How to prepare the Balance Sheet (Statement of Financial Position) under IFRS and US GAAP

The statement of financial position — commonly called the balance sheet under US GAAP — presents an organization’s assets, liabilities, and equity at a specific point in time. While both IFRS (IAS 1) and US GAAP (ASC 205) aim to provide a structured and transparent representation of financial standing, the frameworks differ in format, classification, and terminology. Preparing a compliant statement requires a detailed understanding of recognition rules, measurement criteria, and disclosure requirements in each system.

The statement of financial position summarizes an entity’s resources and obligations at a point in time.

The objective of the statement is to present a clear picture of what an entity owns and owes, enabling users to evaluate its financial health and liquidity. Both IFRS and US GAAP require the inclusion of:

• Assets: Resources controlled by the entity expected to bring future benefits.

• Liabilities: Present obligations expected to lead to outflows of resources.

• Equity: Residual interest after liabilities are deducted from assets.

Under IFRS, the terminology used is “Statement of Financial Position” and the structure is defined in IAS 1 – Presentation of Financial Statements. Under US GAAP, the same document is commonly called a Balance Sheet, and its requirements are primarily addressed in ASC 205 and other topic-specific sections.

The classification of assets under IFRS and US GAAP requires distinct presentation rules.

One of the most critical differences lies in how assets are classified and presented:

• IFRS (IAS 1): Entities may present their statement either in a classified format (current vs non-current) or based on liquidity order when this provides more relevant information (e.g., for banks and insurers).

• US GAAP (ASC 210): A classified balance sheet distinguishing current and non-current items is required, making this approach mandatory for almost all entities.

Asset Classification	IFRS (IAS 1)	US GAAP (ASC 210)
Flexibility	Classified or liquidity-based format allowed	Classified format required
Current assets	Expected to be realized within 12 months or within the normal operating cycle	Expected to be realized within one year or within the normal operating cycle
Examples of current assets	Cash, receivables, inventories, short-term investments	Same as IFRS
Examples of non-current assets	PPE, intangible assets, deferred tax assets, long-term investments	Same as IFRS

Under IFRS, a financial institution such as a bank can arrange its assets by liquidity, showing cash balances first, followed by receivables, securities, and long-term investments, without separating them into current and non-current categories. Under GAAP, this is not permitted.

The classification of liabilities under IFRS and US GAAP impacts liquidity analysis and disclosures.

Liabilities represent obligations requiring settlement in the future, either in cash, goods, or services. While both IFRS and GAAP broadly distinguish current and non-current liabilities, the requirements differ:

• IFRS (IAS 1): Entities can adopt either a classified or liquidity-based format, depending on which is more relevant to users.

• US GAAP: A classified balance sheet showing current and non-current liabilities separately is mandatory.

Liability Classification	IFRS (IAS 1)	US GAAP (ASC 210)
Flexibility	Classified or liquidity-based formats allowed	Classified format required
Current liabilities	Obligations due within 12 months or the operating cycle	Obligations due within one year or the operating cycle
Examples of current liabilities	Trade payables, short-term borrowings, accrued expenses	Same as IFRS
Examples of non-current liabilities	Bonds payable, pension liabilities, deferred tax liabilities	Same as IFRS

This difference particularly affects entities in capital-intensive industries and financial services, where the liquidity-based presentation under IFRS provides a more operationally relevant view.

Equity presentation differs in terminology and required disclosures between IFRS and US GAAP.

Equity represents the residual interest after deducting liabilities from assets. While the structure appears similar under IFRS and GAAP, terminology, presentation, and disclosure depth differ significantly:

• IFRS: Equity is typically broken into share capital, share premium, retained earnings, reserves, and non-controlling interests. The presentation must follow a detailed reconciliation approach showing movements in each component.

• US GAAP: Equity presentation is more focused on common stock, additional paid-in capital, retained earnings, and accumulated other comprehensive income (AOCI). Certain details, such as share class reconciliation, are often disclosed in the notes rather than on the face of the balance sheet.

Equity Component	IFRS (IAS 1)	US GAAP (ASC 505)
Share capital	Always disclosed separately	Disclosed but less standardized
Reserves	Multiple reserve categories required	Often combined into AOCI
Non-controlling interests	Always presented within equity	Required only for consolidated entities
Reconciliation	Full reconciliation of components required	Often disclosed in notes, less detailed

IFRS’s principle-based approach demands more transparency, while US GAAP allows a more concise on-face presentation supplemented by notes.

Measurement differences impact reported balances and comparability.

The structure of the statement is only part of the picture; measurement rules also influence the reported numbers:

• Revaluation model (IFRS): IAS 16 and IAS 38 permit revaluation to fair value for property, plant, equipment, and intangible assets, provided the fair value can be reliably measured.

• Historical cost model (US GAAP): GAAP generally prohibits upward revaluations of fixed assets and intangibles, using a cost-based measurement unless impairment is identified.

Aspect	IFRS (IAS 16, IAS 38)	US GAAP
Asset revaluation	Permitted, with gains in OCI or P&L depending on reversals	Not permitted
Intangible assets	May revalue if active market exists	Must remain at cost
Effect on balance sheet	Higher reported asset values possible	More conservative values reported

This difference often leads to higher reported equity under IFRS for companies using revalued asset bases.

Disclosures play a critical role in explaining the statement’s structure and balances.

Both frameworks require detailed disclosures in the notes, but IFRS disclosures are broader and more principle-based, while GAAP disclosures are rules-driven:

• IFRS requires:

  • Accounting policies applied

  • Key estimates and assumptions

  • Maturity analysis for assets and liabilities

  • Information on revaluations and judgments

• GAAP requires similar disclosures but prescribes structured templates, particularly for SEC registrants.

As a result, IFRS statements often include longer, narrative-style notes, while US GAAP reports tend to provide highly structured, tabular explanations.

Key structural differences between IFRS and US GAAP for the statement of financial position.

Aspect	IFRS (IAS 1)	US GAAP (ASC 205/210)
Terminology	“Statement of financial position”	“Balance sheet”
Format flexibility	Classified or liquidity-based	Classified required
Asset revaluation	Permitted under certain standards	Not permitted
OCI treatment	Always presented within equity	Included as AOCI, but less detailed
Equity reconciliation	Mandatory and comprehensive	Often summarized in notes
Disclosures	Principles-based, extensive	Rules-based, structured

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