What is Grouping and Marshalling in financial statements?

While preparing financial statements, especially Statement of Financial Position (SoFP) also, known as balance sheet, two presentation concepts are applied which are termed as Grouping and Marshalling.

Grouping means presenting similar items together as one figure i.e. by combining them at one place and presenting as a single item on the face of financial statement. For example, entity may have many debtors which needs to be reported in the financial statement but not all of the debtors will be reported individually. Instead all of the debtors will be added (grouped) together and will be presented as a single total. Another example can of inventories which can be raw materials, work in process and finished goods and all three of them will be reported under inventories as one figure on the face of statement of financial position and income statement by grouping the three categories together.

This grouping must not be confused with group financial statements. Process of preparing group financial statements is called consolidation and NOT grouping.

Marshalling means presenting items in a logical order i.e. assets and liabilities in the statement of financial position are listed in particular order. While preparing statement of financial position assets and liabilities are presented by following a particular format or type of marshalling so that it is more understandable and thus adds more value to the financial information embedded in the financial statements.

There are two methods of marshalling:

  • Marshalling by liquidity
  • Marshalling by permanence

Marshalling by liquidity

According to this method the assets and liabilities are listed in descending order on the basis of liquidity i.e the asset which is the most liquid will be listed first and the asset which is least liquid will be listed last. Similarly the liabilities which are falling due earliest will be listed first and the ones payable latest will be listed last.

Marshalling by permanence

This method is completely opposite to the liquidity method. According to this order of listing, assets and liabilities are listed in descending order on the basis of their permanence i.e. the asset with the longest useful life (least liquid) will be listed first and the asset with the least or shortest (most liquid) useful life will be listed last.


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