Last reviewed: July 2026.
The statement of financial position presents an entity's assets, liabilities and equity at the reporting date. Good disclosure goes beyond listing balances: it explains classification, material disaggregation, restrictions, measurement bases and significant risks.
For annual periods beginning on or after 1 January 2027, IFRS 18 replaces IAS 1. Before an entity adopts IFRS 18, IAS 1 remains applicable. IFRS 18 retains the core current/non-current presentation principles while adding stronger aggregation and disaggregation requirements.
Primary statement and notes
The primary statement provides a useful structured summary. The notes provide material information needed to understand the recognised amounts, accounting policies, judgements and risks.
Do not overload the face of the statement with immaterial detail, but do not hide materially different items inside broad captions.
Core line-item checklist
| Area | Typical line items | Related note focus |
|---|---|---|
| Non-current assets | PPE, investment property, goodwill, intangible assets, investments | Measurement, movements, impairment and restrictions |
| Current assets | Inventory, receivables, contract assets, cash | Ageing, allowances, NRV and liquidity |
| Equity | Share capital, reserves, retained earnings, NCI | Movements, rights and restrictions |
| Non-current liabilities | Borrowings, lease liabilities, provisions, deferred tax | Maturities, covenants, measurement and uncertainty |
| Current liabilities | Trade payables, current debt, tax, provisions | Timing, supplier finance and liquidity risk |
Current and non-current classification
Assets and liabilities are normally classified as current and non-current unless a liquidity presentation provides a more useful structured summary. The operating cycle, expected realisation or settlement, trading purpose and twelve-month criteria are important.
Classification is based on rights and conditions at the reporting date, not management preference after year end.
Current liabilities with covenants
When the right to defer settlement depends on compliance with covenants, classification and disclosure depend on whether compliance is required on or before the reporting date. Material covenant information may be needed even when the liability is classified as non-current.
Material disaggregation
Separate items with different nature, function, measurement basis or risk when aggregation would obscure useful information. For example, trade receivables should not be combined with unrelated tax receivables when the risks differ materially.
Use the materiality judgement guide when deciding what belongs on the primary statement and what belongs in the notes.
Property, plant and equipment
Disclose classes, measurement bases, depreciation methods, useful lives and movement reconciliations. Revaluation and impairment movements should agree with equity and profit or loss.
See the IAS 16 revaluation guide and fixed asset register guide.
Goodwill and intangible assets
Present goodwill separately from other intangible assets when material. Notes should explain acquisitions, impairment testing, useful lives, amortisation and development assets.
Inventory and receivables
Inventory notes should cover cost formulas, carrying amounts and write-downs. Receivable disclosures should explain expected credit losses, ageing, concentrations and collateral when applicable.
Cash and restricted balances
Explain cash and cash equivalents, restricted cash, overdrafts included in cash management and significant unavailable balances. A large cash balance may not be freely available to meet group obligations.
Share capital and reserves
Disclose classes of shares, rights, issued quantities, treasury shares and movements. Explain the nature and purpose of material reserves, including revaluation and foreign-currency translation reserves.
The share capital guide explains classification and entries.
Borrowings and liquidity
Borrowing notes should reconcile carrying amounts and explain maturity, currency, rates, security and covenant exposure. IFRS 7 adds financial-risk disclosures for liquidity, credit and market risk.
Provisions and contingencies
Recognised provisions appear as liabilities, while contingent liabilities are usually disclosed rather than recognised. Describe the nature, timing, uncertainty and reimbursements.
Related parties and commitments
Material related-party balances, capital commitments, guarantees and contractual obligations can be essential to understanding the financial position even when they are not separate line items.
Comparatives and opening statement
Present comparative amounts. A third statement of financial position may be required when a retrospective policy change, restatement or reclassification has a material effect at the beginning of the comparative period.
IFRS 18 transition work
Entities adopting IFRS 18 should map existing captions to the new presentation principles, review aggregation, prepare comparatives and update note templates. The standard is effective for periods beginning on or after 1 January 2027, with earlier application permitted.
Offsetting restrictions
Assets and liabilities are presented gross unless an IFRS Standard requires or permits offsetting. Having the same counterparty is not enough; the entity must meet the relevant recognition and settlement criteria.
Judgements and estimation uncertainty
Material judgements about classification, control and recognition should be disclosed separately from key sources of estimation uncertainty such as impairment, provisions and fair values.
Digital reporting and taxonomy
Tagged reporting requires consistent line-item definitions and note relationships. Mapping errors can create digital disclosures that contradict the printed statements, so taxonomy tags should be reviewed with the same care as accounting captions.
Preparation controls
- reconcile every line item to the trial balance;
- agree note totals to the primary statement;
- review current/non-current classification;
- confirm restrictions, pledges and covenants;
- check comparatives and reclassifications;
- review materiality and disaggregation;
- cross-check cash flow and equity movements.
Common mistakes
- using a legal balance-sheet template without IFRS analysis;
- netting assets and liabilities without permission;
- hiding material items in “other” categories;
- classifying liabilities using post-year-end refinancing;
- failing to disclose restrictions and covenants;
- not reconciling notes to the primary statement;
- treating IFRS 18 as already mandatory before adoption.
Key takeaway
A strong statement of financial position combines correct classification with material notes. IFRS 18 reinforces structured summaries, disaggregation and clear communication without changing the need for rigorous ledger reconciliation.
Official references: IFRS 18 Presentation and Disclosure in Financial Statements and IFRS 18 supporting material.