1. Section 4 Statement of Financial Position
The IFRS for SMEs
Section 4
Statement of Financial Position
By: Olonje
11/20/2018

2. Section 4- Scope Section 4:
The statement of financial position (SOFP) (sometimes called the balance sheet) presents an entity’s assets, liabilities and equity as of a specific date at the end of the reporting period.
Section 4:
Set out the information to be presented in a statement of financial position and how to present it
By: Olonje
11/20/2018

3. Section 4 – Line items
Specifies minimum line items—sufficiently different in nature or function for separate presentation (see Para. 4.2)
Requires additional line items headings and subtotals when relevant to an understanding of the entity’s financial position.
Sequencing, format, and titles are not mandated
Some items may be presented in the SOFP or in the notes (see Para. 4.11– 4.14)
By: Olonje
11/20/2018

4. Section 4- line items. continued
Provide information that is relevant to an understanding of the entity’s financial position
In making aggregation/disaggregation judgements consider
the amounts, nature and liquidity of assets
the function of assets within the entity
the amounts, nature and timing of liabilities
By: Olonje
11/20/2018

5. Section 4- Current/Non-current distinction
Make current/non-current distinction unless liquidity presentation is reliable and more relevant
In liquidity presentation present assets and liabilities in order of liquidity
Current assets and current liabilities are defined
All other assets and liabilities are non-current
Deferred tax balances are non-current
By: Olonje
11/20/2018

6. Section 4- Current Assets
Current asset if;
expect to realise, sell or consume in entity’s normal operating cycle
held for trading
expects to realise in next 12 months
cash or equivalent, unless restricted for +12 months
By: Olonje
11/20/2018

7. Section 4- examples current assets
A produces whiskey from barley, water and yeast in a 24‑month distillation process. Inventories include barley and yeast raw materials, partly distilled whiskey and distilled whiskey.
Current assets—expected to be realised (i.e. turned into cash) in the entity’s normal operating cycle.
By: Olonje
11/20/2018

8. Section 4- examples. continued
On 1/1/20X7 B invested Kshs. 900,000 in corporate bonds.
Fixed interest of 5% per year is payable on 1 January each year.
Capital is repayable in 3 annual instalments of Kshs. 300,000 each starting 31/12/20X8.
As At 31/12/20X7 A presents:
current assets—Kshs. 45,000 accrued interest & Kshs. 300,000 capital repayable on 31/12/20X8—expected to be realised within 12 months
non-current asset—Kshs. 600,000 in +12 months
By: Olonje
11/20/2018

9. Section 4- Current Liabilities
Current liability if;
expect to settle in entity’s normal operating cycle
held for trading
due to be settled in next 12 months
entity does not have an unconditional right to defer settlement for at least 12 months after reporting date
By: Olonje
11/20/2018

10. Section 4- examples current liabilities
An obligation to suppliers for the purchase of raw materials.
Current liability—expected to settle (i.e. pay) the supplier in the entity’s normal operating cycle.
At 31/12/20X7 A was in breach of a covenant in a loan that is otherwise repayable 3 years later. The breach entitles (but does not oblige) the bank to require immediate repayment.
At 31/12/20X7 the loan is a current liability—at 31/12/20X7 A does not have an unconditional right to defer settlement for at least 12 months.
By: Olonje
11/20/2018

11. Section 4- examples
Same as in Example above; except after the end of the reporting period (31/12/20X7) and before the financial statements were approved for issue, the bank formally agreed not to demand early repayment of the loan.
At 31/12/20X7 the loan is a current liability—at 31/12/20X7 A does not have an unconditional right to defer settlement for at least 12 months.
By: Olonje
11/20/2018