International financial reporting standards (IFRS) require a statement of financial position for each accounting period. The more common name for this statement is the balance sheet; IFRS dictates a few differences from other national accounting standards. The best tips for an IFRS balance sheet include learning the classifications for certain assets and liabilities, use consistency in the preparation of the IFRS balance sheet, and determination of any exemptions that may exist for the company’s balance sheet. All of these items combined can help prepare a company to comply with certain important IFRS accounting procedures. For example, exemptions may exist if a country already has a certain accounting rule in place for a given business item or activity.
IFRS does not classify all assets and liabilities in the same way as other national accounting standards, such as generally accepted accounting principles (GAAP). For example, the IFRS balance sheet may exclude any long-term debt from current liabilities. This may relate to long-term debt that a company may be able to classify as short-term debt due to certain restrictions in the debt covenant. While GAAP may allow a company to classify this item as short-term debt initially, the IFRS balance sheet will not follow this standard. Other classification changes may exist between IFRS and other national accounting standards for assets and liabilities that help individuals prepare accurate business financial statements.
The consistent preparation of the IFRS balance sheet is another good tip for preparers. When a company switches to IFRS for the first time, it may be able to select a specific format for financial statements. The IFRS balance sheet is no different when it comes to the consistent preparation of accounting information. The selection of a balance sheet format that best matches the inputs that go into the financial statement is a good start for this accounting process. Companies should not drastically change or alter the IFRS balance sheet in order to provide the same data over time, which allows for a better trend analysis.
In its most basic terms, IFRS represents accounting standards for many different nations that have different currencies and financial operations. Countries may not fully adopt every aspect of IFRS for businesses that operate within the country’s borders. Therefore, exemptions may exist for certain financial activities or other items in the IFRS balance sheet. A company needs to understand what these exemptions are so the balance sheet meets only the required format. Many different IFRS statements list the requirements for financial statements and other requirements for accounting procedures.