Conceptual Framework for Financial Reporting

Classification of assets and liabilities
Classification is applied to the unit of account selected for an asset or liability
(see paragraphs 4.48–4.55). However, it may sometimes be appropriate to
separate an asset or liability into components that have different
characteristics and to classify those components separately. That would be
appropriate when classifying those components separately would enhance the
usefulness of the resulting financial information. For example, it could be
appropriate to separate an asset or liability into current and non-current
components and to classify those components separately.
Offsetting
Offsetting occurs when an entity recognises and measures both an asset and
liability as separate units of account, but groups them into a single net
amount in the statement of financial position. Offsetting classifies dissimilar
items together and therefore is generally not appropriate.
Offsetting assets and liabilities differs from treating a set of rights and
obligations as a single unit of account (see paragraphs 4.48–4.55).
Classification of equity
To provide useful information, it may be necessary to classify equity claims
separately if those equity claims have different characteristics (see
paragraph 4.65).
Similarly, to provide useful information, it may be necessary to classify
components of equity separately if some of those components are subject to
particular legal, regulatory or other requirements. For example, in some
jurisdictions, an entity is permitted to make distributions to holders of equity
claims only if the entity has sufficient reserves specified as distributable (see
paragraph 4.66). Separate presentation or disclosure of those reserves may
provide useful information.
7.7
7.8
7.9
7.10
7.11
7.12
7.13
Conceptual Framework
A86
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