In its final comment letter, EFRAG welcomes the exposure draft and agrees with many of the proposed amendments. 

However, EFRAG suggests that the IASB should:

• discuss further measurement issues of financial liabilities with contingent settlement provisions under the scope of IAS 32; 
• allow reclassification if the terms and conditions become, or stop being, effective with the passage of time; and 
• ensure that proposed disclosure requirements are clear, can be implemented by entities and ensuring an adequate cost-benefit balance, particularly on disclosures of terms and conditions related to priority on liquidation. 

The update reports on the EFRAG Financial Reporting Board (EFRAG FRB) meeting on 22 March 2024, EFRAG Financial Reporting Technical Expert Group (EFRAG FR TEG) meetings on 06 March, 14 March and 20 March, EFRAG FR TEG and EFRAG Consultative Forum of Standard Setters (EFRAG CFSS) joint meeting on 13 March 2024.

The update also lists EFRAG publications issued in March-April including:

• EFRAG's final comment letter on IASB's exposure draft 'Financial Instruments with Characteristics of Equity'

The update also covers EFRAG's sustainability reporting and related activities.

Please click to download the March 2024 EFRAG Update from the EFRAG website.

The webinars will be held on 7 and 11 June, respectively. Please click for more information and registration in the press release on the EFRAG website.

The full agenda for the meeting can be found here. We will post any updates to the agenda, our com­pre­hen­sive pre-meet­ing summaries, as well as observer notes from the meeting on this page as they become available.

The Board will discuss the following:

• Climate-related and other uncertainties in the financial statements
• Second comprehensive review of the IFRS for SMEs Standard
• Intangible assets
• Rate-regulated activities
• Post-implementation review of IFRS 9 — Impairment
• Post-implementation review of IFRS 15 — Revenue from contracts with customers
• Provisions — Targeted improvements
• Maintenance and consistent application
• Disclosure initiative — Subsidiaries without public accountability: disclosures
• Board work plan update

The full agenda for the meeting can be found here. We will post any updates to the agenda, our com­pre­hen­sive pre-meet­ing summaries, as well as observer notes from the meeting on this page as they become available.

The resources include:

• sector-specific transition plan guidance for asset owners, asset managers, banks, electric utilities and power generators, food and beverage, metals and mining, and oil and gas;
• sector summary guidance, with high level guidance for 30 sectors of the global economy;
• guidance on the how to undertake a transition planning cycle;
• a paper on the opportunities and challenges of transition plans in emerging markets and developing economies; and
• independent advisory papers, prepared by TPT Working Groups on the subjects of adaptation, nature, JustTransition and SMEs, exploring how transition planning can extend beyond realising net zero.

These new resources complement existing publications including the TPT Disclosure Framework and supporting guidance, issued in October 2023.

While the TPT Framework is not mandatory in the UK, the Financial Conduct Authority has stated its intention to consult on the introduction of guidance for listed companies’ transition plan disclosures, with specific reference to TPT publications. The UK Government has also set out its intention to consult on transition plan disclosures for certain companies, drawing on the output of the TPT.

The full suite of TPT resources can be found on the TPT website.

In the article, IASB member Ann Tarca and ISSB member Bing Leng explain (i) what digital financial reports are and how they are created, (ii) the benefits of digital financial reporting for investors, companies and regulators, and (iii) the importance of the IFRS digital taxonomies.

The new subsite contains all materials about digital financial reporting and the IFRS digital taxonomies — the IFRS Accounting Taxonomy and the forthcoming IFRS Sustainability Disclosure Taxonomy.

Please click to access both items on the IFRS Foundation website:

• Article on digital reporting
• New subsite with material on digital reporting

The first episode covers the March 2024 TIG meeting and is hosted by ISSB Vice-Chair Sue Lloyd, ISSB member Veronika Pountcheva and ISSB staff member Dianora Aria de Marco. They discuss the purpose and the objectives of the TIG, the submissions to the TIG, and insights from TIG members.

Please click to access the podcast via the press release on the IFRS Foundation website.

Background

The IASB undertook the primary financial statements project in response to investors' concerns about the comparability and transparency of entities’ performance reporting and took up discussions in the project in April 2016.

It continued discussions through May 2019 with the scope slowly taking shape during that time and (i) a fundamental revision of the statements of financial position, cash flows and changes in equity, (ii) guidance on the content of OCI and timing of recycling, (iii) segment reporting, and (iv) the presentation of discontinued operations being excluded from the scope of the project.

Rather, the Board decided to focus on four main areas:

1. Introduction of defined subtotals and categories in the statement of profit or loss
2. Introduction of requirements to improve aggregation and disaggregation
3. Introduction of disclosures about Management-defined Performance Measures (MPMs) in the notes to the financial statements
4. Targeted improvements to the statement of cash flows by amending IAS 7 Statement of Cash Flows

An exposure draft of a proposed new standard was published on 17 December 2019 whereby related requirements in IAS 1 Presentation of Financial Statements were proposed to be brought forward to the new standard with limited wording changes. Other requirements of IAS 1 were proposed to be moved to IAS 8 and IFRS 7.

The IASB discussed feedback on the exposure draft in December 2020 and January 2021 and redeliberated the proposals from March 2021 to June 2023. The IASB published the new IFRS 18 Presentation and Disclosure in Financial Statements on 9 April 2024.

Scope

IFRS 18 applies to all financial statements that are prepared and presented in accordance with IFRS Accounting Standards.

Overview

The main changes in the new standard compared with the previous requirements in IAS 1 comprise:

• The introduction of categories and defined subtotals in the statement of profit or loss that aim at additional relevant information and provide a structure for the statement of profit or loss that is more comparable between entities. In particular:
  • Items of income and expense are required to be classified into categories in the statement of profit or loss:
    • Operating
    • Investing
    • Financing
    • Income tax
    • Discontinued operations
    Classification differs in some cases for entities that, as a main business activity, provide financing to customers or invest on assets
  • Entities are required to present the following subtotals:
    • operating profit or loss
    • profit or loss before financing and income tax
    • profit or loss
    These subtotals structure the statement of profit or loss into categories, with no requirement to present category headings.
  • The line items listed in IFRS 18 are required to be presented unless doing so reduces how effective the statement of profit or loss is in providing a useful structured summary of the entity’s income and expenses
• The introduction of requirements to improve aggregation and disaggregation that aim at additional relevant information and ensure that material information is not obscured. In particular:
  • IFRS 18 provides guidance on whether information should be in the primary financial statements (whose role is to provide a useful structured summary) or in the notes
  • Entities are required to identify assets, liabilities, equity, income and expenses that arise from individual transactions or other events, and to classify them into groups based on shared characteristics, resulting in line items in the primary financial statements that share at least one characteristic. These groups are then separated based on further dissimilar 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. Entities should use a descriptive label or, if that is not possible, provide information in the notes about the composition of such aggregated items.
  • Stricter guidance is introduced on whether the analysis of operating expenses is by nature or by function. The presentation should be in a way that provides the most useful structured summary of operating expenses by considering several factors. Presentation of one or more line items for operating expenses classified by function requires disclosure of amounts for five specified expenses, e.g. depreciation.
• The introduction of disclosures on Management-defined Performance Measures (MPMs) in the notes to the financial statements that aim at transparency and discipline in the use of such measures and disclosures in a single location. In particular:
  • MPMs are defined as subtotals of income and expenses that are used in public communications with users of financial statements outside the financial statements, complement totals or subtotals included in IFRSs, and communicate management’s view of an aspect of an entity’s financial performance.
  • Accompanying disclosures are required to be provided in a single note including:
    • A description of why the MPM provides management’s view of performance
    • A description of how the MPM has been calculated
    • A description of 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
    • In cases of a change in how the MPM is calculated, an explanation of the reasons for and the effect of the change

The targeted improvements to IAS 7 aim at improved comparability between entities. The changes include:

• Using the operating profit subtotal as the single starting point for the indirect method of reporting cash flows from operating activities; and
• Removing the presentation alternatives for interest and dividends.

Effective date and transition

IFRS 18 is effective for annual reporting periods beginning on or after 1 January 2027. The standard is applied retrospectively, with specific transition provisions, and early adoption is permitted.

Additional information

Website of the IFRS Foundation

• Press release
• Video message by the IASB Chair
• One-page quick view of IFRS 18
• Project summary
• Effects analysis
• Feedback statement
• Comparison of requirements in IAS 1 and IFRS 18
• Access to the standard, the illustrative examples, and the basis for conclusions (subscription required)

UK Accounting Plus

• Summary of IFRS 18 Presentation and Disclosures in Financial Statements
• Overview of the project history
• Updated EFRAG endorsement status report
• Need to know newsletter

The registration is open to interested companies and stakeholders. 

A summary of the agenda is set out below:

For more information, including on how to register, please see the event page on the EC website.