The net position is the difference between an entity’s assets plus deferred outflows of resources and its liabilities plus deferred inflows of resources. The formula for calculating net position is:
Key Facts
- Calculation: Net Position = (Assets + Deferred Inflows of Resources) – (Liabilities + Deferred Outflows of Resources).
- Components of Net Position: The net position statement consists of three components: net investment in capital assets, restricted net position, and unrestricted net position.
- Net Investment in Capital Assets: This component includes the net amount invested in capital assets, which is the original cost of the assets minus accumulated depreciation and net of capital-related debt.
- Restricted Net Position: Restricted net position represents the amount of net position for which limitations have been placed by creditors, grantors, contributors, laws, and regulations.
- Unrestricted Net Position: Unrestricted net position is the residual amount of the net position that is not restricted or invested in capital assets, net of related debt.
- Presentation: The statement of net position should be presented in a format where assets and deferred outflows of resources are added, and liabilities and deferred inflows of resources are subtracted to calculate the net position.
Net Position = (Assets + Deferred Inflows of Resources) – (Liabilities + Deferred Outflows of Resources)
Components of Net Position
The net position statement consists of three components:
- Net investment in capital assets: This component includes the net amount invested in capital assets, which is the original cost of the assets minus accumulated depreciation and net of capital-related debt.
- Restricted net position: Restricted net position represents the amount of net position for which limitations have been placed by creditors, grantors, contributors, laws, and regulations.
- Unrestricted net position: Unrestricted net position is the residual amount of the net position that is not restricted or invested in capital assets, net of related debt.
Presentation of the Statement of Net Position
The statement of net position should be presented in a format where assets and deferred outflows of resources are added, and liabilities and deferred inflows of resources are subtracted to calculate the net position. The three components of net position should be clearly identified and labeled.
Conclusion
The statement of net position is an important financial statement that provides information about an entity’s financial health and stability. It is used by investors, creditors, and other stakeholders to assess the entity’s ability to meet its obligations and to make informed decisions about whether to invest in or lend money to the entity.
References:
- Financial Accounting for Local and State School Systems: 2014 Edition – Chapter 5: Financial Reporting — Fund Balance/Net Assets (https://nces.ed.gov/pubs2015/fin_acct/chapter5_3.asp)
- Statement of Net Position- Reporting Requirements for Annual Financial Reports (https://fmx.cpa.texas.gov/fmx/pubs/afrrptreq/gen_acct/index.php?section=gov_statements&page=net_assets)
- Statement of Net Position | Finance & Business (https://financeandbusiness.ucdavis.edu/finance/accounting-financial-reporting/annual-report/snp)
FAQs
What is a net position statement?
A net position statement is a financial statement that reports an entity’s financial position at a specific point in time. It shows the entity’s assets, liabilities, and net position.
How is net position calculated?
Net position is calculated by subtracting liabilities and deferred inflows of resources from assets and deferred outflows of resources.
What are the components of net position?
The three components of net position are net investment in capital assets, restricted net position, and unrestricted net position.
What is net investment in capital assets?
Net investment in capital assets is the net amount invested in capital assets, which is the original cost of the assets minus accumulated depreciation and net of capital-related debt.
What is restricted net position?
Restricted net position represents the amount of net position for which limitations have been placed by creditors, grantors, contributors, laws, and regulations.
What is unrestricted net position?
Unrestricted net position is the residual amount of the net position that is not restricted or invested in capital assets, net of related debt.
How is the net position statement presented?
The net position statement is presented in a format where assets and deferred outflows of resources are added, and liabilities and deferred inflows of resources are subtracted to calculate the net position.
Who uses the net position statement?
The net position statement is used by investors, creditors, and other stakeholders to assess the entity’s financial health and stability.