IFRS 18 Presentation and Disclosure in Financial Statements
December 12, 2024
IFRS 18 Presentation and Disclosure in Financial Statements
On April 09, 2024, the International Accounting Standards Board (IASB) published IFRS 18 Presentation and Disclosure in Financial Statements. IFRS 18 will replace IAS 1 Presentation of Financial Statements as the primary source of requirements in IFRS Accounting Standards for financial statement presentation.
While IFRS 18 introduces significant changes to the financial statement presentation, not all aspects of IAS 1 are being revised. In many areas, the requirements of IAS 1 are expected to be ‘brought forward’ into IFRS 18 substantially unchanged.
There will be three sets of new requirements by the new standard which will:
- Improve comparability in the statement of profit or loss (Income Statement) - Presentation of new defined subtotals in the statement of profit or loss where IFRS 18 requires items of income and expense will be classified into operating, financing, investing, income tax or discontinued operations categories, according to that, certain sub-totals will be required to be presented in financial statements, such as operating profit. The operating profit sub-total is now defined in IFRS 18. These subtotals provide a consistent structure for the statement of profit or loss, thereby improving comparability. IFRS 18 will not affect how companies measure their financial performance and the overall profit figure.
- Enhance transparency of Management-defined Performance Measures (MPMs) - Many companies report alternative performance measures or non-GAAP measures. When those measures meet the definition of management-defined performance measures, IFRS 18 requires companies to disclose reconciliations between those measures and subtotals listed in IFRS 18 or totals or subtotals required by IFRS Accounting Standards, for example, ‘adjusted profit or loss’ reconciled to profit or loss.
- Provide more useful labelling, aggregation and disaggregation of information in the financial statements - IFRS 18 sets out requirements to help companies determine whether information about items should be in the primary financial statements or in the notes and provides principles for determining the level of detail needed for the information. IFRS 18 also includes requirements for the presentation of operating expenses in the statement of profit or loss, disclosure of specified expenses by nature, and further information on items grouped together and labelled as “others”. Also, the new standard introduced narrow scope changes to the statement of cash flows with revised requirements for how the statement of cash flow will be presented, including the classification of interest and dividend cash flows.
IFRS 18 is effective for annual reporting periods beginning on or after January 01, 2027 with earlier application permitted. Entities will be required to restate comparative periods.
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