Financial Reporting Standard B-6 (NIF B-6), entitled "Statement of financial position", establishes guidelines for the presentation and structure of the balance sheet in economic entities. Its main objective is to ensure that the financial statements are comparable, both with those of previous periods of the same entity and with those of other organizations.
Objective and Scope of NIF B-6
The purpose of NIF B-6 is to define the standards for the presentation and structure of the statement of financial position, also known as the balance sheet or statement of financial position. It seeks to make these statements comparable and to present in a clear and orderly manner the assets, liabilities and equity of an entity at a specific date. This standard is applicable to all profit-making entities that issue financial statements in accordance with the NIF B-6. NIF A-1, which defines the conceptual framework of the Financial Reporting Standards in Mexico.
Structure of the Statement of Financial Position
NIF B-6 allows two main formats for the presentation of the financial position statement:
- Account form: Presents assets on the left side and liabilities along with shareholders' equity on the right side, or in vertical format, showing assets first, then liabilities, and finally shareholders' equity.
- Report form: It is presented vertically, starting with assets, followed by liabilities and ending with equity.
Regardless of the format chosen, it is essential that the statement of financial position includes, as appropriate, the following items:
- Short-term assets (current): Cash and equivalents, accounts receivable, inventories, among others.
- Long-term (non-current) assets: Property, plant and equipment, intangible assets, long-term investments, etc.
- Short-term liabilities (current): Suppliers, short-term loans, accrued obligations, etc.
- Long-term liabilities (non-current): Long-term debts, provisions for employee benefits, among others.
- Shareholders' equity: Share capital, retained earnings, reserves, among other components.
Classification of Assets and Liabilities
NIF B-6 establishes criteria for classifying short- and long-term assets and liabilities:
- Short-term assets: Those that are expected to be realized, sold or consumed in the normal operating cycle of the entity, or within twelve months after the balance sheet date.
- Short-term liabilities: Obligations that are expected to be settled in the normal operating cycle or within the following twelve months.
For entities such as financial institutions, where the operating cycle is not clearly identifiable, the standard allows assets and liabilities to be presented in order of liquidity, providing more relevant and reliable information.
Shareholders' Equity
The equity represents the residual part of the entity's assets, after deducting all its liabilities. It is composed of different elements, including:
- Share capital: Represents the initial contributions of shareholders or partners to establish the entity, as well as subsequent contributions made. It consists of capital contributions and, in some cases, undisplayed subscribed capital.
- Retained earnings: These are the accumulated profits that the entity has generated and retained instead of distributing them as dividends. These profits allow the entity to grow and strengthen its financial position.
- Reservations: Reserves are established to comply with legal, statutory or voluntary requirements, and are intended to strengthen the financial structure of the entity and prepare it for unforeseen situations.
Shareholders' equity reflects the entity's equity value and is a crucial indicator for investors and other stakeholders regarding the organization's financial stability and solvency.
Conclusion
NIF B-6 is essential for the structured and coherent presentation of the financial position statement of entities. Its correct application promotes transparency and comparability in financial information, facilitating decision-making by internal and external users. It is essential that entities comply with the guidelines of this standard to ensure the quality, relevance and usefulness of their financial statements.
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