Contents

ILLUSTRATIVE EXAMPLES ON IFRS 18 PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS
INTRODUCTIONIE1
PART I—EXAMPLES OF PRESENTATION AND DISCLOSUREIE5
Statement of profit or loss
Statement presenting comprehensive income
Statement of financial position
Statement of changes in equity
Note 1—Specified expenses by nature
Note 2—Management-defined performance measures
Note 3—Analysis of reclassification adjustments
Note 4—Analysis of tax effects relating to each component of other comprehensive income
PART II—ADDITIONAL EXAMPLES OF THE STATEMENT OF PROFIT OR LOSSIE9
Example II-1—Statement of profit or loss for an entity that is a manufacturer
Example II-2—Statement of profit or loss for an entity that is a manufacturer that provides financing to customers as a main business activity
Example II-3—Statement of profit or loss for an entity that is an insurer that invests in financial assets as a main business activity
Example II-4—Statement of profit or loss for an entity that is an investment and retail bank that invests in financial assets as a main business activity and provides financing to customers as a main business activity
PART III—CAPITAL DISCLOSURESIE14
Example III-1—An entity that is not a regulated financial institution
Example III-2—An entity that has not complied with externally imposed capital requirements
IFRS 18 SUPPORTING MATERIALS
APPENDIX
Amendments to guidance on other IFRS Accounting Standards and to IFRS Practice Statement 2 Making Materiality Judgements

Illustrative Examples on IFRS 18 Presentation and Disclosure in Financial Statements

These examples accompany, but are not part of, IFRS 18. They illustrate aspects of IFRS 18 but are not intended to provide interpretative guidance.

Introduction

IE1

IFRS 18 sets out requirements for the presentation and disclosure of information in financial statements. These examples are not intended to illustrate all aspects of the presentation and disclosure requirements in IFRS 18, nor do they illustrate a complete set of financial statements.

IE2

As discussed in paragraphs 6⁠–⁠7, 11⁠–⁠12, 106 and 114 of IFRS 18, an entity is permitted to change the order of presentation or disclosures, the titles of financial statements and the descriptions used, provided it complies with the requirements in IFRS Accounting Standards for the presentation and disclosure of information.

IE3

The examples are structured in three parts:

(a)

Part I—examples of presentation and disclosure. This part sets out examples of the statements of financial performance, financial position and changes in equity for an entity that does not invest in assets as a main business activity, nor provide financing to customers as a main business activity. Therefore, the requirements in paragraphs 49⁠–⁠51, 55⁠–⁠58 and 65⁠–⁠66 of IFRS 18 are not applicable to this entity. This part also provides examples of some disclosures in the notes.

(b)

Part II—additional examples of the statement of profit or loss. This part sets out another example of the statement of profit or loss for an entity that does not invest in assets as a main business activity, nor provide financing to customers as a main business activity. This part also sets out examples of the statement of profit or loss for an entity that either provides financing to customers as a main business activity or invests in assets as a main business activity, or both. Such an entity applies the requirements in paragraphs 49⁠–⁠51 and the requirements in either paragraphs 55⁠–⁠58 or paragraphs 65⁠–⁠66 of IFRS 18, or both, and classifies some income and expenses in the operating category that an entity without such specified main business activities would classify in the investing or financing categories.

(c)

Part III—capital disclosures. The examples in this part illustrate the application of paragraphs 126⁠–⁠128 of IFRS 18.

IE4

Part I and Part II include context-setting paragraphs that precede illustrated presentations or disclosures. Those paragraphs are intended to enable a reader to better understand the context in which the illustrated presentations or disclosures are given. Monetary amounts in Part I, Part II and Part III are denominated in ‘currency units’ (CU).

Part I—Examples of presentation and disclosure

IE5

XYZ Group is a manufacturer that does not invest in assets as a main business activity, nor provide financing to customers as a main business activity. Part I provides examples of some of XYZ Group’s primary financial statements and notes, specifically:

(a)

statements of financial performance (a statement of profit or loss and a statement presenting comprehensive income);

(b)

a statement of financial position;

(c)

a statement of changes in equity;

(d)

Note 1—Specified expenses by nature (see paragraph 83 of IFRS 18);

(e)

Note 2—Management-defined performance measures (see paragraphs 122⁠–⁠123 of IFRS 18);

(f)

Note 3—Analysis of reclassification adjustments (see paragraph 90 of IFRS 18); and

(g)

Note 4—Analysis of tax effects relating to each component of other comprehensive income (see paragraph 93 of IFRS 18).

IE6

This part does not illustrate XYZ Group’s complete set of financial statements. For instance, Part I excludes examples of:

(a)

a statement of cash flows. The illustrative examples accompanying IAS 7 Statement of Cash Flows provide examples of the statement of cash flows for an entity.

(b)

a third statement of financial position as at the beginning of the preceding reporting period. XYZ Group is required to present such a statement as at 1 January 20X1 because it has made a retrospective adjustment of retained earnings as at that date, as illustrated in the statement of changes in equity (see paragraph 37 of IFRS 18).

(c)

other disclosures required by IFRS Accounting Standards. In a complete set of financial statements, an entity is required to cross-reference each item in the primary financial statements to any related information in the notes (see paragraph 114 of IFRS 18), and is likely to cross-reference between related notes.

IE7

For the purpose of the examples in this part:

(a)

XYZ Group has presented profit or loss and other comprehensive income in two statements (see paragraph 12(b) of IFRS 18). Items of other comprehensive income included in the statement presenting comprehensive income are presented before tax effects, with one amount shown for the aggregate amount of income tax relating to those items in each category (see paragraphs 94(b) and 95 of IFRS 18).

(b)

XYZ Group has concluded that the most useful structured summary of its expenses is provided by presenting in the operating category of the statement of profit or loss some expenses classified by function and other expenses classified by nature (see paragraphs 78, B80⁠–⁠B82 and B85 of IFRS 18). Presenting expenses by function most closely represents the way the business is managed and how management reports internally, and is standard practice within the industry in which XYZ Group operates. However, XYZ Group presents goodwill impairment loss separately because any allocation to function line items would be arbitrary and would therefore not provide a faithful representation of the functions. XYZ Group has also concluded that presenting the additional subtotals gross profit, profit before income taxes and profit from continuing operations provides a useful structured summary of its income and expenses.

(c)

XYZ Group has concluded that presenting a statement of financial position distinguishing current items from non-current items provides the most useful structured summary of its assets and liabilities (see paragraph 96 of IFRS 18).

Gains (losses) on disposals of associates and joint ventures, investing Example MonetaryDuration, Credit 330000
Impairment loss recognised in profit or loss, goodwill, operating Example MonetaryDuration Effective 2027-01-01 IFRS 19.37 c Disclosure
IFRS 3.B67 d (v) Disclosure 		330000, 800260, 800270, 817000
Other operating income, operating Example MonetaryDuration, Credit 800200
Table 1. Statement of profit or loss XYZ Group—Statement of profit or loss for the year ended 31 December 20X2
(in thousands of CU)
Note20X220X1
Revenue367,000353,100
Cost of sales1 (241,600) (224,100)
Gross profit125,400129,000
Other operating income212,2004,100
Selling expenses1(28,900)(27,400)
Research and development expenses1, 2(25,100)(25,900)
General and administrative expenses1, 2(20,900)(22,400)
Goodwill impairment loss1, 2(4,500)—
Other operating expenses (1,200) (5,600)
Operating profit257,00051,800
Share of profit and gains on disposal of associates and joint ventures(a)2 5,300 7,300
Profit before financing and income taxes62,30059,100
Interest expenses on borrowings and lease liabilities(13,000)(13,200)
Interest expenses on pension liabilities and provisions (6,500) (6,000)
Profit before income taxes42,80039,900
Income tax expense2 (10,700) (9,975)
Profit from continuing operations232,10029,925
Loss from discontinued operations — (5,500)
PROFIT32,10024,425
Profit attributable to:
Owners of the parent25,68019,540
Non-controlling interests 6,420 4,885
32,10024,425
Earnings per share from continuing operations:
Basic and diluted 0.67 0.66
Earnings per share:
Basic and diluted 0.67 0.54
(a)

Share of profit of associates and joint ventures means the share of associates’ and joint ventures’ profit attributable to owners of the associates and joint ventures after tax and non-controlling interests in the associates and joint ventures.
Table 2. Statement presenting comprehensive income XYZ Group—Statement presenting comprehensive income for the year ended 31 December 20X2
(in thousands of CU)
Note20X220X1
Profit 32,100 24,425
Income and expenses that will not be reclassified to profit or loss:
Gains (losses) on remeasurements of defined benefit plans 6,700 (4,600)
Share of other comprehensive income of associates and joint ventures(a) (2,200) 3,300
Income tax relating to income and expenses that will not be reclassified to profit or loss 4 (1,675) 1,150
Total income and expenses that will not be reclassified to profit or loss 2,825 (150)
Income and expenses that will be reclassified to profit or loss when specific conditions are met:
Exchange differences on translating foreign operations 3 (5,600) 10,000
Losses on cash flow hedges 3 (1,200) (4,000)
Income tax relating to income and expenses that will be reclassified to profit or loss when specific conditions are met 4 1,700 (1,500)
Total income and expenses that will be reclassified to profit or loss when specific conditions are met (5,100) 4,500
Other comprehensive income, net of tax 4 (2,275) 4,350
TOTAL COMPREHENSIVE INCOME 29,825 28,775
Total comprehensive income attributable to:
Owners of the parent 23,420 23,680
Non-controlling interests 6,405 5,095
29,825 28,775
(a)

Share of other comprehensive income of associates and joint ventures means the share of associates’ and joint ventures’ other comprehensive income attributable to owners of the associates and joint ventures after tax and non-controlling interests in the associates and joint ventures.
Table 3. Statement of financial position XYZ Group—Statement of financial position as at 31 December 20X2
(in thousands of CU)
Assets 31 December20X2 31 December20X1
Non-current assets
Property, plant and equipment312,000295,600
Goodwill160,000164,500
Other intangible assets158,400146,500
Investments in associates and joint ventures 20,200 17,400
Total non-current assets650,600624,000
Current assets
Inventories55,50052,500
Trade receivables34,00032,000
Cash and cash equivalents23,40022,800
Other current assets4,6008,575
Total current assets117,500115,875
TOTAL ASSETS768,100739,875

 

(in thousands of CU)
Equity and liabilities 31 December20X2 31 December20X1
Equity attributable to owners of the parent
Share capital110,000100,000
Retained earnings139,720123,040
Other components of equity2,4804,740
Total equity attributable to owners of the parent252,200227,780
Non-controlling interests41,40034,995
Total equity293,600262,775
Non-current liabilities
Borrowings158,700147,200
Lease liabilities85,40097,500
Pension liabilities112,000108,000
Provisions38,00032,000
Deferred tax liabilities4,8008,600
Total non-current liabilities398,900393,300
Current liabilities
Borrowings25,00028,000
Lease liabilities14,00018,000
Payables for goods or services received and other payables21,80022,400
Provisions9,70010,600
Income taxes payable5,1004,800
Total current liabilities75,60083,800
Total liabilities474,500477,100
TOTAL EQUITY AND LIABILITIES768,100739,875
Table 4.
Statement of changes in equity
XYZ Group—Statement of changes in equity as at 31 December 20X2
(in thousands of CU)
Share capital Retained earnings Translation offoreign operations Defined benefit plans Share of other comprehensive incomeof associates and joint ventures Cash flow hedges Total equity attributableto owners of the parent Non-controlling interests Total equity
Balance at 1 January 20X1 100,000 108,100 (2,500) 2,600 (1,500) 2,000 208,700 29,800 238,500
Changes in accounting policy — 400 — — — — 400 100 500
Adjusted balance 100,000 108,500 (2,500) 2,600 (1,500) 2,000 209,100 29,900 239,000
Changes in equity for 20X1
Dividends—(5,000)————(5,000)—(5,000)
Profit or loss—19,540————19,5404,88524,425
Other comprehensive income(a) — — 6,000 (2,760) 3,300 (2,400) 4,140 210 4,350
Total comprehensive income — 19,540 6,000 (2,760) 3,300 (2,400) 23,680 5,095 28,775
Balance at 31 December 20X1 100,000 123,040 3,500 (160) 1,800 (400) 227,780 34,995 262,775
Changes in equity for 20X2
Issue of share capital10,000—————10,000—10,000
Dividends—(9,000)————(9,000)—(9,000)
Profit or loss—25,680————25,6806,42032,100
Other comprehensive income(a) — — (3,360) 4,020 (2,200) (720) (2,260) (15) (2,275)
Total comprehensive income — 25,680 (3,360) 4,020 (2,200) (720) 23,420 6,405 29,825
Balance at 31 December 20X2 110,000 139,720 140 3,860 (400) (1,120) 252,200 41,400 293,600
(a) The amounts included in translation of foreign operations, defined benefit plans, share of other comprehensive income of associates and joint ventures, and cash flow hedges represent other comprehensive income for each component, net of tax and non-controlling interests (where applicable).

Note 1—Specified expenses by nature

This table shows the totals of depreciation, amortisation, employee benefits, impairment losses and write-down of inventories and the amounts related to each line item in the operating category of XYZ Group’s statement of profit or loss.

(in thousands of CU)
20X2 20X1
Depreciation
Cost of sales23,71021,990
Research and development expenses2,5152,590
General and administrative expenses4,9754,750
Total depreciation31,20029,330
Amortisation
Research and development expenses13,84012,690
Total amortisation13,84012,690
Employee benefits
Cost of sales61,64057,175
Selling expenses7,5157,110
Research and development expenses6,5456,750
General and administrative expenses8,9205,825
Total employee benefits84,62076,860
Impairment losses(a)
Research and development expenses1,6001,500
Goodwill impairment loss4,500—
Total impairment losses6,1001,500
Write-down of inventories(a)
Cost of sales2,7752,625
Total write-down of inventories2,7752,625
(a)The amounts disclosed represent the total of impairment losses and reversals of impairment losses and the total of write-down of inventories and reversals of write-down of inventories.

The amounts disclosed are those the entity recognised as expenses in the statement of profit or loss for the year, except for depreciation and employee benefits.

The amounts disclosed for depreciation are the charge for the year, calculated in accordance with IAS 16 Property, Plant and Equipment. The amounts include amounts that have been capitalised by including them in the carrying amount of inventory at the end of the reporting period.

The amounts disclosed for employee benefits are the costs incurred for the year, including pension costs, for employee services, calculated in accordance with IAS 19 Employee Benefits. The amounts include amounts that have been capitalised by including them in the carrying amount of inventory at the end of the reporting period.

Note 2—Management-defined performance measures

IE8

This example illustrates XYZ Group’s disclosures for its management-defined performance measures. For the purpose of this example XYZ Group has:

(a)

disclosed a statement saying adjusted operating profit and adjusted profit from continuing operations provide management’s view of XYZ Group’s operating profit and profit from continuing operations and are not necessarily comparable with measures sharing similar labels or descriptions provided by other entities (see paragraph 122 of IFRS 18).

(b)

labelled and described each of its management-defined performance measures in a clear and understandable manner by explaining that it has adjusted operating profit and profit from continuing operations for non-recurring items of income or expense that it does not expect to arise for several future annual reporting periods (see paragraphs 123 and B134⁠–⁠B135 of IFRS 18).

(c)

included a description of the aspect of financial performance each management-defined performance measure communicates. The entity explained that, in management’s view, adjusted operating profit and adjusted profit from continuing operations provide useful information about XYZ Group’s financial performance because they provide information that is helpful in understanding trends in underlying profitability (see paragraphs 123(a), B137(b) and B138⁠–⁠B139 of IFRS 18).

(d)

explained how it calculated adjusted operating profit and adjusted profit from continuing operations by explaining the specific adjusting items (see paragraphs 123(b), B137(b) and B138⁠–⁠B139 of IFRS 18). The entity has cross-referred its adjusting items to related notes in its financial statements and provided a detailed explanation of restructuring expenses in its note on management-defined performance measures (see paragraph 123(a) of IFRS 18).

(e)

provided a reconciliation between operating profit and adjusted operating profit, and between profit from continuing operations and adjusted profit from continuing operations—that is, reconciliations to the most directly comparable subtotals presented in XYZ Group’s statement of profit or loss (see paragraphs 123(c) and B136⁠–⁠B140 of IFRS 18).

(f)

included for each of its adjusting items the income tax effect, the effect on non-controlling interests and the amount(s) related to each line item in XYZ Group’s statement of profit or loss (see paragraphs 123(d) and B141 of IFRS 18).

(g)

included a description of how it determined the income tax effects (see paragraph 123(e) of IFRS 18).

XYZ Group’s management-defined performance measures

XYZ Group uses the management-defined performance measures adjusted operating profit and adjusted profit from continuing operations in its public communications. These measures are not specified by IFRS Accounting Standards and therefore might not be comparable to apparently similar measures used by other entities.

To provide management’s view of XYZ Group’s financial performance, operating profit and profit from continuing operations have been adjusted for items of income or expense that XYZ Group does not expect to arise for several future annual reporting periods. XYZ Group’s management believes adjusting operating profit and profit from continuing operations for such items provides information that is helpful in understanding trends in XYZ Group’s underlying profitability.

XYZ Group generally adjusts for these items of income or expense:

  • impairment losses (or reversals thereof) of property, plant and equipment (including right-of-use assets) and intangible assets (for information related to impairments refer to Note X Property, plant and equipment, Note X Intangible assets and Note X Research and development expenses);

  • restructuring expenses (for information related to restructuring expenses refer to Note X Employee benefits and Note X General and administrative expenses);

  • non-recurring litigation expenses (for information related to litigation expenses refer to Note X Provisions and Note X General and administrative expenses);

  • gains or losses on disposal of property, plant and equipment and of intangible assets (for information related to disposal of property, plant and equipment and intangible assets refer to Note X Property, plant and equipment, Note X Intangible assets and Note X Other operating income); and

  • gains or losses on disposal of subsidiaries, associates and joint ventures.

XYZ Group assesses non-recurrence of litigation expenses on a case-by-case basis. XYZ Group generally categorises litigation expenses arising from intellectual property disputes, regulatory violations and employee claims as ‘non-recurring’. This classification is based on XYZ Group’s proactive approach of having in place measures designed to prevent such events from occurring.

Management-defined performance measures 20X2 (in thousands of CU)
Adjusting items
IFRS Impairmentlosses Restructuring expenses Gains on disposalof property, plant and equipment Management-defined performance measure
Other operating income —— (1,800)
Research and development expenses 1,600 ——
General and administrative expenses — 3,800 —
Goodwill impairment loss 4,500 ——
Operating profit /Adjusted operating profit 57,000 6,100 3,800 (1,800) 65,100
Income tax expense — (589) 297
Profit from continuing operations /Adjusted profit from continuing operations 32,100 6,100 3,211 (1,503) 39,908
Profit attributable to non-controlling interests 305 161 —
Impairment losses Impairment losses incurred in 20X2 did not yield any tax benefits because they were not eligible for tax deductions in Country A and Country B.
Restructuringexpenses The restructuring expenses in 20X2 are related to XYZ Group’s restructuring programme ‘Apollo 20X2’. These expenses include redundancy expenses, employee retraining expenses and relocation expenses, all related to the closure of several factories in Country C. The tax effect of these restructuring expenses is calculated based on the statutory tax rate applicable in Country C at the end of 20X2, which was 15.5%.
Gains on disposal of property, plant and equipment The tax effect of gains on disposal of property, plant and equipment is calculated based on the statutory tax rate applicable in Country D at the end of 20X2, which was 16.5%.
Management-defined performance measures 20X1 (in thousands of CU)
Adjusting items
IFRS Impairmentlosses Litigation expenses Gains on disposal of associates andjoint ventures Management-defined performance measure
Research and development expenses 1,500 ——
General and administrative expenses — 3,500 —
Operating profit /Adjusted operating profit 51,800 1,500 3,500 — 56,800
Share of profit and gains on disposal of associates and joint ventures —— (2,200)
Income tax expense —— 319
Profit from continuing operations /Adjusted profit from continuing operations 29,925 1,500 3,500 (1,881) 33,044
Profit attributable to non-controlling interests 75 ——
Impairment losses Impairment losses incurred in 20X1 did not yield any tax benefits because they were not eligible for tax deductions in Country E.
Litigation expenses Litigation expenses incurred in 20X1 did not yield any tax benefits because they were not eligible for tax deductions in Country F.
Gains on disposal of associates and joint ventures The tax effect of gains on disposal of associates and joint ventures is calculated based on the statutory tax rate applicable in Country G, at the end of 20X1, which was 14.5%.

Note 3—Analysis of reclassification adjustments

This table shows the reclassification adjustments of the components of other comprehensive income that will be reclassified to profit or loss when specific conditions are met.

(in thousands of CU)
20X2 20X1
Income and expenses that will be reclassified to profit or loss when specific conditions are met
Exchange differences on translating foreign operations (5,600) 10,000
Losses on cash flow hedges:
Losses arising during the year(5,200)(4,000)
Minus: reclassification adjustments for losses included in profit or loss4,000 (1,200) —(4,000)

Note 4—Analysis of tax effects relating to each component of other comprehensive income

(in thousands of CU)
20X2 20X1
Amount before tax Tax (expense) benefit Amount net of tax Amount before tax Tax (expense) benefit Amount net oftax
Income and expenses that will not be reclassified to profit or loss4,500(1,675)2,825(1,300)1,150(150)
Gains (losses) on remeasurements of defined benefit plans6,700(1,675)5,025(4,600)1,150(3,450)
Share of other comprehensive income of associates and joint ventures(2,200)—(2,200)3,300—3,300
Income and expenses that will be reclassified to profit or loss when specific conditions are met(6,800)1,700(5,100)6,000(1,500)4,500
Exchange differences on translating foreign operations(5,600)1,400(4,200)10,000(2,500)7,500
Losses on cash flow hedges (1,200) 300 (900) (4,000) 1,000 (3,000)
Other comprehensive income (2,300) 25 (2,275) 4,700 (350) 4,350

Part II—Additional examples of the statement of profit or loss

IE9

Part II provides additional examples of the statement of profit or loss for four entities:

(a)

Example II-1—Statement of profit or loss for an entity that is a manufacturer;

(b)

Example II-2—Statement of profit or loss for an entity that is a manufacturer that provides financing to customers as a main business activity;

(c)

Example II-3—Statement of profit or loss for an entity that is an insurer that invests in financial assets as a main business activity; and

(d)

Example II-4—Statement of profit or loss for an entity that is an investment and retail bank that invests in financial assets as a main business activity and provides financing to customers as a main business activity.

For simplicity, the examples in this part do not show profit attributable to owners of the parent, profit attributable to non-controlling interests, and earnings per share (basic and diluted).

Example II-1—Statement of profit or loss for an entity that is a manufacturer

IE10

This example illustrates AA Group’s statement of profit or loss. For the purpose of this example:

(a)

AA Group is a manufacturer that does not invest in assets as a main business activity, nor provide financing to customers as a main business activity.

(b)

in accordance with paragraphs 78, B80⁠–⁠B82 and B85 of IFRS 18, AA Group has concluded that presenting in the operating category of the statement of profit or loss all expenses classified by nature provides the most useful structured summary of its expenses. AA Group reached that conclusion because its main drivers of profitability are costs for raw materials and employment.

Depreciation, amortisation and impairment loss (reversal of impairment loss) recognised in profit or loss, operating Example MonetaryDuration, Debit 330000
Interest expenses on pension liabilities, financing Example MonetaryDuration, Debit 800200

AA Group—Statement of profit or loss for the year ended 31 December 20X2

(in thousands of CU)
20X2 20X1
Revenue398,700370,900
Changes in inventories of finished goods and work in progress3,000(3,700)
Raw materials used(146,000)(143,200)
Employee benefits(107,000)(104,600)
Depreciation, amortisation and impairment(37,500)(36,300)
Other operating expenses(17,100)(15,200)
Operating profit94,10067,900
Share of profit of associates and joint ventures3,8002,900
Profit before financing and income taxes97,90070,800
Interest expenses on borrowings and lease liabilities(3,500)(4,000)
Interest expenses on pension liabilities(6,500)(6,800)
Profit before income taxes87,90060,000
Income tax expense(21,800)(15,000)
PROFIT66,10045,000

Example II-2—Statement of profit or loss for an entity that is a manufacturer that provides financing to customers as a main business activity

IE11

This example illustrates BB Group’s statement of profit or loss. For the purpose of this example:

(a)

BB Group is a manufacturer that also provides financing to its customers as a main business activity (see paragraphs 49⁠–⁠51 and 65⁠–⁠66 of IFRS 18). BB Group does not invest in assets as a main business activity.

(b)

in accordance with paragraphs 78, B80⁠–⁠B82 and B85 of IFRS 18, BB Group has concluded that presenting in the operating category of the statement of profit or loss some expenses classified by function and other expenses classified by nature provides the most useful structured summary of its expenses.

(c)

BB Group’s accounting policy is to include:

(i)

in the financing category income and expenses from liabilities that arise from transactions that involve only the raising of finance that do not relate to the provision of financing to customers (see paragraph 65(a)(ii) of IFRS 18); and

(ii)

in the investing category income and expenses from cash and cash equivalents that do not relate to the provision of financing to customers (see paragraph 56(b)(ii) of IFRS 18).

Investment income, investing Example MonetaryDuration, Credit 330000

BB Group—Statement of profit or loss for the year ended 31 December 20X2

(in thousands of CU)
20X2 20X1
Revenue390,000365,000
Cost of sales (285,000) (270,000)
Gross profit from the sale of goods105,00095,000
Interest revenue related to providing financing to customers119,500121,000
Interest expenses related to providing financing to customers (110,000) (100,800)
Net interest income9,50020,200
Selling expenses(28,900)(26,300)
Research and development expenses(15,800)(15,400)
General and administrative expenses(22,900)(23,600)
Other operating expenses (4,500) (5,400)
Operating profit42,40044,500
Income from investments 5,500 4,000
Profit before financing and income taxes47,90048,500
Interest expenses on borrowings not related to providing financing to customers(3,800)(3,500)
Interest expenses on pension liabilities (3,600) (4,200)
Profit before income taxes40,50040,800
Income tax expense (10,125) (10,200)
PROFIT30,37530,600

Example II-3—Statement of profit or loss for an entity that is an insurer that invests in financial assets as a main business activity

IE12

This example illustrates CC Group’s statement of profit or loss. For the purpose of this example:

(a)

CC Group is an insurer that invests as a main business activity in financial assets that generate a return individually and largely independently of CC Group’s other resources (see paragraphs 49⁠–⁠51 and 55⁠–⁠58 of IFRS 18). CC Group does not provide financing to customers as a main business activity.

(b)

in accordance with paragraphs 78, B80⁠–⁠B82 and B85 of IFRS 18, CC Group has concluded that presenting in the operating category of the statement of profit or loss some expenses classified by nature and other expenses classified by function provides the most useful structured summary of its expenses.

CC Group—Statement of profit or loss for the year ended 31 December 20X2

(in thousands of CU)
20X2 20X1
Insurance revenue138,200133,800
Insurance service expenses (107,000) (106,000)
Insurance service result31,20027,800
Investment income117,000103,000
Credit impairment losses(5,000)(1,500)
Insurance finance expenses (85,900) (84,000)
Net financial result26,10017,500
Other operating expenses (3,100) (4,600)
Operating profit54,20040,700
Share of profit or loss of associates and joint ventures (5,400) 4,800
Profit before financing and income taxes48,80045,500
Interest expenses on borrowings and pension liabilities (2,500) (2,200)
Profit before income taxes46,30043,300
Income tax expense(10,200)(9,000)
PROFIT36,10034,300

Example II-4—Statement of profit or loss for an entity that is an investment and retail bank that invests in financial assets as a main business activity and provides financing to customers as a main business activity

IE13

This example illustrates DD Group’s statement of profit or loss. For the purpose of this example:

(a)

DD Group is an investment and retail bank that:

(i)

invests in financial assets that generate a return individually and largely independently of DD Group’s other resources as a main business activity (see paragraphs 49⁠–⁠51 and 55⁠–⁠58 of IFRS 18); and

(ii)

provides financing to customers as a main business activity (see paragraphs 49⁠–⁠51 and 65⁠–⁠66 of IFRS 18).

(b)

in accordance with paragraphs 78, B80⁠–⁠B82 and B85 of IFRS 18, DD Group has concluded that presenting in the operating category of the statement of profit or loss all expenses classified by nature provides the most useful structured summary of its expenses.

(c)

DD Group’s accounting policy is to classify in the operating category income and expenses from all liabilities that arise from transactions that involve only the raising of finance, including liabilities that do not relate to the provision of financing to customers (see paragraph 65(a)(ii) of IFRS 18). As a result, DD Group is not permitted to present the subtotal profit before financing and income taxes (see paragraph 73 of IFRS 18).

Fee and commission expense, operating Example MonetaryDuration, Debit 330000, 800200
Fee and commission income, operating Example MonetaryDuration, Credit 330000, 800200
Interest expense, operating Example MonetaryDuration, Debit 330000
Trading income (expense), operating Example MonetaryDuration, Credit 330000, 800200

DD Group—Statement of profit or loss for the year ended 31 December 20X2

(in thousands of CU)
20X2 20X1
Interest revenue356,000333,800
Interest expenses (281,000) (259,000)
Net interest income75,00074,800
Fee and commission income76,80074,300
Fee and commission expenses (45,300) (44,800)
Net fee and commission income31,50029,500
Net trading income9,100900
Net investment income11,6007,800
Credit impairment losses(17,300)(19,100)
Employee benefits(55,100)(49,500)
Depreciation and amortisation(6,700)(5,950)
Other operating expenses (5,100) (4,550)
Operating profit43,00033,900
Share of profit of associates and joint ventures1,8002,100
Interest expenses on pension and lease liabilities (2,200) (1,800)
Profit before income taxes42,60034,200
Income tax expense (11,200) (9,000)
PROFIT31,40025,200

Part III—Capital disclosures

Example III-1—An entity that is not a regulated financial institution

IE14

This example illustrates the application of paragraphs 126⁠–⁠128 of IFRS 18 by EE Group, an entity that is not a financial institution and is not subject to externally imposed capital requirements. In this simple example, EE Group monitors its capital using a debt-to-adjusted capital ratio. Another entity might use a different method to monitor its capital. EE Group decides, in the light of its circumstances, how much detail it provides to satisfy the requirements in paragraphs 126⁠–⁠128 of IFRS 18. In determining the form and content of the disclosure to satisfy those requirements, EE Group also considers the disclosure requirements set out in paragraphs 44A⁠–⁠44E of IAS 7.

IE15

EE Group manufactures and sells cars. EE Group includes a finance subsidiary that provides financing to customers, primarily in the form of leases.

EE Group’s capital disclosures

EE Group’s objectives in managing its capital are:

(1)

to safeguard the entity’s ability to continue as a going concern, so it can continue to provide returns for shareholders and benefits for other stakeholders; and

(2)

to provide an adequate return to shareholders by pricing its products and services commensurate with the amount of risk.

EE Group sets the amount of its capital in proportion to risk. EE Group manages its capital structure and makes adjustments, taking into consideration changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust its capital structure, EE Group might adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce its debt.

Consistent with other entities in the industry, EE Group monitors capital on the basis of its debt-to-adjusted capital ratio. This ratio is calculated as net debt divided by adjusted capital. Net debt is calculated as total debt (as shown in the statement of financial position) minus cash and cash equivalents. Adjusted capital comprises all components of equity (that is, share capital, share premium, non-controlling interests, retained earnings and revaluation surplus) other than amounts accumulated in equity relating to cash flow hedges, and includes some forms of subordinated debt.

During 20X2 EE Group’s strategy, which was unchanged from 20X1, was to maintain its debt-to-adjusted capital ratio at the lower end of the range 6:1 to 7:1 in order to secure access to finance at a reasonable cost by maintaining a BB credit rating. The debt-to-adjusted capital ratios at 31 December 20X2 and at 31 December 20X1 were:

(in thousands of CU)
31 December20X2 31 December20X1
Total debt1,0001,100
Minus: cash and cash equivalents (90) (150)
Net debt910950
Total equity110105
Plus: subordinated debt instruments3838
Minus: amounts accumulated in equity relating to cash flow hedges (10) (5)
Adjusted capital138138
Debt-to-adjusted capital ratio6.66.9

The decrease in EE Group’s debt-to-adjusted capital ratio during 20X2 resulted primarily from the reduction in net debt that occurred upon the sale of Subsidiary X. This reduction in net debt, together with improved profitability and lower levels of managed receivables, resulted in the dividend payment increasing to CU2.8 million for 20X2 (from CU2.5 million for 20X1).

Example III-2—An entity that has not complied with externally imposed capital requirements

IE16

This example illustrates the application of paragraph 127(e) of IFRS 18 if an entity has not complied with externally imposed capital requirements during the reporting period. The example does not illustrate other disclosures that would be provided to comply with the other requirements in paragraphs 126⁠–⁠128 of IFRS 18.

IE17

FF Group provides financing to its customers and is subject to capital requirements imposed by Regulator X. During the year ended 31 December 20X2 FF Group did not comply with the capital requirements imposed by Regulator X. In its financial statements for the year ended 31 December 20X2 FF Group provides disclosures relating to its non-compliance.

FF Group’s capital disclosures (application of paragraph 127(e) of IFRS 18)

FF Group filed its quarterly regulatory capital return for 30 September 20X2 on 20 October 20X2. At that date, FF Group’s regulatory capital was CU1.0 million below the capital requirement imposed by Regulator X. As a result, FF Group was required to submit a plan to Regulator X indicating how it would increase its regulatory capital to the amount required. FF Group submitted a plan that entailed selling part of its investment portfolio with a carrying amount of CU11.5 million in the fourth quarter of 20X2. In the fourth quarter of 20X2 FF Group sold its fixed interest investment portfolio for CU12.6 million and met its regulatory capital requirement.

IFRS 18 SUPPORTING MATERIALS

These figures accompany, but are not part of, IFRS 18. They depict aspects of IFRS 18 but are not intended to provide interpretative guidance.

  1. Figure 1—IFRS 18 on one page

  2. Figure 2—Classification of income and expenses in the statement of profit or loss for entities without specified main business activities

  3. Figure 3—Classification of specific income and expenses in the statement of profit or loss by entities with specified main business activities

    1. Figure 3.1—Classification of specific income and expenses by entities that invest in assets as a main business activity

    2. Figure 3.2—Classification of specific income and expenses by entities that provide financing to customers as a main business activity

    3. Figure 3.3—Classification of income and expenses from cash and cash equivalents by entities with specified main business activities

  4. Figure 4—Classification of income and expenses from hybrid contracts with host liabilities

  5. Figure 5—Classification of gains and losses on derivatives

  6. Figure 6—Identifying management-defined performance measures

  7. Figure 7—Determining informative labels and information for aggregated items

  8. Figure 8—Useful structured summary and the materiality process

Figure 1—IFRS 18 on one page

Figure 2—Classification of income and expenses in the statement of profit or loss for entities without specified main business activities

Figure 2 summarises the requirements as set out in paragraphs 47⁠–⁠68 and B42⁠–⁠B76 of IFRS 18 for the classification of income and expenses into categories in the statement of profit or loss for entities without specified main business activities.

Figure 3—Classification of specific income and expenses in the statement of profit or loss by entities with specified main business activities

Figures 3.1⁠–⁠3.3 depict aspects of the requirements for entities that invest in assets or provide financing to customers as a main business activity as set out in paragraphs 55⁠–⁠58 and 65⁠–⁠66 of IFRS 18. Such entities classify some income and expenses in the operating category that entities without specified main business activities are required to classify in the investing or financing category.

Figure 3.1—Classification of specific income and expenses by entities that invest in assets as a main business activity

Figure 3.2—Classification of specific income and expenses by entities that provide financing to customers as a main business activity

Figure 3.3—Classification of income and expenses from cash and cash equivalents by entities with specified main business activities

Figure 4—Classification of income and expenses from hybrid contracts with host liabilities

Figure 5—Classification of gains and losses on derivatives

Figure 6—Identifying management-defined performance measures

Figure 6 depicts the requirements for identifying management-defined performance measures (MPMs) as set out in paragraphs 117⁠–⁠120 of IFRS 18.

Figure 7—Determining informative labels and information for aggregated items

Figure 8—Useful structured summary and the materiality process

Appendices

AppendixAmendments to guidance on other IFRS Accounting Standards and to IFRS Practice Statement 2 Making Materiality Judgements

This appendix sets out the amendments to the Illustrative Examples for other IFRS Standards that are a consequence of the International Accounting Standards Board issuing IFRS 18 Presentation and Disclosure in Financial Statements.

* * * * *

The amendments contained in this appendix when this Standard was issued in 2024 have been incorporated into the guidance on the relevant Standards included in this volume.