CFA Level I · CFA Level I Exam · Analyzing Balance Sheets
A liquidity-based presentation of the statement of financial position, rather than a current/non-current classification, is most likely appropriate for:
A bank is the most likely user of a liquidity-based presentation. Its assets and liabilities do not separate cleanly into current and non-current, so ordering them by liquidity is more relevant. Manufacturers and retailers have identifiable operating cycles and normally present a classified statement.
- Aa bank whose assets and liabilities are not clearly separable into current and non-currentCorrect
- Ba manufacturer with a 90-day operating cycle
- Ca retailer with seasonal inventory
Explanation
IFRS permits a liquidity-based order when it provides reliable and more relevant information, as for banks and other financial institutions. Manufacturers and retailers have clear operating cycles and normally use the classified format.
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