Redeliberations continue on Primary Financial Statements project

Keywords: Mazars, Thailand, IFRS, IASB, IAS 1, Financial Statements

22 April 2022

Commenters had actually volunteered their opinions on the proposal in paragraph 42 of the exposure draft to retain the existing rules set out in IAS 1 (cf. IAS 1 para. 85 for the income statement and para. 55 for the statement of financial position). Under these rules, an entity is required to present additional line items, headings and subtotals (on top of the minimum line items and subtotals) when such presentation is “relevant” to an understanding of the entity’s financial performance / position.

The comments received on this topic notably focused on the need to clarify that the required line items will only have to be presented in the primary financial statements if they are material. The IASB thus decided to review some of the presentation principles and the line items required in the primary financial statements, focusing on the following topics with reference to the income statement:

• the definitions of the three new categories for classifying income and expenses: operating, investing and financing;
• the presentation of the required line items: the exposure draft (para. 65) listed essentially the same line items as IAS 1.82, albeit in a more structured format;
• the addition of new required subtotals, i.e. operating profit and profit or loss before financing and income tax;
• the new principles for disaggregation of information.

The IASB made the following decisions (though they are still tentative, as redeliberations are ongoing):

• the general principle in paragraph 42 will be revised: the term “relevant” will be removed, and replaced with a reference to an “understandable overview” of an entity’s income and expenses (or assets, liabilities and equity);
• all the presentation requirements, including the list of line items required in the income statement by paragraph 65, will only apply if the resulting presentation does not prevent the primary financial statement from providing an understandable overview;
• it will be clarified in the application guidance that, in the operating category, it is unlikely that the presentation of items required by paragraph 65 would reduce how useful the statement is in providing an understandable overview of the entity’s income and expenses;
• the term “minimum” will be removed from paragraph 42 and replaced with the term “specified”;
• the list of line items required by paragraph 65, brought forward from IAS 1, will not be discussed any further by the Board;
• there will be no requirement in the final standard to present impairment of non-financial assets as a separate line item;
• the final standard will retain paragraph B44 of the exposure draft, which states that to comply with paragraph 65, an entity may need to present a required line item in more than one of the three categories of the income statement (e.g. to break down impairment losses recognised in accordance with section 5.5 of IFRS 9);
• it will not specify how the financing category should be broken down (whereas the exposure draft specified that income and expenses from financing activities should be presented separately, for continuity with the requirement in IAS 1 to present finance costs separately).
• For the statement of financial position, the exposure draft specified that an entity must present goodwill separately from intangible assets. The Board confirmed this at the February 2022 meeting.