Here’s a detailed explanation of Liabilities items on the Balance Sheet as per IFRS:
- Current Liabilities
Current Liabilities are obligations the entity expects to settle within one year or the operating cycle, whichever is longer.
a. Trade Payables (Accounts Payable)
Amounts owed to suppliers for goods or services received, typically due within a short period.
b. Short-Term Borrowings
Loans or other financing arrangements due within one year. Examples:
Bank overdrafts
Short-term loans
Commercial papers
c. Current Portion of Long-Term Debt
The part of long-term borrowings that is due within the next 12 months.
d. Accrued Expenses
Expenses incurred but not yet paid at the reporting date. Examples:
Salaries payable
Interest payable
e. Provisions
Current liabilities for which the exact amount or timing is uncertain but can be estimated reliably. Examples:
Warranty obligations
Legal claims
f. Current Tax Liabilities
Tax obligations payable to the tax authorities within the next 12 months.
g. Other Current Financial Liabilities
Other obligations of a financial nature due within a year. Examples:
Derivative liabilities
Dividends payable
- Non-Current Liabilities
Non-Current Liabilities are obligations that are not expected to be settled within one year.
a. Long-Term Borrowings
Debt instruments or loans repayable over a period longer than one year. Examples:
Bonds payable
Term loans
b. Lease Liabilities
Obligations to make lease payments under lease agreements as per IFRS 16 Leases.
c. Deferred Tax Liabilities
Arises from temporary differences between accounting income and taxable income, payable in future periods.
d. Provisions
Long-term obligations with uncertain timing or amount. Examples:
Pension obligations
Decommissioning liabilities
e. Other Non-Current Financial Liabilities
Non-current financial obligations not included elsewhere. Examples:
Long-term derivative liabilities
f. Employee Benefit Obligations
Long-term liabilities for employee benefits, such as:
Post-employment benefits (e.g., pensions)
Other long-term benefits (e.g., long-service awards)
g. Contingent Liabilities (Disclosed, not recognized)
Potential liabilities dependent on uncertain future events. Examples:
Guarantees
Pending lawsuits
Key IFRS Requirements for Liabilities
- Recognition Criteria: A liability is recognized if:
The entity has a present obligation from past events.
It is probable that outflows of resources will be required.
The obligation can be measured reliably.
- Measurement:
Initial Measurement: Liabilities are recorded at their fair value or transaction cost.
Subsequent Measurement:
Financial liabilities: Amortized cost or fair value.
Provisions: Best estimate of the obligation at reporting date.
- Current vs. Non-Current Classification:
Obligations due within one year are classified as current.
All others are classified as non-current.
By understanding liabilities under IFRS, entities can ensure accurate classification and disclosure of their financial obligations.
