The Handbook to IFRS Transition and to IFRS U.S. GAAP Dual Reporting

3.3 STRUCTURE OF THE STATEMENT OF FINANCIAL POSITION

3.3.1 Equity versus Balanced Formats

Exhibit 3-1 illustrates the basic formats and basic forms of the statement of financial position.

Exhibit 3-1 Basic Formats and Basic Forms of the Statement of Financial Position

3.3.1.1 Basic Formats

Comment: Accounting practice in different countries has been developing around the two basic formats – balanced and the equity formats – with varied column or page arrangements.

The balanced format, which is the graphic representation of the so-called “fundamental accounting (or balance sheet) equation”, whereby assets equal the sum of liabilities and equity, emphasizes sources of finance (liabilities and equity) and how they are used or invested (assets) as of the reporting date. Under this view, equity is the source of contributed and earned risk capital which together with debt (non-risk capital) finances the entity's assets. Alternatively, both equity and liabilities embody rights, although different, on an entity's assets.

The French-Italian-German tradition typically employs this model. Incidentally, accounting practice in these countries denominates each side of the statement of financial position with specific terms, while the English language simply splits the sources side of the balance sheet into equity and liabilities.

The equity format (also known as “net asset” or “UK GAAP” ...