IASB issues IFRS 18 Presentation and Disclosure in Financial Statements

Here's a snapshot of the key highlights:

IFRS 18, replacing IAS 1, will be effective from 1 January 2027, aiming to enhance how companies communicate financial performance to stakeholders and investors. IFRS 18 affects the complete set of financial statements, including:

Major changes

• Statement of profit or loss (income statement)
• Notes to the financial statements

Some changes

• Statement of cash flows (cash flow statement)

Minimal changes

• Statement of financial position (balance sheet)
• Statement presenting comprehensive income
• Statement of changes in equity

Major changes

• New subtotals: It mandates classifying
  • income and expenses into operating, investing, and financing categories in the statement of profit or loss - plus income taxes and discontinued operations; and
  • to present two new defined subtotals - operating profit and profit before financing and income taxes for enhanced comparability. 
• MPM disclosure:  It requires disclosing reconciliations between management-defined performance measures (MPMs) and specified subtotals, ensuring transparency in conveying management's view of financial performance.
• Enhanced grouping requirements: It outlines guidelines for determining information inclusion and mandates detailed disclosures, aiming to improve transparency and facilitate better decision-making.

Other changes

1. Replacement of IAS 1: IFRS 18 replaces IAS 1, with requirements either replaced by new provisions, transferred with limited wording changes, or moved to other standards like IAS 8 or IFRS 7.
   
   IFRS 18 has also introduced changes to other IFRS Accounting Standards, the most important of which are listed here.
    
2. Statement of Cash Flows: Limited changes are made to the statement of cash flows, including the requirement to use operating profit as the starting point for reporting cash flows from operating activities and removing presentation alternatives for interest and dividend cash flows.
3. Earnings per share: Amendments to IAS 33 allow companies to disclose additional earnings per share only if the numerator is identified in IFRS 18 or an MPM.
4. Interim Financial Reporting: Changes to IAS 34 now require disclosure of information about MPMs in interim financial statements. Other alterations, including those related to subtotals, also apply to condensed financial statements in interim reports.

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