April 2024

IFRS 18
IFRS ® Accounting Standard

Illustrative Examples on
Presentation and Disclosure in Financial Statements

International Accounting Standards Board

 Illustrative Examples on
IFRS 18
Presentation and Disclosure in Financial
Statements
These Illustrative Examples accompany IFRS 18 Presentation and Disclosure in Financial Statements
(published April 2024; see separate booklet) and are issued by the International Accounting Standards
Board (IASB).

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© IFRS Foundation 2024

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 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

CONTENTS
from paragraph
ILLUSTRATIVE EXAMPLES
INTRODUCTION IE1
PART I—EXAMPLES OF PRESENTATION AND DISCLOSURE IE5
Statement of profit or loss
Statement presenting comprehensive income
Statement of financial position
Statement of changes in equity
Note 1—Specified expenses by nature
Note 2—Management-defined performance measures
Note 3—Analysis of reclassification adjustments
Note 4—Analysis of tax effects relating to each component of other
comprehensive income
PART II—ADDITIONAL EXAMPLES OF THE STATEMENT OF PROFIT OR
LOSS IE9
Example II-1—Statement of profit or loss for an entity that is a manufacturer
Example II-2—Statement of profit or loss for an entity that is a manufacturer
that provides financing to customers as a main business activity
Example II-3—Statement of profit or loss for an entity that is an insurer that
invests in financial assets as a main business activity
Example II-4—Statement of profit or loss for an entity that is an investment
and retail bank that invests in financial assets as a main business activity
and provides financing to customers as a main business activity
PART III—CAPITAL DISCLOSURES IE14
Example III-1—An entity that is not a regulated financial institution
Example III-2—An entity that has not complied with externally imposed
capital requirements
IFRS 18 SUPPORTING MATERIALS
APPENDIX
Amendments to guidance on other IFRS Accounting Standards and to IFRS
Practice Statement 2 Making Materiality Judgements

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Illustrative Examples on
IFRS 18 Presentation and Disclosure in Financial
Statements

These examples accompany, but are not part of, IFRS 18. They illustrate aspects of IFRS 18 but are not
intended to provide interpretative guidance.

Introduction
IE1 IFRS 18 sets out requirements for the presentation and disclosure of
information in financial statements. These examples are not intended to
illustrate all aspects of the presentation and disclosure requirements in
IFRS 18, nor do they illustrate a complete set of financial statements.

IE2 As discussed in paragraphs 6–7, 11–12, 106 and 114 of IFRS 18, an entity is
permitted to change the order of presentation or disclosures, the titles of
financial statements and the descriptions used, provided it complies with the
requirements in IFRS Accounting Standards for the presentation and
disclosure of information.

IE3 The examples are structured in three parts:

(a) Part I—examples of presentation and disclosure. This part sets out
examples of the statements of financial performance, financial
position and changes in equity for an entity that does not invest in
assets as a main business activity, nor provide financing to customers
as a main business activity. Therefore, the requirements in paragraphs
49–51, 55–58 and 65–66 of IFRS 18 are not applicable to this entity.
This part also provides examples of some disclosures in the notes.

(b) Part II—additional examples of the statement of profit or loss. This

part sets out another example of the statement of profit or loss for an
entity that does not invest in assets as a main business activity, nor
provide financing to customers as a main business activity. This part
also sets out examples of the statement of profit or loss for an entity
that either provides financing to customers as a main business activity
or invests in assets as a main business activity, or both. Such an entity
applies the requirements in paragraphs 49–51 and the requirements in
either paragraphs 55–58 or paragraphs 65–66 of IFRS 18, or both, and
classifies some income and expenses in the operating category that an
entity without such specified main business activities would classify in
the investing or financing categories.

(c) Part III—capital disclosures. The examples in this part illustrate the
application of paragraphs 126–128 of IFRS 18.

IE4 Part I and Part II include context-setting paragraphs that precede illustrated
presentations or disclosures. Those paragraphs are intended to enable a reader
to better understand the context in which the illustrated presentations or
disclosures are given. Monetary amounts in Part I, Part II and Part III are
denominated in ‘currency units’ (CU).

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 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

Part I—Examples of presentation and disclosure

IE5 XYZ Group is a manufacturer that does not invest in assets as a main business
activity, nor provide financing to customers as a main business activity. Part I
provides examples of some of XYZ Group’s primary financial statements and
notes, specifically:

(a) statements of financial performance (a statement of profit or loss and a

statement presenting comprehensive income);

(b) a statement of financial position;

(c) a statement of changes in equity;

(d) Note 1—Specified expenses by nature (see paragraph 83 of IFRS 18);

(e) Note 2—Management-defined performance measures (see paragraphs

122–123 of IFRS 18);

(f) Note 3—Analysis of reclassification adjustments (see paragraph 90 of

IFRS 18); and

(g) Note 4—Analysis of tax effects relating to each component of other

comprehensive income (see paragraph 93 of IFRS 18).

IE6 This part does not illustrate XYZ Group’s complete set of financial statements.
For instance, Part I excludes examples of:

(a) a statement of cash flows. The illustrative examples accompanying

IAS 7 Statement of Cash Flows provide examples of the statement of cash
flows for an entity.

(b) a third statement of financial position as at the beginning of the

preceding reporting period. XYZ Group is required to present such a
statement as at 1 January 20X1 because it has made a retrospective
adjustment of retained earnings as at that date, as illustrated in the
statement of changes in equity (see paragraph 37 of IFRS 18).

(c) other disclosures required by IFRS Accounting Standards. In a

complete set of financial statements, an entity is required to cross-
reference each item in the primary financial statements to any related
information in the notes (see paragraph 114 of IFRS 18), and is likely to
cross-reference between related notes.

IE7 For the purpose of the examples in this part:

(a) XYZ Group has presented profit or loss and other comprehensive
income in two statements (see paragraph 12(b) of IFRS 18). Items of
other comprehensive income included in the statement presenting
comprehensive income are presented before tax effects, with one
amount shown for the aggregate amount of income tax relating to
those items in each category (see paragraphs 94(b) and 95 of IFRS 18).

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(b) XYZ Group has concluded that the most useful structured summary of
its expenses is provided by presenting in the operating category of the
statement of profit or loss some expenses classified by function and
other expenses classified by nature (see paragraphs 78, B80–B82 and
B85 of IFRS 18). Presenting expenses by function most closely
represents the way the business is managed and how management
reports internally, and is standard practice within the industry in
which XYZ Group operates. However, XYZ Group presents goodwill
impairment loss separately because any allocation to function line
items would be arbitrary and would therefore not provide a faithful
representation of the functions. XYZ Group has also concluded that
presenting the additional subtotals gross profit, profit before income
taxes and profit from continuing operations provides a useful
structured summary of its income and expenses.

(c) XYZ Group has concluded that presenting a statement of financial

position distinguishing current items from non-current items provides
the most useful structured summary of its assets and liabilities (see
paragraph 96 of IFRS 18).

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 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

Statement of profit or loss

XYZ Group—Statement of profit or loss for the year ended 31 December 20X2

(in thousands of CU)

Note 20X2 20X1
Revenue 367,000 353,100
Cost of sales 1 (241,600) (224,100)
Gross profit 125,400 129,000
Other operating income 2 12,200 4,100
Selling expenses 1 (28,900) (27,400)
Research and development expenses 1, 2 (25,100) (25,900)
General and administrative expenses 1, 2 (20,900) (22,400)
Goodwill impairment loss 1, 2 (4,500) —
Other operating expenses (1,200) (5,600)
Operating profit 2 57,000 51,800
Share of profit and gains on disposal of associates 2 5,300 7,300
and joint ventures(a)
Profit before financing and income taxes 62,300 59,100
Interest expenses on borrowings and lease liabilities (13,000) (13,200)
Interest expenses on pension liabilities and provisions (6,500) (6,000)
Profit before income taxes 42,800 39,900
Income tax expense 2 (10,700) (9,975)
Profit from continuing operations 2 32,100 29,925
Loss from discontinued operations — (5,500)
PROFIT 32,100 24,425
Profit attributable to:
Owners of the parent 25,680 19,540
Non-controlling interests 6,420 4,885
32,100 24,425
Earnings per share from continuing operations:
Basic and diluted 0.67 0.66
Earnings per share:
Basic and diluted 0.67 0.54

(a) Share of profit of associates and joint ventures means the share of associates’ and joint ventures’
profit attributable to owners of the associates and joint ventures after tax and non-controlling
interests in the associates and joint ventures.

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Statement presenting comprehensive income

XYZ Group—Statement presenting comprehensive income for the year ended

31 December 20X2

(in thousands of CU)

Note 20X2 20X1
Profit 32,100 24,425
Income and expenses that will not be reclassified
to profit or loss:
Gains (losses) on remeasurements of defined 6,700 (4,600)
benefit plans
Share of other comprehensive income of associates (2,200) 3,300
and joint ventures(a)
Income tax relating to income and expenses that will 4 (1,675) 1,150
not be reclassified to profit or loss
Total income and expenses that will not be 2,825 (150)
reclassified to profit or loss
Income and expenses that will be reclassified to
profit or loss when specific conditions are met:
Exchange differences on translating foreign 3 (5,600) 10,000
operations
Losses on cash flow hedges 3 (1,200) (4,000)
Income tax relating to income and expenses that will 4 1,700 (1,500)
be reclassified to profit or loss when specific
conditions are met
Total income and expenses that will be (5,100) 4,500
reclassified to profit or loss when specific
conditions are met
Other comprehensive income, net of tax 4 (2,275) 4,350
TOTAL COMPREHENSIVE INCOME 29,825 28,775

Total comprehensive income attributable to:

Owners of the parent 23,420 23,680
Non-controlling interests 6,405 5,095
29,825 28,775

(a) Share of other comprehensive income of associates and joint ventures means the share of
associates’ and joint ventures’ other comprehensive income attributable to owners of the
associates and joint ventures after tax and non-controlling interests in the associates and joint
ventures.

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 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

Statement of financial position

XYZ Group—Statement of financial position as at 31 December 20X2

(in thousands of CU)

31 December 31 December
Assets 20X2 20X1
Non-current assets
Property, plant and equipment 312,000 295,600
Goodwill 160,000 164,500
Other intangible assets 158,400 146,500
Investments in associates and joint ventures 20,200 17,400
Total non-current assets 650,600 624,000

Current assets
Inventories 55,500 52,500
Trade receivables 34,000 32,000
Cash and cash equivalents 23,400 22,800
Other current assets 4,600 8,575
Total current assets 117,500 115,875
TOTAL ASSETS 768,100 739,875

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(in thousands of CU)

31 December 31 December
Equity and liabilities 20X2 20X1
Equity attributable to owners of the parent
Share capital 110,000 100,000
Retained earnings 139,720 123,040
Other components of equity 2,480 4,740
Total equity attributable to owners of the parent 252,200 227,780
Non-controlling interests 41,400 34,995
Total equity 293,600 262,775

Non-current liabilities
Borrowings 158,700 147,200
Lease liabilities 85,400 97,500
Pension liabilities 112,000 108,000
Provisions 38,000 32,000
Deferred tax liabilities 4,800 8,600
Total non-current liabilities 398,900 393,300

Current liabilities
Borrowings 25,000 28,000
Lease liabilities 14,000 18,000
Payables for goods or services received and other 21,800 22,400
payables
Provisions 9,700 10,600
Income taxes payable 5,100 4,800
Total current liabilities 75,600 83,800
Total liabilities 474,500 477,100
TOTAL EQUITY AND LIABILITIES 768,100 739,875

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 Statement of changes in equity
XYZ Group—Statement of changes in equity as at 31 December 20X2

(in thousands of CU)

Share capital Retained Translation of Defined Share of other comprehensive income Cash flow Total equity attributable Non-controlling Total equity
earnings foreign operations benefit plans of associates and joint ventures hedges to owners of the parent interests

Balance at 1 January 20X1 100,000 108,100 (2,500) 2,600 (1,500) 2,000 208,700 29,800 238,500

Changes in accounting policy — 400 — — — — 400 100 500

Adjusted balance 100,000 108,500 (2,500) 2,600 (1,500) 2,000 209,100 29,900 239,000

Changes in equity for 20X1

Dividends — (5,000) — — — — (5,000) — (5,000)

Profit or loss — 19,540 — — — — 19,540 4,885 24,425

Other comprehensive income(a) — — 6,000 (2,760) 3,300 (2,400) 4,140 210 4,350

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Total comprehensive income — 19,540 6,000 (2,760) 3,300 (2,400) 23,680 5,095 28,775

Balance at 31 December 20X1 100,000 123,040 3,500 (160) 1,800 (400) 227,780 34,995 262,775

Changes in equity for 20X2

Issue of share capital 10,000 — — — — — 10,000 — 10,000

Dividends — (9,000) — — — — (9,000) — (9,000)

Profit or loss — 25,680 — — — — 25,680 6,420 32,100

Other comprehensive income(a) — — (3,360) 4,020 (2,200) (720) (2,260) (15) (2,275)

Total comprehensive income — 25,680 (3,360) 4,020 (2,200) (720) 23,420 6,405 29,825

Balance at 31 December 20X2 110,000 139,720 140 3,860 (400) (1,120) 252,200 41,400 293,600

(a) The amounts included in translation of foreign operations, defined benefit plans, share of other comprehensive income of associates and joint ventures, and cash flow hedges represent other comprehensive
income for each component, net of tax and non-controlling interests (where applicable).
ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

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Note 1—Specified expenses by nature

This table shows the totals of depreciation, amortisation, employee benefits,
impairment losses and write-down of inventories and the amounts related to
each line item in the operating category of XYZ Group’s statement of profit or
loss.

(in thousands of CU)

20X2 20X1
Depreciation
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

Amortisation
Research and development expenses 13,840 12,690
Total amortisation 13,840 12,690

Employee benefits
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

Impairment losses(a)

Research and development expenses 1,600 1,500

Goodwill impairment loss 4,500 —
Total impairment losses 6,100 1,500

Write-down of inventories(a)

Cost of sales 2,775 2,625

Total write-down of inventories 2,775 2,625
(a) The amounts disclosed represent the total of impairment losses and reversals of impairment
losses and the total of write-down of inventories and reversals of write-down of inventories.

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 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

The amounts disclosed are those the entity recognised as expenses in the
statement of profit or loss for the year, except for depreciation and employee
benefits.

The amounts disclosed for depreciation are the charge for the year, calculated
in accordance with IAS 16 Property, Plant and Equipment. The amounts include
amounts that have been capitalised by including them in the carrying amount
of inventory at the end of the reporting period.

The amounts disclosed for employee benefits are the costs incurred for the
year, including pension costs, for employee services, calculated in accordance
with IAS 19 Employee Benefits. The amounts include amounts that have been
capitalised by including them in the carrying amount of inventory at the end
of the reporting period.

Note 2—Management-defined performance measures

IE8 This example illustrates XYZ Group’s disclosures for its management-defined
performance measures. For the purpose of this example XYZ Group has:

(a) disclosed a statement saying adjusted operating profit and adjusted

profit from continuing operations provide management’s view of XYZ
Group’s operating profit and profit from continuing operations and are
not necessarily comparable with measures sharing similar labels or
descriptions provided by other entities (see paragraph 122 of IFRS 18).

(b) labelled and described each of its management-defined performance

measures in a clear and understandable manner by explaining that it
has adjusted operating profit and profit from continuing operations for
non-recurring items of income or expense that it does not expect to
arise for several future annual reporting periods (see paragraphs 123
and B134–B135 of IFRS 18).

(c) included a description of the aspect of financial performance each

management-defined performance measure communicates. The entity
explained that, in management’s view, adjusted operating profit and
adjusted profit from continuing operations provide useful information
about XYZ Group’s financial performance because they provide
information that is helpful in understanding trends in underlying
profitability (see paragraphs 123(a), B137(b) and B138–B139 of IFRS 18).

(d) explained how it calculated adjusted operating profit and adjusted

profit from continuing operations by explaining the specific adjusting
items (see paragraphs 123(b), B137(b) and B138–B139 of IFRS 18). The
entity has cross-referred its adjusting items to related notes in its
financial statements and provided a detailed explanation of
restructuring expenses in its note on management-defined
performance measures (see paragraph 123(a) of IFRS 18).

(e) provided a reconciliation between operating profit and adjusted

operating profit, and between profit from continuing operations and
adjusted profit from continuing operations—that is, reconciliations to
the most directly comparable subtotals presented in XYZ Group’s

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statement of profit or loss (see paragraphs 123(c) and B136–B140 of

IFRS 18).

(f) included for each of its adjusting items the income tax effect, the
effect on non-controlling interests and the amount(s) related to each
line item in XYZ Group’s statement of profit or loss (see paragraphs
123(d) and B141 of IFRS 18).

(g) included a description of how it determined the income tax effects (see
paragraph 123(e) of IFRS 18).

XYZ Group’s management-defined performance measures

XYZ Group uses the management-defined performance measures adjusted
operating profit and adjusted profit from continuing operations in its public
communications. These measures are not specified by IFRS Accounting
Standards and therefore might not be comparable to apparently similar
measures used by other entities.

To provide management’s view of XYZ Group’s financial performance,

operating profit and profit from continuing operations have been adjusted for
items of income or expense that XYZ Group does not expect to arise for several
future annual reporting periods. XYZ Group’s management believes adjusting
operating profit and profit from continuing operations for such items provides
information that is helpful in understanding trends in XYZ Group’s
underlying profitability.

XYZ Group generally adjusts for these items of income or expense:

• impairment losses (or reversals thereof) of property, plant and equipment

(including right-of-use assets) and intangible assets (for information
related to impairments refer to Note X Property, plant and equipment,
Note X Intangible assets and Note X Research and development expenses);

• restructuring expenses (for information related to restructuring expenses

refer to Note X Employee benefits and Note X General and administrative
expenses);

• non-recurring litigation expenses (for information related to litigation

expenses refer to Note X Provisions and Note X General and administrative
expenses);

• gains or losses on disposal of property, plant and equipment and of

intangible assets (for information related to disposal of property, plant and
equipment and intangible assets refer to Note X Property, plant and
equipment, Note X Intangible assets and Note X Other operating income);
and

• gains or losses on disposal of subsidiaries, associates and joint ventures.

XYZ Group assesses non-recurrence of litigation expenses on a case-by-case

basis. XYZ Group generally categorises litigation expenses arising from
intellectual property disputes, regulatory violations and employee claims as
‘non-recurring’. This classification is based on XYZ Group’s proactive approach
of having in place measures designed to prevent such events from occurring.

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 Management-defined performance measures 20X2 (in thousands of CU)

Adjusting items
IFRS Impairment Restructuring Gains on disposal Management-
losses expenses of property, plant defined
and equipment performance
measure
Other operating income — — (1,800)
Research and development expenses 1,600 — —
General and administrative expenses — 3,800 —
Goodwill impairment loss 4,500 — —

Operating profit / 57,000 6,100 3,800 (1,800) 65,100

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Adjusted operating profit

Income tax expense — (589) 297

Profit from continuing operations / 32,100 6,100 3,211 (1,503) 39,908

Adjusted profit from continuing operations

Profit attributable to non-controlling interests 305 161 —

Impairment losses Impairment losses incurred in 20X2 did not yield any tax benefits because they were not eligible for tax deductions in Country A and Country B.
Restructuring The restructuring expenses in 20X2 are related to XYZ Group’s restructuring programme ‘Apollo 20X2’. These expenses include redundancy
expenses expenses, employee retraining expenses and relocation expenses, all related to the closure of several factories in Country C. The tax effect of these
restructuring expenses is calculated based on the statutory tax rate applicable in Country C at the end of 20X2, which was 15.5%.
Gains on disposal of The tax effect of gains on disposal of property, plant and equipment is calculated based on the statutory tax rate applicable in Country D at the
property, plant and end of 20X2, which was 16.5%.
equipment
ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

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Management-defined performance measures 20X1 (in thousands of CU)

Adjusting items
IFRS Impairment Litigation Gains on disposal of associates and Management-
losses expenses joint ventures defined
performance
measure
Research and development expenses 1,500 — —
General and administrative expenses — 3,500 —

Operating profit / 51,800 1,500 3,500 — 56,800

Adjusted operating profit

Share of profit and gains on disposal of associates and joint — — (2,200)

APRIL 2024

ventures

© IFRS Foundation
Income tax expense — — 319

Profit from continuing operations / 29,925 1,500 3,500 (1,881) 33,044

Adjusted profit from continuing operations

Profit attributable to non-controlling interests 75 — —

Impairment losses Impairment losses incurred in 20X1 did not yield any tax benefits because they were not eligible for tax deductions in Country E.
Litigation expenses Litigation expenses incurred in 20X1 did not yield any tax benefits because they were not eligible for tax deductions in Country F.
Gains on disposal of associates The tax effect of gains on disposal of associates and joint ventures is calculated based on the statutory tax rate applicable in Country G,
and joint ventures at the end of 20X1, which was 14.5%.
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Note 3—Analysis of reclassification adjustments

This table shows the reclassification adjustments of the components of other
comprehensive income that will be reclassified to profit or loss when specific
conditions are met.

(in thousands of CU)

20X2 20X1
Income and expenses that will be
reclassified to profit or loss when specific
conditions are met
Exchange differences on translating foreign (5,600) 10,000
operations
Losses on cash flow hedges:
Losses arising during the year (5,200) (4,000)
Minus: reclassification adjustments for 4,000 (1,200) — (4,000)
losses included in profit or loss

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Note 4—Analysis of tax effects relating to each

component of other comprehensive income
(in thousands of CU)
20X2 20X1
Amount Tax Amount Amount Tax Amount
before (expense) net of before (expense) net of
tax benefit tax tax benefit tax
Income and expenses 4,500 (1,675) 2,825 (1,300) 1,150 (150)
that will not be
reclassified to profit or
loss
Gains (losses) on 6,700 (1,675) 5,025 (4,600) 1,150 (3,450)
remeasurements of
defined benefit plans
Share of other (2,200) — (2,200) 3,300 — 3,300
comprehensive income of
associates and joint
ventures

Income and expenses (6,800) 1,700 (5,100) 6,000 (1,500) 4,500

that will be reclassified
to profit or loss when
specific conditions are
met
Exchange differences on (5,600) 1,400 (4,200) 10,000 (2,500) 7,500
translating foreign
operations
Losses on cash flow (1,200) 300 (900) (4,000) 1,000 (3,000)
hedges
Other comprehensive (2,300) 25 (2,275) 4,700 (350) 4,350
income

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 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

Part II—Additional examples of the statement of profit or loss

IE9 Part II provides additional examples of the statement of profit or loss for four
entities:

(a) Example II-1—Statement of profit or loss for an entity that is a

manufacturer;

(b) Example II-2—Statement of profit or loss for an entity that is a

manufacturer that provides financing to customers as a main business
activity;

(c) Example II-3—Statement of profit or loss for an entity that is an

insurer that invests in financial assets as a main business activity; and

(d) Example II-4—Statement of profit or loss for an entity that is an

investment and retail bank that invests in financial assets as a main
business activity and provides financing to customers as a main
business activity.

For simplicity, the examples in this part do not show profit attributable to
owners of the parent, profit attributable to non-controlling interests, and
earnings per share (basic and diluted).

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Example II-1—Statement of profit or loss for an entity that

is a manufacturer
IE10 This example illustrates AA Group’s statement of profit or loss. For the
purpose of this example:

(a) AA Group is a manufacturer that does not invest in assets as a main

business activity, nor provide financing to customers as a main
business activity.

(b) in accordance with paragraphs 78, B80–B82 and B85 of IFRS 18, AA
Group has concluded that presenting in the operating category of the
statement of profit or loss all expenses classified by nature provides
the most useful structured summary of its expenses. AA Group
reached that conclusion because its main drivers of profitability are
costs for raw materials and employment.

AA Group—Statement of profit or loss for the year ended

31 December 20X2
(in thousands of CU)
20X2 20X1
Revenue 398,700 370,900
Changes in inventories of finished goods and work in 3,000 (3,700)
progress
Raw materials used (146,000) (143,200)
Employee benefits (107,000) (104,600)
Depreciation, amortisation and impairment (37,500) (36,300)
Other operating expenses (17,100) (15,200)
Operating profit 94,100 67,900
Share of profit of associates and joint ventures 3,800 2,900
Profit before financing and income taxes 97,900 70,800
Interest expenses on borrowings and lease liabilities (3,500) (4,000)
Interest expenses on pension liabilities (6,500) (6,800)
Profit before income taxes 87,900 60,000
Income tax expense (21,800) (15,000)
PROFIT 66,100 45,000

20 © IFRS Foundation
 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

Example II-2—Statement of profit or loss for an entity that

is a manufacturer that provides financing to customers as
a main business activity
IE11 This example illustrates BB Group’s statement of profit or loss. For the
purpose of this example:

(a) BB Group is a manufacturer that also provides financing to its

customers as a main business activity (see paragraphs 49–51 and 65–66
of IFRS 18). BB Group does not invest in assets as a main business
activity.

(b) in accordance with paragraphs 78, B80–B82 and B85 of IFRS 18, BB
Group has concluded that presenting in the operating category of the
statement of profit or loss some expenses classified by function and
other expenses classified by nature provides the most useful structured
summary of its expenses.

(c) BB Group’s accounting policy is to include:

(i) in the financing category income and expenses from liabilities

that arise from transactions that involve only the raising of
finance that do not relate to the provision of financing to
customers (see paragraph 65(a)(ii) of IFRS 18); and

(ii) in the investing category income and expenses from cash and
cash equivalents that do not relate to the provision of financing
to customers (see paragraph 56(b)(ii) of IFRS 18).

© IFRS Foundation 21
 APRIL 2024

BB Group—Statement of profit or loss for the year ended

31 December 20X2
(in thousands of CU)
20X2 20X1
Revenue 390,000 365,000
Cost of sales (285,000) (270,000)
Gross profit from the sale of goods 105,000 95,000
Interest revenue related to providing financing to customers 119,500 121,000
Interest expenses related to providing financing to customers (110,000) (100,800)
Net interest income 9,500 20,200
Selling expenses (28,900) (26,300)
Research and development expenses (15,800) (15,400)
General and administrative expenses (22,900) (23,600)
Other operating expenses (4,500) (5,400)
Operating profit 42,400 44,500
Income from investments 5,500 4,000
Profit before financing and income taxes 47,900 48,500
Interest expenses on borrowings not related to (3,800) (3,500)
providing financing to customers
Interest expenses on pension liabilities (3,600) (4,200)
Profit before income taxes 40,500 40,800
Income tax expense (10,125) (10,200)
PROFIT 30,375 30,600

22 © IFRS Foundation
 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

Example II-3—Statement of profit or loss for an entity that

is an insurer that invests in financial assets as a main
business activity
IE12 This example illustrates CC Group’s statement of profit or loss. For the
purpose of this example:

(a) CC Group is an insurer that invests as a main business activity in

financial assets that generate a return individually and largely
independently of CC Group’s other resources (see paragraphs 49–51
and 55–58 of IFRS 18). CC Group does not provide financing to
customers as a main business activity.

(b) in accordance with paragraphs 78, B80–B82 and B85 of IFRS 18, CC
Group has concluded that presenting in the operating category of the
statement of profit or loss some expenses classified by nature and
other expenses classified by function provides the most useful
structured summary of its expenses.

CC Group—Statement of profit or loss for the year ended

31 December 20X2
(in thousands of CU)
20X2 20X1
Insurance revenue 138,200 133,800
Insurance service expenses (107,000) (106,000)
Insurance service result 31,200 27,800
Investment income 117,000 103,000
Credit impairment losses (5,000) (1,500)
Insurance finance expenses (85,900) (84,000)
Net financial result 26,100 17,500
Other operating expenses (3,100) (4,600)
Operating profit 54,200 40,700
Share of profit or loss of associates and joint ventures (5,400) 4,800
Profit before financing and income taxes 48,800 45,500
Interest expenses on borrowings and pension (2,500) (2,200)
liabilities
Profit before income taxes 46,300 43,300
Income tax expense (10,200) (9,000)
PROFIT 36,100 34,300

© IFRS Foundation 23
 APRIL 2024

Example II-4—Statement of profit or loss for an entity that

is an investment and retail bank that invests in financial
assets as a main business activity and provides financing
to customers as a main business activity
IE13 This example illustrates DD Group’s statement of profit or loss. For the
purpose of this example:

(a) DD Group is an investment and retail bank that:

(i) invests in financial assets that generate a return individually

and largely independently of DD Group’s other resources as a
main business activity (see paragraphs 49–51 and 55–58 of
IFRS 18); and

(ii) provides financing to customers as a main business activity (see

paragraphs 49–51 and 65–66 of IFRS 18).

(b) in accordance with paragraphs 78, B80–B82 and B85 of IFRS 18, DD
Group has concluded that presenting in the operating category of the
statement of profit or loss all expenses classified by nature provides
the most useful structured summary of its expenses.

(c) DD Group’s accounting policy is to classify in the operating category

income and expenses from all liabilities that arise from transactions
that involve only the raising of finance, including liabilities that do not
relate to the provision of financing to customers (see paragraph 65(a)(ii)
of IFRS 18). As a result, DD Group is not permitted to present the
subtotal profit before financing and income taxes (see paragraph 73 of
IFRS 18).

24 © IFRS Foundation
 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

DD Group—Statement of profit or loss for the year ended

31 December 20X2
(in thousands of CU)
20X2 20X1
Interest revenue 356,000 333,800
Interest expenses (281,000) (259,000)
Net interest income 75,000 74,800
Fee and commission income 76,800 74,300
Fee and commission expenses (45,300) (44,800)
Net fee and commission income 31,500 29,500
Net trading income 9,100 900
Net investment income 11,600 7,800
Credit impairment losses (17,300) (19,100)
Employee benefits (55,100) (49,500)
Depreciation and amortisation (6,700) (5,950)
Other operating expenses (5,100) (4,550)
Operating profit 43,000 33,900
Share of profit of associates and joint ventures 1,800 2,100
Interest expenses on pension and lease liabilities (2,200) (1,800)
Profit before income taxes 42,600 34,200
Income tax expense (11,200) (9,000)
PROFIT 31,400 25,200

© IFRS Foundation 25
 APRIL 2024

Part III—Capital disclosures

Example III-1—An entity that is not a regulated financial

institution
IE14 This example illustrates the application of paragraphs 126–128 of IFRS 18 by
EE Group, an entity that is not a financial institution and is not subject to
externally imposed capital requirements. In this simple example, EE Group
monitors its capital using a debt-to-adjusted capital ratio. Another entity
might use a different method to monitor its capital. EE Group decides, in the
light of its circumstances, how much detail it provides to satisfy the
requirements in paragraphs 126–128 of IFRS 18. In determining the form and
content of the disclosure to satisfy those requirements, EE Group also
considers the disclosure requirements set out in paragraphs 44A–44E of IAS 7.

IE15 EE Group manufactures and sells cars. EE Group includes a finance subsidiary
that provides financing to customers, primarily in the form of leases.

EE Group’s capital disclosures

EE Group’s objectives in managing its capital are:

(1) to safeguard the entity’s ability to continue as a going concern, so it

can continue to provide returns for shareholders and benefits for other
stakeholders; and

(2) to provide an adequate return to shareholders by pricing its products

and services commensurate with the amount of risk.

EE Group sets the amount of its capital in proportion to risk. EE Group

manages its capital structure and makes adjustments, taking into
consideration changes in economic conditions and the risk characteristics of
the underlying assets. In order to maintain or adjust its capital structure, EE
Group might adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares, or sell assets to reduce its debt.

Consistent with other entities in the industry, EE Group monitors capital on

the basis of its debt-to-adjusted capital ratio. This ratio is calculated as net
debt divided by adjusted capital. Net debt is calculated as total debt (as shown
in the statement of financial position) minus cash and cash equivalents.
Adjusted capital comprises all components of equity (that is, share capital,
share premium, non-controlling interests, retained earnings and revaluation
surplus) other than amounts accumulated in equity relating to cash flow
hedges, and includes some forms of subordinated debt.

During 20X2 EE Group’s strategy, which was unchanged from 20X1, was to
maintain its debt-to-adjusted capital ratio at the lower end of the range 6:1 to
7:1 in order to secure access to finance at a reasonable cost by maintaining a
BB credit rating. The debt-to-adjusted capital ratios at 31 December 20X2 and
at 31 December 20X1 were:

26 © IFRS Foundation
 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

(in thousands of CU)

31 December 31 December
20X2 20X1
Total debt 1,000 1,100
Minus: cash and cash equivalents (90) (150)
Net debt 910 950
Total equity 110 105
Plus: subordinated debt instruments 38 38

Minus: amounts accumulated in equity

relating to cash flow hedges (10) (5)
Adjusted capital 138 138
Debt-to-adjusted capital ratio 6.6 6.9

The decrease in EE Group’s debt-to-adjusted capital ratio during 20X2 resulted

primarily from the reduction in net debt that occurred upon the sale of
Subsidiary X. This reduction in net debt, together with improved profitability
and lower levels of managed receivables, resulted in the dividend payment
increasing to CU2.8 million for 20X2 (from CU2.5 million for 20X1).

Example III-2—An entity that has not complied with

externally imposed capital requirements
IE16 This example illustrates the application of paragraph 127(e) of IFRS 18 if an
entity has not complied with externally imposed capital requirements during
the reporting period. The example does not illustrate other disclosures that
would be provided to comply with the other requirements in paragraphs
126–128 of IFRS 18.

IE17 FF Group provides financing to its customers and is subject to capital

requirements imposed by Regulator X. During the year ended 31 December
20X2 FF Group did not comply with the capital requirements imposed by
Regulator X. In its financial statements for the year ended 31 December 20X2
FF Group provides disclosures relating to its non-compliance.

FF Group’s capital disclosures (application of paragraph 127(e) of

IFRS 18)
FF Group filed its quarterly regulatory capital return for 30 September 20X2
on 20 October 20X2. At that date, FF Group’s regulatory capital was CU1.0
million below the capital requirement imposed by Regulator X. As a result, FF
Group was required to submit a plan to Regulator X indicating how it would
increase its regulatory capital to the amount required. FF Group submitted a
plan that entailed selling part of its investment portfolio with a carrying
amount of CU11.5 million in the fourth quarter of 20X2. In the fourth quarter
of 20X2 FF Group sold its fixed interest investment portfolio for CU12.6
million and met its regulatory capital requirement.

© IFRS Foundation 27
 APRIL 2024

IFRS 18 SUPPORTING MATERIALS

These figures accompany, but are not part of, IFRS 18. They depict aspects of IFRS 18 but are not
intended to provide interpretative guidance.

Figure 1—IFRS 18 on one page

Figure 2—Classification of income and expenses in the statement of profit or

loss for entities without specified main business activities

Figure 3—Classification of specific income and expenses in the statement of

profit or loss by entities with specified main business activities

Figure 3.1—Classification of specific income and expenses by entities

that invest in assets as a main business activity

Figure 3.2—Classification of specific income and expenses by entities

that provide financing to customers as a main business activity

Figure 3.3—Classification of income and expenses from cash and cash

equivalents by entities with specified main business activities

Figure 4—Classification of income and expenses from hybrid contracts with

host liabilities

Figure 5—Classification of gains and losses on derivatives

Figure 6—Identifying management-defined performance measures

Figure 7—Determining informative labels and information for aggregated items

Figure 8—Useful structured summary and the materiality process

28 © IFRS Foundation
 Figure 1 summarises the requirements in IFRS 18, including requirements introduced by IFRS 18 and requirements carried forward from
IAS 1 Presentation of Financial Statements to IFRS 18 and other IFRS Accounting Standards.
Financial statements
Provide financial information about a reporting entity’s assets, liabilities, equity, income and expenses that is useful to users of financial statements in assessing the
prospects for future net cash inflows to the entity and in assessing management’s stewardship of the entity’s economic resources (paragraph 9)
Primary financial statements Notes to the financial statements
Provide useful structured summaries of Presented in a systematic manner to provide material information necessary to understand
the entity’s assets, liabilities, equity, income, the line items presented in the primary financial statements and to supplement the
expenses and cash flows (paragraphs 16, financial statements. Disclose material information in the notes if not presented in the
18–24 and B8–B9) Items in primary primary financial statements (paragraphs 17–20, 113–116, B6–B7 and B112)
financial statements
Changes introduced by IFRS 18 cross-referenced to Disclosures introduced or amended by IFRS 18 for:
focused on: related information • Management-defined performance measures (paragraphs 117–125 and B113–B142)
• Statement of profit or loss (paragraphs in the notes •S  pecified expenses by nature (paragraphs 83–85 and B84)
46–50, 52–82 and B29–B85) (paragraph 114) • Description of nature expenses included in each function line item (paragraph 82(b))
Limited changes to specific • Information relating to specified main business activities if an entity invests in assets
Figure 1—IFRS 18 on one page

requirements for: or provides financing to customers as a main business activity (paragraph 51)
• Statement of cash flows Disclosures carried forward, for example:
(see paragraph 3 and IAS 7) •B  asis of preparation of the financial statements (paragraphs 6A–6N of IAS 81)

© IFRS Foundation
• Statement of financial position •M  aterial accounting policy information (paragraphs 27A–27I of IAS 81)
(paragraphs 96–106 and B90–B111) Amounts in the notes
linked to the primary •S  ources of estimation uncertainty (paragraphs 31A–31I of IAS 81)
No changes to specific requirements for: •C  apital management and other disclosure requirements, such as information
financial statements
• Statement presenting comprehensive by disclosing the line related to share capital and dividends (paragraphs 126–132)
income (paragraphs 86–95 and B86–B89) • Information relating to liabilities with the right to defer settlement of those liabilities
item(s) that contain
• Statement of changes in equity those amounts subject to complying with covenants within 12 months after the reporting period
(paragraphs 107–112) (paragraph 114) (paragraph B106)

Aggregation and disaggregation (paragraphs 41–45 and B16–B28)

• Principles to aggregate based on shared characteristics and to disaggregate based on characteristics that are not shared
• Guidance on finding informative labels and for disclosing information on aggregated items
General requirements for financial statements (paragraphs 10–14, 25–40, B1–B5 and B10–B15)
• Complete set of financial statements • Identification of financial statements • Frequency of reporting
• Consistency of presentation, disclosure and classification • Comparative information • Materiality
ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

1
These paragraphs were carried forward from IAS 1 Presentation of Financial Statements to IAS 8 Basis of Preparation of Financial Statements when the IASB issued IFRS 18.

29
 APRIL 2024

Figure 2—Classification of income and expenses in the statement

of profit or loss for entities without specified main business
activities
Figure 2 summarises the requirements as set out in paragraphs 47–68 and B42–B76 of IFRS 18 for
the classification of income and expenses into categories in the statement of profit or loss for entities
without specified main business activities.

Categories and subtotals in the statement of profit or loss1

Operating category (paragraphs 52 and B42)

Income and expenses that are not classified in the other categories

Operating profit or loss

Investing category (paragraphs 53–54 and B43–B49)

Income and expenses (as specified in paragraph 54) from:
• investments in associates, joint ventures and unconsolidated subsidiaries;
• cash and cash equivalents; and
• other assets that generate a return individually and largely independently of
the entity’s other resources

Profit or loss before financing and income taxes

Financing category (paragraphs 59–64 and B50–B58)

• Income and expenses (as specified in paragraph 60) from liabilities that arise
from transactions that involve only the raising of finance
• Interest income and expenses and income and expenses arising from
changes in interest rates (as specified in paragraph 61) from liabilities that
arise from transactions that do not involve only the raising of finance

Income taxes category (paragraph 67)

Discontinued operations category (paragraph 68)

Profit or loss
1
IFRS 18 also sets out requirements on how to classify in the categories in the statement of
profit of loss (paragraph 48):
• foreign exchange differences and the gain or loss on the net monetary position (paragraphs
B65–B69); and
• gains and losses on derivatives and designated hedging instruments (paragraphs B70–B76).

30 © IFRS Foundation
 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

Figure 3—Classification of specific income and expenses in the

statement of profit or loss by entities with specified main
business activities
Figures 3.1–3.3 depict aspects of the requirements for entities that invest in assets or provide
financing to customers as a main business activity as set out in paragraphs 55–58 and 65–66 of
IFRS 18. Such entities classify some income and expenses in the operating category that entities
without specified main business activities are required to classify in the investing or financing
category.

Figure 3.1—Classification of specific income and expenses by

entities that invest in assets as a main business activity

Income and expenses specified in paragraph 54 from:

investments in
other assets that generate a
associates, joint
cash and cash return individually and largely
ventures and
equivalents independently of the entity’s
unconsolidated
other resources
subsidiaries1

Is the investment No
accounted for using
the equity method?

Is investing in the asset a main business

Yes activity (paragraphs B38 and B40)?

No Yes

Classify in the investing Classify in the

See Figure 3.3 category (paragraphs operating category
53 and 55(a)) (paragraphs 55(b) and 58)

1
Investments in associates, joint ventures and unconsolidated subsidiaries include investments
in such assets in consolidated and separate financial statements.

© IFRS Foundation 31
 APRIL 2024

Figure 3.2—Classification of specific income and expenses by

entities that provide financing to customers as a main business
activity

Income and expenses specified in Interest income

paragraph 60 from liabilities that and expenses
arise from transactions that involve and income and Income and
only the raising of finance: expenses arising expense
from changes specified in
related to not related in interest rates paragraph 54
providing to providing (as specified in from cash and
financing to financing to paragraph 61) cash equivalents
customers customers from other
liabilities

Make
accounting
policy choice
Classify in (paragraph
the operating 65(a)(ii))1,2 Classify in the
category financing category
See Figure 3.3
(paragraphs (paragraphs 65(a)(ii)
65(a)(i) and and 65(b)(i))
65(a)(ii))
1
T he choice of accounting policy shall be consistent (where applicable) with that made for the
classification of income and expenses from cash and cash equivalents (paragraph 65(a)(ii))
(see Figure 3.3).
2
If an entity cannot distinguish which of the liabilities that arise from transactions that involve only
the raising of finance relate to providing financing to customers, it shall apply the accounting
policy choice to classify income and expenses from all such liabilities in the operating category
(paragraph 66).

32 © IFRS Foundation
 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

Figure 3.3—Classification of income and expenses from cash and

cash equivalents by entities with specified main business
activities

Does the entity invest in financial assets (in the scope of paragraph 53(c))
as a main business activity?

No

Does the entity provide financing to customers

as a main business activity?

Yes
Yes
Does the income or expense specified
in paragraph 54 from cash and No
cash equivalents relate to providing
financing to customers?
Yes No

Classify in Classify in
Accounting policy Classify in
the operating the operating
choice to classify in the investing
category category
the operating category category
income and income and
or the investing income and
expenses expenses
category income and expenses
specified in specified in
expenses specified specified in
paragraph 54 paragraph 54
in paragraph 54 paragraph 54
(paragraph (paragraph
(paragraph 56(b)(ii))1,2 (paragraph 56)
56(a)) 56(b)(i))
1
T he choice of accounting policy shall be consistent (where applicable) with that made for
the classification of income and expenses from liabilities that arise from transactions that
involve only the raising of finance that do not relate to providing financing to customers
(paragraph 56(b)(ii)) (see Figure 3.2).
2
If an entity cannot distinguish which cash and cash equivalents relate to providing financing to
customers, it shall apply the accounting policy choice to classify income and expenses from all
cash and cash equivalents in the operating category (paragraph 57).

© IFRS Foundation 33
34
Figure 4 depicts how an entity applies the requirements for the financing category to hybrid contracts that contain a host liability as set out in
paragraphs B56–B57 of IFRS 18.
Are the host liability and the embedded derivative required to be separated?
No

Does the hybrid contract (with a non-separated embedded derivative) arise from a transaction
that involves only the raising of finance?
No

How is the hybrid contract (with a non-separated

Yes embedded derivative) classified?

Yes (a) A financial liability

(b) An insurance
in the scope of IFRS 9
contracts with host liabilities

contract in the Other than

Financial Instruments
scope of IFRS 17 (a) and (b)
that is measured at
Insurance Contracts
amortised cost
APRIL 2024

© IFRS Foundation
Host liabilities—classify the income and expenses as Classify the income
required for classification of income and expenses from and expenses from
liabilities applying either (paragraph B56(a)(i)): Classify the
Classify the income the hybrid contract
income and Classify the income
• paragraphs 52, 60 and 65–66 for liabilities that arise and expenses in the operating
expenses applying and expenses from
from transactions that involve only the raising of specified in category applying
paragraphs 52, the hybrid contract
finance; paragraph 60 paragraph 52,
60 and 65–66 in the operating
from the hybrid except for those
• paragraphs 52, 61 and 65 for liabilities that arise from for liabilities that category applying
contract after initial specified in
transactions that do not involve only the raising of arise from paragraphs 52
recognition in the paragraph 61 to
finance; or transactions that and 64(b)
financing category be classified in the
• paragraphs 52 and 64(b) for an insurance liability involve only the (paragraph
(paragraph financing category
raising of finance B56(c)(ii))
Embedded derivatives—classify the income and B56(c)(i)) (if applicable)
(paragraph B56(b))
expenses as required for similar standalone derivatives (paragraph
Figure 4—Classification of income and expenses from hybrid

applying paragraphs B70–B76 (paragraph B56(a)(ii)) B56(c)(iii))

 Figure 5 depicts the requirements for classifying gains and losses on derivatives as set out in paragraphs B70–B76 of IFRS 18.
Is the derivative used to manage identified risks?

Yes No

Is the derivative designated as a hedging instrument Is the derivative related to a transaction that involves
applying IFRS 9 Financial Instruments? only the raising of finance?
Yes

Does the entity provide financing to customers

as a main business activity?

Yes No Yes
No
Does the derivative relate to providing
No
financing to customers?
Yes No

Classify in the same category

Classify in the same category Accounting policy
as the income and expenses

© IFRS Foundation
as the income and expenses choice to classify
affected by the risks the Classify in
affected by the risks the Classify in in the operating Classify in
derivative is used to manage, the operating
derivative is used to manage, the financing category or the operating
except when it would require category
except when it would require category financing category
the grossing up of gains (paragraphs
the grossing up of gains (paragraph category (paragraph
or losses or involve undue B73(a), B59
or losses—then classify B73(a)) (paragraphs B73(b))
cost or effort—then classify and 65(a)(i))
in the operating category B73(a), B59 and
in the operating category
(paragraph B70)1 65(a)(ii))
(paragraph B72)
1
 aragraph B70 also applies to the gains and losses on a financial instrument other than a derivative designated as a hedging instrument applying
P
IFRS 9 Financial Instruments.
Figure 5—Classification of gains and losses on derivatives
ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

35
 APRIL 2024

Figure 6—Identifying management-defined performance

measures
Figure 6 depicts the requirements for identifying management-defined performance measures (MPMs)
as set out in paragraphs 117–120 of IFRS 18.

Is the measure a subtotal of income and expenses No

(paragraph 117)?

Yes

Is the measure used in public communications

No
outside financial statements (paragraph 117(a))?

Yes
Not an MPM—
Is the measure listed in paragraph 118 or specifically Yes disclosure
required to be presented or disclosed by requirements
IFRS Accounting Standards (paragraph 117(c))? for MPMs are
not applicable
No

Does the measure communicate management’s view

of an aspect of the financial performance of the entity
as a whole (paragraph 117(b))?1

No

Is there reasonable and supportable information Yes

Yes to rebut the presumption (paragraph 120)?1

No

MPM—disclosure requirements for MPMs are

applied to that measure

1
It is presumed that a subtotal of income and expenses used in public communications
communicates management’s view (paragraph 119); an entity is not required to consider
whether to rebut the presumption.

36 © IFRS Foundation
 Figure 7 depicts aspects of the requirements for determining informative labels and information for aggregated items as set out in
paragraphs B25–B26 of IFRS 18.

Is there a more informative label for aggregated items than ‘other’?

Yes No
Determining
informative Use the informative
Use a label that describes the aggregated item as precisely as possible.
aggregated items

label label for the

For example, ‘other operating expenses’ or ‘other finance expenses’
aggregated item
(Paragraph B26(a))
(Paragraph B25)

Do the aggregated items comprise only items for which information is not material?

Yes

Is the aggregated amount sufficiently large that users of

No financial statements might reasonably question whether it

© IFRS Foundation
includes items for which information could be material?
Determining
information Yes No
for aggregated
items Provide further information about the amount.
For example:
• an explanation that no items for which information
would be material are included in the amount; or No further
Disclose material information
• an explanation that the amount comprises several consideration
(Paragraph 41)
items for which information would not be material, needed
with an indication of the nature and amount of the
largest item.
Figure 7—Determining informative labels and information for

(Paragraph B26(b))
ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

37
38
Figure 8 depicts how ‘useful structured summary’ relates to the materiality process in IFRS Practice Statement 2 Making Materiality Judgements.
Materiality process in IFRS Practice Statement 2 Making Materiality Judgements

Step 1 Requirements Knowledge about primary users’

Identify of IFRS Standards common information needs

In Step 3 of the materiality process, to organise the

material information identified in Step 2 within the
draft financial statements:
Step 2 Quantitative Qualitative • an entity exercises judgement when deciding how
Assess factors factors to communicate information clearly and concisely
entity-specific (paragraph 56 of IFRS Practice Statement 2); and
and external • an entity would consider the different roles of primary
financial statements and notes in deciding whether to
present an item of information separately in the financial
statements, to aggregate it with other information or to
disclose the information in the notes (paragraph 58 of
APRIL 2024

© IFRS Foundation
IFRS Practice Statement 2).
IFRS 18 states that:
• the role of the primary financial statements is to provide
Step 3 Organise the information within useful structured summaries of a reporting entity’s
Organise the draft financial statements recognised assets, liabilities, equity, income, expenses
and cash flows (paragraph 16); and
• the role of the notes is to provide material information
necessary to understand the line items presented in
Step 4 Review the draft the primary financial statements and to supplement the
Review financial statements financial statements (paragraph 17).
Figure 8—Useful structured summary and the materiality process
 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

Appendix

Amendments to guidance on other IFRS Accounting Standards

and to IFRS Practice Statement 2 Making Materiality Judgements
These amendments to guidance on other IFRS Accounting Standards and to IFRS Practice Statement 2
Making Materiality Judgements are necessary in order to ensure consistency with IFRS 18
Presentation and Disclosure in Financial Statements.

IFRS 1 First-time Adoption of International Financial Reporting

Standards

Paragraphs IG3, IG37 and IG Example 11 in paragraph IG63 are amended. New text is
underlined and deleted text is struck through.

Guidance on implementing
IFRS 1 First-time Adoption of International Financial Reporting
Standards
...

IAS 10 Events after the Reporting Period

...

IG3 Paragraphs 14–17 of the IFRS require some modifications to the principles
in IAS 10 when a first-time adopter determines whether changes in estimates
are adjusting or non-adjusting events at the date of transition to IFRSs (or,
when applicable, the end of the comparative period). Cases 1 and 2 below
illustrate those modifications. In case 3 below, paragraphs 14–17 of the IFRS
do not require modifications to the principles in IAS 10.

(a) Case 1—Previous GAAP required estimates of similar items for the date
of transition to IFRSs, using an accounting policy that is consistent
with IFRSs. In this case, the estimates in accordance with IFRSs need to
be consistent with estimates made for that date in accordance with
previous GAAP, unless there is objective evidence that those estimates
were in error (see IAS 8 Basis of Preparation of Financial Statements
Accounting Policies, Changes in Accounting Estimates and Errors). The entity
reports later revisions to those estimates as events of the period in
which it makes the revisions, rather than as adjusting events resulting
from the receipt of further evidence about conditions that existed at
the date of transition to IFRSs.

...

IAS 34 Interim Financial Reporting

IG37 IAS 34 and paragraphs 32 and 33 of the IFRS apply applies if an entity is
required, or elects, to present an interim financial report in accordance with
IFRSs. Accordingly, neither IAS 34 nor the IFRS requires an entity:

© IFRS Foundation 39
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(a) to present interim financial reports that comply with IAS 34; or

(b) to prepare new versions of interim financial reports presented in

accordance with previous GAAP. However, if an entity does prepare an
interim financial report in accordance with IAS 34 for part of the
period covered by its first IFRS financial statements, the entity restates
the comparative information presented in that report so that it
complies with IFRSs.

...

Explanation of transition to IFRSs

IG63 Paragraphs 24(a) and (b), 25 and 26 of the IFRS require a first-time adopter to
disclose reconciliations that give sufficient detail to enable users to
understand the material adjustments to the statement of financial position,
statement of comprehensive income and, if applicable, statement of cash
flows. Paragraph 24(a) and (b) requires specific reconciliations of equity and
total comprehensive income. IG Example 11 shows one way of satisfying these
requirements.

IG Example 11 Reconciliation of equity and total comprehensive income

...
Reconciliation of total comprehensive income for 20X4
Note Previous Effect of IFRSs
GAAP transition to
IFRSs
CU CU CU
Revenue 20,910 0 20,910
1,2,3 Cost of sales (15,283) (97) (15,380)
Gross profit 5,627 (97) 5,530
6 Other income 0 180 180
1 Distribution costs (1,907) (30) (1,937)
1,4 Administrative expenses (2,842) (300) (3,142)
Operating profit 878 (427) 451
6 Investment Finance income 1,446 1800 1,626
1,446
Profit before financing and – – 2,077
income taxes
Interest expenses on interest- (1,902) 0 (1,902)
bearing loansFinance costs
Profit before tax 422 (247) 175
5 Tax expense (158) 74 (84)

continued...

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ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

...continued

IG Example 11 Reconciliation of equity and total comprehensive income

Profit (loss) for the year 264 (173) 91
7 Cash flow hedges 0 (40) (40)
8 Tax relating to other
comprehensive income 0 (29) (29)
Other comprehensive
income 0 (69) (69)
Total comprehensive
income 264 (242) 22

Notes to the reconciliation of total comprehensive income for 20X4:

...
6 Financial assets at fair value through profit or loss increased in value
by CU180 during 20X4. They were carried at cost in accordance with
previous GAAP. Fair value changes have been included in ‘Investment
Other income’.

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IFRS 2 Share-based Payment

IG Example 11 is amended. New text is underlined and deleted text is struck through.

Guidance on implementing
IFRS 2 Share-based Payment
...

Equity-settled share-based payment transactions

...

IG Example 11
Employee share purchase plan
...
Application of requirements

...
However, in some cases, the expense relating to an ESPP might not be
material. IAS 8 Basis of Preparation of Financial Statements Accounting Policies,
Changes in Accounting Estimates and Errors states that the accounting policies in
IFRSs need not be applied when the effect of applying them is immaterial
(IAS 8, paragraph 8). IFRS 18 Presentation and Disclosure in Financial Statements
also IAS 1 Presentation of Financial Statements states that information is
material if omitting, misstating or obscuring it could reasonably be expected
to influence decisions that the primary users of general purpose financial
statements make on the basis of those financial statements, which provide
financial information about a specific reporting entity. Materiality depends
on the nature or magnitude of information, or both. An entity assesses
whether information, either individually or in combination with other
information, is material in the context of its financial statements taken as a
whole (IFRS 18, paragraphs B1–B5IAS 1, paragraph 7). Therefore, in this
example, the entity should consider whether the expense of CU256,000 is
material.

42 © IFRS Foundation
 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

IFRS 5 Non-current Assets Held for Sale and Discontinued

Operations

Example 11 accompanying IFRS 5 is updated. New text is underlined and deleted text is
struck through.

Guidance on implementing
IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations
...

Presenting discontinued operations in the statement of

comprehensive income
Paragraph 33 of the IFRS requires an entity to disclose a single amount in the statement
of comprehensive income for discontinued operations with an analysis in the notes or in
a section of the statement of comprehensive income separate from continuing
operations. Example 11 illustrates how these requirements might be met.

Example 11
XYZ GROUP – STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED
31 DECEMBER 20X2 (illustrating the classification of expenses by function)
(in thousands of currency units) 20X2 20X1

Continuing operations
Revenue X X
Cost of sales (X) (X)
Gross profit X X
Other operating income X X
Distribution costs (X) (X)
Administrative expenses (X) (X)
Other operating expenses (X) (X)
Operating profit X X
Finance costs (X) (X)
Share of profit of associates X X
Profit before financing and income taxes X X
Interest expenses (X) (X)
Profit before income taxestax X X
Income tax expense (X) (X)
Profit for the period from continuing operations X X

continued...

© IFRS Foundation 43
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...continued

XYZ GROUP – STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED

31 DECEMBER 20X2 (illustrating the classification of expenses by function)

Discontinued operations
Profit for the period from discontinued operations(a) X X
Profit for the period X X

Attributable to:
Owners of the parent
Profit for the period from continuing operations X X
Profit for the period from discontinued operations X X
Profit for the period attributable to owners of the parent X X
Non-controlling interests
Profit for the period from continuing operations X X
Profit for the period from discontinued operations X X
Profit for the period attributable to non-controlling interests X X
X X

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IFRS 7 Financial Instruments: Disclosures

Paragraphs IG6 and IG12 are amended. Paragraph IG13 and its subheading are deleted.
New text is underlined and deleted text is struck through.

Guidance on implementing
IFRS 7 Financial Instruments: Disclosures
...

Classes of financial instruments and level of disclosure

(paragraphs 6 and B1–B3)
...

IG6 Paragraph 6C(c) of IAS 8 Basis of Preparation of Financial Statements 17(c) of IAS 1
requires an entity to ‘provide additional disclosures when compliance with the
specific requirements in IFRSs is insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the entityʼs
financial position and financial performance.’

Significance of financial instruments for financial position and

performance (paragraphs 7–30, B4 and B5)
...

Defaults and breaches (paragraphs 18 and 19)

IG12 Paragraphs 18 and 19 require disclosures when there are any defaults or
breaches of loans payable. Any defaults or breaches may affect the
classification of the liability as current or non-current in accordance with
IFRS 18IAS 1.

Total interest expense (paragraph 20(b))

IG13 Total interest expense disclosed in accordance with paragraph 20(b) is a
component of finance costs, which paragraph 82(b) of IAS 1 requires to be
presented separately in the statement of comprehensive income. The line item
for finance costs may also include amounts associated with non-financial
liabilities.

IG13 [Deleted]
IG13A–
IG13B

The footnote to the heading before paragraph IG13 is deleted. Deleted text is struck
through.

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* In Improvements to IFRSs issued in May 2008, the Board amended paragraph IG13
and removed ‘total interest income’ as a component of finance costs. This
amendment removed an inconsistency with paragraph 32 of IAS 1 Presentation of
Financial Statements, which precludes the offsetting of income and expenses (except
when required or permitted by an IFRS).

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 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

IFRS 9 Financial Instruments

Paragraphs IE18 and IE114 are amended. New text is underlined and deleted text is
struck through.

IFRS 9 Financial Instruments

Illustrative Examples
...

Impairment (Section 5.5)

Assessing significant increases in credit risk since initial

recognition
...

Example 3—highly collateralised financial asset

IE18 Company H invests in owns real estate assets as a main business activity (see
IFRS 18 Presentation and Disclosure in Financial Statements). Company H which are
financed its investments through by a five-year loan from Bank Z with a loan-
to-value (LTV) ratio of 50 per cent. The loan is secured by a first-ranking
security over the real estate assets. At initial recognition of the loan, Bank Z
does not consider the loan to be originated credit-impaired as defined in
Appendix A of IFRS 9.

...

Reclassification of financial assets (Section 5.6)

...

Example 15—reclassification of financial assets

...

Scenario 6: Reclassification out of the fair value through

other comprehensive income measurement category and
into the fair value through profit or loss measurement
category
IE114 Bank A reclassifies the portfolio of bonds out of the fair value through other
comprehensive income measurement category and into the fair value through
profit or loss measurement category. The portfolio of bonds continues to be
measured at fair value. However, the cumulative gain or loss previously
recognised in other comprehensive income is reclassified from equity to profit
or loss as a reclassification adjustment (see IFRS 18IAS 1 Presentation of Financial
Statements).

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IFRS 13 Fair Value Measurement

Paragraph IE62 and the table below paragraph IE62 are amended. New text is underlined
and deleted text is struck through.

IFRS 13 Fair Value Measurement

Illustrative Examples
...

Fair value disclosures

...

Example 16—Reconciliation of fair value measurements

categorised within Level 3 of the fair value hierarchy
...

IE62 Gains and losses included in profit or loss for the period (above) are presented
in the line item ‘income from financial assets’ financial income and in the line
item ‘income from investment property’non-financial income as follows:

Income Income
from from
financial invest-
assets ment
Financial property
income Non-
financial
income
(CU in millions)
Total gains or losses for the period included in profit
or loss (18) 4
Change in unrealised gains or losses for the period
included in profit or loss for assets held at the end
of the reporting period (13) 4

(Note: A similar table would be presented for liabilities unless another format is
deemed more appropriate by the entity.)

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 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

IFRS 14 Regulatory Deferral Accounts

The Statement of profit or loss and other comprehensive income in Example 1 and
paragraph IE2 are amended. New text is underlined and deleted text is struck through.

IFRS 14 Regulatory Deferral Accounts

Illustrative Examples
...

Regulatory deferral account balances

Example 1—Illustrative presentation of financial

statements
...

XYZ Group—Statement of profit or loss and other comprehensive income

for the year ended 31 December 20X7
(illustrating the presentation of profit or loss and other comprehensive
income in one statement and the classification of expenses within profit or
loss by function)
(in currency units)
20X7 20X6
Revenue 390,000 358,784
Cost of sales (237,062) (230,000)
Gross profit 152,938 128,784
Other operating income 44,247 16,220
Distribution costs (9,000) (13,700)
Administrative expenses (20,000) (31,500)
Other operating expenses (2,100) (1,200)
Finance costs (8,000) (7,500)
Operating profit 166,085 98,604
Share of profit of associates 35,100 15,100
Profit before financing and income taxes 201,185 113,704
Interest expenses (8,000) (7,500)
Profit before income taxestax 193,185 106,204
Income tax expense (43,587) (44,320)
Profit for the year before net movements in
regulatory deferral account balances 149,598 61,884

continued...

© IFRS Foundation 49
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...continued

Net movement in regulatory deferral account

balances related to profit or loss and the related
deferred tax movement (27,550) 3,193
Profit for the year and net movements in regula-
tory deferral account balances 122,048 65,077
Other comprehensive income: Items that will not
be reclassified to profit or loss
Remeasurement of defined benefit pension plans (7,938) (3,784)
Net movement in regulatory deferral account
balances related to other comprehensive income 7,140 4,207
Other comprehensive income for the year, net of
income taxestax (798) 423
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR 121,250 65,500
Profit and net movements in regulatory deferral
account balances attributable to:
Owners of the parent 97,798 51,977
Non-controlling interests 24,250 13,100
122,048 65,077
Total comprehensive income attributable to:
Owners of the parent 97,000 52,400
Non-controlling interests 24,250 13,100
121,250 65,500
Earnings per share (in currency units):
Basic and diluted 0.61 0.35
Basic and diluted including net movement in
regulatory deferral account balances 0.46 0.30

...

IE2 For each type of rate-regulated activity, paragraph 33 requires an entity to

disclosepresent, for each class of regulatory deferral account balance, a
reconciliation of the carrying amount at the beginning and the end of the
period. This example illustrates how that requirement may be met for an
entity with two types of rate-regulated activity (electricity distribution and gas
distribution), but is not intended to illustrate all aspects of this Standard or
IFRS more generally.

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 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

IFRS 16 Leases

Paragraphs IE9 and IE10 are amended. New text is underlined and deleted text is struck
through.

IFRS 16 Leases
Illustrative Examples
...

Lessee disclosure (paragraphs 59 and B49–B50)

IE9 Example 22 illustrates how a lessee with different types of lease portfolios
might comply with the disclosure requirements described in paragraphs 59
and B49 of IFRS 16 about variable lease payments. This example shows only
current period information. IFRS 18 Presentation and Disclosure in Financial
Statements IAS 1 Presentation of Financial Statements requires an entity to present
comparative information.

...

IE10 Example 23 illustrates how a lessee with different types of lease portfolios
might comply with the disclosure requirements described in paragraphs 59
and B50 of IFRS 16 about extension options and termination options. This
example shows only current period information. IFRS 18 IAS 1 requires an
entity to present comparative information.

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IAS 7 Statement of Cash Flows

The illustrative examples accompanying IAS 7 are amended. In the first illustrative
example (A—Statement of cash flows for an entity other than a financial institution), the
title, paragraphs 1 and 3, the Consolidated statement of comprehensive income for the
period ended 20X2, the Consolidated statement of financial position as at end of 20X2,
the Direct method statement of cash flows, the Indirect method statement of cash flows,
the Notes to the statement of cash flows (direct method and indirect method) (particularly,
A. Obtaining control of subsidiary, D. Segment information, E. Reconciliation of liabilities
arising from financing activities) and Alternative presentation (indirect method) are
amended. In the second illustrative example (B—Statement of cash flows for a financial
institution), the title, paragraph 1 and the Direct method statement of cash flows are
amended. In the third illustrative example (C—Reconciliation of liabilities arising from
financing activities), paragraph 2 is amended. New text is underlined and deleted text is
struck through.

Illustrative Examples
...

A Statement of cash flows for an entity that does not invest in

assets or provide financing to customers as a main business
activityother than a financial institution
1 The examples show only current period amounts. Comparative information
Corresponding amounts for the preceding period is are required to be
presented in accordance with IAS 1 Presentation of Financial StatementsIFRS 18
Presentation and Disclosure in Financial Statements.

...

3 The following additional information is also relevant for the preparation of

the statements of cash flows:

• all of the shares of a subsidiary were acquired for 590. The fair values of
assets acquired and liabilities assumed were as follows:

Inventories 100
Trade and other Accounts receivables 100
Cash 40
Property, plant and equipment 650
Trade payables 100
Long-term debt 200

...

• during the period, the group acquired property, plant and equipment and
right-of-use assets relating to property, plant and equipment with an
aggregate cost of 1,250, of which 900 related to right-of-use assets. Cash
payments of 350 were made to purchase property, plant and equipment.

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• depreciation on property, plant and equipment and amortisation of

intangible assets for the period amounted to 350 and 100 respectively.

• plant with original cost of 80 and accumulated depreciation of 60 was sold

for 20.

• trade and other accounts receivables as at the end of 20X2 include 100 of
interest receivable.

Consolidated statement of comprehensive income for the period ended

20X2(a)
Sales 30,650
Cost of sales (26,450)
(26,000)
Gross profit 4,200
4,650
Depreciation (450)
Selling Administrative and selling expenses (600)(910)
General and administrative expenses (310)
Operating profit 3,290
Share of profit or loss of associates and joint ventures 50
Interest expense (400)
Investment income 450500
Foreign exchange loss (40)
Profit before financing and income taxes 3,750
Interest expenses (400)
Foreign exchange loss (40)
Profit before income taxestaxation 3,350
Income tax expenseTaxes on income (300)
Profit/total comprehensive income 3,050

Consolidated statement of financial position as at end of 20X2

20X2 20X1
Assets
Current assets
Cash and cash equivalents 230 160
Trade and other Accounts
receivables 1,900 1,200

continued...

© IFRS Foundation 53
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...continued

Consolidated statement of financial position as at end of 20X2

20X2 20X1
Inventories
Inventory 1,000 1,950
Non-current assets
Investments in associates and
joint ventures 500 450
Investments in other financial
instruments 2,000 2,050
Portfolio investments 2,500 2,500
Property, plant and equipment
at cost 3,730 1,910
Accumulated depreciation (1,450) (1,060)
Property, plant and equipment 1,880 350
net 2,280 850
Intangible assets 400 500
Total assets 7,910 6,660

Liabilities
Current liabilities
Trade payables 250 1,890
Interest payable 230 100
Income taxes payable 400 1,000
Non-current liabilities
Long-term debt 2,300 1,040
Total liabilities 3,180 4,030

EquityShareholders’ equity
Share capital 1,500 1,250
Retained earnings 3,230 1,380
Total shareholders’ equity 4,730 2,630
Total liabilities and
shareholders’ equity 7,910 6,660

54 © IFRS Foundation
ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

Direct method statement of cash flows (paragraph 18(a))

20X2
Cash flows from operating activities
Cash receipts from customers 30,150
Cash paid to suppliers and employees (27,600)
Cash from operating activities before income taxesCash
generated from operations 2,550
Interest paid (270)
Income taxes paid (900)

Net cash from operating activities 1,650

1,380

Cash flows from investing activities

Acquisition of Subsidiarysubsidiary X, net of cash
acquired (Note A) (550)
Purchase of property, plant and equipment (Note B) (350)
Proceeds from sale of equipment 20
Interest received 200
Dividends received 200

Net cash used in investing activities (480)

Cash flows from financing activities

Proceeds from issue of share capital 250
Proceeds from long-term borrowings 250
Payment of lease liabilities (90)
Interest paid (270)

Dividends paid(a) (1,200)

Net cash used in financing activities (1,060)

(790)

Net increase in cash and cash equivalents 110

Cash and cash equivalents at beginning of period
(Note C) 120

continued...

© IFRS Foundation 55
 APRIL 2024

...continued

Direct method statement of cash flows (paragraph 18(a))

20X2
Cash and cash equivalents at end of period (Note C) 230
(a) This could also be shown as an operating cash flow.

Indirect method statement of cash flows (paragraph 18(b))

20X2
Cash flows from operating activities
Operating profitProfit before taxation 3,290
3,350
Adjustments for:
Depreciation 350450
Amortisation 100
Foreign exchange loss 40
Investment income (500)
Interest expense 400
Operating profit before depreciation and amortisation 3,740
Increase in trade and other receivables (500)
Decrease in inventories 1,050
Decrease in trade payables (1,740)
Cash from operating activities before income taxesCash
generated from operations 2,550
Interest paid (270)
Income taxes paid (900)
Net cash from operating activities 1,650
1,380

Cash flows from investing activities

Acquisition of Subsidiarysubsidiary X, net of cash
acquired (Note A) (550)
Purchase of property, plant and equipment (Note B) (350)
Proceeds from sale of equipment 20
Interest received 200
Dividends received 200
Net cash used in investing activities (480)

continued...

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 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

...continued

Indirect method statement of cash flows (paragraph 18(b))

20X2
Cash flows from financing activities
Proceeds from issue of share capital 250
Proceeds from long-term borrowings 250
Payment of lease liabilities (90)
Interest paid (270)

Dividends paid(a) (1,200)

Net cash used in financing activities (1,060)
(790)

Net increase in cash and cash equivalents 110

Cash and cash equivalents at beginning of period
(Note C) 120
Cash and cash equivalents at end of period (Note C) 230
(a) This could also be shown as an operating cash flow.

Notes to the statement of cash flows (direct method and

indirect method)

A. Obtaining control of subsidiary

During the period the Group obtained control of Subsidiary subsidiary X. The fair values
of assets acquired and liabilities assumed were as follows:

Cash 40
Inventories 100
Trade and other Accounts receivables 100
Property, plant and equipment 650
Trade payables (100)
Long-term debt (200)
Total purchase price paid in cash 590
Less: Cash of Subsidiary subsidiary X acquired (40)
Cash paid to obtain control net of cash acquired 550

...

© IFRS Foundation 57
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D. Segment information
Segment A Segment B Total
Cash flows from:
Operating activities 1,720 (70) 1,650
1,520 (140) 1,380
Investing activities (640) 160 (480)
Financing activities (770) (290) (1,060)
(570) (220) (790)
310 (200) 110

E. Reconciliation of liabilities arising from financing activities

20X1 Cash Non-cash changes 20X2
flows
Interest Acquisi- New
expenses tion leases
Long-term borrow- 1,040 250 – 200 – 1,490
ings
Lease liabilities – (90) – – 900 810
Long-term debt 1,040 160 – 200 900 2,300
Interest payable 100 (270) 400 – – 230
1,140 (110) 400 200 900 2,530

Alternative presentation (indirect method)

As an alternative, in an indirect method statement of cash flows, operating profit before
working capital changes is sometimes presented as follows:

SalesRevenues excluding investment income 30,650

Cost of sales (26,000)
Selling expenses (600)
General and administrative expenses (310)
Operating expense excluding depreciation (26,910)

Operating profit before depreciation and amortisationbefore

working capital changes 3,740

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 ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

B Statement of cash flows for an entity that invests in assets or

provides financing to customers as a main business activitya
financial institution
1 The example shows only current period amounts. Comparative information
amounts for the preceding period is are required to be presented in
accordance with IFRS 18 Presentation and Disclosure in Financial StatementsIAS 1
Presentation of Financial Statements.

...

Direct method statement of cash flows (paragraph 18(a))

20X2
Cash flows from operating activities

Interest(a) and commission receipts 28,747

28,447

Interest payments(a) (23,463)

Dividends received(a) 200

Recoveries on loans previously written off 237
Cash payments to employees and suppliers (997)
4,224

(Increase) decrease in operating assets:

Short-term funds (650)
Deposits held for regulatory or monetary control
purposes 234
Funds advanced to customers (288)
Net increase in credit card receivables (360)
Other short-term negotiable securities (120)

Increase (decrease) in operating liabilities:

Deposits from customers 600
Negotiable certificates of deposit (200)
Net cash from operating activities before income 3,940
taxestax 3,440
Income taxes paid (100)
Net cash from operating activities 3,840
3,340

continued...

© IFRS Foundation 59
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...continued

Direct method statement of cash flows (paragraph 18(a))

20X2
Cash flows from investing activities
Disposal of subsidiarySubsidiary Y 50
Dividends received 200
Interest received 300
Proceeds from sales of non-dealing securities 1,200
Purchase of non-dealing securities (600)
Purchase of property, plant and equipment (500)
Net cash from investing activities 150650

Cash flows from financing activities

Issue of loan capital 1,000
Issue of preference shares by subsidiary undertaking 800
Repayment of long-term borrowings (200)
Net decrease in other borrowings (1,000)
Dividends paid (400)
Net cash from financing activities 200
Effects of exchange rate changes on cash and cash
equivalents 600
Net increase in cash and cash equivalents 4,790
Cash and cash equivalents at beginning of
period 4,050
Cash and cash equivalents at end of period 8,840
(a) An entity classifies each of these cash flows in a single category.

C Reconciliation of liabilities arising from financing activities

...

2 The example shows only current period amounts. Comparative information

Corresponding amounts for the preceding period is are required to be presented
in accordance with IFRS 18 Presentation and Disclosure in Financial StatementsIAS 1
Presentation of Financial Statements.

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IAS 8 Accounting Policies, Changes in Accounting Estimates and

Errors

The title of IAS 8 is amended. New text is underlined and deleted text is struck through.

IAS 8 Basis of Preparation of Financial StatementsAccounting

Policies, Changes in Accounting Estimates and Errors
A footnote is added to the heading ‘Beta Co Extract from the statement of comprehensive
income’ in Example 1 – Retrospective restatement of errors. New text is underlined.

* This statement of comprehensive income does not aim to illustrate the

requirements in IFRS 18 for the structure of the statement of profit or loss.

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IAS 32 Financial Instruments: Presentation

Paragraph IE32, Example 7 in paragraph IE32, paragraph IE33 and Example 8 in

paragraph IE33 are amended. New text is underlined and deleted text is struck through.

IAS 32 Financial Instruments: Presentation

Illustrative Examples
...

Entities such as mutual funds and co-operatives whose share

capital is not equity as defined in IAS 32

Example 7: Entities with no equity

IE32 The following example illustrates a format of a statement of comprehensive
income and statement of financial position that may be used by entities such
as mutual funds that do not have equity as defined in IAS 32 and that do not
provide financing to customers as a main business activity. Other formats are
possible.

Statement of comprehensive income for the year ended 31 December 20X1

20X1 20X0
CU CU
Revenue 2,956 1,718
Expenses (classified by nature or function, in accord-
ance with IFRS 18) (644) (614)
Operating profit/profit before financingProfit from operat- 2,312 1,104
ing activities
Finance costs
Interest expenses– other finance costs (47) (47)
Distributions– distributions to unitholders (50) (50)
Change in net assets attributable to unitholders 2,215 1,007

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Statement of financial position at 31 December 20X1

20X1 20X0
CU CU CU CU

ASSETS
Non-current assets (classified
in accordance
with IFRS 18IAS 1) 91,374 78,484
Total non-current assets 91,374 78,484
Current assets (classified in
accordance
with IFRS 18IAS 1) 1,422 1,769
Total current assets 1,422 1,769
Total assets 92,796 80,253

LIABILITIES
Current liabilities (classified in
accordance
with IFRS 18IAS 1) 647 66
Total current liabilities (647) (66)
Non-current liabilities exclud-
ing net assets attributable to
unitholders (classified in
accordance
with IFRS 18IAS 1) 280 136
(280) (136)
Net assets attributable to
unitholders 91,869 80,051

Example 8: Entities with some equity

IE33 The following example illustrates a format of a statement of comprehensive
income and statement of financial position that may be used by entities that
do not provide financing to customers as a main business activity and whose
share capital is not equity as defined in IAS 32. The entities’ share capital is
not classified as equity because the entity has an obligation to repay the share
capital on demand but does not have all the features or meet the conditions in
paragraphs 16A and 16B or paragraphs 16C and 16D. Other formats are
possible.

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Statement of comprehensive income for the year ended 31 December 20X1

20X1 20X0
CU CU
Revenue 472 498
Expenses (classified by nature or function, in accord-
ance with IFRS 18) (367) (396)
Operating profit/profit before financingProfit from operat- 105 102
ing activities
Finance costs
Interest expenses– other finance costs (4) (4)
Distributions– distributions to members (50) (50)
Change in net assets attributable to members 51 48

Statement of financial position at 31 December 20X1

20X1 20X0
CU CU CU CU

ASSETS
Non-current assets (classified
in accordance
with IFRS 18IAS 1) 908 830
Total non-current assets 908 830
Current assets (classified in
accordance
with IFRS 18IAS 1) 383 350
Total current assets 383 350
Total assets 1,291 1,180

continued...

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...continued

Statement of financial position at 31 December 20X1

20X1 20X0
CU CU CU CU

LIABILITIES
Current liabilities (classified in
accordance
with IFRS 18IAS 1) 372 338
Share capital repayable on
demand 202 161
Total current liabilities (574) (499)
Total assets less current
liabilities 717 681

Non-current liabilities (classi-

fied in accordance
with IFRS 18IAS 1) 187 196
(187) (196)

OTHER COMPONENTS OF EQUITY(a)

Reserves eg revaluation
surplus, retained earnings etc 530 485
530 485
717 681

MEMORANDUM NOTE – Total members’ interests

Share capital repayable on
demand 202 161
Reserves 530 485
732 646

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IAS 41 Agriculture

Example 1 is amended. New text is underlined and deleted text is struck through.

Illustrative Examples
These examples, which were prepared by the IASC staff but were not approved by the IASC Board,
accompany, but are not part of, IAS 41. They have been updated to take account of the changes made
by IFRS 18 Presentation and Disclosure in Financial Statements IAS 1 Presentation of
Financial Statements (as revised in 2007) and Improvements to IFRSs issued in 2008.

...

Example 1 XYZ Dairy Ltd

...

Statement of comprehensive income

XYZ Dairy Ltd Notes Year ended
Statement of comprehensive income 31 December
20X1
Fair value of milk produced 518,240
Gains arising from changes in fair value less costs to sell of
dairy livestock 3 39,930
558,170
Inventories used (137,523)
Employee benefitsStaff costs (207,283)
(127,283)
Depreciation expense (15,250)
Professional services expenses (98,847)
Other operating expenses (18,245)
(197,092)
(477,148)
Operating profit/profit before financing and income
taxesProfit from operations 81,022
Income tax expense (43,194)
Profit/total comprehensive income for the year 37,828

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Statement of changes in equity

XYZ Dairy Ltd Year ended
Statement of changes in equity 31 December
20X1
Share Retained Total
capital earnings
Balance at 1 January 20X1 1,000,000 865,000 1,865,000

Profit/total comprehensive 37,828 37,828

income for the year
Balance at 31 December 20X1 1,000,000 902,828 1,902,828

Statement of cash flows

XYZ Dairy Ltd Notes Year ended
Statement of cash flows 31 December
20X1
Cash flows from operating activities
Cash receipts from sales of milk 498,027
Cash receipts from sales of livestock 97,913
Cash paid for supplies and to employees (460,831)
Cash paid for purchases of livestock (23,815)
Cash flows from operating activities before income
taxes 111,294
Income taxes paid (43,194)
Net cash from operating activities 68,100
Cash flows from investing activities
Purchase of property, plant and equipment (68,100)
Net cash used in investing activities (68,100)
Net increase in cash 0
Cash at beginning of the year 10,000
Cash at end of the year 10,000

The footnote to ‘Statement of comprehensive income’ in Example 1 is amended. New text

is underlined and deleted text is struck through.

* This statement of comprehensive income presents an analysis of expenses

classified in the operating category using a classification based on the nature of
expenses. IFRS 18 Presentation and Disclosure in Financial Statements IAS 1 Presentation
of Financial Statements requires that an entity, in the operating category of the
statement of profit or loss, classify and present expenses in a way that provides
the most useful structured summary of the expenses using the nature of expenses

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and their function within the entitypresent, either in the statement of

comprehensive income or in the notes, an analysis of expenses using a
classification based on either the nature of expenses or their function within the
entity. IAS 1 encourages presentation of an analysis of expenses in the statement
of comprehensive income.

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IFRIC 1 Changes in Existing Decommissioning, Restoration and

Similar Liabilities

Paragraphs IE4 and IE5 of Example 1 and paragraph IE13 of Example 3 that accompany
IFRIC 1 are amended. New text is underlined and deleted text is struck through.

Illustrative Examples
...

Example 1: Cost model

...

IE4 Following this adjustment, the carrying amount of the asset is CU82,000
(CU120,000 – CU8,000 – CU30,000), which will be depreciated over the
remaining 30 years of the asset’s life giving a depreciation expense for the
next year of CU2,733 (CU82,000 ÷ 30). The next year’s increase in the liability
finance cost for the unwinding of the discount will be CU415 (CU8,300 × 5 per
cent).

IE5 If the change in the liability had resulted from a change in the discount rate,
instead of a change in the estimated cash flows, the accounting for the change
would have been the same but the next year’s increase in the liability for the
unwinding of the discount finance cost would have reflected the new discount
rate.

...

Example 3: Transition
IE13 The following example illustrates retrospective application of the
Interpretation for preparers that already apply IFRSs. Retrospective
application is required by IAS 8 Basis of Preparation of Financial
StatementsAccounting Policies, Changes in Accounting Estimates and Errors, where
practicable, and is the benchmark treatment in the previous version of IAS 8.
The example assumes that the entity:

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IFRIC 12 Service Concession Arrangements

Add a footnote to ‘Table 1.5 Statement of comprehensive income (currency units)’ of

Example 1, ‘Table 2.5 Statement of comprehensive income (currency units)’ of Example 2
and ‘Table 3.8 Statement of comprehensive income (currency units)’ of Example 3 that
accompanies IFRIC 12. New text is underlined.

* This statement of comprehensive income does not aim to illustrate the

requirements of IFRS 18 Presentation and Disclosure in Financial Statements for the
structure of the statement of profit or loss.

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IFRS Practice Statement 2 Making Materiality Judgements

Paragraphs 5, 73, 88A, 88D–88E and 88G are amended. Example P, Example S,
Example T, Diagram 2 and the Appendix are also amended. New text is underlined and
deleted text is struck through. The footnotes to the text are not reproduced. Amendments
to footnotes are included after amendments to the Practice Statement.

General characteristics of materiality

Definition of material
5 The Conceptual Framework for Financial Reporting (Conceptual Framework) provides
the following definition of material information (Appendix A and
paragraph B1 of IFRS 18 Presentation and Disclosure in Financial Statements provide
paragraph 7 of IAS 1 Presentation of Financial Statements provides a similar
definition):

...

Specific topics
...

Errors
...

73 An entity must correct all material errors, as well as any immaterial errors
made intentionally to achieve a particular presentation of its financial
position, financial performance or cash flows, to ensure compliance with IFRS
Standards. The entity should refer to IAS 8 Basis of Preparation of Financial
Statements Accounting Policies, Changes in Accounting Estimates and Errors for
guidance on how to correct an error.

...

Information about covenants

...

Example P—assessing whether information about covenants is material

...
Application

...
Paragraph B106 of IFRS 18 76ZA of IAS 1 requires an entity to disclose, in
specified circumstances, information in the notes that enables users of
financial statements to understand the risk that non-current liabilities with
covenants could become repayable within twelve months after the reporting
period.
...

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...

Information about accounting policies

88A Paragraph 27A of IAS 8 117 of IAS 1 requires an entity to disclose material
accounting policy information.

...

Diagram 2—determining whether accounting policy information is material

Is the transaction, other event or condition to which the accounting policy

information relates material in size or nature, or a combination of both?

Accounting policy information that Is the accounting policy information

relates to immaterial transactions, that relates to a material transaction,
other events or conditions is other event or condition itself
immaterial and need not be disclosed material to the financial statements
(paragraphs 27B and 27E of IAS 8 (paragraph 27C of IAS 8
117A and 117D of IAS 1). 117B of IAS 1)?

Immaterial Material
accounting policy accounting policy
information that information shall
relates to material be disclosed
transactions, (paragraphs 27A
other events or and 27D of IAS 8
conditions need 117 and 117C of
not be disclosed IAS 1).
(paragraphs 27B
and 27E of IAS 8
117A and 117D
of IAS 1).

Note: an entity’s conclusion that accounting policy information is immaterial

does not affect the related disclosure requirements set out in other
IFRS Standards (paragraph 27F of IAS 8117E of IAS 1).

88D Paragraph 27C of IAS 8 117B of IAS 1 includes examples of circumstances in

which an entity is likely to consider accounting policy information to be
material to its financial statements. The list is not exhaustive, but provides
guidance on when an entity would normally consider accounting policy
information to be material.

88E Paragraph 27D of IAS 8 117C of IAS 1 describes the type of material
accounting policy information that users of financial statements find most
useful. Users generally find information about the characteristics of an
entity’s transactions, other events or conditions—entity-specific information
—more useful than disclosures that only include standardised information, or
information that duplicates or summarises the requirements of the IFRS
Standards. Entity-specific accounting policy information is particularly useful

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when that information relates to an area for which an entity has exercised
judgement—for example, when an entity applies an IFRS Standard differently
from similar entities in the same industry.

...

88G Paragraph 27E of IAS 8 117D of IAS 1 states that if an entity discloses
immaterial accounting policy information, such information shall not obscure
material information. Paragraphs 56–59 provide guidance about how to
communicate information clearly and concisely in the financial statements.

Example S—making materiality judgements and focusing on entity-

specific information while avoiding standardised (boilerplate) accounting
policy information
...
Application

...
The entity evaluates the effect of disclosing the accounting policy
information by considering the presence of qualitative factors. The entity
noted that its revenue recognition accounting policies:

...

(c) were not developed in accordance with IAS 8 Basis of Preparation of

Financial StatementsAccounting Policies, Changes in Accounting Estimates and
Errors in the absence of an IFRS Standard that specifically applies; and

...

Example T—making materiality judgements on accounting policy

information that only duplicates requirements in the IFRS Standards
...
Application

...
However, the entity’s impairment accounting policy relates to an area for
which the entity is required to make significant judgements or assumptions,
as described in paragraphs 27G and 31A of IAS 8122 and 125 of IAS 1. Given
the entity’s specific circumstances, it concludes that information about its
significant judgements and assumptions related to its impairment
assessments could reasonably be expected to influence the decisions of the
primary users of the entity’s financial statements. The entity notes that its
disclosures about significant judgements and assumptions already include
information about the significant judgements and assumptions used in its
impairment assessments.

...

...

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Appendix
References to the Conceptual Framework for Financial Reporting
and IFRS Standards
...

Extracts from IFRS 18 Presentation and Disclosure in Financial

StatementsIAS 1 Presentation of Financial Statements
Paragraph 7

Referred to in paragraphs 5, 41 and 60 of the Practice Statement

Material:

Information is material if omitting, misstating or obscuring it could reasonably be

expected to influence decisions that the primary users of general purpose financial
statements make on the basis of those financial statements which provide financial
information about a specific reporting entity.

Materiality depends on the nature or magnitude of information, or both. An entity assesses

whether information, either individually or in combination with other information, is
material in the context of its financial statements taken as a whole.

Paragraph 7

Referred to in paragraph 6 of the Practice Statement

Assessing whether information could reasonably be expected to influence decisions made by
the primary users of a specific reporting entity’s general purpose financial statements
requires an entity to consider the characteristics of those users while also considering the
entity’s own circumstances. […] At times, even well informed and diligent users may need to
seek the aid of an adviser to understand information about complex economic phenomena.

Paragraph 15

Referred to in paragraph 62 of the Practice Statement

Financial statements shall present fairly the financial position, financial performance
and cash flows of an entity. Fair presentation requires the faithful representation of the
effects of transactions, other events and conditions in accordance with the definitions
and recognition criteria for assets, liabilities, income and expenses set out in the
Conceptual Framework for Financial Reporting (Conceptual Framework). The application of
IFRSs, with additional disclosure when necessary, is presumed to result in financial
statements that achieve a fair presentation.

Paragraph 17

Referred to in paragraph 10 of the Practice Statement

In virtually all circumstances, an entity achieves a fair presentation by compliance with
applicable IFRSs. A fair presentation also requires an entity:

(a) to select and apply accounting policies in accordance with IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors. IAS 8 sets out a hierarchy of authoritative
guidance that management considers in the absence of an IFRS that specifically
applies to an item.

(b) to present information, including accounting policies, in a manner that provides

relevant, reliable, comparable and understandable information.

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(c) to provide additional disclosures when compliance with the specific requirements in
IFRSs is insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the entity’s financial position and
financial performance.

Paragraph 15

Referred to in paragraph 58 of the Practice Statement

To achieve the objective of financial statements (see paragraph 9), an entity presents
information in the primary financial statements and discloses information in the notes.
An entity need only present or disclose material information (see paragraphs 19 and
B1–B5).

Paragraph 16

Referred to in paragraph 58 of the Practice Statement

The role of the primary financial statements is to provide structured summaries of a
reporting entity’s recognised assets, liabilities, equity, income, expenses and cash flows,
that are useful to users of financial statements for:

(a) obtaining an understandable overview of the entity’s recognised assets, liabilities,

equity, income, expenses and cash flows;

(b) making comparisons between entities, and between reporting periods for the
same entity; and

(c) identifying items or areas about which users of financial statements may wish to
seek additional information in the notes.

Paragraph 17

Referred to in paragraph 58 of the Practice Statement

The role of the notes is to provide material information necessary:

(a) to enable users of financial statements to understand the line items presented in
the primary financial statements (see paragraph B6); and

(b) to supplement the primary financial statements with additional information to

achieve the objective of financial statements (see paragraph B7).

Paragraph 18

Referred to in paragraph 58 of the Practice Statement

An entity shall use the roles of the primary financial statements and the notes, described in
paragraphs 16–17, to determine whether to include information in the primary financial
statements or in the notes. The different roles of the primary financial statements and the
notes mean that the extent of the information required in the notes differs from that in the
primary financial statements. The differences mean that:

(a) to provide the structured summaries described in paragraph 16, information

provided in the primary financial statements is more aggregated than information
provided in the notes; and

(b) to provide the information described in paragraph 17, more detailed information
about the entity’s assets, liabilities, equity, income, expenses and cash flows,
including the disaggregation of information presented in the primary financial
statements, is provided in the notes.

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Paragraph 19

Referred to in paragraph 10 of the Practice Statement

Some IFRS Accounting Standards specify information that is required to be presented in
the primary financial statements or disclosed in the notes. An entity need not provide a
specific presentation or disclosure required by IFRS Accounting Standards if the
information resulting from that presentation or disclosure is not material. This is the
case even if IFRS Accounting Standards contain a list of specific requirements or describe
them as minimum requirements.

Paragraph 20

Referred to in paragraph 10 of the Practice Statement

An entity shall consider whether to provide additional disclosures when compliance with
the specific requirements in IFRS Accounting Standards is insufficient to enable users of
financial statements to understand the effect of transactions and other events and
conditions on the entity’s financial position and financial performance.

Paragraph 41

Referred to in paragraphs 28, 57 and 69 of the Practice Statement

For the purposes of this Standard, an item is an asset, liability, equity instrument or
reserve, income, expense or cash flow or any aggregation or disaggregation of such assets,
liabilities, equity, income, expenses or cash flows. A line item is an item that is presented
separately in the primary financial statements. Other material information about items is
disclosed in the notes. Unless doing so would override specific aggregation or
disaggregation requirements in IFRS Accounting Standards, an entity shall (see
paragraphs B16–B23):

(a) classify and aggregate assets, liabilities, equity, income, expenses or cash flows
into items based on shared characteristics;

(b) disaggregate items based on characteristics that are not shared;

(c) aggregate or disaggregate items to present line items in the primary financial
statements that fulfil the role of the primary financial statements in providing
useful structured summaries (see paragraph 16);

(d) aggregate or disaggregate items to disclose information in the notes that fulfils
the role of the notes in providing material information (see paragraph 17); and

(e) ensure that aggregation and disaggregation in the financial statements do not
obscure material information (see paragraph B3).

Paragraph 42Paragraph 29

Referred to in paragraph 43 of the Practice Statement

Applying the principles in paragraph 41, an entity shall disaggregate items whenever the
resulting information is material. If, applying paragraph 41(c), an entity does not present
material information in the primary financial statements, it shall disclose the information in
the notes. Paragraphs B79 and B111 set out examples of income, expenses, assets, liabilities
and items of equity that might have sufficiently dissimilar characteristics that presentation
in the statement of profit or loss or statement of financial position or disclosure in the notes
is necessary to provide material information.

An entity shall present separately each material class of similar items. An entity shall
present separately items of a dissimilar nature or function unless they are immaterial.

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Paragraph 30A

Referred to in paragraphs 28, 57 and 69 of the Practice Statement

When applying this and other IFRSs an entity shall decide, taking into consideration all
relevant facts and circumstances, how it aggregates information in the financial statements,
which include the notes. An entity shall not reduce the understandability of its financial
statements by obscuring material information with immaterial information or by
aggregating material items that have different natures or functions.

Paragraph 31

Referred to in paragraph 10 of the Practice Statement

Some IFRSs specify information that is required to be included in the financial statements,
which include the notes. An entity need not provide a specific disclosure required by an IFRS
if the information resulting from that disclosure is not material. This is the case even if the
IFRS contains a list of specific requirements or describes them as minimum requirements.
An entity shall also consider whether to provide additional disclosures when compliance
with the specific requirements in IFRS is insufficient to enable users of financial statements
to understand the impact of particular transactions, other events and conditions on the
entity’s financial position and financial performance.

Paragraph 3138

Referred to in paragraphs 67 and 70 of the Practice Statement

Except when IFRS Accounting Standards permit or require otherwise, an entity shall
provide comparative information (that is, information for the preceding reporting
period) for all amounts reported in the current period’s financial statements. An entity
shall include comparative information for narrative and descriptive information if it is
necessary for an understanding of the current period’s financial statements (see
paragraph B13).

Except when IFRSs permit or require otherwise, an entity shall present comparative
information in respect of the preceding period for all amounts reported in the current
period’s financial statements. An entity shall include comparative information for
narrative and descriptive information if it is relevant to understanding the current
period’s financial statements.

Paragraph 3238A

Referred to in paragraph 67 of the Practice Statement

An entity shall present a current reporting period and preceding period in each of its
primary financial statements and in the notes. Paragraphs B14–B15 set out requirements
relating to additional comparative information.

An entity shall present, as a minimum, two statements of financial position, two

statements of profit or loss and other comprehensive income, two separate statements of
profit or loss (if presented), two statements of cash flows and two statements of changes
in equity, and related notes.

Appendix A

Referred to in paragraphs 5, 41 and 60 of the Practice Statement

material information:

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Information is material if omitting, misstating or obscuring it could reasonably be expected

to influence decisions that the primary users of general purpose financial statements make
on the basis of those financial statements, which provide financial information about a
specific reporting entity.

Paragraph B2

Referred to in paragraphs 5, 41 and 60 of the Practice Statement

Materiality depends on the nature or magnitude of information, or both. An entity assesses
whether information, either individually or in combination with other information, is
material in the context of its financial statements taken as a whole.

Paragraph B4

Referred to in paragraph 6 of the Practice Statement

Assessing whether information could reasonably be expected to influence decisions made by
the primary users of a specific reporting entity’s general purpose financial statements
requires an entity to consider the characteristics of those users while also considering the
entity’s own circumstances.

Paragraph B5

Referred to in paragraph 6 of the Practice Statement

…At times, even well-informed and diligent users may need to seek the aid of an adviser to
understand information about complex economic phenomena.

Paragraph B1438C

Referred to in paragraph 69 of the Practice Statement

An entity may provide comparative information in addition to the comparative information
required by IFRS Accounting Standards, as long as that information is prepared in
accordance with IFRS Accounting Standards. This additional comparative information may
consist of one or more of the primary financial statements referred to in paragraph 10, but
need not comprise a complete set of financial statements. When this is the case, the entity
shall disclose in the notes information for those additional primary financial statements.

An entity may present comparative information in addition to the minimum comparative

financial statements required by IFRSs, as long as that information is prepared in accordance
with IFRSs. This comparative information may consist of one or more statements referred to
in paragraph 10, but need not comprise a complete set of financial statements. When this is
the case, the entity shall present related note information for those additional statements.

Paragraph 117

Referred to in paragraphs 88A and 88C of the Practice Statement

An entity shall disclose material accounting policy information (see paragraph 7).
Accounting policy information is material if, when considered together with other
information included in an entity’s financial statements, it can reasonably be expected to
influence decisions that the primary users of general purpose financial statements make
on the basis of those financial statements.

Paragraph 117A

Referred to in paragraph 88C of the Practice Statement

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Accounting policy information that relates to immaterial transactions, other events or

conditions is immaterial and need not be disclosed. Accounting policy information may
nevertheless be material because of the nature of the related transactions, other events or
conditions, even if the amounts are immaterial. However, not all accounting policy
information relating to material transactions, other events or conditions is itself material.

Paragraph 117B

Referred to in paragraphs 88C and 88D of the Practice Statement

Accounting policy information is expected to be material if users of an entity’s financial
statements would need it to understand other material information in the financial
statements. For example, an entity is likely to consider accounting policy information
material to its financial statements if that information relates to material transactions, other
events or conditions and:

(a) the entity changed its accounting policy during the reporting period and this change
resulted in a material change to the information in the financial statements;

(b) the entity chose the accounting policy from one or more options permitted by IFRSs
—such a situation could arise if the entity chose to measure investment property at
historical cost rather than fair value;

(c) the accounting policy was developed in accordance with IAS 8 in the absence of an
IFRS that specifically applies;

(d) the accounting policy relates to an area for which an entity is required to make
significant judgements or assumptions in applying an accounting policy, and the
entity discloses those judgements or assumptions in accordance with paragraphs 122
and 125; or

(e) the accounting required for them is complex and users of the entity’s financial
statements would otherwise not understand those material transactions, other
events or conditions—such a situation could arise if an entity applies more than one
IFRS to a class of material transactions.

Paragraph 117C

Referred to in paragraphs 88C and 88E of the Practice Statement

Accounting policy information that focuses on how an entity has applied the requirements
of the IFRSs to its own circumstances provides entity-specific information that is more useful
to users of financial statements than standardised information, or information that only
duplicates or summarises the requirements of the IFRSs.

Paragraph 117D

Referred to in paragraphs 88C and 88G of the Practice Statement

If an entity discloses immaterial accounting policy information, such information shall not
obscure material accounting policy information.

Paragraph 117E

Referred to in paragraph 88C of the Practice Statement

An entity’s conclusion that accounting policy information is immaterial does not affect the
related disclosure requirements set out in other IFRSs.

Paragraph BC73 BC30F of the Basis for Conclusions

Referred to in paragraphs 28 and 69 of the Practice Statement

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Aggregating and disaggregating information requires an entity to avoid both omitting useful
information by providing insufficient detail and obscuring information with too much detail.
For example, an entity’s total assets, total liabilities, total equity, total income, total expenses
and total cash flows provide some information about the entity’s financial position, financial
performance and cash flows, but are too aggregated to be useful on their own. Conversely,
disaggregated information about individual transactions or other events provides detailed
information, but may be so detailed as to obscure material information. Accordingly, an
entity uses its judgement to determine how much detail is necessary to provide useful
information.

Paragraph 30A was added to IAS 1 to highlight that when an entity decides how it aggregates
information in the financial statements, it should take into consideration all relevant facts
and circumstances. Paragraph 30A emphasises that an entity should not reduce the
understandability of its financial statements by providing immaterial information that
obscures the material information in financial statements or by aggregating material items
that have different natures or functions. Obscuring material information with immaterial
information in financial statements makes the material information less visible and
therefore makes the financial statements less understandable. The amendments do not
actually prohibit entities from disclosing immaterial information, because the Board thinks
that such a requirement would not be operational; however, the amendments emphasise
that disclosure should not result in material information being obscured.

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Extracts from IAS 8 Basis of Preparation of Financial

StatementsAccounting Policies, Changes in Accounting
Estimates and Errors
Paragraph 5

Referred to in paragraphs 72 and 78 of the Practice Statement

Prior period errors are omissions from, and misstatements in, the entity's financial
statements for one or more prior periods arising from a failure to use, or misuse of,
reliable information that:

(a) was available when financial statements for those periods were authorised for
issue; and

(b) could reasonably be expected to have been obtained and taken into account in
the preparation and presentation of those financial statements.

Such errors include the effects of mathematical mistakes, mistakes in applying

accounting policies, oversights or misinterpretations of facts, and fraud.

Paragraph 6A

Referred to in paragraph 62 of the Practice Statement

Financial statements shall present fairly the financial position, financial performance
and cash flows of an entity. Fair presentation requires the faithful representation of the
effects of transactions, other events and conditions in accordance with the definitions
and recognition criteria for assets, liabilities, income and expenses set out in the
Conceptual Framework for Financial Reporting (Conceptual Framework). The application of
IFRSs, with additional disclosure when necessary, is presumed to result in financial
statements that achieve a fair presentation.

Paragraph 6C

Referred to in paragraph 10 of the Practice Statement

In virtually all circumstances, an entity achieves a fair presentation by compliance with
applicable IFRSs. A fair presentation also requires an entity:

(a) to select and apply accounting policies in accordance with this Standard. This
Standard sets out a hierarchy of authoritative guidance that management considers
in the absence of an IFRS that specifically applies to an item.

(b) to present information, including accounting policies, in a manner that provides

relevant, reliable, comparable and understandable information.

(c) to provide additional disclosures when compliance with the specific requirements in
IFRSs is insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the entity’s financial position and
financial performance.

Paragraph 8

Referred to in paragraph 8 of the Practice Statement

IFRSs set out accounting policies that the IASB has concluded result in financial statements
containing relevant and reliable information about the transactions, other events and
conditions to which they apply. Those policies need not be applied when the effect of
applying them is immaterial. However, it is inappropriate to make, or leave uncorrected,

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immaterial departures from IFRSs to achieve a particular presentation of an entity’s financial

position, financial performance or cash flows.

Paragraph 27A

Referred to in paragraph 88A and 88C of the Practice Statement

An entity shall disclose material accounting policy information (see paragraph 5).
Accounting policy information is material if, when considered together with other
information included in an entity’s financial statements, it can reasonably be expected to
influence decisions that the primary users of general purpose financial statements make
on the basis of those financial statements.

Paragraph 27B

Referred to in paragraph 88C of the Practice Statement

Accounting policy information that relates to immaterial transactions, other events or
conditions is immaterial and need not be disclosed. Accounting policy information may
nevertheless be material because of the nature of the related transactions, other events or
conditions, even if the amounts are immaterial. However, not all accounting policy
information relating to material transactions, other events or conditions is itself material.

Paragraph 27C

Referred to in paragraphs 88C and 88D of the Practice Statement

Accounting policy information is expected to be material if users of an entity’s financial
statements would need it to understand other material information in the financial
statements. For example, an entity is likely to consider accounting policy information
material to its financial statements if that information relates to material transactions, other
events or conditions and:

(a) the entity changed its accounting policy during the reporting period and this change
resulted in a material change to the information in the financial statements;

(b) the entity chose the accounting policy from one or more options permitted by IFRSs
—such a situation could arise if the entity chose to measure investment property at
historical cost rather than fair value;

(c) the accounting policy was developed in accordance with this Standard in the absence
of an IFRS that specifically applies;

(d) the accounting policy relates to an area for which an entity is required to make
significant judgements or assumptions in applying an accounting policy, and the
entity discloses those judgements or assumptions in accordance with paragraphs
27G and 31A; or

(e) the accounting required for them is complex and users of the entity’s financial
statements would otherwise not understand those material transactions, other
events or conditions—such a situation could arise if an entity applies more than one
IFRS to a class of material transactions.

Paragraph 27D

Referred to in paragraphs 88C and 88E of the Practice Statement

Accounting policy information that focuses on how an entity has applied the requirements
in the IFRSs to its own circumstances provides entity-specific information that is more useful
to users of financial statements than standardised information, or information that only
duplicates or summarises the requirements of the IFRSs.

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Paragraph 27E

Referred to in paragraphs 88C and 88G of the Practice Statement

If an entity discloses immaterial accounting policy information, such information shall not
obscure material accounting policy information.

Paragraph 27F

Referred to in paragraph 88C of the Practice Statement

An entity’s conclusion that accounting policy information is immaterial does not affect the
related disclosure requirements set out in other IFRSs.

Paragraph 41

Referred to in paragraph 73 of the Practice Statement

Errors can arise in respect of the recognition, measurement, presentation or disclosure of
elements of financial statements. Financial statements do not comply with IFRSs if they
contain either material errors or immaterial errors made intentionally to achieve a
particular presentation of an entity's financial position, financial performance or cash flows.
Potential current period errors discovered in that period are corrected before the financial
statements are authorised for issue. However, material errors are sometimes not discovered
until a subsequent period, and these prior period errors are corrected in the comparative
information presented in the financial statements for that subsequent period (see paragraphs
42–47).

Extracts from IAS 34 Interim Financial Reporting

…

Paragraph 20

Referred to in paragraph 85 of the Practice Statement

Interim reports shall include interim financial statements (condensed or complete) for
periods as follows:

(a) statement of financial position as of the end of the current interim period and a
comparative statement of financial position as of the end of the immediately
preceding financial year.

(b) statement(s) of financial performance statements of profit or loss and other

comprehensive income for the current interim period and cumulatively for the
current financial year to date, with comparative statement(s) of financial
performance statements of profit or loss and other comprehensive income for
the comparable interim periods (current and year-to-date) of the immediately
preceding financial year. As permitted by IFRS 18IAS 1 (as amended in 2011), an
interim report may present for each period a statement (or statements) or
statements of financial performanceprofit or loss and other comprehensive
income.

(c) statement of changes in equity cumulatively for the current financial year to
date, with a comparative statement for the comparable year-to-date period of the
immediately preceding financial year.

(d) statement of cash flows cumulatively for the current financial year to date, with a
comparative statement for the comparable year-to-date period of the immediately
preceding financial year.

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In paragraph 5 the footnote at the end of the first sentence is amended. New text is
underlined and deleted text is struck through.

* See Appendix A and paragraph B2 of Appendix B of IFRS 18 Presentation and

Disclosure in Financial Statementsparagraph 7 of IAS 1 Presentation of Financial
Statements.

In paragraph 6 the footnote at the end of the paragraph is amended. New text is
underlined and deleted text is struck through.

* See Appendix A and paragraph B4 of IFRS 18paragraph 7 of IAS 1.

In paragraph 8 the footnote at the end of the paragraph is amended. New text is
underlined and deleted text is struck through.

* See paragraph 8 of IAS 8 Basis of Preparation of Financial StatementsAccounting Policies,

Changes in Accounting Estimates and Errors.

In paragraph 10 the footnote at the end of the paragraph is amended. New text is
underlined and deleted text is struck through.

* See paragraph 6C(c) of IAS 8 and paragraphs 19–20 of IFRS 18paragraphs 17(c) and
31 of IAS 1.

In paragraph 28 the footnote at the end of the paragraph is amended. New text is
underlined and deleted text is struck through.

* See paragraph 41 of IFRS 18 and paragraph BC73 of the Basis for Conclusions on
IFRS 18paragraph 30A of IAS 1 and paragraph BC30F of the Basis for Conclusions
on IAS 1.

In paragraph 41 the footnote at the end of the first sentence is amended. New text is
underlined and deleted text is struck through.

* See Appendix A and paragraph B2 of IFRS 18paragraph 7 of IAS 1.

In paragraph 43 the footnote after ‘much detail’ is amended. New text is underlined and
deleted text is struck through.

* See paragraph 42 of IFRS 18paragraph 29 of IAS 1.

In paragraph 57 the footnote after ‘is obscured’ is amended. New text is underlined and
deleted text is struck through.

* See paragraph 41 of IFRS 18paragraph 30A of IAS 1.

84 © IFRS Foundation
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In paragraph 60 the footnote after ‘other information’ is amended. New text is underlined
and deleted text is struck through.

* See Appendix A and paragraph B2 of IFRS 18paragraph 7 of IAS 1.

In paragraph 62(d) the footnote added to the end of the sub-paragraph is amended. New
text is underlined and deleted text is struck through.

* See paragraph 6A of IAS 815 of IAS 1.

In paragraph 67 the footnotes at the end of the first, second, third and fourth sentences
are amended. New text is underlined and deleted text is struck through.

* Except when IFRS Standards permit or require otherwise. See paragraph 31 of

IFRS 1838 of IAS 1.

† See paragraph 31 of IFRS 1838 of IAS 1.

‡ See paragraph 32 of IFRS 1838A of IAS 1.

§ Paragraph 10(g) of IFRS 18 10(f) of IAS 1 also requires an entity to provide a

statement of financial position as at the beginning of the preceding period when
the entity applies an accounting policy retrospectively or makes a retrospective
restatement of items in its financial statements, or when it reclassifies items in its
financial statements in accordance with paragraphs 37–40 of IFRS 1840A–40D of
IAS 1.

In paragraph 69 the footnote after ‘with the Standards’ and the footnote at the end of the
third sentence are amended. New text is underlined and deleted text is struck through.

* See paragraph B14 of IFRS 1838C of IAS 1.

† See paragraph 41 of IFRS 18 and paragraph BC73 of the Basis for Conclusions on
IFRS 18paragraph 30A of IAS 1 and paragraph BC30F of the Basis for Conclusions
on IAS 1.

In paragraph 70 the footnote after ‘current-period financial statements,’ is amended. New

text is underlined and deleted text is struck through.

* See paragraph 31 of IFRS 1838 of IAS 1.

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