The IAS 1:10 requires that each company should prepare a complete set of its financial statements. The following analysis represents the financial statements of British Airways Company. This is the biggest airline company in UK and is a publicly traded company (Soderstrom and Jialin 675).
IFRS 1 requires that the organization must present financial statements its liabilities which states that its liabilities as either current or non-current (Soderstrom and Jialin 689). The non-current liability are recognized when a company has discretion and expects to roll over or refinance an obligation for at least 12 months after the period of reporting under an existing loan facility issued by the same lender and under the similar conditions. British Airways recognizes various items as its current liabilities. Such items include current portion of long-term liabilities, which is the portion of the long-term liability that the company expects to refinance within the ensuing one year (British Airways Ply 15). In the previous year’s financial reports, the company used to treat this portion as long-term liability.
British Airways reports trade payables and other operating costs as current liability even when some of it are due to be settled in more than twelve months after the period of reporting (British Airways Plc. 56). This is per IFRS 1 70 that requires such items to be treated as so given that they are part of the working capital that is used in the company’s normal operating cycle (Soderstrom and Jialin 811). The IFRS 13 permits the companies to measure the current assets and liabilities using the fair value price. British airways applies the fair value method to measure its current liability as compared to cost basis that it would use when preparing its statements under the GAAP. The IFRS requires separation of different items in the current liability section depending on their nature, which has been adopted by the British Airways presentation of current liabilities.
Long term Assets
Under both IFRS and GAAP, the long-term assets are initially valued at their costs. However, after the initial recognition the long-term assets are adjusted for fair value under the IFRS. According to the financial notes 2 of the British Airways 2013 financial report, the value of the long-term assets of the company used the fair value basis as opposed to cost basis, which was used in the financial report of the year 2010 (British Airways Plc. 74). The company reports notes that the component depreciation has been used in some long term assets when there was difference between the pattern of economic benefit between the item and the main assets. In line with this, British Airways deprecates various components of its Airplanes differently. The components have different residual value and useful lives. This makes the company to have different depreciation expense under different case scenarios. However, if the company was using the GAAP the airplanes would be depreciated as one item.
Adoption of this depreciation method led to increase in depreciation expense in British Airways. The British airways recognized Impairment charge, which was calculated using the IFRS method. Under the GAAP, asset impairment is considered irreversible Just as (Soderstrom and Jialin 89) notes. When coming up with an impairment charge, British Airways recognized the assets valueless direct selling cost. The assets were considered impaired when its recoverable amount was exceeded by the carrying amount of the asset. This difference is accounted for as the impairment charge.