IFRS 18
20 May 2024
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2
IFRS Calendar
IFRS 15 IFRS 9 IFRS 16 IFRS 17 IFRS 18 IFRS 19
May 2014 Jul 2014 Jan 2016 May 2017 April 2024 May 2024
Page 33
Page
IFRS 18 Presentation and Disclosure in Financial Statements
➢ Replaces IAS 1 Presentation of Financial Statements
➢ New presentation and disclosure requirements
➢ Related requirements brought forward from IAS 1 with limited wording changes
➢ Will not change how companies recognise and measure items in the financial statements
➢ Amendments to other IFRS Accounting Standards, including limited amendments to IAS 7
Statement of Cash Flows
Presentation prepared on the basis of IFRS 18 Presentation and Disclosure in Financial Statements EFRAG FR TEG
and USER PANEL educational session 14 May 2024.
IFRS 18 – the new requirements
Disclosures about Enhanced requirments on
New required subtotals in
management-defined grouping of information
statement of profit or loss,
performance measures (aggregation and
including operating profit.
(MPMs) disaggregation)
Categories and subtotals in the statement of profit or loss
➢ IFRS 18 introduces three new defined categories to provide a consistent
structure of the statement of profit or loss:
➢ operating
➢ investing
➢ financing
➢ Two new required subtotals to enable analysis:
➢ operating profit
➢ profit before financing and taxes
New required subtotals in statement of profit and loss
Revenue
Cost of sales
Gross profit
Operating
Other operating income
Operating profit Selling expense
Gives a complete picture of a Research and development expenses
company’s operations General and Administrative expenses
Goodwill impairment loss
Other operating expenses
Operating profit
Profit before financing and
Share of profit or loss of associates and joint ventures
income taxes Investing
Other investment income
Gives a picture of a
Profit before financing and income taxes
company’s performance
before the effects of its Interest expense on borrowings and lease liabilities
Financing
financing Interest expense on pension liabilities and provisions
Profit before taxes
Income tax expense
PROFIT
Investing category
Objective: To communicate information about returns from investments separately
Income and expenses from investments
Income and expenses from
Income and expenses from
assets that generate a return Income and expenses
non-consolidated
individually and from cash and cash
subsidiaries, associates
largely independently of other equivalents
and joint ventures
resources held by an entity
Examples (for entities that do not invest as part of their main business activities*):
• Rental income and fair value changes on investment property
• Interest income and fair value changes on financial assets (other than cash and
cash equivalents)
• Dividends and fair value changes on non-consolidated equity investments
*For example for an investment property company, income from investment properties would be included
8 in operating profit.
Financing category
Objective of profit before financing and income tax is to enable comparison of
entities’ perforamnce before their financing decisions.
All income and expenses from liabilities from Interest expense and effects of
transactions that involve only the raising of changes in interest
finance rates from other liabilities
• Receipt and return of cash or company’s
• Lease liabilities
own shares
• Defined benefit pension
• Reduction in financial liability
liabilities
• E.g., bank loans
9
Operating category
Includes income and expenses from an entity’s main business activities
Income and expenses Main business activities
An entity may have more than one main business activity.
For example, an entity that manufactures a product and also
• All income and expenses from a provides financing to customers may determine that both its
company’s operations, regardless manufacturing activity and customer-finance activity are
of whether they are volatile or main business activities. To classify income and expenses
unusual in same way into the categories of operating, investing and financing as
• Including from its main business required by this Standard, an entity need only determine
whether either of, or both, investing in assets
activities and providing financing to customers are main business
activities.
10
Financing and investing as main business activities
Interest revenue
Interest expense
Net interest income
Fee and commission income
Fee and commission expenses
Operating
Net fee and commission income
Net trading income
Net investment income
Credit impairment losses
Employee benefits
Depreciation and amortisation
Other operating expenses
Operating profit
Share of profit or loss of associates and joint ventures
Non-main
Interest expenses on pension and lease liabilities
Profit before taxes
Income tax expense
PROFIT
Insurance as a main business activity
Insurance revenue
Insurance service expenses
Insurance service result
Operating
Investment income
Credit impairment losses
Insurance finance expenses
Net financial result
Other operating expenses
Operating profit
Share of profit or loss of associates and joint ventures Investing
Profit before financing and income tax
Interest expenses on pension and lease liabilities Financing
Profit before taxes
Income tax expense
PROFIT
Changes to the statement of cash flows
Cash flows Entities without specified Entities with specified main business
main business activities activities
Interest received Investing activities A single category for each
Interest paid Financing activities item—operating, investing or
Dividends received Investing activities financing categories
Dividends paid Financing activities Financing activities
Operating profit or loss subtotal to be the starting point for the indirect method of reporting cash flows
from operating activities
Management-defined Performance Measures (MPMs)
Subtotals of income and expenses not required or
specifically exempted by IFRS Accounting Standards
Included in public communications outside financial
statements
Measures that communicate management’s view of a
company’s financial performance
Management-defined Performance Measures (MPMs)
Examples of alternative performance measures (APMs) or non-GAAP measures used today:
➢ Adjusted operating profit
➢ Adjusted profit or loss
➢ Adjusted EBITDA
➢ Free cash flow
➢ Return on equity
Investors have concerns about lack of transparency of how these measures are calculated
Management-defined Performance Measures (MPMs)
Disclosures required for MPMs:
➢ Reconciliation back to IFRS-defined subtotal
➢ Explanation of why the MPM is reported
➢ Explanation of how the MPM is calculated
➢ Explanation of any changes to the MPM
Management-defined Performance Measures (MPMs)
Source: EFRAG FR TEG and USER PANEL educational session 14 May 2024
Grouping – aggregation and disaggregation – of information
IFRS 18 introduces:
➢ Enhanced requirements for grouping of information, including requirements for presenting and
disclosing operating expenses,
➢ Guidance on whether information should be in the primary financial statements or the notes,
➢ Disclosures about items labelled as ‘other’.
Grouping – aggregation and disaggregation – of information
➢ Identify the assets, liabilities, equity, income, expenses and cash flows that arise from individual transactions or
other events;
➢ Classify and aggregate assets, liabilities, equity, income, expenses and cash flows into items based on their
characteristics, for example:
➢ their nature,
➢ their function,
➢ their measurement basis or another characteristic)
so as to result in the presentation in the primary financial statements of line items and disclosure in the notes of
items that have at least one similar characteristic; and
➢ Disaggregate items based on dissimilar characteristics:
➢ (i) in the primary financial statements, as necessary to provide useful structured summaries; and
➢ (ii) in the notes, as necessary to provide material information.
Grouping – aggregation and disaggregation – of information
➢ Label and describe items presented or disclosed in a way that faithfully represents the characteristics of the item.
➢ An entity shall label items presented or disclosed as ‘other’ only if it cannot find a more informative label.
➢ If an entity cannot find a more informative label than ‘other’:
➢ for any aggregation—the entity shall use a label that describes the aggregated item as precisely as possible, for example,
‘other operating expenses’ or ‘other finance expenses’.
➢ for an aggregation comprising only items for which information is not material—the entity shall consider whether the
aggregated amount is sufficiently large that users of financial statements might reasonably question whether it includes
items for which information could be material.
Grouping – aggregation and disaggregation – of information
Expenses by nature
•depreciation
•amortisation
•employee benefits
•impairment losses and reversals
•write-downs and reversals
Disclose the amounts included in each line item in the
operating category of the statement of profit or loss for
Grouping – aggregation and disaggregation – of information
2024 2023
Cost of sales 23 710 21 990
Research and development expenses 2 515 2 590
General and administrative expenses 4 975 4 750
Total depreciation 31 200 29 330
Research and development expenses 13 840 12 690
Total amortisation 13 840 12 690
Cost of sales 61 640 57 175
Selling expenses 7 515 7 110
Research and development expenses 6 545 6 750
General and administrative expenses 8 920 5 825
Total employee benefits 84 620 76 860
Research and development expenses 1 600 1 500
Goodwill impairment loss 4 500 0
Total impairment loss 6 100 1 500
Cost of sales 2 775 2 625
Total write-down of inventories 2 775 2 625
IFRS 18 Presentation and Disclosure in Financial Statements
IAS 1 IFRS 18
► Originally issued in 1997 ► Originally issued in 2024
► Pages: 62 ► Pages: 180
► Paragraphs: 140 ► Paragraphs: 132
► Additional guidance: none ► Appendix A: Defined terms
► Appendix B: B1 – B142
► Appendix C: Effective date and transition
► Appendix D: Amendments to other IFRS
Accounting Standards
23
IFRS 18 Presentation and Disclosure in Financial Statements
➢ Effective date – 1 January 2027
➢ Early application permitted (EFRAG endorsement required in EU)
➢ Applied retrospectively and in interim financial statements
Michał Błeszyński
Senior Manager
EY Academy of Business
[email protected]+48 660 440 063
