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IASB proposes new standard on general presentation and disclosures in financial statements

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Dec 17, 2019

On December 17, 2019, the International Accounting Standards Board (IASB) published the exposure draft of a new standard "General Presentation and Disclosures" that is intended to replace IAS 1, "Presentation of Financial Statements". Comments are requested by June 30, 2020.



The Agenda consultation 2015 revealed that respondents wanted the Board to prioritize projects that are important to users of financial statements, including the disclosure initiative and the primary financial statements project. The Board took up discussions in the project in April 2016.

The Board decided to focus on four main areas:

  • Introduction of defined subtotals and categories in the statement of profit or loss
  • Introduction of requirements to improve aggregation and disaggregation
  • Introduction of Management Performance Measures (MPMs) and accompanying disclosures in financial statements
  • Introduction of targeted improvements to the statement of cash flows

In May 2019, the Board also decided that a discussion paper is not required and that as a next project step, the Board will develop an exposure draft for a new standard replacing IAS 1, Presentation of Financial Statements. The related requirements in IAS 1 will be brought forward to the new standard with limited wording changes. Other requirements of IAS 1 will be moved to IAS 8 (which would be renamed to Basis of Preparation, Accounting Policies, Changes in Accounting Estimates and Errors) and IFRS 7.


Key proposals

On the four above mentioned areas, ED/2019/7 General Presentation and Disclosures proposes the following:

  • The introduction of defined subtotals and categories in the statement of profit or loss aims at additional relevant information and a P&L structure that is more comparable between entities. The proposals include:
    • Require all entities to present an operating profit or loss subtotal in the statement of profit or loss, which is defined as profit from continuing operations before tax and before investing (defined as returns from investments that are generated individually and largely independently of other resources held by an entity), financing (defined as income and expenses from assets and liabilities related to an entity’s financing), and the share of profit of integral associates and joint ventures; whether an item is ‘unusual’ does not affect whether it is included in operating profit; there is a separate proposed approach to operating profit for financial entities.
    • Require entities to present separately ‘integral’ and ‘non-integral’ associates and joint ventures in statements of financial performance and cash flows, where a significant interdependency between an entity and an associate or joint venture would indicate that the associate or joint venture is integral to the main business activities of the entity (the definition would be supplemented with indicators for determining whether a joint venture or associate is ‘integral’ or ‘non-integral’).
    • Not to define EBITDA, but to use ‘operating profit or loss before depreciation and amortisation’, which would provide similar information to many of the EBITDA measures that are currently being used and is clearly understood.
  • The introduction of requirements to improve aggregation and disaggregation aims at additional relevant information and insuring that material information not being obscured. The proposals include:
    • Remove the free choice whether the analysis of operating expenses is by nature or by function; instead the Board proposes to provide a set of factors for entities to consider when making this assessment; remove the option to present an analysis of expenses in the notes only; if the statement of profit or loss presents an analysis by function, there is no requirement to analyse each functional line item by nature in the notes (analysis would be of total operating expenses).
    • Require the entities to identify assets, liabilities, equity, income and expenses that arise from individual transactions or other events and classify them into groups based on shared characteristics, resulting in line items in the primary financial statements that share at least one characteristic, then separate them based on further characteristics, resulting in the separate disclosure of material items in the notes; there may be a need to aggregate immaterial items with dissimilar characteristics to avoid obscuring relevant information; companies should use a descriptive label or, if that is not possible, provide information in the notes about the composition of such aggregated items.
    • Define unusual income and expenses as income and expenses with limited predictive value when it is reasonable to expect that income or expenses that are similar in type and amount will not arise for several future annual reporting periods; income and expenses from the recurring remeasurement of items measured at a current value would not be expected to be classified as unusual; unusual income and expenses would be disaggregated by line items presented in statement of profit or loss and line items disclosed in the analysis of operating expenses by nature, if the entity analyses expenses by function in the statement of profit or loss.
  • The introduction of Management Performance Measures (MPMs) and accompanying disclosures in the financial statements aims at transparency and discipline in the use of such measures and disclosures in a single location. The proposals include:
    • Require disclosure in the notes of subtotals of income and expenses that are used in public communications with users of financial statements, outside financial statements, complement totals or subtotals included in IFRSs, and communicate management’s view of an aspect of an entity’s financial performance; they would be accompanied by disclosures in a single note to enhance transparency.
    • MPMs can be non-financial performance measures or financial performance measures; they would be accompanied by disclosures in the notes offering a description of why the MPM provides management’s view of performance, how the MPM has been calculated, how the measure provides useful information about an entity’s financial performance, a reconciliation of the MPM to the most directly comparable subtotal or total specified by IFRSs, a statement that the MPM provides management’s view of an aspect of the entity’s financial performance, the effect of tax and non-controlling interests separately for each of the differences between the MPM and the most directly comparable subtotal or total specified by IFRSs; if there is a change in how the MPM is calculated, an explanation would be provided to help users understand the reasons for and effect of the change.
    • Specify that as regards adjusted earnings per share, the numerator of adjusted EPS can only be either a subtotal specified by IFRSs or a management performance measure.
  • The introduction of targeted improvements to the statement of cash flows aims at improved comparability between entities. The proposals include:
    • Require entities to use operating profit as the single starting point for the indirect reconciliation.
    • Remove the classification options for interest and dividends.

Comments on the proposals are requested by 30 June 2020.


Effective date and transition

The ED does not contain a proposed effective date as the IASB will decide on the effective date only upon completion of its redeliberations. The expectation is currently that the standard will become effective approximately 18-24 months after being published in its finalized form.

The standard would be applied retrospectively and early adoption would be permitted.


Additional information


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