Ch05 Kieso Ifrs4

Intermediate Accounting
IFRS Edition
Kieso, Weygandt, Warfield
Fourth Edition
Chapter 5
Statement of Financial Position and Statement of Cash
Flows
Prepared by
Coby Harmon
University of California, Santa Barbara
Westmont College
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Copyright ©2020 John Wiley & Sons, Inc.
Learning Objectives
After studying this chapter, you should be able to:

LO 1 Explain the uses, limitations, and content of the statement of
financial position.
LO 2 Prepare a classified statement of financial position.
LO 3 Explain the purpose, content, and preparation of the
statement of cash flows.
LO 4 Describe additional types of information provided.
Copyright ©2020 John Wiley & Sons, Inc. 2

PREVIEW OF CHAPTER 5

Learning Objective 1
Explain the uses, limitations, and
content of the statement of financial
position.
LO 1 Copyright ©2020 John Wiley & Sons, Inc. 4

Statement of Financial Position
Statement of financial position, also referred to as the

งบ#ล
balance sheet: Liability quityl
Asset =
+ [
Asset เ&น เ(ยว + ใ- Asof
Net ) งบ
1. Reports assets, liabilities, and equity at a specific date.

LiabilityAsset
=
=
2. Provides information about resources, obligations to

Equity dinaryshar CO e)
creditors, and equity in net resources.

p Crvnt 1 Non -
Crent
3. Helps in predicting amounts, timing, and uncertainty of

future cash flows. 1 3าง 6งไ8ไ9 เ:น ;<บ
บน แร ณ คง ะ
เกณ1 เ:นสด : <บ ตาม กระแส เ:นสด

Usefulness
Bนวณ Cตรา Dวน ROA ะ
p NI
• Computing rates of return. ltotalasset → EนทGพI Jอ ใL เMด รายไ9
?
ROEINI 1 E Nไร 1 เOาของ
• Evaluating the capital
→
เOาของ
structure. ประเSนโครงสUาง Qน r Jอ หW Qน ?
ลง
L "
A =
Lt E
ๆ
• Assess risk and future cash
flows. Ex . Yอง Z [ง B เ\อ ห] ^ญ
Accovnt Recive ก .
• Assess the company’s:

o Liquidity,
o Solvency, and = ค สามารถ
.
ใน การ aระ หW
o Financial flexibility.

Limitations
• Most assets and liabilities are
reported at historical cost.
preciation Imparment Ex.de
• Use of judgments and estimates.

,
• Many items of financial value

are omitted.
↳
bคคล ) : ไ8 สามารถ cด dลeาไ9
Ex .
Interrectuallost 1 ทGพยากร
historicalcost
Goodi Reliable fน จน+hาย จiง ๆ

°
o
Bad ะ Revulation dลeา ป จ . ของ AIS ไ8 เjา ;บ dลeา +kนlก ใน งบ
จะ
mา หา
dลeา ใน nองตลาดไ8ไ9 Yองใ- Markto Model
B นอน ทาง คoตศาสตq i. จะ ไ8 Reliable
แr sด FV จะ Relevance

Elements of the Statement of Financial
Position
Asset
• Resource controlled An asset : New

by the entity. a present economic resource
controlled by the entity as a result of
• Result of past events. past events. Eทt ใน economicresourceundercontrolled
µ ๚µ
• Future economic
An economic resource :
benefits are expected
-
a right that has the potential to

to flow to the entity. produce economic benefits.

Position
Liability
" " " ม
Eqvity
*
A liability: . . .
• Present obligation of the entity. a present obligation of the

entity to transfer an economic
• Arising from past events. resource as a result of past
• Settlement is expected to result events.
in an outflow of resources
An obligation is a duty or
embodying economic benefits. responsibility that an entity has
no practical ability to avoid.
Position
Equity
• Residual interest in the assets of the entity after

deducting all its liabilities. Dวนไ9 เvย คงเหwอ Asset liabilityจาก -
• Equity is a residual; that is, something left over. In other words:

Equity (Net Assets) = Assets − Liabilities

Classification
n
^
ILLUSTRATION 5.1

รายการย่ อกรมพัฒนาธุรกิจการค้ ากระทรวงพาณิชย์
12
→
Prepaid Net
[ FRS 1s :c ontraltassets เxอนไข ก .

เ ;บ เ:น yน
+ ไ8 ใz เวลา
:L CNRV → lowerlostot Net Realizable Dวน rาง เ{า 10 6 51 Other Rev & Exp .
"" " " " "e

5- FUCTS
TAS 41 BI ological Assets | BBAาBย

ี
4Mt
FVLCTS
IFRS 9 _
→
Supply
Non -
Crurent helforsale
↳
Discontinue ~ด Mจการ
13
If RS 9
If RS 15
เก•ง Nไร
a
Investment PPE → ใL เzา

↳ Fv →
p i. Cost บ
ไ8 ไ9 ใ- ใน ก €เ•น งาน
.
IAS 16 Cost Modela Revalve

รา PV
Rightofused AIS If RS 16 Lease Yอง discountcashflows การ ‚ Als dลeา ^ง เzา เMน 1 ƒ
1 PPE แr Yอง „ด
Goodwill
=
Depre . Dr .
Rightotused Als
^ง 1
cr . Lease Liability
CBAicons_UmableFVLCTSpiologicalAssetSXBBAiBe_arFVl.CI
f
ก เ{า PL
CBAicons_umab_leEx.at ค เ‡อ ˆอ ‰นŠ FVLCTS CA
|
,
• …ต†
ร
BBAiBeare_rEx.msม FVLCTS NCA
CBAiconsumabl_eEx.at ย •อย ผล ผ•ต +6ง อ•บน Yน FVLCTS

g
* ‹ช =
Cost Model
BBAIBEGLIEEX ‘ม ชา .
เถา
อ’น มะพUาว Cost -
Dep .
-
Imp TTAS 1 6)
ใL ผล ผ•ต มาก ก“า period ขาย เ&น ผ•ตผล ทาง ก เกษตรไ8 ไ9 เ•น แr ขาย เ&น ซาก
↳ 1 .
14
N 1A
ro Z ยอด —นผวน
Bankoveredrat mาใ- ใน การ บiหาร ทาง ก เ:น
ยาง
.
ะ
Cashไ9
Income Tax
Payable Yอง แยก จาก Payable yน
Provision
Non - Cvrrent Als
˜ ™ ;บ
↳ 1.11 :D iscontnve heltorsale
15
ไ•ใน L หšอ E Jไ9
Defer Tax
DBO
16
Issuedand Paid
Premium
→ กร‚ hาย Dividend sด s % จาก Nไร ›ทt

œก จาก Unapro
17
AOCI :O ther componentsot Equity
= NCI
18
Classification
Non-Current Assets
Generally consists of:
• Long-Term Investments
• Property, Plant, and Equipment
• Intangibles Assets
• Other Assets

Non-Current Assets
Long-Term Investments
ก CCCTest
1. Securities (bonds, ordinary shares, or long-term notes).

2. Tangible assets not currently used in operations (land
เรา Gง Nไร
held for speculation). Investment= PPE
DBO
3. Special funds (sinking fund, pension fund, or plant

expansion fund).
4. Non-consolidated subsidiaries or associated companies.

Classification
Under IFRS-9, all financial instruments should be classified according to the following
scheme (source: EY): เ•ยน แžว
ร i
→ CCCTest
= SPPI ✓ ✗ ✗ ✗
For Trading
เŸอ 3า = Current =
current
Gบ principal & Int .
พUอม ขาย
Qก
เอ
Non -
Current lurrentornon
Current m
ก
or
บ
Non lvrrent LO 1
-
↳
Accovnt Recivable ใ- AMC
Classifications of Debt Securities
↳ ccc Test
Non -
Current Cvrentor Non Current
AMC
โ
OCI-Recycling
LO 1
Classifications of Equity Securities
Current
✓
^
OCI
Non-recycling
trve
MK

Presentation of Long-Term Investments
ILLUSTRATION 5.2

Non-Current Assets
Property, Plant, and Equipment
↳
Yอง หา Acc. Depre
Tangible long-lived assets used in the regular operations of

the business.
• Physical property such as land, buildings, machinery,
furniture, tools, and wasting resources (minerals).
ไ8 Yอง sด eา เ¡อม แr Impairไ9
• With the exception of land, a company either depreciates
(e.g., buildings) or depletes (e.g., oil reserves) these assets.
เ ก

Presentation of Property, Plant, and Equipment
ILLUSTRATION 5.3

= …ญญา เzา


Non-Current Assets
Intangible Assets IAS 38
Lack physical substance and are not financial instruments.

• Patents, copyrights, franchises, goodwill, trademarks,
trade names, and customer lists.
• Amortize limited-life intangible assets over their useful
lives. „ด อา¢ ใL ป
ตาม การ ย .
• Periodically assess indefinite-life intangibles for

impairment. ไ8 „ด £ แe Imparment
จน

Presentation of Intangible Assets
ILLUSTRATION 5.4

Non-Current Assets
Other Assets
Items vary in practice. Can include:
• Long-term prepaid expenses
• Non-current receivables
• Assets in special funds Qน “า ไ9
กอง
ใน [ ƒ
ๆ คาด ขาย ภาย
• Property held for sale ( current )

{อ ¥;ด
• Restricted cash or securities

Classification
Current Assets
Cash and other assets a company expects to convert into cash, sell,
or consume either in one year or in the operating cycle, whichever
is longer.
ILLUSTRATION 5.5

Current Assets
Inventories
Disclose:
• Basis of valuation (e.g., lower-of-cost-or-net realizable
value). LCNRV
• Cost flow assumption (e.g., FIFO or average cost).

Presentation of Inventories

Current Assets
Inventories

Current Assets
Receivables 1
-
AM C ะ IMP airment → ECL :[ xpectedcardit Loss
Major categories of receivables should be shown in the

statement of financial position or the related notes.
A company should clearly identify
• Anticipated loss due to uncollectibles.
• Amount and nature of any non-trade receivables.
B ประ;น
• Receivables used as collateral.
↳ ขาย ลด
¦ก
หW with Record lwithout Record
↳ =
Collateral

Presentation of Receivables
IMP . LOSS
ILLUSTRATION 5.8

ILLUSTRATION 5.8

ป จบ .
=
IFRS 9 โ
ILLUSTRATION 5.8

Current Assets
Prepaid Expenses
Payment of cash, that is recorded as an asset because service or
benefit will be received in the future.
Prepayments often occur in regard to:

• Insurance
• Supplies
• Advertising
• Rent
• Taxes
Presentation of Prepaid Expenses
ILLUSTRATION 5.9

Presentation of Short-Term Investments
ILLUSTRATION 5.10

Current Assets
Cash current
=
Cash § saving
• Generally consist of currency and demand deposits.
• Cash equivalents - short-term, highly liquid investments
that mature within three months or less. <บ cน + ไ9 3M จาก
. มา
• Restrictions or commitments must be disclosed.

¨ว เ:น ค©ง ไ8 เMน เªอน Cash Eguivalents
อา¢ 3 =

Presentation of Cash and Cash Equivalents
ILLUSTRATION 5.11

Presentation of Restricted Cash
ILLUSTRATION 5.12

Presentation of Cash and Cash Equivalents
=
ondemand

Classification
Equity
1. Share Capital. The par or stated value of shares issued. It includes
ordinary shares (sometimes referred to as common shares) and
preference shares (sometimes referred to as preferred shares).
2. Share Premium. The excess of amounts paid-in over the par or
stated value.
3. Retained Earnings. The company’s undistributed earnings.
4. Accumulated Other Comprehensive Income. The aggregate amount
of the other comprehensive income items.
5. Treasury Shares. Generally, the amount of ordinary shares
repurchased.
6. Non-Controlling Interest (Minority Interest). A portion of the equity
of subsidiaries not owned by the reporting company.
Presentation of Equity
ILLUSTRATION 5.13

Presentation of Reserves
ILLUSTRATION 5.14

Presentation of Equities
Mk True

Statement of Changes in Equity
Consolidated financial statements

Equity attributable to owners of the Company
Other component of shareholders' equity
Other comprehensive income
Exchange
differences on
Capital reserve Retained earnings translation of Fair value Total other Total equity Equity attributable
Issued and for share-based Appropriated - financial reserve of components of attributable to to non-controlling Total
paid-up payment statutory statements in investments shareholders' owners of interests of shareholders
Note share capital Share premium transactions reserve Unappropriated foreign currencies at FVOCI →
Recycelingequity the Company the subsidiaries equity
Balance as at 1 January 2020 920,878,100 8,785,027,903 656,331,057 92,585,000 3,844,557,041 4,776,404 2,322,227 7,098,631 14,306,477,732 320,210,479 14,626,688,211
Profit for the year - - - - 907,372,570 - ; เ{า - - 907,372,570 4,233,435 911,606,005
ก Non
-
Recyecling RE เลย
Other comprehensive income for the year - - - - (30,256,221) (699,482) (2,322,227) (3,021,709) (33,277,930) - (33,277,930)
Total comprehensive income for the year - - - - 877,116,349 (699,482) (2,322,227) (3,021,709) 874,094,640 4,233,435 878,328,075
Dividend paid 31 - - - - (1,657,572,405) - - - (1,657,572,405) - (1,657,572,405)
Balance as at 31 December 2020 920,878,100 8,785,027,903 656,331,057 92,585,000 3,064,100,985 4,076,922 - 4,076,922 13,522,999,967 324,443,914 13,847,443,881
↳
ตรงใน
งบ#ล

Classification
Non-Current Liabilities
Obligations that a company does not reasonably expect to liquidate
within the longer of one year or the normal operating cycle. Three
types:
«ดหา เ:น ก .
1. Obligations arising from specific financing situations.

2. Obligations arising from the ordinary operations of the
company.
3. Obligations that depend on the occurrence or non-occurrence
of one or more future events to confirm the amount payable,
or the payee, or the date payable.

Presentation of Non-Current Liabilities
ILLUSTRATION 5.15

Presentation of Non-Current Liabilities
true
Non-current liabilities
Long-term borrowings 28 158,491,494

Financial liabilities at fair value อ¬‰น-
through profit or loss 10 1,139,170
Deferred tax liabilities 26 6,251,016
Unrealised discount on acquisition cost of
telecom licence 25 -
Lease liabilities 31 113,751,160
Liabilities under agreements and
licences for operation 32 55,521,542
Employee benefits obligations 33 3,990,075
Provisions 34 6,485,825
Other non-current liabilities 35 10,514,517
Total non-current liabilities 356,144,799

Classification
Current Liabilities
Obligations that a company generally expects to settle in its
normal operating cycle or one year, whichever is longer.
Includes:
1. Payables resulting from the acquisition of goods and services.
2. Collections received in advance for the delivery of goods or
performance of services.
3. Other liabilities whose liquidation will take place within the
operating cycle or one year.

Presentation of Current Liabilities
ILLUSTRATION 5.16

Current liabilities
Short-term borrowings 28 3,500,000

Financial liabilities at fair value
through profit or loss 10 1,274,426
Trade and other payables 29 90,276,648
Current portion of lease liabilities 31 12,654,125
Current portion of long-term borrowings 28 61,007,697
Short-term loans from related parties 42 -
Income tax payable Yอง แยก แสดง Tax 161,833
Other current liabilities 30 6,911,239
Total current liabilities 175,785,968

ไ9 Gบ ®วงห¯า
ราย

Prepare a classified statement of
financial position.

Account Form and Report Form
• IFRS does not specify the order or format of the items in
the statement.
• Two general forms:
o 1. Account form → T A แ 0 Unt งบ จบ ใน ห¯า เ(ยว
• Assets on left side
• Equity and liabilities on right side
o 2. Report form Dวนให°ใ-
• Lists the sections one above the other

Classified Report-Form Statement of
Financial Position
The report form
lists assets,
followed by
equity and
liabilities
directly below,
on the same
page.
ILLUSTRATION 5.17

Explain the purpose, content, and
preparation of the statement of cash
flows.

Statement of Cash Flows
↳ เรา รณ1 เ:น สด
ใ-บ ให° .
An important element of the objective of financial reporting is

“assessing the amounts, timing, and uncertainty of cash
flows.” ใ- การ± ไ9 →
คาด
IASB requires the statement of cash flows (also called the

cash flow statement).

Purpose of the Statement of Cash
Flows
Primary Purpose: To provide relevant information about the
cash receipts and cash payments of an enterprise during a
- 2 m n
n n r n
period.
Statement provides answers to the following questions:
1. Where did the cash come from?
2. What was the cash used for?
3. What was the change in the cash balance?

Content of the Statement of Cash Flows
1
2
3
OFO CFI CFF → NCL E
Operating
,
Investing Activities Financing

Activities เ²ยว{อง ;บ รายการ NCA
เ&น
จะ ใน Nไร Qน
รายการ งบ ขาด +
Change Making and Activities
Transactions that CA.CL เ²ยว{อง ;บ ก Jอ หW & «ดหา เ:น
.
(E)
enter into the collecting loans and Transactions

determination of acquiring and involving
net income. disposing of liability and
t
Change CA CL
investments and
บาง รายการ อาจไ8
,
equity items.
อ•
Ex .
Intrest Payable → F property, plant, and
equipment.
ยกเ•น ³อ
´น ก©บµน

Basic Format of Cash Flow Statement
↳ Yอง ตรง ;บ
งบ#ล บน ¶ด แรก lcash & Cash E)
ILLUSTRATION 5.18

Cash Inflows and Outflows
→ ³อ ´น µน
ILLUSTRATION 5.19

Sources of Information
Information obtained from several sources:

1. comparative statements of financial position,
2. current income statement, and
3. selected transaction data.
Yอง
˜ Bussiness .
Merchandising →
Inventory :O
perating [ A
land ะ
Investing
→
NCA
Dividend
I" " "" "
loanto
} อ•ไ9·ง ™ แrLาม เป¸ยนไป
9
→
:
Investing Nc A → Interest Receipts "
or มา
0M ation £ใL ยอด ˜ (
"
BO Dividend →
rrowing : Financing
→
"" "
Interrestpayment
Ncl
} อ•ไ9·ง ™
⇒ ก "
9
•
Real Estate Land
or B ถาม {อ 8,9
→ :
operating (A
w
Operation
งาน
Bank loan :O perating

•
→
→
Interest Receipts Operating
เjา¹น
→
Borrowing :O perating ]
Interestpayment Operating
⇒

Preparation of Statement of Cash Flows
Illustration: On January 1, 2022, in its first year of operations,

Telemarketing Inc. issued 50,000 ordinary shares of $1 par
value for $50,000 cash. The company rented its office space,
furniture, and telecommunications equipment and performed
marketing services throughout the first year. In June 2022, the
company purchased land for $15,000.
Illustration 5.20 shows the company’s comparative
statements of financial position at the beginning and end of
2022.
Illustration 5.21 shows the company’s income statement data.

Financial Statements Needed to
Prepare the Statement of Cash Flows
ILLUSTRATION 5.20
ILLUSTRATION 5.21

Four Steps
Determine:
1. Net cash provided by (or used in) operating activities.
2. Net cash provided by (or used in) investing and financing
activities.
3. Determine the change (increase or decrease) in cash
during the period.
4. Reconcile the change in cash with the beginning and the
ending cash balances.

Preparing the Statement of Cash Flows
Net Cash Provided by Operating Activities
• Excess of cash receipts over cash payments from operating
activities.
• Determined by converting net income on an accrual basis
to a cash basis.
• Add to or deduct from net income those items in the
income statement that do not affect cash.
• Requires an analysis of the current year’s income
statement, comparative statements of financial position
and selected transaction data.

Net Cash Provided by Operating
Activities
Analysis of Telemarketing’s comparative statements of financial position
reveals two items that will affect the computation of net cash provided by
operating activities:
1. The increase in accounts receivable reflects a non-cash increase of
$41,000 in revenues.
2. The increase in accounts payable reflects a non-cash increase of
$12,000 in expenses.
Therefore, to arrive at net cash provided by operating activities,
Telemarketing Inc. deducts from net income the increase in accounts
receivable ($41,000), and it adds back to net income the increase in
accounts payable ($12,000). As a result of these adjustments, the
company determines net cash provided by operating activities to be
$10,000.
Computation of Net Cash Provided by
Operating Activities
ILLUSTRATION 5.22

Net Cash Flows Provided by Investing
and Financing Activities
Telemarketing Inc.’s investing activities.
• Purchased land for $15,000.
Telemarketing Inc.’s financing activities.
• Issued ordinary shares for $50,000.
• Paid $14,000 in dividends.

Investing and Financing Activities
Purchase of Land
Paid $15,000
to buy land
ILLUSTRATION 5.22

Issuance of Ordinary Shares
Receipt of
$50,000 cash
from issuance
of shares
ILLUSTRATION 5.23

Payment of Dividends
Paid $14,000
for dividends
ILLUSTRATION 5.23

Brief Exercise 5-12
Keyser Beverage Company reported the following items in the
most recent year.
Activity
Net income $40,000
Dividends paid 5,000
Increase in accounts receivable 10,000
Increase in accounts payable 7,000
Purchase of equipment 8,000
Depreciation expense 4,000
Issue of notes payable 20,000
Required: Determine if each item should be classified as an operating,

investing, or financing activity.

Brief Exercise 5-12
Solution
Keyser Beverage Company reported the following items in the
most recent year.
Activity
Net income $40,000 Operating
Dividends paid 5,000 Financing
Increase in accounts receivable 10,000 Operating
Increase in accounts payable 7,000 Operating
Purchase of equipment 8,000 Investing
Depreciation expense 4,000 Operating
Issue of notes payable 20,000 Financing

Significant Non-Cash Activities
Reported in a separate note to the financial statements.
Examples include:
• Issuance of ordinary shares to purchase assets.
• Conversion of bonds into ordinary shares.
• Issuance of debt to purchase assets.
• Exchanges on long-lived assets.

Comprehensive Statement of Cash
Flows
ILLUSTRATION 5.24

Usefulness of Statement of Cash Flows
Without cash, a company will not survive.

Cash flow from Operations:
• High amount - able to generate sufficient cash from
operations to pay its bills without further borrowing.
• Low or negative amount - may have to
o borrow or
o issue equity securities.

Financial Liquidity
ILLUSTRATION 5.26
Ratio indicates the ability to pay off current liabilities from

operations.
Ratio near 1:1 is good.

Financial Flexibility
ILLUSTRATION 5.27
Ratio indicates the ability to repay liabilities from net cash

provided by operating activities, without having to liquidate
assets employed in operations.

Free Cash Flow
ILLUSTRATION 5.29
Indicates the amount of discretionary cash flow available.

Describe additional types of information
provided.

Additional Information
IFRS requires that a complete set of financial statements be presented

annually. Comprised of the following:
1. Statement of financial position at the end of the period;
2. Statement of comprehensive income for the period to be presented
either as:
a) One single statement of comprehensive income.
b) A separate income statement and statement of comprehensive income.
3. Statement of changes in equity;
4. Statement of cash flows; and
5. Notes, comprising a summary of significant accounting policies and
other explanatory information.

Additional Information
Notes to the Financial Statements
Accounting Policies
• Specific principles, bases, conventions, rules, and practices
applied in preparing and presenting financial information.
• First note generally titled, “Summary of Significant
Accounting Policies.”

Notes to the Financial Statements
Examples of Footnote Disclosure
ILLUSTRATION 5.30
ILLUSTRATION 5.31

Additional Notes to the Financial Statements
Item 1
IFRS requires specific disclosures. Examples include:
1. Items of property, plant, and equipment are disaggregated
into classes such as
• land,
• buildings, etc.,
• in the notes, with related accumulated depreciation
reported where applicable.

Item 2
2. Receivables are disaggregated into amounts
• receivable from trade customers,
• receivables from related parties,
• prepayments, and
• other amounts.

Items 3 and 4
3. Inventories are disaggregated into classifications such as
merchandise, production supplies, work in process, and
finished goods.
4. Provisions are disaggregated into provisions for employee
benefits and other items.

Additional Notes
Maturity Analysis for Receivables
ILLUSTRATION 5.34

Additional Notes
Maturity Analysis for Financial Liabilities
ILLUSTRATION 5.35

Techniques of Disclosure
Parenthetical Disclosure of Shares Issued
ILLUSTRATION 5.35
Parenthetical explanation is an advantage over a note because it
brings the additional information into the body of the statement
where readers will less likely overlook it.

Techniques of Disclosure
Cross-Reference and Contra Items
Companies “cross-reference” a direct relationship between an
asset and a liability on the statement of financial position.
ILLUSTRATION 5.38

Other Guidelines
Offsetting
• IAS No. 1 indicates that it is important that assets and

liabilities, and income and expense, be reported
separately. Lาม œก ;น
กลบ
• It is proper to measure assets net of valuation

allowances, such as allowance for doubtful accounts
or inventory net of impairment.
Other Guidelines
Consistency
• The Conceptual Framework indicates that companies

should follow consistent principles and methods from
one period to the next.
• Accounting policies must be consistently applied for
similar transactions and events unless an IFRS
requires a different policy.
Other Guidelines
Fair Presentation
• Faithful representation of transactions and events

using the definitions and recognition criteria in the
Conceptual Framework.
• Presumed that the use of IFRS with appropriate
disclosure results in financial statements that are
fairly presented.
Identify the major types of financial
ratios and what they measure.

Using Ratios to Analyze Performance
Major Types of Ratios

Liquidity Ratios. Measures of the company’s short-term ability to
pay its maturing obligations.
Activity Ratios. Measures of how effectively the company uses its
assets.
Profitability Ratios. Measures of the degree of success or failure of
a given company or division for a given period of time.
Coverage Ratios. Measures of the degree of protection for long-
term creditors and investors.

A Summary of Financial Ratios
Liquidity and Activity Ratios
ILLUSTRATION 5A.1

A Summary of Financial Ratio
Profitability Ratios
ILLUSTRATION 5A.1

A Summary of Financial Ratios
Coverage Ratios
ILLUSTRATION 5A.1

Compare the statement of financial
position and statement of cash flows
under IFRS and U.S. GAAP.

Global Accounting Insights
Similarities
Following are the key similarities between U.S. GAAP and IFRS related to the
statement of financial position.
• Both U.S. GAAP and IFRS allow the use of the title “balance sheet” or
“statement of financial position.” IFRS recommends but does not require the
use of the title “statement of financial position” rather than balance sheet.
• Both U.S. GAAP and IFRS require disclosures about (1) accounting policies
followed, (2) judgments that management has made in the process of
applying the entity’s accounting policies, and (3) the key assumptions and
estimation uncertainty that could result in a material adjustment.
Comparative prior period information must be presented and financial
statements must be prepared annually.
• U.S. GAAP and IFRS require presentation of non-controlling interests in the
equity section of the statement of financial position.

Differences
• U.S. GAAP follows the same guidelines as presented in the
chapter for distinguishing between current and noncurrent
assets and liabilities. However, under U.S. GAAP, public
companies must follow U.S. SEC regulations, which require
specific line items. In addition, specific U.S. GAAP mandates
certain forms of reporting for this information. I F R S requires
a classified statement of financial position except in very
limited situations.
• Under U.S. GAAP cash is listed first, but under IFRS it is many
times listed last. That is, under IFRS, current assets are usually
listed in the reverse order of liquidity than under U.S. GAAP.

More Differences
• U.S. GAAP has many differences in terminology that you will notice in this
textbook. One example is the use of common stock under U.S. GAAP,
which is referred to as share capital—ordinary under IFRS.
• Use of the term “reserve” is discouraged in U.S. GAAP, but there is no such
prohibition in IFRS.

About the Numbers
The order of presentation in the statement of financial position differs between
U.S. GAAP and IFRS. As indicated in the following table, U.S. companies generally
present current assets, non-current assets, current and non-current liabilities,
and shareholders’ equity. In addition, within the current asset and liability
classifications, items are presented in order of liquidity.
ILLUSTRATION GAAP5.1

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of these programs or from the use of the information contained herein.

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Intermediate Accounting

After studying this chapter, you should be able to:

Copyright ©2020 John Wiley & Sons, Inc. 2

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Statement of financial position, also referred to as the

1. Reports assets, liabilities, and equity at a specific date.

2. Provides information about resources, obligations to

creditors, and equity in net resources.

3. Helps in predicting amounts, timing, and uncertainty of

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• Assess the company’s:

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• Use of judgments and estimates.

• Many items of financial value

Goodi Reliable fน จน+hาย จiง ๆ

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• Resource controlled An asset : New

a right that has the potential to

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• Present obligation of the entity. a present obligation of the

• Residual interest in the assets of the entity after

• Equity is a residual; that is, something left over. In other words:

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1. Securities (bonds, ordinary shares, or long-term notes).

3. Special funds (sinking fund, pension fund, or plant

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Current Cvrentor Non Current

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Tangible long-lived assets used in the regular operations of

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Lack physical substance and are not financial instruments.

• Periodically assess indefinite-life intangibles for

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• Property held for sale ( current )

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• Cost flow assumption (e.g., FIFO or average cost).

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AM C ะ IMP airment → ECL :[ xpectedcardit Loss

Major categories of receivables should be shown in the

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