IFRS 18 Lecture Summary

Introduction to IFRS 18

• New presentation standard for financial statements
• Significant changes from the previous standard, IAS 1
• Effective starting January 1, 2027 (early application allowed)
• Retrospective application required (consider earlier periods, especially 2026)

Overview of IFRS 18 Objectives

• Sets requirements for presentation and disclosures in financial statements
• Aims to provide relevant information about reporting entity's assets, liabilities, equity, income, and expenses
• Extensive guidance and structure

General Requirements for Financial Statements

• Components of a complete set of financial statements:
  • Statement(s) of financial performance
  • Statement of financial position (Balance Sheet)
  • Statement of changes in equity
  • Statement of cash flows (described in IAS 7)
  • Notes
• Prepared for the reporting period (like a video except for the statement of financial position which is a snapshot)
• Comparative information and third balance sheet if necessary

Statement(s) of Financial Performance

• Two presentation options:
  • Single statement with two sections: profit or loss, and other comprehensive income
  • Two separate statements: one for profit or loss, and one for other comprehensive income
• Clear identification of each component
• Must include several details such as entity name, reporting period, presentation currency, etc.
• Principles on reporting frequency, consistency, and comparative information

Aggregation and Disaggregation

• Principles for grouping and breaking down items
• Offsetting principles

Statement of Profit or Loss

• New categories for classifying expenses and income:
  • Operating
  • Investing
  • Financing
  • Income taxes
  • Discontinued operations
• Special rules for entities with specific main business activities (e.g., banks)
• Operating Category: Default category for income and expenses not in other categories
• Investing Category: Income and expenses from investments (e.g., associates, joint ventures)
• Financing Category: Income and expenses related to liabilities (e.g., loans, bonds)

New Subtotals in Financial Statements

• Subtotal for operating profit or loss
• Profit or loss before financing and income taxes
• Profit or loss for the period
• Specific line items required on its face (list not exhaustive)

Statement of Comprehensive Income

• Totals for profit or loss (from profit or loss statement)
• Other Comprehensive Income:
  • Items reclassified to profit or loss when conditions are met
  • Items not reclassified
• Total for comprehensive income (sum of profit or loss and other comprehensive income)
• Allocation between owners of parent and non-controlling interest

Statement of Financial Position (Balance Sheet)

• Minimal changes from IAS 1
• Required items (e.g., property, plant, and equipment, investment property, trade payables)
• Separate presentation of current and non-current assets and liabilities

Statement of Changes in Equity

• Total comprehensive income (allocation between owners of parent and non-controlling interest)
• Effects of retrospective application/restatement
• Reconciliations between beginning and end of reporting period
• Separate disclosure of changes from profit or loss, other comprehensive income, and transactions with owners

Notes to Financial Statements

• Basis for preparation and accounting policies
• Additional information per other IFRS standards
• Important business events and entity information
• Management-defined measures (new in IFRS 18, e.g., free cash flows)
• Capital-related disclosures (from IAS 1)
• Systematic presentation and cross-referencing to financial statements

Conclusion

• Invitation to sign up for additional IFRS resources at cpdbox.com