFD: The Game | *Background* {data-background="../Backgrounds/ESG.png" class="present-only" visibility="hidden"}

- We will divide into 10 groups; each group will receive
    - One company card
        - You will play the game representing the company
    - A set of 12 risk cards (blue, indicated A-L)
    - A set of 16 action cards (green, indicated 1-16)

> Choose your roles

1. One member will be the **Chairman**. They maintain final say on the company's choices and should keep discussions on track.
2. One member will be a **Resilience Manager**. They will act as the score-keeper for the company in Phase 2 of the game.
3. The remaining members will be employees on the ESG risk committee, providing insight on the decisions.

## TCFD: The Game | *Phase 1*: Make your choices {data-background="../Backgrounds/ESG.png" class="present-only" visibility="hidden"}

> Choose your sustainability strategy

:::: {.columns}

::: {.column width="50%"}

**Risks**

- Consider what risks your firm is most likely subjected to
- Chairman should record the letters in the instruction sheet (step 4)

:::

::: {.column width="50%"}

**Actions**

- For each risk, select the action you would take to counter it.
    - Action 1 should counteract Risk 1
    - Action 2 should counteract Risk 2
- Chairman should record the numbers in the instruction sheet (step 5)

:::

::::

::: {.callout-tip}
## Note

The winning team will be asked to explain their choice of risks why they selected the actions they did

:::

## TCFD: The Game | *Phase 2:*  {data-background="../Backgrounds/ESG.png" class="present-only" visibility="hidden"}

> How well will your company survive?

- **6** events are about to occur
- I will call out each event, and then list the Action numbers that counter each
    - You get 1 point for each action number I call
        - Some events are counteracted by 4 actions, meaning you can get up to 4 points if you have all 4 actions!


## Additional information for Singapore {data-background="../Backgrounds/reference.jpg"}

- You can find more details on sustainability in Singapore at this links:
    - [NEA: Climate Change](https://www.nea.gov.sg/our-services/climate-change-energy-efficiency/climate-change/overview)
    - [Green Plan 2030](https://www.greenplan.gov.sg/)
    - [Ministry of Sustainability and the Environment](https://www.mse.gov.sg/)
    - [SGX Sustainability Reporting](https://www.sgx.com/sustainable-finance/sustainability-reporting)


# End matter {data-background-video="../Backgrounds/section.mp4" data-background-video-loop="true"}

## Wrap up {data-background="../Backgrounds/ending.jpg"}

- Later this week:
    1) Grab your project topic at 10am on Thursday -- look for the announcement on eLearn!
- For next week
    1) Recap the reading for this week
    2) Read the pages for next week
        - Liabilities (Chapter 9)
    3) Submit last week's homework
        - Available on eLearn
        - Submit on eLearn
    4) Practice on eLearn
        - Practice on Time value of money
        - Automatic feedback provided
- Survey on the class session at [rmc.link/101survey7](https://docs.google.com/forms/d/e/1FAIpQLSdzyohx5MTN40nrDxCWRfuyapH7b1N6NG6MQqV6-lMMNT9z2Q/viewform?usp=sf_link)

## Packages used for these slides {data-background="../Backgrounds/code.jpg"}

- `{kableExtra}`
- `{knitr}`
- `{revealjs}`




## References {data-background="../Backgrounds/books-old.jpg" .never .small visibility="hidden"}

## Custom code {data-background="../Backgrounds/code.jpg" .never .small visibility="hidden"}


## NOTES {class="never" visibility="hidden"}



## Estimated liabilities {data-background="../Backgrounds/section.jpg" class="header" .never visibility="hidden"}

## Provision for warranty repairs {data-background="../Backgrounds/default.jpg" class="default" .never visibility="hidden"}

- Manufacturers need to factor in liabilities from warranties
- Estimate this *provision for warranty repairs* at year end

![](../Diagrams/JE_7-7.png){width="800px" fig-align="center" .lightbox}


## What does contingent mean? {data-background="../Backgrounds/default.jpg" class="default" .never visibility="hidden"}

- Contingent liabilities are not presently liabilities, but could become liabilities in the future.
- Listed in the financial statement notes, but not journalized
- To note all 3 must be true:
    1. Must depend on a future outcome of past events
    2. May, *but probably will not*, require an outflow of resources
    3. Must not have a sufficiently reliable estimate of the amount owed.

> Contingent liabilities are obligations you might or might not have

## Recognizing liabilities {data-background="../Backgrounds/default.jpg" class="default" .never visibility="hidden"}

- If chance of owing is very low
    - Ignore
- If chance is reasonably possible
    - *Contingent liability* $\Rightarrow$ Make a note to your financial statements, but don't include it in the statements themselves
- If a sufficiently reliable estimation can be made
    - This is a *real liability* $\Rightarrow$ Include it in your adjusting entries
        - Not as a contingent liability
    - Ex.:
        - Provision for warranty repairs
