GAAP vs. IFRS: Classified Balance Sheet

Alright now let's discuss some of the differences between gap and offers for the classified balance sheet. So when we're talking about the balance sheet, that financial statement we prepare. Let's see how lifers handles it differently than Gap. So remember Gap. These are the rules in the USA and they're set by the Financial Accounting Standards board. So the F. A S. B faz be they create Gap where internationally we have the International Accounting Standards board, I. A. S. B. That they create lifers, Right? And those are the international rules that are generally used pretty much in every other country where we have gap here in the USa Okay, so let's see some of the difference between gap and differs for the balance sheet. So what we're gonna see is that let's go through the similarities first is first that they both require a balance sheet. Right? The balance sheet is a very important statement where we show our assets are liabilities and our equity and the classified balance sheet. Remember the classified balance sheet will split up our assets and our liabilities into a current and long term portion. So, those guidelines are as well for current and long term, they're the same for Gap and I furs, we have that one year threshold that we talked about right? There is the one year threshold if they're less than one year. Well their current if there longer than one year, they're going to be classified as long term. So for the most part they're similar. Let's go ahead and check out some of these differences between gap and differs for the balance sheet first has a different name. They don't call it the balance sheet where the gap calls it a balance sheet, we're gonna see that I first calls it the statement of financial position. Okay, so pretty much says the same thing, right, statement of financial position. What is our position at this point in time? The balance sheet shows the balances at a certain point in time. It's just the name of the statement, not a real big deal there. And then another kind of interesting one is that I first tends to show equity before liabilities right? When we've talked about it and when I showed you our examples, we had assets and then we'd show liabilities and then we'd show equity. Well, I first tends to show the equity first, so it'll be assets. Equity liabilities, not a big deal there either. How about the next one under Ifor's, This one's actually pretty interesting as well, assets are shown in reverse order. So they start with the least liquid. They start with their long term assets and then they go backwards order to their most current assets. So the assets is almost flipped entirely from what we were talking about long term first and then it shows the current assets in reverse liquidity as well where cash is going to be the final thing shown. Okay, that one's pretty interesting too. Then we're gonna have some just general terminology differences. So when we have an investment, maybe we have some shares of stock that we bought in another company. Our company bought shares of apple stock or something. Well, we would classify that under investments where I would call that share investments, not a big deal there either. Now another, this is one of the key key differences between lifers and Gap. This last one here, this one comes up. You're gonna see this one come up in many different chapters is the use of the fair value principle. Remember that in Gap when we talked about recording assets, we talked about the historical cost principle. Remember the historical cost principle? That means we're gonna keep our assets on our balance sheet at what they cost us historically. Well, ifor's allows you to update these values to the fair value to have more updated information based on the current market value of these assets. Okay, So this is one of the key difference and especially applies to long term assets. Okay, because a big thing with gap is where we're gonna record, let's say when we buy a piece of equipment or something that we're gonna use for many years, what we recorded at its historical cost and we leave it at that value. But with the with the fair value principle, ifor's allows you to change that value of the of the equipment or some long term asset that you've purchased and updated to its current market value. There's there's benefits pros and cons for the historical cost and the fair value principle. Um But for the most part, this is just one of the key differences. Right? Where the historical cost principle? Well, it's it helps stay more consistent. Right? We're not gonna have these fluctuations based on market values. Maybe it goes up in one period and down in one period. Well, that's gonna add a lot of inconsistency based on just the value of an asset that you might just be holding on to for a long time. Where the fair value principle, it stays more current. Right? It gives you more current information. But you're gonna have these fluctuations because you're constantly updating these values. All right. So these are some of the main differences. Why don't we go on on the next page, I've got an example of what a statement of financial position might look like under ifor's. Okay, so let's check it out real quick. So look at this statement of financial position. Notice how it starts with these long term assets first. Long term, all of these actually including the long term investments. Those are all listed first. And then it shows the current assets underneath. And look they're in reverse order. We've got cash listed last. Right? We start with prepaid and it starts going in reverse order in order of liquidity with cash listed last. And then look at as we keep going. Look at the equity and liability section, well, it shows equity first and then it shows the non current liabilities, so our long term liabilities and then finally our current liabilities last. So it's a little bit interesting. It's just in reverse order. But for the most part we're seeing the same information right there, showing us a lot of the same information. And again, it's showing us how assets, total assets of 61,400 equal our total equity and liabilities of 61,400. So the main thing here is still that assets equal liabilities plus equity. Right? So for the most part, we're seeing the same information. It's just how it's presented is a little different. Cool. Alright, let's go ahead and move on to the next video.