Accounting Policies in IFRS: Disclosure and Estimates in Financial Statements

Accounting policies are essential to ensure that a company's financial statements accurately reflect its financial position. Financial Reporting Standards (NIF) They provide specific guidelines on how accounting policies should be disclosed, what types of estimates should be considered, and how risks and uncertainties should be managed. In this article, we will explore in detail the key aspects related to the disclosure of accounting policies, estimates, and their impact on financial statements.

What Are Accounting Policies?

The accounting policies are the criteria and methods that a company's management uses to apply accounting standards and fairly reflect financial information. According to IFRS, accounting policies must be disclosed in the notes to the financial statements so that users understand how key figures, such as inventory valuation, asset depreciation, or the determination of bad debts, were determined.

What Accounting Policies Should Be Disclosed?

They exist two main types of accounting policies that must be revealed:

1. Basis of valuation, presentation and disclosure of financial statements:
   This includes the policies an entity uses to value its assets and liabilities, such as depreciation methods or inventory treatment. These should be clearly detailed to ensure that users understand how IFRSs have been applied to the entity's particular circumstances.
3. Other accounting policies that are necessary for the proper understanding of the financial statements:
   This could include policies related to revenue recognition, the valuation of intangible assets, and others, which are crucial to providing an accurate picture of the company's financial health.

Important Accounting Policies

The NIF 2025 define the "significant accounting policies" like those whose Lack of disclosure would affect the understanding of the financial statementsThese policies are crucial for the correct interpretation of financial statements, as they directly affect how items are presented and valued in the company's financial statements.

The company's management must assess whether the disclosure of a significant accounting policy will be useful to users of financial statements. This implies that each entity must apply professional judgment and not rely exclusively on standard templates or examples from other companies. The disclosure should provide added value and allow users to understand how the policies applied impact the financial statements.

Consequently, accounting policies that are not material (i.e., those that do not significantly affect the understanding of the financial statements) should not be revealedThis is a way to avoid unnecessary information overload, allowing the disclosures to be concise and useful.

Uncertainties and Estimates in Accounting Policies

Estimates are fundamental in accounting, and revelations on the risks arising from uncertainties must be transparent so that users of financial statements understand the impact of these risks on the company's financial situation.

Disclosures should cover the following points:

1. Effects of uncertainties:
   Companies must provide information about any significant uncertainties that may affect the value of assets and liabilities at the reporting date.
2. Risk management:
   Accounting policies should include details of how the entity manages risks and how these are reflected in the recognition and valuation of items in the financial statements. This may include market risks, operational risks, and financial risks.
3. Qualitative and quantitative information:
   Both qualitative and quantitative information about risks must be provided. Quantitative information should allow users to assess the financial impact of risks on the amounts reported in the financial statements.
4. Significant risks:
   Disclosures should also address the significant risks faced by the company, such as fluctuations in exchange rates, interest rates, credit risks, among others. This allows users of financial statements to have a clear view of the company's financial risk exposure.

Conclusion

The accounting policies and the Disclosures about estimates and uncertainties are essential to ensuring that financial statements provide a true and fair view of a company's financial position. Under IFRS, entities must carefully evaluate which policies and estimates to disclose to ensure that the information presented is relevant and useful to users. By providing details about risk management and significant uncertainties, companies can provide a greater level of transparency and confidence in their financial statements.