FINANCIAL POSITION Flashcards
What is a Statement of Financial Position?
A formal financial statement showing the financial position of an entity through three elements: assets, liabilities, and equity.
What is the Current/Noncurrent Distinction in the Statement of Financial Position?
It separates assets and liabilities into current and noncurrent categories unless liquidity presentation is more relevant and reliable.
What are General Purpose Financial Statements?
Financial statements prepared according to IFRS to meet the needs of users who cannot require tailored reports.
What are the components of a complete set of financial statements?
- Statement of Financial Position
- Statement of Comprehensive Income
- Statement of Changes in Equity
- Statement of Cash Flows
- Notes
- A Statement of Financial Position at the beginning of the earliest comparative period (in certain situations).
What is the objective of financial statements?
To provide information about the financial position, performance, and cash flows of an entity useful for decision-making.
Define ‘Assets.’
Resources controlled by an entity from past events, expected to provide future economic benefits.
What are the characteristics of assets?
- Controlled by the entity
- Result of a past transaction/event
- Provides future benefits
- Measured reliably
What are current assets?
Assets that are cash or equivalents, held primarily for trading, expected to be realized within 12 months, or expected to be sold or realized during the normal operating cycle.
Define Noncurrent Assets.
Assets not meeting the criteria for classification as current assets, typically long-term.
Define Liabilities.
Present obligations from past events that are expected to result in an outflow of resources embodying economic benefits.
What are current liabilities?
Liabilities due to be settled within 12 months or within the normal operating cycle, or liabilities lacking a right to defer settlement for at least 12 months.
What are noncurrent liabilities?
Liabilities not classified as current, typically long-term, such as long-term debt or obligations due beyond 12 months.
Are share dividends payable considered a liability?
No, they are considered equity because there is no transfer of an economic resource until dividends are actually paid.
When is a liability classified as noncurrent?
When the entity has a right to defer settlement for at least 12 months after the reporting period.
What is the rule for refinancing liabilities?
Liabilities that are refinanced before the reporting date are classified as noncurrent; otherwise, they are current.
How are accounts receivable classified in terms of assets?
Accounts receivable are usually current assets unless assigned for long-term purposes, in which case they may be classified as noncurrent assets.
How is inventory classified?
Typically classified as a current asset, even if expected to be sold beyond 12 months, as long as it’s part of the normal operating cycle.
How is bond investment classified?
It is classified as a current asset if it is held for short-term trading purposes.
How is land held for sale classified?
Classified as a current asset under inventories if held for resale or under specific circumstances for non-current if meeting held-for-sale criteria (PFRS 5).
How is cash surrender value of life insurance classified?
Typically a non-current asset, as it provides a benefit realized over a long period.
How is deferred tax asset classified?
It is always classified as a non-current asset, per PAS 12 (Income Taxes).
How is accounts payable classified?
Accounts payable are part of current liabilities, but advance payments to suppliers should not be included as they are current assets.
What are accrued expenses and bonds payable?
These are classified as current liabilities if due within 12 months, including any premium on bonds payable.
How are contingent liabilities classified?
Recognized contingent liabilities expected to reverse within the next year are classified as current liabilities.
How are notes payable classified?
Notes payable due beyond 12 months are classified as non-current liabilities.
