{"id":14679,"date":"2024-09-19T07:00:11","date_gmt":"2024-09-19T06:00:11","guid":{"rendered":"https:\/\/globalconnectadmin.com\/?p=14679"},"modified":"2024-09-19T03:33:19","modified_gmt":"2024-09-19T02:33:19","slug":"ifrs-18-presentation-and-disclosure-in-financial-statements-part-1-2","status":"publish","type":"post","link":"https:\/\/globalconnectadmin.com\/nl\/ifrs-18-presentation-and-disclosure-in-financial-statements-part-1-2\/","title":{"rendered":"IFRS 18 \u2013 Presentation and Disclosure in Financial Statements \u2013 Part 1"},"content":{"rendered":"\n[et_pb_section fb_built=&#8221;1&#8243; _builder_version=&#8221;4.16&#8243; global_colors_info=&#8221;{}&#8221; theme_builder_area=&#8221;post_content&#8221;][et_pb_row _builder_version=&#8221;4.16&#8243; background_size=&#8221;initial&#8221; background_position=&#8221;top_left&#8221; background_repeat=&#8221;repeat&#8221; global_colors_info=&#8221;{}&#8221; theme_builder_area=&#8221;post_content&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.16&#8243; custom_padding=&#8221;|||&#8221; global_colors_info=&#8221;{}&#8221; custom_padding__hover=&#8221;|||&#8221; theme_builder_area=&#8221;post_content&#8221;][et_pb_text _builder_version=&#8221;4.27.0&#8243; background_size=&#8221;initial&#8221; background_position=&#8221;top_left&#8221; background_repeat=&#8221;repeat&#8221; hover_enabled=&#8221;0&#8243; global_colors_info=&#8221;{}&#8221; theme_builder_area=&#8221;post_content&#8221; sticky_enabled=&#8221;0&#8243;]<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/globalconnectadmin.com\/wp-content\/uploads\/2024\/09\/art_50a-241x300.png\" width=\"503\" height=\"626\" alt=\"\" class=\"wp-image-14676 alignnone size-medium\" style=\"display: block; margin-left: auto; margin-right: auto;\" srcset=\"https:\/\/globalconnectadmin.com\/wp-content\/uploads\/2024\/09\/art_50a-241x300.png 241w, https:\/\/globalconnectadmin.com\/wp-content\/uploads\/2024\/09\/art_50a.png 425w\" sizes=\"(max-width: 503px) 100vw, 503px\" \/><\/p>\n<p>According to Andreas Barckow, IASB Chair: \u201cIFRS 18 represents the most significant change to companies\u2019 presentation of financial performance since IFRS Accounting Standards were introduced more than 20 years ago. It will give investors better information about companies\u2019 financial performance and consistent anchor points for their analysis.\u201d<\/p>\n<p>IFRS 18 <em>Presentation and Disclosure in Financial Statements<\/em> replaces IAS 1 <em>Presentation of Financial Statements<\/em> and although it carries forward many requirements from IAS 1 unchanged, the new Standard contains three sets of new requirements. This article will focus on the first two sets of new requirements while the next article will deal with the third set of new requirements and the changes to the cash flow statement.<\/p>\n<p>\u00a0The first two sets of requirements introduced by the new IFRS 18 is detailed below:<\/p>\n<p>\u00a01. <strong>Improved comparability in the statement of profit or loss (income statement)<\/strong><\/p>\n<p>\u00a0IFRS 18 requires a company:<\/p>\n<ul>\n<li>to classify income and expenses into operating, investing and financing categories in the statement of profit or loss\u2014plus income taxes and discontinued operations; and<\/li>\n<li>to present two new defined subtotals\u2014operating profit and profit before financing and income taxes.<\/li>\n<\/ul>\n<p>\u00a0IFRS 18 defines operating profit or loss as \u201cthe total of all income and expenses classified in the operating category.\u201d The operating profit subtotal gives a complete picture of a company\u2019s operations, whereas the profit before financing and income taxes gives a picture of a company\u2019s performance before the effects of its financing.<\/p>\n<p>What is included in each category?<\/p>\n<table>\n<tbody>\n<tr>\n<td width=\"141\">\n<p>Operating Category<\/p>\n<\/td>\n<td width=\"460\">\n<p>\u2022 All income and expenses from a company\u2019s operations, regardless of whether they are volatile or unusual<\/p>\n<p>\u2022 Default category \u2013 includes all income and expenses that are not classified in the investing, financing, income taxes or discontinued operations categories<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td width=\"141\">\n<p>Investing Category<\/p>\n<\/td>\n<td width=\"460\">\n<p>\u2022 Income and expenses from assets that generate a return individually and largely independently of other resources held by an entity<\/p>\n<p>\u2022 Income and expenses from non-consolidated subsidiaries, associates and joint ventures<\/p>\n<p>\u2022 Income and expenses from cash and cash equivalents<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td width=\"141\">\n<p>Financing Category:<\/p>\n<\/td>\n<td width=\"460\">\n<p>\u2022 All income and expenses from liabilities that arise from transactions that involve only the raising of finance<\/p>\n<p>\u2022 Interest expense and effects of changes in interest rates from other liabilities (such as lease liabilities and defined pension liabilities)<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Specific companies, whose main business comprise providing financing to customers and investing in assets e.g. banks and insurance companies, include income and expenses in their operating profit that for other companies would be included in the investing or financing categories.<\/p>\n<p>Foreign exchange differences are classified in the same category as the income or expense giving rise to the gain or loss. If this will involve undue cost or effort, they are classified in the operating category.<\/p>\n<p>The introduction of the three new defined categories provides a consistent structure of the statement of profit and loss. This, together with newly defined subtotals, addresses investor feedback regarding inconsistencies in the structure and content of statements of profit and loss, which hinders the comparability of financial performance between companies.<\/p>\n<p><strong>2. Enhanced transparency of management-defined performance measures (MPMs)<\/strong><\/p>\n<p>Many companies provide company-specific measures, often referred to as alternative performance measures or non-GAAP measures. Investors find these measures useful, but they have concerns about the lack of transparency of how these measures are calculated. To address investor concerns, IFRS 18 introduces a new defined term, MPM, and requires specific disclosures to be included in the financial statements.<\/p>\n<p>An MPM is defined as a subtotal of income and expenses that:<\/p>\n<ul>\n<li>is used in public communications outside financial statements;<\/li>\n<li>is used to communicate to investors management\u2019s view of an aspect of the financial performance of the entity as a whole; and<\/li>\n<li>is not listed in IFRS 18 or specifically required by IFRS Accounting Standards.<\/li>\n<\/ul>\n<p>IFRS 18 requires an entity to disclose the following information about its MPMs in a single note to the financial statements:<\/p>\n<ul>\n<li>A description of the aspect of financial performance that it communicates and why management believes the MPM provides useful information about the entity\u2019s financial performance;<\/li>\n<li>How the MPM is calculated;<\/li>\n<li>A reconciliation between the MPM and most directly comparable subtotal required by IFRS;<\/li>\n<li>How the entity determined income tax effect; and<\/li>\n<li>Changes in the calculation of the MPM<\/li>\n<\/ul>\n<p>The IFRS 18 disclosure of information about MPMs will increase transparency and investors\u2019 understanding of how the measures compare with the measures defined by IFRS Accounting Standards. This disclosure will be subject to audit and will aid investors to get insight into how management views the company\u2019s financial performance, how the company is managed and how its financial performance is developing.<\/p>\n<p>Our follow-up article will deal with the third set of new requirements, grouping of information in the financial statements (aggregation and disaggregation), as well as the changes to the cash flow statement.<\/p>\n<p>Sources:<br \/><span><a href=\"https:\/\/www.ifrs.org\/news-and-events\/news\/2024\/04\/new-ifrs-accounting-standard-will-aid-investor-analysis-of-companies-financial-performance\/\" target=\"_blank\" rel=\"noopener\">https:\/\/www.ifrs.org\/news-and-events\/news\/2024\/04\/new-ifrs-accounting-standard-will-aid-investor-analysis-of-companies-financial-performance\/<\/a><\/span>\u00a0<\/p>\n<p><span><a href=\"https:\/\/www.ifrs.org\/content\/dam\/ifrs\/project\/primary-financial-statements\/ifrs-standard\/projectsummary-ifrs18-april2024.pdf\" target=\"_blank\" rel=\"noopener\">https:\/\/www.ifrs.org\/content\/dam\/ifrs\/project\/primary-financial-statements\/ifrs-standard\/projectsummary-ifrs18-april2024.pdf<\/a><\/span><\/p>\n<p><span><a href=\"https:\/\/www.ifrs.org\/supporting-implementation\/supporting-materials-by-ifrs-standards\/ifrs-18\/webinar-series-new-requirements-in-ifrs18-explained\/\" target=\"_blank\" rel=\"noopener\">https:\/\/www.ifrs.org\/supporting-implementation\/supporting-materials-by-ifrs-standards\/ifrs-18\/webinar-series-new-requirements-in-ifrs18-explained\/<\/a><\/span><\/p>\n<p><span><a href=\"https:\/\/www.efrag.org\/sites\/default\/files\/sites\/webpublishing\/SiteAssets\/IFRS%2018_EFRAG%20and%20IASB%20webinar%20for%20corporates_07June2024.pdf\" target=\"_blank\" rel=\"noopener\">https:\/\/www.efrag.org\/sites\/default\/files\/sites\/webpublishing\/SiteAssets\/IFRS%2018_EFRAG%20and%20IASB%20webinar%20for%20corporates_07June2024.pdf<\/a><\/span><\/p>\n<p>Photo by Antoni Shkraba: <a href=\"https:\/\/www.pexels.com\/photo\/person-in-black-suit-jacket-holding-white-paper-5816299\/\" target=\"_blank\" rel=\"noopener\">https:\/\/www.pexels.com\/photo\/person-in-black-suit-jacket-holding-white-paper-5816299\/<\/a><\/p>[\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section]\n","protected":false},"excerpt":{"rendered":"<p>According to Andreas Barckow, IASB Chair: \u201cIFRS 18 represents the most significant change to companies\u2019 presentation of financial performance since IFRS Accounting Standards were introduced more than 20 years ago. It will give investors better information about companies\u2019 financial performance and consistent anchor points for their analysis.\u201d IFRS 18 Presentation and Disclosure in Financial Statements [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":14676,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"[et_pb_section fb_built=\"1\" _builder_version=\"4.16\" global_colors_info=\"{}\" theme_builder_area=\"post_content\"][et_pb_row _builder_version=\"4.16\" background_size=\"initial\" background_position=\"top_left\" background_repeat=\"repeat\" global_colors_info=\"{}\" theme_builder_area=\"post_content\"][et_pb_column type=\"4_4\" _builder_version=\"4.16\" custom_padding=\"|||\" global_colors_info=\"{}\" custom_padding__hover=\"|||\" theme_builder_area=\"post_content\"][et_pb_text _builder_version=\"4.27.0\" background_size=\"initial\" background_position=\"top_left\" background_repeat=\"repeat\" hover_enabled=\"0\" global_colors_info=\"{}\" theme_builder_area=\"post_content\" sticky_enabled=\"0\"]<p><img src=\"https:\/\/globalconnectadmin.com\/wp-content\/uploads\/2024\/09\/art_50a-241x300.png\" width=\"503\" height=\"626\" alt=\"\" class=\"wp-image-14676 alignnone size-medium\" style=\"display: block; margin-left: auto; margin-right: auto;\" \/><\/p>\n<p>According to Andreas Barckow, IASB Chair: \u201cIFRS 18 represents the most significant change to companies\u2019 presentation of financial performance since IFRS Accounting Standards were introduced more than 20 years ago. It will give investors better information about companies\u2019 financial performance and consistent anchor points for their analysis.\u201d<\/p>\n<p>IFRS 18 <em>Presentation and Disclosure in Financial Statements<\/em> replaces IAS 1 <em>Presentation of Financial Statements<\/em> and although it carries forward many requirements from IAS 1 unchanged, the new Standard contains three sets of new requirements. This article will focus on the first two sets of new requirements while the next article will deal with the third set of new requirements and the changes to the cash flow statement.<\/p>\n<p>\u00a0The first two sets of requirements introduced by the new IFRS 18 is detailed below:<\/p>\n<p>\u00a01. <strong>Improved comparability in the statement of profit or loss (income statement)<\/strong><\/p>\n<p>\u00a0IFRS 18 requires a company:<\/p>\n<ul>\n<li>to classify income and expenses into operating, investing and financing categories in the statement of profit or loss\u2014plus income taxes and discontinued operations; and<\/li>\n<li>to present two new defined subtotals\u2014operating profit and profit before financing and income taxes.<\/li>\n<\/ul>\n<p>\u00a0IFRS 18 defines operating profit or loss as \u201cthe total of all income and expenses classified in the operating category.\u201d The operating profit subtotal gives a complete picture of a company\u2019s operations, whereas the profit before financing and income taxes gives a picture of a company\u2019s performance before the effects of its financing.<\/p>\n<p>What is included in each category?<\/p>\n<table>\n<tbody>\n<tr>\n<td width=\"141\">\n<p>Operating Category<\/p>\n<\/td>\n<td width=\"460\">\n<p>\u2022 All income and expenses from a company\u2019s operations, regardless of whether they are volatile or unusual<\/p>\n<p>\u2022 Default category \u2013 includes all income and expenses that are not classified in the investing, financing, income taxes or discontinued operations categories<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td width=\"141\">\n<p>Investing Category<\/p>\n<\/td>\n<td width=\"460\">\n<p>\u2022 Income and expenses from assets that generate a return individually and largely independently of other resources held by an entity<\/p>\n<p>\u2022 Income and expenses from non-consolidated subsidiaries, associates and joint ventures<\/p>\n<p>\u2022 Income and expenses from cash and cash equivalents<\/p>\n<\/td>\n<\/tr>\n<tr>\n<td width=\"141\">\n<p>Financing Category:<\/p>\n<\/td>\n<td width=\"460\">\n<p>\u2022 All income and expenses from liabilities that arise from transactions that involve only the raising of finance<\/p>\n<p>\u2022 Interest expense and effects of changes in interest rates from other liabilities (such as lease liabilities and defined pension liabilities)<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Specific companies, whose main business comprise providing financing to customers and investing in assets e.g. banks and insurance companies, include income and expenses in their operating profit that for other companies would be included in the investing or financing categories.<\/p>\n<p>Foreign exchange differences are classified in the same category as the income or expense giving rise to the gain or loss. If this will involve undue cost or effort, they are classified in the operating category.<\/p>\n<p>The introduction of the three new defined categories provides a consistent structure of the statement of profit and loss. This, together with newly defined subtotals, addresses investor feedback regarding inconsistencies in the structure and content of statements of profit and loss, which hinders the comparability of financial performance between companies.<\/p>\n<p><strong>2. Enhanced transparency of management-defined performance measures (MPMs)<\/strong><\/p>\n<p>Many companies provide company-specific measures, often referred to as alternative performance measures or non-GAAP measures. Investors find these measures useful, but they have concerns about the lack of transparency of how these measures are calculated. To address investor concerns, IFRS 18 introduces a new defined term, MPM, and requires specific disclosures to be included in the financial statements.<\/p>\n<p>An MPM is defined as a subtotal of income and expenses that:<\/p>\n<ul>\n<li>is used in public communications outside financial statements;<\/li>\n<li>is used to communicate to investors management\u2019s view of an aspect of the financial performance of the entity as a whole; and<\/li>\n<li>is not listed in IFRS 18 or specifically required by IFRS Accounting Standards.<\/li>\n<\/ul>\n<p>IFRS 18 requires an entity to disclose the following information about its MPMs in a single note to the financial statements:<\/p>\n<ul>\n<li>A description of the aspect of financial performance that it communicates and why management believes the MPM provides useful information about the entity\u2019s financial performance;<\/li>\n<li>How the MPM is calculated;<\/li>\n<li>A reconciliation between the MPM and most directly comparable subtotal required by IFRS;<\/li>\n<li>How the entity determined income tax effect; and<\/li>\n<li>Changes in the calculation of the MPM<\/li>\n<\/ul>\n<p>The IFRS 18 disclosure of information about MPMs will increase transparency and investors\u2019 understanding of how the measures compare with the measures defined by IFRS Accounting Standards. This disclosure will be subject to audit and will aid investors to get insight into how management views the company\u2019s financial performance, how the company is managed and how its financial performance is developing.<\/p>\n<p>Our follow-up article will deal with the third set of new requirements, grouping of information in the financial statements (aggregation and disaggregation), as well as the changes to the cash flow statement.<\/p>\n<p>Sources:<br \/><span><a href=\"https:\/\/www.ifrs.org\/news-and-events\/news\/2024\/04\/new-ifrs-accounting-standard-will-aid-investor-analysis-of-companies-financial-performance\/\">https:\/\/www.ifrs.org\/news-and-events\/news\/2024\/04\/new-ifrs-accounting-standard-will-aid-investor-analysis-of-companies-financial-performance\/<\/a><\/span>\u00a0<\/p>\n<p><span><a href=\"https:\/\/www.ifrs.org\/content\/dam\/ifrs\/project\/primary-financial-statements\/ifrs-standard\/projectsummary-ifrs18-april2024.pdf\">https:\/\/www.ifrs.org\/content\/dam\/ifrs\/project\/primary-financial-statements\/ifrs-standard\/projectsummary-ifrs18-april2024.pdf<\/a><\/span><\/p>\n<p><span><a href=\"https:\/\/www.ifrs.org\/supporting-implementation\/supporting-materials-by-ifrs-standards\/ifrs-18\/webinar-series-new-requirements-in-ifrs18-explained\/\">https:\/\/www.ifrs.org\/supporting-implementation\/supporting-materials-by-ifrs-standards\/ifrs-18\/webinar-series-new-requirements-in-ifrs18-explained\/<\/a><\/span><\/p>\n<p><span><a href=\"https:\/\/www.efrag.org\/sites\/default\/files\/sites\/webpublishing\/SiteAssets\/IFRS%2018_EFRAG%20and%20IASB%20webinar%20for%20corporates_07June2024.pdf\">https:\/\/www.efrag.org\/sites\/default\/files\/sites\/webpublishing\/SiteAssets\/IFRS%2018_EFRAG%20and%20IASB%20webinar%20for%20corporates_07June2024.pdf<\/a><\/span><\/p>\n<p>Photo by Antoni Shkraba: <a href=\"https:\/\/www.pexels.com\/photo\/person-in-black-suit-jacket-holding-white-paper-5816299\/\">https:\/\/www.pexels.com\/photo\/person-in-black-suit-jacket-holding-white-paper-5816299\/<\/a><\/p>[\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section]","_et_gb_content_width":"","footnotes":""},"categories":[158],"tags":[],"class_list":["post-14679","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-nieuws-nl"],"_links":{"self":[{"href":"https:\/\/globalconnectadmin.com\/nl\/wp-json\/wp\/v2\/posts\/14679","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/globalconnectadmin.com\/nl\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/globalconnectadmin.com\/nl\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/globalconnectadmin.com\/nl\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/globalconnectadmin.com\/nl\/wp-json\/wp\/v2\/comments?post=14679"}],"version-history":[{"count":2,"href":"https:\/\/globalconnectadmin.com\/nl\/wp-json\/wp\/v2\/posts\/14679\/revisions"}],"predecessor-version":[{"id":14681,"href":"https:\/\/globalconnectadmin.com\/nl\/wp-json\/wp\/v2\/posts\/14679\/revisions\/14681"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/globalconnectadmin.com\/nl\/wp-json\/wp\/v2\/media\/14676"}],"wp:attachment":[{"href":"https:\/\/globalconnectadmin.com\/nl\/wp-json\/wp\/v2\/media?parent=14679"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/globalconnectadmin.com\/nl\/wp-json\/wp\/v2\/categories?post=14679"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/globalconnectadmin.com\/nl\/wp-json\/wp\/v2\/tags?post=14679"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}