IFRS 18 Presentation and Disclosure in Financial Statements

Published on 10 April 2025 at 19:15

 

Background and Applicability

Introduced in April 2024, IFRS 18 replaces IAS 1 with the goal of improving consistency and transparency in the presentation and disclosure of financial statements. It is applicable to entities preparing general-purpose financial statements under IFRS for annual periods beginning on or after 1 January 2027, with early adoption permitted.

Objective and Scope

  • Objective: To ensure financial statements provide relevant and reliable information on an entity’s assets, liabilities, equity, income, and expenses.

  • Scope: Applies to all general-purpose financial statements under IFRS, except for interim financial reports (IAS 34) and entities with specialized structures such as mutual funds or cooperatives.

 

 

General Requirements

  • A complete set of financial statements includes:
    1. Statement(s) of financial performance
    2. Statement of financial position
    3. Statement of changes in equity
    4. Statement of cash flows (as per IAS 7)
    5. Notes, including a summary of accounting policies
    6. Comparative information
    7. A third statement of financial position when required for restatements
  • Focus on materiality: Only material information needs to be disclosed.
  • Primary statements vs. Notes: Primary statements provide structured summaries, while notes include detailed breakdowns and explanations.

 

Aggregation and Disaggregation

  • Entities must aggregate similar items and disaggregate items with distinct characteristics to ensure clarity and accuracy.
  • Offsetting is not allowed unless explicitly permitted by IFRS.

Statement of Profit or Loss

  • Income and expenses are classified into five categories:
    1. Operating
    2. Investing
    3. Financing
    4. Income taxes
    5. Discontinued operations
  • Entities with specific business models, such as investing or customer financing, follow tailored classification rules.
  • Key subtotals include: Operating profit, Profit before financing and taxes, and Net profit or loss.

Statement of Comprehensive Income

  • This statement includes three main components:
    1. Profit or loss
    2. Other comprehensive income (OCI)
    3. Total comprehensive income
  • OCI is further divided into:
    • Items that will be reclassified to profit or loss
    • Items that will not be reclassified

 

Statement of Financial Position

  • Assets and liabilities are categorized as current or non-current, unless a liquidity-based presentation is more relevant.
  • Entities must disclose amounts expected to be recovered or settled beyond 12 months.
  • Key line items, such as property, receivables, and tax-related items, must be explicitly presented or disclosed.

Statement of Changes in Equity

  • This statement must include:
    • Total comprehensive income
    • Effects of retrospective adjustments
    • Reconciliation of opening and closing balances for each equity component

Notes

  • Notes must follow a systematic structure and be clearly cross-referenced to the primary financial statements.
  • Required disclosures include:
    • Basis of preparation
    • Accounting policies
    • Additional essential details

Management-Defined Performance Measures (MDPMs)

  • MDPMs are subtotals of income and expenses used in public reporting but not prescribed by IFRS.
  • Entities must disclose:
    • A description and rationale behind the measure
    • The calculation methodology
    • Reconciliation to IFRS-compliant subtotals
    • Tax and non-controlling interest impacts

Capital and Other Disclosures

  • Entities must outline their capital management policies and compliance with relevant capital requirements.
  • Disclosures must also address share capital details, reserves, and dividend distributions.

 

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