THE EUROPEAN COMMISSION,
Having regard to the Treaty on the Functioning of the European Union,
Having regard to Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards [^ntr1-L_202600338EN.000101-E0001], and in particular Article 3(1) thereof,
Whereas:
- (1) By Commission Regulation (EU) 2023/1803 [^ntr2-L_202600338EN.000101-E0002] certain international accounting standards and interpretations that were in existence on 8 September 2022 were adopted.
- (2) On 9 April 2024, the International Accounting Standards Board issued the International Financial Reporting Standard 18 Presentation and Disclosure in Financial Statements (‘IFRS 18’) with the objective to improve the communicated information in the financial statements, with a focus on information in the statement of profit or loss.
- (3) IFRS 18 fosters the reporting of financial performance by ensuring that companies disclose relevant information that faithfully represents their assets, liabilities, equity, income and expenses. It enables investors to make more informed decisions leading to better allocations of capital and contributing to long-term financial stability.
- (4) IFRS 18 strengthens the quality of financial reporting in particular by requiring companies’ defined subtotals in the statement of profit or loss; the disclosure about management-defined performance measures; and adding new principles for aggregation and disaggregation of information.
- (5) The adoption of IFRS 18 implies by way of consequence, amendments to the following standards or interpretations of standards: IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 2 Share-based Payment, IFRS 3 Business Combinations, IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, IFRS 6 Exploration for and Evaluation of Mineral Resources, IFRS 7 Financial Instruments: Disclosures, IFRS 8 Operating Segments, IFRS 9 Financial Instruments, IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, IFRS 13 Fair Value Measurement, IFRS 15 Revenue from Contracts with Customers, IFRS 16 Leases, IFRS 17 Insurance Contracts, International Accounting Standard (‘IAS’) 2 Inventories, IAS 7 Statement of Cash Flows, IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, IAS 10 Events after the Reporting Period, IAS 12 Income Taxes, IAS 16 Property, Plant and Equipment, IAS 19 Employee Benefits, IAS 20 Accounting for Government Grants and Disclosure of Government Assistance, IAS 21 The Effects of Changes in Foreign Exchange Rates, IAS 24 Related Party Disclosures, IAS 26 Accounting and Reporting by Retirement Benefit Plans, IAS 27 Separate Financial Statements, IAS 28 Investments in Associates and Joint Ventures, IAS 29 Financial Reporting in Hyperinflationary Economies, IAS 32 Financial Instruments: Presentation, IAS 33 Earnings per Share, IAS 34 Interim Financial Reporting, IAS 36 Impairment of Assets, IAS 37 Provisions, Contingent Liabilities and Contingent Assets, IAS 38 Intangible Assets, IAS 40 Investment Property, IAS 41 Agriculture, Interpretations of the International Financial Reporting Interpretations Committee (‘IFRIC’) 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities, IFRIC 2 Members’ Shares in Co-operative Entities and Similar Instruments, IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds, IFRIC 6 Liabilities arising from Participating in a Specific Market—Waste Electrical and Electronic Equipment, IFRIC 12 Service Concession Arrangements, IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, IFRIC 16 Hedges of a Net Investment in a Foreign Operation, IFRIC 17 Distributions of Non-cash Assets to Owners, IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments, IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine, IFRIC 21 Levies, IFRIC 22 Foreign Currency Transactions and Advance Consideration, IFRIC 23 Uncertainty over Income Tax Treatments, and Interpretations of the Standard Interpretations Committee (‘SIC’)-7 Introduction of the Euro, SIC-10 Government Assistance – No Specific Relation to Operating Activities, SIC-25 Income Taxes – Changes in the Tax Status of an Entity or its Shareholders, SIC-29 Service Concession Arrangements: Disclosures and SIC-32 Intangible Assets—Web Site Costs.
- (6) Moreover, it implies by way of consequence the withdrawal of IAS 1 Presentation of Financial Statements.
- (7) Following a consultation with the European financial reporting advisory group EFRAG, the Commission has concluded that IFRS 18 meets the conditions for adoption set out in Article 3(2) of Regulation (EC) No 1606/2002
- (8) Regulation (EU) 2023/1803 should therefore be amended accordingly.
- (9) The measures provided for in this Regulation are in accordance with the opinion of the Accounting Regulatory Committee,
HAS ADOPTED THIS REGULATION:
Article 1
The Annex to Regulation (EU) 2023/1803 is amended as follows:
- (1) International Financial Reporting Standard (‘IFRS’) 18 Presentation and Disclosure in Financial Statements (‘IFRS 18’) is inserted as set out in the Annex to this Regulation;
- (2) IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 2 Share-based Payment, IFRS 3 Business Combinations, IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, IFRS 6 Exploration for and Evaluation of Mineral Resources, IFRS 7 Financial Instruments: Disclosures, IFRS 8 Operating Segments, IFRS 9 Financial Instruments, IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, IFRS 13 Fair Value Measurement, IFRS 15 Revenue from Contracts with Customers, IFRS 16 Leases, IFRS 17 Insurance Contracts, International Accounting Standard (‘IAS’) 2 Inventories, IAS 7 Statement of Cash Flows, IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, IAS 10 Events after the Reporting Period, IAS 12 Income Taxes, IAS 16 Property, Plant and Equipment, IAS 19 Employee Benefits, IAS 20 Accounting for Government Grants and Disclosure of Government Assistance, IAS 21 The Effects of Changes in Foreign Exchange Rates, IAS 24 Related Party Disclosures, IAS 26 Accounting and Reporting by Retirement Benefit Plans, IAS 27 Separate Financial Statements, IAS 28 Investments in Associates and Joint Ventures, IAS 29 Financial Reporting in Hyperinflationary Economies, IAS 32 Financial Instruments: Presentation, IAS 33 Earnings per Share, IAS 34 Interim Financial Reporting, IAS 36 Impairment of Assets, IAS 37 Provisions, Contingent Liabilities and Contingent Assets, IAS 38 Intangible Assets, IAS 40 Investment Property, IAS 41 Agriculture, Interpretations of the International Financial Reporting Interpretations Committee (‘IFRIC’) 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities, IFRIC 2 Members’ Shares in Co-operative Entities and Similar Instruments, IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds, IFRIC 6 Liabilities arising from Participating in a Specific Market—Waste Electrical and Electronic Equipment, IFRIC 12 Service Concession Arrangements, IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, IFRIC 16 Hedges of a Net Investment in a Foreign Operation, IFRIC 17 Distributions of Non-cash Assets to Owners, IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments, IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine, IFRIC 21 Levies, IFRIC 22 Foreign Currency Transactions and Advance Consideration, IFRIC 23 Uncertainty over Income Tax Treatments, and Interpretations of the Standard Interpretations Committee (‘SIC’)-7 Introduction of the Euro, SIC-10 Government Assistance – No Specific Relation to Operating Activities, SIC-25 Income Taxes – Changes in the Tax Status of an Entity or its Shareholders, SIC-29 Service Concession Arrangements: Disclosures and SIC-32 Intangible Assets—Web Site Costs are amended in accordance with IFRS 18 as set out in the Annex to this Regulation.
- (3) IAS 1 Presentation of Financial Statements is deleted.
Article 2
Each company shall apply the amendment referred to in Article 1 at the latest as from the commencement date of its first financial year starting on or after 1 January 2027.
Article 3
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 13 February 2026.
For the Commission
The President
Ursula VON DER LEYEN
[^ntr1-L_202600338EN.000101-E0001]: OJ L 243, 11.9.2002, p. 1, ELI: http://data.europa.eu/eli/reg/2002/1606/oj.
[^ntr2-L_202600338EN.000101-E0002]: Commission Regulation (EU) 2023/1803 of 13 September 2023 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council (OJ L 237, 26.9.2023, p. 1, ELI: http://data.europa.eu/eli/reg/2023/1803/oj).
ANNEX
IFRS 18
Presentation and Disclosure in Financial Statements
International Financial Reporting Standard 18
Presentation and Disclosure in Financial Statements
OBJECTIVE
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1 |
This Standard sets out requirements for the presentation and disclosure of information in general purpose financial statements (financial statements) to help ensure they provide relevant information that faithfully represents an entity’s assets, liabilities, equity, income and expenses. |
SCOPE
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2 |
An entity shall apply this Standard in presenting and disclosing information in financial statements prepared in accordance with IFRS Accounting Standards. |
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3 |
This Standard sets out general and specific requirements for the presentation of information in the statement(s) of financial performance, the statement of financial position and the statement of changes in equity. This Standard also sets out requirements for the disclosure of information in the notes. IAS 7 Statement of Cash Flows sets out requirements for the presentation and disclosure of cash flow information. However, the general requirements for financial statements in paragraphs 9–43 and 113–114 apply to the statement of cash flows. |
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4 |
Other IFRS Accounting Standards set out the recognition, measurement, presentation and disclosure requirements for specific transactions and other events. |
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5 |
This Standard does not apply to the presentation and disclosure of information in condensed interim financial statements prepared applying IAS 34 Interim Financial Reporting. However, paragraphs 41–45 and 117–125 apply to such financial statements. |
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6 |
This Standard uses terminology that is suitable for profit-oriented entities, including public sector business entities. If entities with not-for-profit activities in the private sector or the public sector apply this Standard, they may need to amend the descriptions used for particular line items, categories, subtotals or totals in the financial statements and for the financial statements themselves. |
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7 |
Similarly, entities that do not have equity as defined in IAS 32 Financial Instruments: Presentation (for example, some mutual funds) and entities whose share capital is not equity (for example, some co-operative entities) may need to adapt the financial statement presentation of members’ or unitholders’ interests. |
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Many entities provide a financial review by management, which is separate from the financial statements (see paragraph 10), that describes and explains the main features of the entity’s financial performance and financial position, as well as the principal uncertainties it faces. Such a review is outside the scope of IFRS Accounting Standards. |
GENERAL REQUIREMENTS FOR FINANCIAL STATEMENTS
Objective of financial statements
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9 |
The objective of financial statements is to provide financial information about a reporting entity’s assets, liabilities, equity, income and expenses that is useful to users of financial statements in assessing the prospects for future net cash inflows to the entity and in assessing management’s stewardship of the entity’s economic resources. |
A complete set of financial statements
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10 |
A complete set of financial statements comprises: (a) a statement (or statements) of financial performance for the reporting period (see paragraph 12); (b) a statement of financial position as at the end of the reporting period; (c) a statement of changes in equity for the reporting period; (d) a statement of cash flows for the reporting period; (e) notes for the reporting period; (f) comparative information in respect of the preceding period as specified in paragraphs 31–32; and (g) a statement of financial position as at the beginning of the preceding period if required by paragraph 37. |
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11 |
The statements listed in paragraphs 10(a)–10(d) (and their comparative information) are referred to as the primary financial statements. An entity may use titles for the statements other than those used in this Standard. For example, an entity may use the title ‘balance sheet’ instead of ‘statement of financial position’. In addition, although this Standard uses terms such as ‘other comprehensive income’, ‘profit or loss’ and ‘total comprehensive income’, an entity may use other terms to label the totals, subtotals and line items required by this Standard as long as they are labelled in a way that faithfully represents the characteristics of the items, as required by paragraph 43. For example, an entity may use the term ‘net income’ to label ‘profit or loss’. |
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12 |
An entity shall present its statement(s) of financial performance as either: (a) a single statement of profit or loss and other comprehensive income, with profit or loss and other comprehensive income presented in two sections—if this option is chosen, an entity shall present the profit or loss section first followed directly by the other comprehensive income section; or (b) a statement of profit or loss and a separate statement presenting comprehensive income that shall begin with profit or loss—if this option is chosen, the statement of profit or loss shall immediately precede the statement presenting comprehensive income. |
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13 |
In this Standard: (a) the profit or loss section described in paragraph 12(a) and the statement of profit or loss described in paragraph 12(b) are referred to as the statement of profit or loss; and (b) the other comprehensive income section described in paragraph 12(a) and the statement presenting comprehensive income described in paragraph 12(b) are referred to as the statement presenting comprehensive income. |
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14 |
An entity shall present each of the primary financial statements with equal prominence in a complete set of financial statements. |
The roles of the primary financial statements and the notes
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15 |
To achieve the objective of financial statements (see paragraph 9), an entity presents information in the primary financial statements and discloses information in the notes. An entity need only present or disclose material information (see paragraphs 19 and B1–B5). |
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16 |
The role of the primary financial statements is to provide structured summaries of a reporting entity’s recognised assets, liabilities, equity, income, expenses and cash flows, that are useful to users of financial statements for: (a) obtaining an understandable overview of the entity’s recognised assets, liabilities, equity, income, expenses and cash flows; (b) making comparisons between entities, and between reporting periods for the same entity; and (c) identifying items or areas about which users of financial statements may wish to seek additional information in the notes. |
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17 |
The role of the notes is to provide material information necessary: (a) to enable users of financial statements to understand the line items presented in the primary financial statements (see paragraph B6); and (b) to supplement the primary financial statements with additional information to achieve the objective of financial statements (see paragraph B7). |
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18 |
An entity shall use the roles of the primary financial statements and the notes, described in paragraphs 16–17, to determine whether to include information in the primary financial statements or in the notes. The different roles of the primary financial statements and the notes mean that the extent of the information required in the notes differs from that in the primary financial statements. The differences mean that: (a) to provide the structured summaries described in paragraph 16, information provided in the primary financial statements is more aggregated than information provided in the notes; and (b) to provide the information described in paragraph 17, more detailed information about the entity’s assets, liabilities, equity, income, expenses and cash flows, including the disaggregation of information presented in the primary financial statements, is provided in the notes. |
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19 |
Some IFRS Accounting Standards specify information that is required to be presented in the primary financial statements or disclosed in the notes. An entity need not provide a specific presentation or disclosure required by IFRS Accounting Standards if the information resulting from that presentation or disclosure is not material. This is the case even if IFRS Accounting Standards contain a list of specific requirements or describe them as minimum requirements. |
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20 |
An entity shall consider whether to provide additional disclosures when compliance with the specific requirements in IFRS Accounting Standards is insufficient to enable users of financial statements to understand the effect of transactions and other events and conditions on the entity’s financial position and financial performance. |
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21 |
Paragraph 16 establishes that the role of the primary financial statements is to provide structured summaries that are useful for the purposes specified in that paragraph (referred to hereafter as a useful structured summary). An entity shall use the role of the primary financial statements to determine what material information to present in those statements, as set out in paragraphs 22–24. |
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22 |
To provide a useful structured summary in a primary financial statement, an entity shall comply with specific requirements that determine the structure of the statement. The specific requirements are: (a) for the statement of profit or loss—the requirements in paragraphs 47, 69, 76 and 78; (b) for the statement presenting comprehensive income—the requirements in paragraphs 86–88; (c) for the statement of financial position—the requirements in paragraphs 96 and 104; (d) for the statement of changes in equity—the requirements in paragraph 107; and (e) for the statement of cash flows—the requirements in paragraph 10 of IAS 7. |
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23 |
Some IFRS Accounting Standards require specific line items to be presented separately in the primary financial statements (for example paragraphs 75 and 103 of this Standard). An entity need not present separately a line item in a primary financial statement if doing so is not necessary for the statement to provide a useful structured summary. This is the case even if IFRS Accounting Standards contain a list of specific required line items or describe the line items as minimum requirements (see paragraph B8). |
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24 |
An entity shall present additional line items and subtotals if such presentations are necessary for a primary financial statement to provide a useful structured summary. When an entity presents additional line items or subtotals, those line items or subtotals shall (see paragraph B9): (a) comprise amounts recognised and measured in accordance with IFRS Accounting Standards; (b) be compatible with the statement structure created by the requirements listed in paragraph 22; (c) be consistent from period to period, in accordance with paragraph 30; and (d) be displayed no more prominently than the totals and subtotals required by IFRS Accounting Standards. |
Identification of the financial statements
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25 |
An entity shall clearly identify the financial statements and distinguish them from other information in the same published document (see paragraph B10). |
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26 |
IFRS Accounting Standards apply only to financial statements, and not necessarily to other information provided in an annual report, a regulatory filing or another document. Therefore, it is important that users of financial statements can distinguish information that is prepared using IFRS Accounting Standards from other information that may be useful to users but is not the subject of those requirements. |
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27 |
An entity shall clearly identify each primary financial statement and the notes. In addition, an entity shall disclose prominently, and repeat when necessary for the information provided to be understandable: (a) the name of the reporting entity or other means of identification, and any change in that information from the end of the preceding reporting period; (b) whether the financial statements are of an individual entity or a group of entities; (c) the date of the end of the reporting period or the period covered by the financial statements; (d) the presentation currency, as defined in IAS 21 The Effects of Changes in Foreign Exchange Rates; and (e) the level of rounding used for the amounts in the financial statements (see paragraph B11). |
Frequency of reporting
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28 |
An entity shall provide a complete set of financial statements at least annually. When an entity changes the end of its reporting period and provides financial statements for a period longer or shorter than one year, the entity shall disclose, in addition to the period covered by the financial statements: (a) the reason for using a longer or shorter period; and (b) the fact that amounts included in the financial statements are not entirely comparable. |
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29 |
Normally, an entity consistently prepares financial statements for a one-year period. However, for practical reasons, some entities prefer to report, for example, for a 52-week period. This Standard does not preclude this practice. |
Consistency of presentation, disclosure and classification
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30 |
An entity shall retain the presentation, disclosure and classification of items in the financial statements from one reporting period to the next unless: (a) it is apparent, following a significant change in the nature of the entity’s operations or a review of its financial statements, that another presentation, disclosure or classification would be more appropriate having regard to the criteria for selecting and applying accounting policies in IAS 8 Basis of Preparation of Financial Statements (see paragraph B12); or (b) an IFRS Accounting Standard requires a change in presentation, disclosure or classification. |
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31 |
Except when IFRS Accounting Standards permit or require otherwise, an entity shall provide comparative information (that is, information for the preceding reporting period) for all amounts reported in the current period’s financial statements. An entity shall include comparative information for narrative and descriptive information if it is necessary for an understanding of the current period’s financial statements (see paragraph B13). |
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32 |
An entity shall present a current reporting period and preceding period in each of its primary financial statements and in the notes. Paragraphs B14–B15 set out requirements relating to additional comparative information. |
Change in accounting policy, retrospective restatement or reclassification
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33 |
If an entity changes the presentation, disclosure or classification of items in its financial statements, it shall reclassify comparative amounts unless reclassification is impracticable. When an entity reclassifies comparative amounts, it shall disclose (including as at the beginning of the preceding period): (a) the nature of the reclassification; (b) the amount of each item or class of items that is reclassified; and (c) the reason for the reclassification. |
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34 |
When it is impracticable to reclassify comparative amounts, an entity shall disclose: (a) the reason for not reclassifying the amounts; and (b) the nature of the adjustments that would have been made if the amounts had been reclassified. |
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35 |
Enhancing the inter-period comparability of information assists users of financial statements in making economic decisions, especially by allowing the assessment of trends in information for predictive purposes. In some circumstances, it is impracticable to reclassify comparative information for a particular prior reporting period to achieve consistency with the current period. For example, an entity may not have collected data in the prior period(s) in a way that allows reclassification, and it may be impracticable to recreate the information. |
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36 |
IAS 8 sets out the adjustments to comparative information required when an entity changes an accounting policy or corrects an error. |
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37 |
An entity shall present a third statement of financial position as at the beginning of the preceding period in addition to the comparative information required in paragraphs 31–32 if: (a) it applies an accounting policy retrospectively, makes a retrospective restatement of items in its financial statements or reclassifies items in its financial statements; and (b) the retrospective application, retrospective restatement or reclassification has a material effect on the information in the statement of financial position as at the beginning of the preceding period. |
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38 |
In the circumstances described in paragraph 37 an entity shall present three statements of financial position—a statement of financial position as at: (a) the end of the current reporting period; (b) the end of the preceding period; and (c) the beginning of the preceding period. |
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39 |
When an entity is required to present a third statement of financial position applying paragraph 37, it shall disclose the information required by paragraphs 33–36 and IAS 8. However, it need not provide the related notes to the statement of financial position as at the beginning of the preceding period. |
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40 |
The date of that third statement of financial position shall be as at the beginning of the preceding period regardless of whether an entity’s financial statements provide comparative information for earlier periods (as permitted by paragraphs B14–B15). |
AGGREGATION AND DISAGGREGATION
Principles of aggregation and disaggregation
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41 |
For the purposes of this Standard, an item is an asset, liability, equity instrument or reserve, income, expense or cash flow or any aggregation or disaggregation of such assets, liabilities, equity, income, expenses or cash flows. A line item is an item that is presented separately in the primary financial statements. Other material information about items is disclosed in the notes. Unless doing so would override specific aggregation or disaggregation requirements in IFRS Accounting Standards, an entity shall (see paragraphs B16–B23): (a) classify and aggregate assets, liabilities, equity, income, expenses or cash flows into items based on shared characteristics; (b) disaggregate items based on characteristics that are not shared; (c) aggregate or disaggregate items to present line items in the primary financial statements that fulfil the role of the primary financial statements in providing useful structured summaries (see paragraph 16); (d) aggregate or disaggregate items to disclose information in the notes that fulfils the role of the notes in providing material information (see paragraph 17); and (e) ensure that aggregation and disaggregation in the financial statements do not obscure material information (see paragraph B3). |
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42 |
Applying the principles in paragraph 41, an entity shall disaggregate items whenever the resulting information is material. If, applying paragraph 41(c), an entity does not present material information in the primary financial statements, it shall disclose the information in the notes. Paragraphs B79 and B111 set out examples of income, expenses, assets, liabilities and items of equity that might have sufficiently dissimilar characteristics that presentation in the statement of profit or loss or statement of financial position or disclosure in the notes is necessary to provide material information. |
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43 |
An entity shall label and describe items presented in the primary financial statements (that is, totals, subtotals and line items) or items disclosed in the notes in a way that faithfully represents the characteristics of the item (see paragraphs B24–B26). To faithfully represent an item, an entity shall provide all descriptions and explanations necessary for a user of financial statements to understand the item. In some cases, an entity might need to include in the descriptions and explanations the meaning of the terms the entity uses and information about how it has aggregated or disaggregated assets, liabilities, equity, income, expenses and cash flows. |
Offsetting
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44 |
An entity shall not offset assets and liabilities or income and expenses, unless required or permitted by an IFRS Accounting Standard (see paragraphs B27–B28). |
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45 |
An entity reports separately both assets and liabilities, and income and expenses. Offsetting in the statement(s) of financial performance or the statement of financial position, except when offsetting reflects the substance of the transaction or other event, reduces users’ ability to understand the transactions and other events and conditions that have occurred and to assess the entity’s future cash flows. Measuring assets net of valuation allowances—for example, obsolescence allowances on inventories and allowances for expected credit losses on financial assets—is not offsetting. |
STATEMENT OF PROFIT OR LOSS
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46 |
An entity shall include all items of income and expense in a reporting period in the statement of profit or loss unless an IFRS Accounting Standard requires or permits otherwise (see paragraphs 88–95 and B86). |
Categories in the statement of profit or loss
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47 |
An entity shall classify income and expenses included in the statement of profit or loss in one of five categories (see paragraph B29): (a) the operating category (see paragraph 52); (b) the investing category (see paragraphs 53–58); (c) the financing category (see paragraphs 59–66); (d) the income taxes category (see paragraph 67); and (e) the discontinued operations category (see paragraph 68). |
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48 |
Paragraphs 52–68 set out requirements for classifying income and expenses in the operating, investing, financing, income taxes and discontinued operations categories. In addition, paragraphs B65–B76 set out requirements on how foreign exchange differences, the gain or loss on the net monetary position, and gains and losses on derivatives and designated hedging instruments are classified in the categories. |
Entities with specified main business activities
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49 |
To classify income and expenses in the operating, investing and financing categories, an entity shall assess whether it has a specified main business activity—that is a main business activity of (see paragraphs B30–B41): (a) investing in particular types of assets, referred to hereafter as investing in assets (see paragraph 53); or (b) providing financing to customers. |
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50 |
Applying paragraphs 55–58 and 65–66, an entity with a specified main business activity classifies in the operating category some income and expenses that would have been classified in the investing or financing category if the activity were not a main business activity. |
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51 |
If an entity: (a) invests in assets as a main business activity, it shall disclose that fact. (b) provides financing to customers as a main business activity, it shall disclose that fact. (c) identifies a different outcome from its assessment of whether it invests in assets or provides financing to customers as a main business activity (see paragraph B41), it shall disclose: (i) the fact the outcome of the assessment has changed and the date of the change. (ii) the amount and classification of items of income and expense before and after the date of the change in the outcome of the assessment in the current period and the amount and classification in the prior period for the items for which the classification has changed because of the changed outcome of the assessment, unless it is impracticable to do so. If an entity does not disclose the information because it is impracticable to do so, the entity shall disclose that fact. |
The operating category
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52 |
An entity shall classify in the operating category all income and expenses included in the statement of profit or loss that are not classified in (see paragraph B42): (a) the investing category; (b) the financing category; (c) the income taxes category; or (d) the discontinued operations category. |
The investing category
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53 |
Except as required by paragraphs 55–58 for an entity that has a specified main business activity, an entity shall classify in the investing category income and expenses specified in paragraph 54 from: (a) investments in associates, joint ventures and unconsolidated subsidiaries (see paragraphs B43–B44); (b) cash and cash equivalents; and (c) other assets if they generate a return individually and largely independently of the entity’s other resources (see paragraphs B45–B49). |
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54 |
The income and expenses from the assets identified in paragraph 53 that an entity shall classify in the investing category comprise the amounts included in the statement of profit or loss for (see paragraph B47): (a) the income generated by the assets; (b) the income and expenses that arise from the initial and subsequent measurement of the assets, including on derecognition of the assets; and (c) the incremental expenses directly attributable to the acquisition and disposal of the assets—for example, transaction costs and costs to sell the assets. |
Entities with specified main business activities
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55 |
For the assets specified in paragraph 53(a) (that is, investments in associates, joint ventures and unconsolidated subsidiaries) that an entity invests in as a main business activity (see paragraph B38), the entity shall classify the income and expenses specified in paragraph 54: (a) in the investing category if the assets are accounted for applying the equity method (see paragraphs B43(a) and B44(a)); or (b) in the operating category if the assets are not accounted for applying the equity method (see paragraphs B43(b)–(c) and B44(b)–(c)). |
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56 |
For the assets specified in paragraph 53(b) (that is, cash and cash equivalents), an entity shall classify the income and expenses specified in paragraph 54 in the investing category unless: (a) it invests as a main business activity in financial assets within the scope of paragraph 53(c)—in which case it shall classify the income and expenses in the operating category. (b) it does not meet the requirements in (a) but provides financing to customers as a main business activity—in which case it shall classify: (i) the income and expenses from cash and cash equivalents that relate to providing financing to customers, for example cash and cash equivalents held for related regulatory requirements—in the operating category. (ii) the income and expenses from cash and cash equivalents that do not relate to providing financing to customers—by applying an accounting policy choice to classify the income and expenses specified in paragraph 54 in the operating category or the investing category. The choice of accounting policy shall be consistent with that made by the entity for the purpose of the related accounting policy for income and expenses from liabilities in paragraph 65(a)(ii). |
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57 |
If an entity applying paragraph 56(b) cannot distinguish between the cash and cash equivalents described in paragraphs 56(b)(i) and 56(b)(ii), it shall apply the accounting policy choice in paragraph 56(b)(ii) to classify income and expenses from all cash and cash equivalents in the operating category. |
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58 |
For the assets specified in paragraph 53(c) (that is, other assets if they generate a return individually and largely independently of the entity’s other resources) that an entity invests in as a main business activity (see paragraph B40), the entity shall classify the income and expenses specified in paragraph 54 in the operating category. |
The financing category
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59 |
To determine what income and expenses to classify in the financing category, an entity shall distinguish between: (a) liabilities that arise from transactions that involve only the raising of finance (see paragraphs B50–B51); and (b) liabilities other than those described in (a)—that is, liabilities that arise from transactions that do not involve only the raising of finance (see paragraph B53). |
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60 |
For the liabilities specified in paragraph 59(a) (that is, liabilities that arise from transactions that involve only the raising of finance), except as set out in paragraphs 63–66, an entity shall classify in the financing category the amounts included in the statement of profit or loss for: (a) income and expenses that arise from the initial and subsequent measurement of the liabilities, including on derecognition of the liabilities (see paragraph B52); and (b) the incremental expenses directly attributable to the issue and extinguishment of the liabilities—for example, transaction costs. |
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61 |
For the liabilities specified in paragraph 59(b) (that is, liabilities that arise from transactions that do not involve only the raising of finance), except as set out in paragraphs 63–64, an entity shall classify in the financing category: (a) interest income and expenses, but only if the entity identifies such income and expenses for the purpose of applying other requirements in IFRS Accounting Standards; and (b) income and expenses arising from changes in interest rates, but only if the entity identifies such income and expenses for the purpose of applying other requirements in IFRS Accounting Standards. |
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62 |
Paragraphs B56–B57 set out how an entity shall apply the requirements in paragraphs 59–61 to hybrid contracts that contain a host that is a liability. |
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63 |
The requirements in paragraphs 60–61 do not apply to gains and losses on derivatives and designated hedging instruments. An entity shall apply paragraphs B70–B76 to classify such gains and losses. |
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64 |
An entity shall exclude from the financing category and classify in the operating category: (a) income and expenses from issued investment contracts with participation features recognised applying IFRS 9 Financial Instruments (see paragraph B58); and (b) insurance finance income and expenses included in the statement of profit or loss applying IFRS 17 Insurance Contracts. |
Entities with specified main business activities
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65 |
If an entity provides financing to customers as a main business activity, it shall classify income and expenses (see paragraph B59): (a) from the liabilities specified in paragraph 59(a) (that is, liabilities that arise from transactions that involve only the raising of finance): (i) if the liabilities relate to providing financing to customers—in the operating category. (ii) if the liabilities do not relate to providing financing to customers—by applying an accounting policy choice to classify the income and expenses specified in paragraph 60 in the operating category or the financing category. The choice of accounting policy shall be consistent with that made by the entity for the purpose of the related accounting policy for income and expenses from cash and cash equivalents in paragraph 56(b)(ii). (b) from the liabilities specified in paragraph 59(b) (that is, liabilities that arise from transactions that do not involve only the raising of finance): (i) if the income and expenses are specified in paragraph 61—in the financing category; or (ii) if the income and expenses are not specified in paragraph 61—in the operating category. |
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66 |
If an entity applying paragraph 65(a) cannot distinguish between the liabilities described in paragraphs 65(a)(i) and 65(a)(ii), it shall apply the accounting policy choice in paragraph 65(a)(ii) to classify income and expenses from all such liabilities in the operating category. |
The income taxes category
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67 |
An entity shall classify in the income taxes category tax expense or tax income that is included in the statement of profit or loss applying IAS 12 Income Taxes, and any related foreign exchange differences (see paragraphs B65–B68). |
The discontinued operations category
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68 |
An entity shall classify in the discontinued operations category income and expenses from discontinued operations as required by IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. |
Totals and subtotals to be presented in the statement of profit or loss
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69 |
An entity shall present totals and subtotals in the statement of profit or loss for: (a) operating profit or loss (see paragraph 70); (b) profit or loss before financing and income taxes (see paragraph 71), subject to paragraph 73; and (c) profit or loss (see paragraph 72). |
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70 |
Operating profit or loss comprises all income and expenses classified in the operating category. |
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71 |
Profit or loss before financing and income taxes comprises: (a) operating profit or loss; and (b) all income and expenses classified in the investing category. |
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72 |
Profit or loss is the total of income less expenses included in the statement of profit or loss. Accordingly, it comprises all income and expenses classified in all categories in the statement of profit or loss (see paragraph 47). |
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73 |
An entity shall not apply paragraph 69(b) if it applies the accounting policy set out in paragraph 65(a)(ii) of classifying in the operating category income and expenses from liabilities that do not relate to the provision of financing to customers. However, such an entity shall apply paragraph 24 to determine whether to present an additional subtotal after operating profit and before the financing category. For example, the entity would present a subtotal for operating profit or loss and income and expenses from investments accounted for using the equity method if the entity determines doing so is necessary to provide a useful structured summary of its income and expenses. |
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74 |
If an entity described in paragraph 73 presents an additional subtotal comprising operating profit or loss and all income and expenses classified in the investing category, it shall not label the subtotal in a way that implies the subtotal excludes financing amounts, such as ‘profit before financing’. Applying paragraph 43, the entity shall label the subtotal in a way that faithfully represents the amounts included in the subtotal. |
Items to be presented in the statement of profit or loss or disclosed in the notes
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75 |
An entity shall present in the statement of profit or loss line items for (see paragraph B77): (a) amounts required by this Standard, namely: (i) revenue, presenting separately the line items described in (b)(i) and (c)(i); (ii) operating expenses, presenting separately line items as required by paragraphs 78 and 82(a); (iii) share of the profit or loss of associates and joint ventures accounted for using the equity method; (iv) income tax expense or income; and (v) a single amount for the total of discontinued operations (see IFRS 5); (b) amounts required by IFRS 9, namely: (i) interest revenue calculated using the effective interest method; (ii) impairment losses (including reversals of impairment losses or impairment gains) determined in accordance with Section 5.5 of IFRS 9; (iii) gains and losses arising from the derecognition of financial assets measured at amortised cost; (iv) any gain or loss arising from the difference between the fair value of a financial asset and its previous amortised cost at the date of reclassification from amortised cost measurement to measurement at fair value through profit or loss; and (v) any cumulative gain or loss previously recognised in other comprehensive income that is reclassified to profit or loss at the date of reclassification of a financial asset from measurement at fair value through other comprehensive income to measurement at fair value through profit or loss; and (c) amounts required by IFRS 17, namely: (i) insurance revenue; (ii) insurance service expenses from contracts issued within the scope of IFRS 17; (iii) income or expenses from reinsurance contracts held; (iv) insurance finance income or expenses from contracts issued within the scope of IFRS 17; and (v) finance income or expenses from reinsurance contracts held. |
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76 |
An entity shall present in the statement of profit or loss (outside all the categories described in paragraph 47) an allocation of profit or loss for the reporting period attributable to: (a) non-controlling interests; and (b) owners of the parent. |
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77 |
Paragraphs B78–B79 set out requirements on how an entity uses its judgement to determine whether to present additional line items in the statement of profit or loss or disclose items in the notes. |
Presentation and disclosure of expenses classified in the operating category
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78 |
In the operating category of the statement of profit or loss, an entity shall classify and present expenses in line items in a way that provides the most useful structured summary of its expenses, using one or both of these characteristics (see paragraphs B80–B85): (a) the nature of expenses; or (b) the function of the expenses within the entity. |
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79 |
Any individual line item shall comprise operating expenses aggregated on the basis of only one of these characteristics, but the same characteristic does not have to be used as the aggregation basis for all line items (see paragraph B81). |
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80 |
In classifying expenses by nature (‘nature expenses’), an entity provides information about operating expenses related to the nature of the economic resources consumed to accomplish the entity’s activities without reference to the activities in relation to which those economic resources were consumed. Such information includes information about raw material expense, employee benefit expense, depreciation and amortisation. |
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81 |
In classifying expenses by function within the entity, an entity allocates and aggregates operating expenses according to the activity to which the consumed resource relates. For example, cost of sales is a function line item that combines expenses relating to an entity’s production or other revenue-generating activities such as: raw material expense, employee benefit expense, depreciation and amortisation. Therefore, when classifying expenses by function, an entity might: (a) allocate to several function line items (such as cost of sales and research and development) expenses relating to economic resources of the same nature (such as employee benefit expense); and (b) include in a single function line item an allocation of expenses relating to economic resources of several natures (such as raw material expense, employee benefit expense, depreciation and amortisation). |
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82 |
If an entity presents one or more line items comprising expenses classified by function in the operating category of the statement of profit or loss, it shall: (a) present a separate line item for its cost of sales, if the entity classifies operating expenses in functions that include a cost of sales function. That line item shall include the total of inventory expense described in paragraph 38 of IAS 2 Inventories. (b) disclose a qualitative description of the nature of expenses included in each function line item. |
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83 |
An entity that presents one or more line items comprising expenses classified by function in the operating category of the statement of profit or loss shall also disclose in a single note: (a) the total for each of: (i) depreciation, comprising the amounts required to be disclosed by paragraph 73(e)(vii) of IAS 16 Property, Plant and Equipment, paragraph 79(d)(iv) of IAS 40 Investment Property and paragraph 53(a) of IFRS 16 Leases; (ii) amortisation, comprising the amount required to be disclosed by paragraph 118(e)(vi) of IAS 38 Intangible Assets; (iii) employee benefits, comprising the amount for employee benefits recognised by an entity applying IAS 19 Employee Benefits and the amount for services received from employees recognised by an entity applying IFRS 2 Share-based Payment; (iv) impairment losses and reversals of impairment losses, comprising the amounts required to be disclosed by paragraphs 126(a) and 126(b) of IAS 36 Impairment of Assets; and (v) write-downs and reversals of write-downs of inventories, comprising the amounts required to be disclosed by paragraphs 36(e) and 36(f) of IAS 2; and (b) for each total listed in (a)(i)–(v): (i) the amount related to each line item in the operating category (see paragraph B84); and (ii) a list of any line items outside the operating category that also include amounts relating to the total. |
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84 |
Paragraph 41 requires an entity to disaggregate items to provide material information. However, an entity that applies paragraph 83 is exempt from disclosing: (a) in relation to function line items presented in the operating category of the statement of profit or loss—disaggregated information about the amounts of nature expenses included in each line item, beyond the amounts specified in paragraph 83; and (b) in relation to nature expenses specifically required by an IFRS Accounting Standard to be disclosed in the notes—disaggregated information about the amounts of the expenses included in each function line item presented in the operating category of the statement of profit or loss, beyond the amounts specified in paragraph 83. |
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85 |
The exemption in paragraph 84 relates to disaggregation of operating expenses. However, it does not exempt an entity from applying specific disclosure requirements relating to those expenses in IFRS Accounting Standards. |
STATEMENT PRESENTING COMPREHENSIVE INCOME
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86 |
An entity shall present in the statement presenting comprehensive income totals for: (a) profit or loss; (b) other comprehensive income (see paragraphs B86–B87); and (c) comprehensive income, being the total of profit or loss and other comprehensive income. |
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87 |
An entity shall present an allocation of comprehensive income for the reporting period attributable to: (a) non-controlling interests; and (b) owners of the parent. |
Other comprehensive income
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88 |
An entity shall classify income and expenses included in the statement presenting comprehensive income in one of two categories: (a) income and expenses that will be reclassified to profit or loss when specific conditions are met; and (b) income and expenses that will not be reclassified to profit or loss. |
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89 |
An entity shall present, in each of the categories of the statement presenting comprehensive income, line items for: (a) the share of other comprehensive income of associates and joint ventures accounted for using the equity method; and (b) other items of other comprehensive income. |
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90 |
An entity shall present in the statement presenting comprehensive income or disclose in the notes reclassification adjustments relating to components of other comprehensive income (see paragraphs B88–B89). |
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91 |
Other IFRS Accounting Standards specify whether and when amounts previously included in other comprehensive income are reclassified to profit or loss. Such reclassifications are referred to in this Standard as reclassification adjustments. An entity includes a reclassification adjustment with the related component of other comprehensive income in the period that the adjustment is reclassified to profit or loss. An entity might have included these amounts in other comprehensive income as unrealised gains in the current or prior periods. An entity shall deduct them from other comprehensive income in the period in which the realised gains are reclassified to profit or loss to avoid including them in total comprehensive income twice. |
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92 |
An entity disclosing reclassification adjustments in the notes shall present in the statement presenting comprehensive income the items of other comprehensive income after any related reclassification adjustments. |
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93 |
An entity shall either present in the statement presenting comprehensive income or disclose in the notes the amount of income taxes relating to each item of other comprehensive income, including reclassification adjustments (see paragraphs 61A and 63 of IAS 12). |
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94 |
An entity may present items of other comprehensive income either: (a) net of related tax effects; or (b) before related tax effects, with one amount shown for the aggregate amount of income taxes relating to those items. |
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95 |
If an entity selects the alternative in paragraph 94(b), it shall allocate the tax between the categories set out in paragraph 88. |
STATEMENT OF FINANCIAL POSITION
Classification of assets and liabilities as current or non-current
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96 |
An entity shall present current and non-current assets, and current and non-current liabilities, as separate classifications in its statement of financial position in accordance with paragraphs 99–102 except when a presentation based on liquidity provides a more useful structured summary. When that exception applies, an entity shall present all assets and liabilities in order of liquidity (see paragraphs B90–B93). |
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97 |
Whichever method of presentation is adopted, an entity shall disclose the amount expected to be recovered or settled after more than 12 months for each asset and liability line item that combines amounts expected to be recovered or settled: (a) no more than 12 months after the reporting period; and (b) more than 12 months after the reporting period. |
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98 |
When an entity presents current and non-current assets, and current and non-current liabilities, as separate classifications in its statement of financial position, it shall not classify deferred tax assets (liabilities) as current assets (liabilities). |
Current assets
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99 |
An entity shall classify an asset as current when (see paragraphs B94–B95): (a) it expects to realise the asset, or intends to sell or consume it, in its normal operating cycle; (b) it holds the asset primarily for the purpose of trading; (c) it expects to realise the asset within 12 months after the reporting period; or (d) the asset is cash or a cash equivalent (as defined in IAS 7), unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. |
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100 |
An entity shall classify all assets other than those specified in paragraph 99 as non-current. |
Current liabilities
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101 |
An entity shall classify a liability as current when: (a) it expects to settle the liability in its normal operating cycle (see paragraphs B96 and B107–B108); (b) it holds the liability primarily for the purpose of trading (see paragraph B97); (c) the liability is due to be settled within 12 months after the reporting period (see paragraphs B97–B98 and B107–B108); or (d) it does not have the right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period (see paragraphs B99–B108). |
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102 |
An entity shall classify all liabilities other than those specified in paragraph 101 as non-current. |
Items to be presented in the statement of financial position or disclosed in the notes
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103 |
An entity shall present in the statement of financial position line items for: (a) property, plant and equipment; (b) investment property; (c) intangible assets; (d) goodwill; (e) financial assets (excluding amounts shown under (g), (j) and (k)); (f) portfolios of contracts within the scope of IFRS 17 that are assets, disaggregated as required by paragraph 78 of IFRS 17; (g) investments accounted for using the equity method; (h) biological assets within the scope of IAS 41 Agriculture; (i) inventories; (j) trade and other receivables; (k) cash and cash equivalents; (l) the total of assets classified as held for sale and assets included in disposal groups classified as held for sale in accordance with IFRS 5; (m) trade and other payables; (n) provisions; (o) financial liabilities (excluding amounts shown under (m) and (n)); (p) portfolios of contracts within the scope of IFRS 17 that are liabilities, disaggregated as required by paragraph 78 of IFRS 17; (q) liabilities and assets for current tax, as defined in IAS 12; (r) deferred tax liabilities and deferred tax assets, as defined in IAS 12; and (s) liabilities included in disposal groups classified as held for sale in accordance with IFRS 5. |
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104 |
An entity shall present in the statement of financial position: (a) non-controlling interests; and (b) issued capital and reserves attributable to owners of the parent. |
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105 |
Paragraphs B109–B111 set out requirements on how an entity uses its judgement to determine whether to present additional line items in the statement of financial position or disclose items in the notes. |
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106 |
Subject to paragraph 96, this Standard does not prescribe the order or format in which an entity presents items in the statement of financial position. In addition, the descriptions used and the ordering of items or aggregation of similar items may be amended according to the nature of the entity and its transactions, to provide a useful structured summary of the entity’s assets, liabilities and equity. For example, a financial institution may amend the descriptions in paragraph 103 to provide a useful structured summary of the assets, liabilities and equity of a financial institution. |
STATEMENT OF CHANGES IN EQUITY
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107 |
An entity shall present a statement of changes in equity as required by paragraph 10. The statement of changes in equity shall include: (a) total comprehensive income for the reporting period, showing separately the total amounts attributable to owners of the parent and to non-controlling interests; (b) for each component of equity, the effects of retrospective application or retrospective restatement recognised in accordance with IAS 8; and (c) for each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately (as a minimum) presenting changes resulting from: (i) profit or loss; (ii) other comprehensive income; and (iii) transactions with owners in their capacity as owners, showing separately contributions by and distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of control. |
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108 |
IAS 8 requires retrospective adjustments for changes in accounting policies, to the extent practicable, except when the transition requirements in another IFRS Accounting Standard require otherwise. IAS 8 also requires restatements to correct errors to be made retrospectively, to the extent practicable. Retrospective adjustments and retrospective restatements are not changes in equity, but they are adjustments to the opening balance of retained earnings, except when IFRS Accounting Standards require retrospective adjustment of another component of equity. Paragraph 107(b) requires an entity to present in the statement of changes in equity the total adjustment to each component of equity resulting from changes in accounting policies and, separately, from corrections of errors. An entity shall present these adjustments for each prior reporting period and the beginning of the period. |
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109 |
For each component of equity an entity shall either present in the statement of changes in equity or disclose in the notes an analysis of other comprehensive income by item (see paragraph 107(c)(ii)). |
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110 |
An entity shall either present in the statement of changes in equity or disclose in the notes the amount of dividends recognised as distributions to owners during the reporting period, and the related amount of dividends per share. |
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111 |
In paragraph 107, the components of equity include, for example, each class of contributed equity, the accumulated balance of each class of other comprehensive income and retained earnings. |
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112 |
Changes in an entity’s equity between the beginning and the end of the reporting period reflect the increase or decrease in its net assets during the period. Except for changes resulting from transactions with owners in their capacity as owners (such as equity contributions, reacquisitions of the entity’s own equity instruments and dividends) and transaction costs directly related to such transactions, the overall change in equity during a period represents the total amount of income and expenses, including gains and losses, generated by the entity’s activities during that period. |
NOTES
Structure
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113 |
An entity shall disclose in the notes: (a) information about the basis of preparation of the financial statements (see paragraphs 6A–6N of IAS 8) and the specific accounting policies used (see paragraphs 27A–27I of IAS 8); (b) information required by IFRS Accounting Standards that is not presented in the primary financial statements; and (c) other information that is not presented in the primary financial statements, but is necessary for an understanding of any of them (see paragraph 20). |
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114 |
An entity shall, as far as practicable, present notes in a systematic manner (see paragraph B112). In determining a systematic manner, the entity shall consider the effect on the understandability and comparability of its financial statements. An entity shall cross-reference each item in the primary financial statements to any related information in the notes. If amounts disclosed in the notes are included in one or more line items in the primary financial statements, an entity shall disclose in the note the line item(s) in which the amounts are included. |
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115 |
An entity may disclose notes providing information about the basis of preparation of the financial statements and specific accounting policies used in a separate section of the financial statements. |
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116 |
If not disclosed elsewhere in information published with the financial statements, an entity shall disclose in the notes: (a) the domicile and legal form of the entity, its country of incorporation and the address of its registered office (or principal place of business, if different from the registered office); (b) a description of the nature of the entity’s operations and its principal activities; (c) the name of the parent and the ultimate parent of the group; and (d) if it is a limited-life entity, information regarding the length of its life. |
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