Professional Judgment of a Financial Manager in the Context of the Application of International Financial Reporting Standards

The aim of the article is to examine and reveal the role of the professional judgment of a financial manager in companies that apply International Financial Reporting Standards (hereinafter referred to as IFRS). An analysis has been conducted on IFRS that regulate the principles of accounting and presentation of information regarding non-current assets, financial instruments, and provisions in financial statements. It has been revealed that in the standards under consideration, a crucial role is assigned to the professional judgment of managerial staff. Issues that require the involvement of the financial manager’s professional judgment have been detailed, along with their impact on the company’s financial statements. The significance of the financial manager’s participation in forming the company’s accounting policy, as well as in making decisions regarding the capitalization of expenses for the modernization of fixed assets and borrowing costs, has been substantiated. The study demonstrates that it is the financial manager, rather than the accountant, who primarily holds information regarding management’s intentions concerning the retention of financial instruments, and therefore, the financial managers are responsible for classifying financial assets and liabilities at initial recognition. This determines what will be included in the initial cost of financial instruments, the value at which their subsequent accounting will be recorded, and whether their revaluation will affect the company’s financial results. It is found that the role of a financial manager requires a deep understanding of IFRS, which pertains to the accounting of both financial and non-financial assets and liabilities, such as non-current assets and provisions. This not only influences decision-making regarding the specifics of their accounting and presentation in financial statements but also the understanding of the mechanism for forming and forecasting revenues and expenses related to depreciation, revaluation, impairment, and discounting of various assets and liabilities. It has been concluded that the professional judgment of financial managers has not received adequate attention in either scientific publications or domestic educational programs. Consequently, a promising direction for further research has been determined: identifying the role of the professional judgment of financial managers among other issues of accounting and financial reporting according to IFRS. It has been further determined that knowledge of IFRS will enable financial managers to apply professional judgment to improve the reliability of financial information presentation, planning, and to enhance the efficiency of asset management in enterprises.