IFRS 18 the new presentation standard brings quite big changes in how your financial statements might look like so let's sum it up and see what's new this lecture has a few parts first we will introduce IFRS 18 in the short overview then we will look at the general requirements for the financial statements especially what the complete set is next we will focus on the statement of profit or loss and here are the main changes in comparison with is1 then a statement of other comprehensive income statement of financial position statement of changes in equity and finally the notes I am Sylvia of CPD box.com and let me invite you to sign up for my free IFRS newsletter packed with free lectures practical tips and other materials on cpdb box.com so IFRS 18 was issued in 2024 it replaced the oldest standard is1 presentation of financial statement and the effective date is 1st January 2027 but you can apply it earlier that is possible let me warn you that you should apply this standard retrospectively so it means restatement of earlier periods and so you should really be focusing also on the period of 2026 at latest the objective of IFRS 18 is to set the requirements for presentation and disclosures in the financial statements for general purposes just to help users provide relevant information about the reporting entity assets liabilities Equity income and expenses this standard is quite extensive quite significant contains loads of guidance and it is structured into a few parts first general requirements for financial statements aggregation and disaggregation and then the parts dedicated to individual statements like statement of profit or loss statement of outer comprehensive income statement of financial position statement of changes in equity notes and appendices we Define terms and additional guidance which is by the way as mandatory to apply as the rules in the standard itself so let's start with the general requirements to fulfill the main objective of financial statements a complete set of financial statements comprises of a few components statement or statements let me explain this a bit later of financial performance statement of financial position or balance sheet statement of changes in equity statement of cash flows which is further described in is7 and notes now all of these components are prepared for the reporting period telling us a story of what happened during the year or at time period that you're reporting so they're like a video well except for one which is prepared as at the end of the reporting period so the statement of financial position is a snapshot a photograph of what the entity has and owes at a certain point of time also we have to State the comparative information and the third balance sheet if necessary under circum ances when it comes to the statement or statements of financial performance you have two options either presented as a single statement with two sections one for profit or loss and one for other comprehensive income or as two separate statements one for profit or loss and one for the other comprehensive income your choice each component of the financial statements must be clearly identified so so it must Clearly say which statement or notes we are looking at here it's statement of comprehensive income then there must be a name of the reporting entity or information about its change whether the financial statements are of an individual entity or group of entities the date of the end of the reporting period or the period covered by the financial statements information about presentation currency and the level of rounding used in presentation of numbers and then if 18 provides a few more principles about the frequency of reporting so how often you should present the financial statements consistency and comparative information now a separate section is dedicated to aggregation and disaggregation speaking about the principles of which items to group and which to break down and about offsetting so that's for the general part let's take a look to the rules for presenting the statement of profit or loss where we see the biggest changes in comparison with older is1 standard so IFRS 18 introduces categories in which you need to classify all expenses and income there are five operating investing financing and those three might seem like from cash flow statement but they are not the same thing they are different the last two categories are income taxes and discontinued operations so before we speak about what goes where in general there are exceptions so for the first three categories we need to assess whether the entity has specified main business activity and that could either be investing in some type of assets that would be for example investment fund or providing financing to customers for example Banks obviously due to the character of their main business these entities classify many of their expenses and income in operating rather than investment and financing category for example interest expenses are in financing category for production company but in operating category for a bank now let's dig in the details the first category is operating category and this is default category and it means that here are all the income and expenses that are not elsewhere so not in financing or investing category the second category is investing category and here we need to present income and expenses from investments in Associates joint ventures and unconsolidated subsidiaries cash and cash equivalents and other assets if they generate returns individually and largely independently of the other resources for example rentals collected from Investment Properties or interest from bonds that you hold the except is of course entities whose main business activity is investing in assets as we mentioned and they would present these items in operating category the third category is financing category which basically is all about income and expenses related to liabilities so here we need to make a clear distinction there are liabilities from Raising Finance like loans payable bonds payable and similar and in this case income and expenses from initial and subsequent measurement of these liabilities like interests and also incremental expenses like transaction costs or presented in financing category the second type of liabilities or other liabilities not related to raising Finance for example Provisions or employee benefits and here interest income and expenses and income and expenses from changing GR if they are both separately identified by The Entity are presented here the exception is the entity with main business activity of providing Finance like Banks so here those items from Raising Finance go in operating category so categories are definitely the new thing in IFRS 18 you don't need to label them as such though then we have new subtotals required by the new standard so we must first present subtotal for operating profit or loss that is in fact all income and expenses in operating category then we have profit or loss before financing and income taxes which is the previous subtotal plus investing category income and expenses and finally profit or loss for the period again this might look a bit different for entities with specifying main business activity IFRS 18 then prescrib certain line items to be presented on its face as a minimum you can see the list here it is not exhaustive and let me remind you that entity must present profit or loss in allocation between owners of the parent and non-controlling interest let's move to the statement of comprehensive income here we need to present certain totals for profit or loss that is carried from the profit or loss statement then other comprehensive income and here you need to present individual items in one of the two categories those that will be reclassified to profit or loss when conditions are met and those that will not be reclassified which is which well that depends on the rules of the specific standards finally the total for comprehensive income which is basically the sum of the profit or loss and out comprehensive income again allocate the comp comprehensive income between owners of the parent and non-controlling interest the statement of financial position or balance sheet here IFRS 18 did not change much compared to is1 so so here's the list of items that shall be as a minimum included in this statement on the asset side you should present property plan and Equipment investment property intangible assets and other assets as listed here and then usually under liabilities and Equity you need to show trade and other payables Provisions Financial liabilities non-controlling interests issued capital and reserves attributable to the parent some items might have asset or liability character so could be presented in both categories such as totals of assets held for sale and totals of assets and liabilities separately in disposal groups according to IFRS 5 groups of contracts under IFRS 7 those are insurance contracts those can be either liability or an asset liabilities and assets for current income tax according to is2 deferred income tax according to is2 is1 requires the line items to be presented separately in the current and non-current distinction so current asset separated from non-current ones and the same with liabilities statement of changes INE Equity carried over from is1 so here the entity shall present at least total comprehensive income separately amounts attributable to owners of the parent and to non-controlling interest for each component of equity separately effects of retrospective application or restatement recognized according to is8 and for each component of equity separately reconciliation between the carrying amount amount at the beginning and at the end of the reporting period and here we must disclose separately changes resulting from the profit or loss other comprehensive income and transactions with owners such as contributions from owners distribution of dividends and similar if you'd like to learn how to make the statement of changes in equity you're very welcome to visit cpdb box.com finally let's take a look at the note IFRS 18 makes changes here too but let's see what should be stated here first information about the basis for Preparation and accounting policies used and then information required by another IFRS not presented in primary financial statements so those are all subtotals and additional information required as disclosures in line with many standards like IFR 16 for leases or IFR nine for financial instruments next other important information not presented in primary financial statements for example about some events that might have affected the business here we need to present also general information about The Entity if not shown elsewhere like description of its activity legal name who the parent is ETC management defined measures I'll make a whole new video lecture on this one because this is new in IFRS 18 but these are simply numbers outside IFRS reporting used by The Entity to communicate its performance and here we must present what they are and their reconciliation to IFRS reporting free measure it could be free cash flows just as an example then Capital related disclosures as carried from is1 sure you need to present notes in some systematic Manner and do not forget to cross reference them to the financial statements so that's about it for this relatively short summary for full IFRS lectures let me invite you to sign up for IFRS kit and I bet you'll put your IFRS progress on a real fast track thank you for watching this video please share it and if you're not subscribed do this now so you won't miss any new lecture bye