Question:
Air France–KLM (AF) , a French company, prepares its financial statements according to International
Financial Reporting Standards. AF’s annual report for the year ended March 31, 2011, which includes
financial statements and disclosure notes, is provided with all new textbooks. This material also is
included in AF’s “Registration
Document 2010–11,” dated June 15, 2011 and is available at www.airfranceklm.com.
Required:
Describe the apparent differences in the order of presentation of the components of the balance sheet
between IFRS as applied by Air France–KLM (AF) and a typical balance sheet prepared in accordance
with U.S. GAAP.
Answer:
Under U.S. GAAP, we present current assets and liabilities before noncurrent
assets and liabilities. IAS No. 1 doesn’t prescribe the format of the balance
sheet, but balance sheets prepared using IFRS often report noncurrent items first. AF’s balance sheet
presents noncurrent assets and liabilities before current assets and liabilities and also presents equity
before liabilities.
Another difference is the order of the individual line items within categories. For example, in the United
States, current assets generally are listed in order of liquidity, with cash and cash equivalents listed first,
followed by short-term investments, accounts receivable, and then inventories. AF’s current assets
appear to be listed in the reverse order of liquidity.
Air France–KLM (AF) , a French company, prepares its financial statements according to International
Financial Reporting Standards. AF’s annual report for the year ended March 31, 2011, which includes
financial statements and disclosure notes, is provided with all new textbooks. This material also is
included in AF’s “Registration
Document 2010–11,” dated June 15, 2011 and is available at www.airfranceklm.com.
Required:
Describe the apparent differences in the order of presentation of the components of the balance sheet
between IFRS as applied by Air France–KLM (AF) and a typical balance sheet prepared in accordance
with U.S. GAAP.
Answer:
Under U.S. GAAP, we present current assets and liabilities before noncurrent
assets and liabilities. IAS No. 1 doesn’t prescribe the format of the balance
sheet, but balance sheets prepared using IFRS often report noncurrent items first. AF’s balance sheet
presents noncurrent assets and liabilities before current assets and liabilities and also presents equity
before liabilities.
Another difference is the order of the individual line items within categories. For example, in the United
States, current assets generally are listed in order of liquidity, with cash and cash equivalents listed first,
followed by short-term investments, accounts receivable, and then inventories. AF’s current assets
appear to be listed in the reverse order of liquidity.
