Statement of Financial Position

Objective A: The Foundations of the SFP

The statement of financial position is built on three foundations:

1. The accounting equation: Assets = Liabilities + Equity. The SFP is simply a detailed presentation of this equation.

2. IFRS Accounting Standards: IAS 1 (Presentation of Financial Statements) prescribes the minimum content and structure. Assets and liabilities must be classified as current or non-current. Items must be presented in order of liquidity (or reverse liquidity).

3. The business entity concept: The SFP reports only the assets, liabilities, and equity of the business, not the personal affairs of the owners.

Objective B: Preparing the SFP

The standard format under IFRS is:

Statement of Financial Position as at [date]

Non-current assets
Property, plant and equipment X
Intangible assets X
---
X
Current assets
Inventories X
Trade and other receivables X
Cash and cash equivalents X
---
X
---
Total assets X
===

Equity
Share capital X
Share premium X
Retained earnings X
Revaluation surplus X
---
Total equity X

Non-current liabilities
Long-term borrowings X
---
X
Current liabilities
Trade and other payables X
Short-term borrowings X
Tax payable X
---
X
---
Total equity and liabilities X
===