IFRS 18

PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

OBJECTIVE

SCOPE

GENERAL REQUIREMENTS FOR FINANCIAL STATEMENTS

Objective of financial statements

A complete set of financial statements

The roles of the primary financial statements and the notes

Identification of the financial statements

Frequency of reporting

Consistency of presentation, disclosure and classification

Comparative information

AGGREGATION AND DISAGGREGATION

Principles of aggregation and disaggregation

Offsetting

STATEMENT OF PROFIT OR LOSS

Categories in the statement of profit or loss

Totals and subtotals to be presented in the statement of profit or loss

Items to be presented in the statement of profit or loss or disclosed in the notes

STATEMENT PRESENTING COMPREHENSIVE INCOME

Other comprehensive income

STATEMENT OF FINANCIAL POSITION

Classification of assets and liabilities as current or non-current

Items to be presented in the statement of financial position or disclosed in the notes

103

STATEMENT OF CHANGES IN EQUITY

107

Information to be presented in the statement of changes in equity

107

Information to be presented in the statement of changes in equity or disclosed in the notes

109

NOTES

113

Structure

113

Management-defined performance measures

117

Capital

126

Other disclosures

130

APPENDICES

A Defined terms

B Application guidance

C Effective date and transition

D Amendments to other IFRS Accounting Standards

APPROVAL BY THE INTERNATIONAL ACCOUNTING STANDARDS BOARD OF

PRESENTATION AND DISCLOSURE IN FINANCIAL STATEMENTS

FOR THE ACCOMPANYING GUIDANCE LISTED BELOW, SEE PART B OF THIS EDITION

ILLUSTRATIVE EXAMPLES

FOR THE BASIS FOR CONCLUSIONS, SEE PART C OF THIS EDITION

BASIS FOR CONCLUSIONS

Presentation and Disclosure in Financial Statements

is set out in

paragraphs 1–132

and

appendices A–D

. All the paragraphs have equal authority. Paragraphs in

bold type

state the main principles. Terms defined in

Appendix A

are in

italics

the first time that they appear in the Standard. Definitions of other terms are given in the Glossary. The Standard should be read in the context of its objective and the

Basis for Conclusions

, the

Preface to IFRS Accounting Standards

and the

Conceptual Framework for Financial Reporting

Basis of Preparation of Financial Statements

provides a basis for selecting and applying accounting policies in the absence of explicit guidance.

[

Refer:

paragraphs 10–12

]

International Financial Reporting Standard 18

Presentation and Disclosure in Financial Statements

Objective

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.

[

Refer:

Conceptual Framework

paragraphs 2.5-2.22

]

Scope

An entity shall apply this Standard in presenting and disclosing information in financial statements prepared in accordance with

IFRS Accounting Standards

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

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.

Other

IFRS Accounting Standards

set out the recognition, measurement, presentation and disclosure requirements for specific transactions and other events.

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.

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.

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.

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

[

Note:

IFRS

Practice Statement 1

Management Commentary

provides a broad, non‑binding framework for the presentation of management commentary that relates to financial statements that have been prepared in accordance with IFRS Accounting Standards.]

General requirements for financial statements

Objective of financial statements

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.

[

Refer:

Conceptual Framework

paragraph 3.2

]

A complete set of financial statements

A complete set of financial statements comprises:

(a)

a statement (or statements) of financial performance for the reporting period (see

paragraph 12

);

[

Refer:

paragraphs 46–95

and

B29–B89

]

(b)

a statement of financial position as at the end of the reporting period;

[

Refer:

paragraphs 96–106

and

B90–B111

]

(c)

a statement of changes in equity for the reporting period;

[

Refer:

paragraphs 107–112

]

(d)

a statement of cash flows for the reporting period;

[

Refer:

paragraph 3

]

(e)

notes

for the reporting period;

[

Refer:

paragraphs 113–132

and

B112–B142

]

(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

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’.

[

Refer:

Basis for Conclusions

paragraphs BCZ19–BCZ24

]

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.

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.

An entity shall present each of the

primary financial statements

with equal prominence in a complete set of financial statements.

[

Refer:

Basis for Conclusions

paragraph BCZ25

]

The roles of the primary financial statements and the notes

[

Refer:

paragraphs B6–B9

Basis for Conclusions paragraphs BC45–BC63

]

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

[

Note:

IFRS

Practice Statement 2

Making Materiality Judgements

(Practice Statement) provides reporting entities with guidance on making materiality judgements when preparing general purpose financial statements in accordance with IFRS Accounting Standards. The Practice Statement is non-mandatory guidance developed by the International Accounting Standards Board. It is not a Standard. Therefore, its application is not required to state compliance with IFRS Accounting Standards]

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

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

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.

Information presented in the primary financial statements or disclosed in the notes

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.

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.

Information presented in the primary financial statements

[

Refer:

Supporting materials

Figure 8—Useful structured summary and the materiality process

]

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

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

and

;

(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

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

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

[

Refer:

paragraphs B10–B11

]

An entity shall clearly identify the financial statements and distinguish them from other information in the same published document (see

paragraph B10

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.

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

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

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.

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

[

Refer:

paragraphs B12

Basis for Conclusions paragraphs BCZ322

]

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

Basis of Preparation of Financial Statements

(see

paragraph B12

);

[

Refer:

IAS 8 paragraphs 7–13

]

(b)

an IFRS Accounting Standard requires a change in presentation, disclosure or classification.

Comparative information

[

Refer:

paragraphs B13–B15

Basis for Conclusions paragraphs BCZ64–BCZ70

]

Except when

IFRS Accounting Standards

permit or require otherwise,

[

Refer:

for example,

IFRS 1 paragraph 21

]

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

[IFRIC

Update

, June 2005, Agenda Decision, ‘IAS 1 Comparatives for prospectuses’

The IFRIC considered whether to amend requirements in paragraph 36 of IAS 1 [now paragraph 31 of

Presentation and Disclosure in Financial Statements

] relating to comparative information, because of perceived practical problems in complying with EU requirements for prospectuses.

The IFRIC decided not to add the item to its agenda because it believed that the issue involved a difference of approach between IAS 1 [now IFRS 18] and certain regulatory requirements that were not capable of being resolved merely by issuing an interpretation of IAS 1.]

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

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.

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.

[

Refer:

IAS 8 paragraph 5 (definition of

impracticable

)

]

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.

sets out the adjustments to comparative information required when an entity changes an accounting policy

[

Refer:

IAS 8 paragraphs 14–31

and

50–53

]

or corrects an error

[

Refer:

IAS 8 paragraphs 41–53

]

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.

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.

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

. However, it need not provide the related

notes

to the statement of financial position as at the beginning of the preceding period.

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

[

Refer:

paragraphs B16–B26

Basis for Conclusions paragraphs BC71–BC80

]

For the purposes of this Standard, an item is an asset, liability, equity instrument or reserve, income, expense or cash flow or any

aggregation

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

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.

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

[

Refer:

paragraphs B27–B28

]

An entity shall not offset assets and liabilities or income and expenses, unless required

[

Refer:

for example,

IAS 32 paragraph 42

]

or permitted by an IFRS Accounting Standard (see

paragraphs B27–B28

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

[

Refer:

Illustrative Examples Part I, Statement of profit or loss

and

Part II, Example II-1–II-4

]

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

[

Refer:

paragraph B29

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

Basis for Conclusions paragraphs BC81–BC87

]

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

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

[

Refer:

paragraphs B30–B41

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

Basis for Conclusions paragraphs BC94–BC102

]

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.

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.

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.

[

Refer:

IAS 8 paragraph 5 (definition of

impracticables

)

]

The operating category

[

Refer:

paragraph B42

Basis for Conclusions paragraphs

BC88–BC93

and

BC407–BC413

]

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;

[

Refer:

paragraphs 53–58

and

B43–B49

]

(b)

the financing category;

[

Refer:

paragraphs 59–66

and

B50–B59

]

(c)

the income taxes category;

[

Refer:

paragraph 67

]

(d)

the discontinued operations category.

[

Refer:

paragraph 68

]

The investing category

[

Refer:

paragraphs B43–B49

Basis for Conclusions paragraphs BC103–BC147

]

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

[

Refer:

IAS 7 paragraph 6 (definition of

cashcash

and

cash equivalentscash equivalents

)

]

(c)

other assets if they generate a return individually and largely independently of the entity’s other resources (see

paragraphs B45–B49

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

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)).

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)

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.

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

[

Refer:

paragraphs B50–B59

Basis for Conclusions paragraphs BC148–BC199

]

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

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.

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.

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.

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.

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

Financial Instruments

(see

paragraph B58

); and

(b)

insurance finance income and expenses included in the statement of profit or loss applying

Insurance Contracts

Entities with specified main business activities

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.

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

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

Income Taxes

, and any related foreign exchange differences (see

paragraphs B65–B68

The discontinued operations category

An entity shall classify in the discontinued operations category income and expenses from discontinued operations as required by

Non-current Assets Held for Sale and Discontinued Operations

Totals and subtotals to be presented in the statement of profit or loss

[

Refer:

Basis for Conclusions paragraphs BC88–BC93

BC148–BC152

, and

BC189–BC191

]

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

Operating profit or loss

comprises all income and expenses classified in the operating category.

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.

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

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.

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

[

Refer:

paragraphs B77–B85

Basis for Conclusions paragraphs BC236–BC245

]

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

);

(b)

amounts required by

, namely:

(i)

interest revenue calculated using the effective interest method;

E3,

(ii)

impairment losses (including reversals of impairment losses or impairment gains) determined in accordance with

Section 5.5 of

;

(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

, namely:

(i)

insurance revenue;

(ii)

insurance service expenses from contracts issued within the scope of

;

(iii)

income or expenses from reinsurance contracts held;

(iv)

insurance finance income or expenses from contracts issued within the scope of

; and

(v)

finance income or expenses from reinsurance contracts held.

[IFRIC®

Update

, July 2012, Agenda Decision, ‘

Presentation of Financial Statements

and

Income Taxes

—Presentation of payments on non-income taxes’

The IFRS Interpretations Committee received a request seeking clarification of whether production-based royalty payments payable to one taxation authority that are claimed as an allowance against taxable profit for the computation of income tax payable to another taxation authority should be presented as an operating expense or a tax expense in the statement of comprehensive income.

As the basis for this request, the submitter assumed that the production-based royalty payments are, in themselves, outside the scope of

Income Taxes

while the income tax payable to the other taxation authority is within the scope of IAS 12. On the basis of this assumption, the submitter asks the Committee to clarify whether the production-based royalty payments can be viewed as prepayment of the income tax payable. The Committee used the same assumption when discussing the issue.

[The Committee observed that the line item of ‘tax expense’ that is required by paragraph 82(d) of IAS 1

Presentation of Financial Statements

is intended to require an entity to present taxes that meet the definition of income taxes under IAS 12. The Committee also noted that it is the basis of calculation determined by the relevant tax rules that determines whether a tax meets the definition of an income tax. Neither the manner of settlement of a tax liability nor the factors relating to recipients of the tax is a determinant of whether an item meets that definition.] [The requirements in IAS 1 referred to in this paragraph are not all brought forward unchanged to IFRS 18

Presentation and Disclosure in Financial Statements

. The Committee’s conclusion regarding the application of the requirements in IAS 1 might not apply to the requirements in IFRS 18.]

The Committee further noted that the production-based royalty payments should not be treated differently from other expenses that are outside the scope of IAS 12, all of which may reduce income tax payable. Accordingly, the Committee observed that it is inappropriate to consider the royalty payments to be prepayment of the income tax payables. Because the production-based royalties are not income taxes, the royalty payments should not be presented as an income tax expense in the statement of comprehensive income.

The Committee considered that, in the light of its analysis of the existing requirements of IAS 1 [now IFRS 18] and IAS 12, an interpretation was not necessary and consequently decided not to add this issue to its agenda.]

[IFRIC®

Update

, March 2018, Agenda Decision, ‘Presentation of interest revenue for particular financial instruments (

Financial Instruments

and

Presentation of Financial Statements

)’

The Committee received a request about the effect of the consequential amendment that IFRS 9 made to paragraph 82(a) of IAS 1 [now paragraph 75(b)(i) of

Presentation and Disclosure in Financial Statements

]. That consequential amendment requires an entity to present separately, in the profit or loss section of the statement of comprehensive income or in the statement of profit or loss, interest revenue calculated using the effective interest method. The request asked whether that requirement affects the presentation of fair value gains and losses on derivative instruments that are not part of a designated and effective hedging relationship (applying the hedge accounting requirements in IFRS 9 or

IAS 39

Financial Instruments: Recognition and Measurement

Appendix A to IFRS 9 defines the term ‘effective interest method’ and other related terms. Those interrelated terms pertain to the requirements in IFRS 9 for amortised cost measurement and the expected credit loss impairment model. In relation to financial assets, the Committee observed that the effective interest method is a measurement technique whose purpose is to calculate amortised cost and allocate interest revenue over the relevant time period. The Committee also observed that the expected credit loss impairment model in IFRS 9 is part of, and interlinked with, amortised cost accounting.

The Committee noted that amortised cost accounting, including interest revenue calculated using the effective interest method and credit losses calculated using the expected credit loss impairment model, is applied only to financial assets that are subsequently measured at amortised cost or fair value through other comprehensive income. In contrast, amortised cost accounting is not applied to financial assets that are subsequently measured at fair value through profit or loss.

Consequently, the Committee concluded that the requirement in paragraph 82(a) of IAS 1 [now paragraph 75(b)(i) of IFRS 18] to present separately an interest revenue line item calculated using the effective interest method applies only to those assets that are subsequently measured at amortised cost or fair value through other comprehensive income (subject to any effect of a qualifying hedging relationship applying the hedge accounting requirements in IFRS 9 or IAS 39).

The Committee did not consider any other presentation requirements in IAS 1 [now IFRS 18] or broader matters related to the presentation of other ‘interest’ amounts in the statement of comprehensive income. This is because the consequential amendment that IFRS 9 made to paragraph 82(a) of IAS 1 [now paragraph 75(b)(i) of IFRS 18] did not affect those matters. More specifically, the Committee did not consider whether an entity could present other interest amounts in the statement of comprehensive income, in addition to presenting the interest revenue line item required by paragraph 82(a) of IAS 1 [now paragraph 75(b)(i) of IFRS 18].

The Committee concluded that the principles and requirements in IFRS Standards provide an adequate basis for an entity to apply paragraph 82(a) of IAS 1 [now paragraph 75(b)(i) of IFRS 18] and present separately, in the profit or loss section of the statement of comprehensive income or in the statement of profit or loss, interest revenue calculated using the effective interest method. Consequently, the Committee decided not to add this matter to its standard-setting agenda.]

[IFRIC®

Update

, January 2015, Agenda Decision, ‘

IAS 39

Financial Instruments: Recognition and Measurement

and

Presentation of Financial Statements

—Income and expenses arising on financial instruments with a negative yield—presentation in the statement of comprehensive income’

The Interpretations Committee discussed the ramifications of the economic phenomenon of negative effective interest rates for the presentation of income and expenses in the statement of comprehensive income.

The Interpretations Committee noted that interest resulting from a negative effective interest rate on a financial asset does not meet the definition of interest revenue in IAS 18 Revenue [IAS 18 has been withdrawn. Paragraph 4.2 of the

Conceptual Framework for Financial Reporting

contains a definition of income], because it reflects a gross outflow, instead of a gross inflow, of economic benefits. Consequently, the expense arising on a financial asset because of a negative effective interest rate should not be presented as interest revenue, but in an appropriate expense classification.

The Interpretations Committee noted that in accordance with paragraphs 85 and 112(c) of IAS 1

Presentation of Financial Statements

[now paragraph 113(c) of IFRS 18

Presentation and Disclosure in Financial Statements

], the entity is required to present additional information about such an amount if that is relevant to an understanding of the entity’s financial performance or to an understanding of this item.

The Interpretations Committee considered that in the light of the existing IFRS requirements an interpretation was not necessary and consequently decided not to add the issue to its agenda.]

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

[

Refer:

IFRS 10 Appendix A (definition of

non‑controlling interestnon-controlling interest

)

]

(b)

owners

of the parent.

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

[

Refer:

paragraphs B80–B85

Basis for Conclusions paragraphs BC246–BC276

]

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.

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

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.

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).

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

Inventories

(b)

disclose a qualitative description of the nature of expenses included in each function line item.

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

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

Intangible Assets

;

(iii)

employee benefits, comprising the amount for employee benefits recognised by an entity applying

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

; 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.

[

Refer:

Illustrative Examples Part I, Note 1—Specified expenses by nature

]

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.

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

[

Refer:

Illustrative Examples Part I, Statement presenting comprehensive income

]

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.

An entity shall present an allocation of comprehensive income for the reporting period attributable to:

(a)

non-controlling interests; and

[

Refer:

IFRS 10 Appendix A (definition of

non‑controlling interestnon-controlling interest

)

]

(b)

owners

of the parent.

[

Refer:

Basis for Conclusions paragraph BCZ244

]

Other comprehensive income

[

Refer:

paragraphs B86–B89

Basis for Conclusions paragraphs BCZ277–BCZ284

]

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.

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.

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

[

Refer:

Illustrative Examples Part I, Note 3—Analysis of reclassification adjustments

]

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.

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.

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

[

Refer:

Illustrative Examples Part I, Note 4—Analysis of tax effects relating to each component of other comprehensive income

]

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.

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

[

Refer:

Illustrative Examples Part I, Statement of financial position

]

Classification of assets and liabilities as current or non-current

[

Refer:

paragraphs B90–B93

]

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

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.

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

[

Refer:

paragraphs B94–B95

Basis for Conclusions paragraph BCZ288

]

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

), unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

[IFRIC®

Update

, June 2005, Agenda Decision, ‘IAS 1 Normal operating cycle’

The IFRIC considered an issue regarding the classification of current and non–current assets by reference to an entity's normal operating cycle. It was asked whether the guidance in paragraph 57(a) of IAS 1 [now paragraph 99(a) of

Presentation and Disclosure in Financial Statements

] was applicable only if an entity had a predominant operating cycle. This is particularly relevant to the inventories of conglomerates which, on a narrow reading of the wording, might always have to refer to the twelve–month criterion in paragraph 57(c) of IAS 1 [now paragraph 99(c) of IFRS 18], rather than the operating cycle criterion.

The IFRIC decided not to consider the question further because, in its view, it was clear that the wording should be read in both the singular and the plural and that it was the nature of inventories in relation to the operating cycle that was relevant to classification. [Furthermore, if inventories of different cycles were held, and it was material to readers' understanding of an entity's financial position, then the general requirement in paragraph 71 (now paragraph 57) of IAS 1 already required disclosure of further information.] [The requirements in IAS 1 referred to in this paragraph are not all brought forward unchanged to IFRS 18. The Committee’s conclusion regarding the application of the requirements in IAS 1 might not apply to the requirements in IFRS 18.]

[IFRIC®

Update

, March 2022, Agenda Decision,

Statement of Cash Flows

—Demand Deposits with Restrictions on Use arising from a Contract with a Third Party’

The Committee received a request about whether an entity includes a demand deposit as a component of cash and cash equivalents in its statements of cash flows and financial position when the demand deposit is subject to contractual restrictions on use agreed with a third party.

...

The Committee concluded that the principles and requirements in IFRS Accounting Standards provide an adequate basis for an entity to determine whether to include demand deposits subject to contractual restrictions on use agreed with a third party as a component of cash and cash equivalents in its statements of cash flows and financial position. Consequently, the Committee decided not to add a standard-setting project to the work plan.

[The full text of the Agenda Decision is reproduced after paragraph 6 of IAS 7.]]

100

An entity shall classify all assets other than those specified in

paragraph 99

as non-current.

Current liabilities

[

Refer:

paragraphs B96–B108

Basis for Conclusions paragraphs BCZ285–BCZ312

]

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

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

[

Refer:

paragraphs B109–B111

Basis for Conclusions paragraphs BC313–BC315

]

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

that are assets, disaggregated as required by

paragraph 78 of

;

(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

;

(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

that are liabilities, disaggregated as required by paragraph 78 of

;

(q)

liabilities and assets for current tax, as defined in

;

(r)

deferred tax liabilities and deferred tax assets, as defined in

; and

(s)

liabilities included in disposal groups classified as held for sale in accordance with

[IFRIC®

Update

, December 2020, Agenda Decision, ‘Supply Chain Financing Arrangements—Reverse Factoring’

The Committee received a request about reverse factoring arrangements. Specifically, the request asked:

how an entity presents liabilities to pay for goods or services received when the related invoices are part of a reverse factoring arrangement; and

what information about reverse factoring arrangements an entity is required to disclose in its financial statements.

In a reverse factoring arrangement, a financial institution agrees to pay amounts an entity owes to the entity’s suppliers and the entity agrees to pay the financial institution at the same date as, or a date later than, suppliers are paid.

Presentation in the statement of financial position

Presentation of Financial Statements

[now

Presentation and Disclosure in Financial Statements

] specifies how an entity is required to present its liabilities in the statement of financial position.

[Paragraph 54 of IAS 1 requires an entity to present ‘trade and other payables’ separately from other financial liabilities. ‘Trade and other payables’ are sufficiently different in nature or function from other financial liabilities to warrant separate presentation (paragraph 57 of IAS 1). Paragraph 55 of IAS 1 requires an entity to present additional line items (including by disaggregating the line items listed in paragraph 54) when such presentation is relevant to an understanding of the entity’s financial position. Consequently, an entity is required to determine whether to present liabilities that are part of a reverse factoring arrangement:

within trade and other payables;

within other financial liabilities; or

as a line item separate from other items in its statement of financial position.

Paragraph 11(a) of IAS 37

Provisions, Contingent Liabilities and Contingent Assets

states that ‘trade payables are liabilities to pay for goods or services that have been received or supplied and have been invoiced or formally agreed with the supplier’. Paragraph 70 of IAS 1 explains that ‘some current liabilities, such as trade payables… are part of the working capital used in the entity’s normal operating cycle’. The Committee therefore concluded that an entity presents a financial liability as a trade payable only when it:

represents a liability to pay for goods or services;

is invoiced or formally agreed with the supplier; and

is part of the working capital used in the entity’s normal operating cycle.

Paragraph 29 of IAS 1 requires an entity to ‘present separately items of a dissimilar nature or function unless they are immaterial’. Paragraph 57 specifies that line items are included in the statement of financial position when the size, nature or function of an item (or aggregation of similar items) is such that separate presentation is relevant to an understanding of the entity’s financial position. Accordingly, the Committee concluded that, applying IAS 1, an entity presents liabilities that are part of a reverse factoring arrangement:

as part of ‘trade and other payables’ only when those liabilities have a similar nature and function to trade payables—for example, when those liabilities are part of the working capital used in the entity’s normal operating cycle.

separately when the size, nature or function of those liabilities makes separate presentation relevant to an understanding of the entity’s financial position. In assessing whether it is required to present such liabilities separately (including whether to disaggregate trade and other payables), an entity considers the amounts, nature and timing of those liabilities (paragraphs 55 and 58 of IAS 1).

The Committee observed that an entity assessing whether to present liabilities that are part of a reverse factoring arrangement separately might consider factors including, for example:

whether additional security is provided as part of the arrangement that would not be provided without the arrangement.

the extent to which the terms of liabilities that are part of the arrangement differ from the terms of the entity’s trade payables that are not part of the arrangement.] [The requirements in IAS 1 referred to in these paragraphs are not all brought forward unchanged to IFRS 18. The Committee’s conclusion regarding the application of the requirements in IAS 1 might not apply to the requirements in IFRS 18.]

Derecognition of a financial liability

An entity assesses whether and when to derecognise a liability that is (or becomes) part of a reverse factoring arrangement applying the derecognition requirements in

Financial Instruments

An entity that derecognises a trade payable to a supplier and recognises a new financial liability to a financial institution applies IAS 1 [now IFRS 18] in determining how to present that new liability in its statement of financial position (see ‘Presentation in the statement of financial position’).

...

Notes to the financial statements

...

An entity applies judgement in determining whether to provide additional disclosures in the notes about the effect of reverse factoring arrangements on its financial position, financial performance and cash flows. The Committee observed that:

assessing how to present liabilities and cash flows related to reverse factoring arrangements may involve judgement. An entity discloses the judgements that management has made in this respect if they are among the judgements made that have the most significant effect on the amounts recognised in the financial statements (paragraph 122 of IAS 1 [now paragraph 27G of IAS 8

Basis of Preparation of Financial Statements

]).

reverse factoring arrangements may have a material effect on an entity’s financial statements. An entity provides information about reverse factoring arrangements in its financial statements to the extent that such information is relevant to an understanding of any of those financial statements (paragraph 112 of IAS 1 [now paragraph 113 of IFRS 18]).

The Committee noted that making materiality judgements involves both quantitative and qualitative considerations.

...

The Committee concluded that the principles and requirements in IFRS Standards provide an adequate basis for an entity to determine the presentation of liabilities that are part of reverse factoring arrangements, the presentation of the related cash flows, and the information to disclose in the notes about, for example, liquidity risks that arise in such arrangements. Consequently, the Committee decided not to add a standard-setting project on these matters to the work plan.]

[IFRIC®

Update

, September 2019, Agenda Decision, ‘

Presentation of Financial Statements

—Presentation of Liabilities or Assets Related to Uncertain Tax Treatments’

The Committee received a request about the presentation of liabilities or assets related to uncertain tax treatments recognised applying

IFRIC 23

Uncertainty over Income Tax Treatments

(uncertain tax liabilities or assets). The request asked whether, in its statement of financial position, an entity is required to present uncertain tax liabilities as current (or deferred) tax liabilities or, instead, can present such liabilities within another line item such as provisions. A similar question could arise regarding uncertain tax assets.

The definitions in IAS 12 of current tax and deferred tax liabilities or assets

When there is uncertainty over income tax treatments, paragraph 4 of IFRIC 23 requires an entity to ‘recognise and measure its current or deferred tax asset or liability applying the requirements in IAS 12 based on taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates determined applying IFRIC 23’. Paragraph 5 of

Income Taxes

defines:

current tax as the amount of income taxes payable (recoverable) in respect of the taxable profit (tax loss) for a period; and

deferred tax liabilities (or assets) as the amounts of income taxes payable (recoverable) in future periods in respect of taxable (deductible) temporary differences and, in the case of deferred tax assets, the carryforward of unused tax losses and credits.

Consequently, the Committee observed that uncertain tax liabilities or assets recognised applying IFRIC 23 are liabilities (or assets) for current tax as defined in IAS 12, or deferred tax liabilities or assets as defined in IAS 12.

Presentation of uncertain tax liabilities (or assets)

Neither IAS 12 nor IFRIC 23 contain requirements on the presentation of uncertain tax liabilities or assets. Therefore, the presentation requirements in IAS 1 [now

Presentation and Disclosure in Financial Statements

] apply. Paragraph 54 of IAS 1 states that ‘the statement of financial position shall include line items that present: …(n) liabilities and assets for current tax, as defined in IAS 12; (o) deferred tax liabilities and deferred tax assets, as defined in IAS 12…’ [now paragraphs 103(q) and 103(r) of IFRS 18].

[Paragraph 57 of IAS 1 states that paragraph 54 ‘lists items that are sufficiently different in nature or function to warrant separate presentation in the statement of financial position’. Paragraph 29 requires an entity to ‘present separately items of a dissimilar nature or function unless they are immaterial’.

Accordingly, the Committee concluded that, applying IAS 1, an entity is required to present uncertain tax liabilities as current tax liabilities (paragraph 54(n)) or deferred tax liabilities (paragraph 54(o)); and uncertain tax assets as current tax assets (paragraph 54(n)) or deferred tax assets (paragraph 54(o)).] [The requirements in IAS 1 referred to in these paragraphs are not all brought forward unchanged to IFRS 18. The Committee’s conclusion regarding the application of the requirements in IAS 1 might not apply to the requirements in IFRS 18.]

The Committee concluded that the principles and requirements in IFRS Standards provide an adequate basis for an entity to determine the presentation of uncertain tax liabilities and assets. Consequently, the Committee decided not to add the matter to its standard-setting agenda.]

104

An entity shall present in the statement of financial position:

(a)

non-controlling interests; and

[

Refer:

IFRS 10 Appendix A (definition of

non‑controlling interestnon-controlling interest

)

]

(b)

issued capital and reserves attributable to

owners

of the parent.

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

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

[

Refer:

Illustrative Examples Part I, Statement of changes in equity

]

Information to be presented in the statement of changes in equity

[

Refer:

Basis for Conclusions paragraphs BCZ316–BCZ317

]

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

; 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.

[

Refer:

IFRS 10 paragraphs B97–B99

]

108

requires retrospective adjustments for changes in accounting policies, to the extent practicable, except when the transition requirements in another IFRS Accounting Standard require otherwise.

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.

Information to be presented in the statement of changes in equity or disclosed in the notes

[

Refer:

Basis for Conclusions paragraph BCZ318

]

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)

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.

111

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.

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

[

Refer:

paragraph B112

Basis for Conclusions paragraphs BCZ319–BC324

]

113

An entity shall disclose in the

notes

(a)

information about the basis of preparation of the financial statements (see

paragraphs 6A–6N of

) and the specific accounting policies used (

see paragraphs 27A–27I of

);

(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

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.

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.

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.

[

Refer:

IFRS 7 Basis for Conclusions paragraph BCZ32C

]

Management-defined performance measures

[

Refer:

paragraphs B113–B142

Basis for Conclusions paragraphs BC325–BC390

]

Identification of management-defined performance measures

[

Refer:

paragraphs B113–B131

Supporting materials Figure 6—Identifying management-defined performance measures

Basis for Conclusions paragraphs BC328–BC368

]

117

management-defined performance measure

is a subtotal of income and expenses that (see

paragraphs B113–B122

(a)

an entity uses in public communications outside financial statements;

(b)

an entity uses to communicate to users of financial statements management’s view of an aspect of the financial performance of the entity as a whole; and

(c)

is not listed in

paragraph 118

, or specifically required to be presented or disclosed by

IFRS Accounting Standards

118

Subtotals of income and expenses that are not

management-defined performance measure

are:

(a)

gross profit or loss (revenue minus cost of sales) and similar subtotals (see

paragraph B123

);

(b)

operating profit or loss

before depreciation, amortisation and impairments within the scope of

IAS 36

;

(c)

operating profit or loss and income and expenses from all investments accounted for using the equity method;

(d)

for an entity that applies

paragraph 73

, a subtotal comprising operating profit or loss and all income and expenses classified in the investing category;

(e)

profit or loss

before income taxes; and

(f)

profit or loss from continuing operations.

119

An entity shall presume that a subtotal of income and expenses that it uses in public communications outside its financial statements communicates to users of financial statements management’s view of an aspect of the financial performance of the entity as a whole, unless, applying

paragraph 120

, the entity rebuts the presumption.

120

An entity is permitted to rebut the presumption described in

paragraph 119

and assert that a subtotal does not communicate management’s view of an aspect of the financial performance of the entity as a whole, but only if it has reasonable and supportable information available that demonstrates the basis for the assertion (see

paragraphs B124–B131

Disclosure of management-defined performance measures

[

Refer:

paragraphs B132–B142

Basis for Conclusions paragraphs BC369–BC390

Illustrative Examples Part I, Note 2—Management-defined performance measures

]

121

The objective of the disclosures for

management-defined performance measures

is for an entity to provide information to help a user of financial statements understand:

(a)

the aspect of financial performance that, in management’s view, is communicated by a management-defined performance measure; and

(b)

how the management-defined performance measure compares with the measures defined by

IFRS Accounting Standards

122

An entity shall disclose information about all measures that meet the definition of

management-defined performance measures

paragraph 117

in a single note (see

paragraphs B132–B133

). This note shall include a statement that the management-defined performance measures provide management’s view of an aspect of the financial performance of the entity as a whole and are not necessarily comparable with measures sharing similar labels or descriptions provided by other entities.

123

An entity shall label and describe each

management-defined performance measure

in a clear and understandable manner that does not mislead users of financial statements (see

paragraphs B134–B135

). For each management-defined performance measure, the entity shall disclose:

(a)

a description of the aspect of financial performance that, in management’s view, is communicated by the management-defined performance measure. This description shall include explanations of why, in management’s view, the management-defined performance measure provides useful information about the entity’s financial performance.

(b)

how the management-defined performance measure is calculated.

(c)

a reconciliation between the management-defined performance measure and the most directly comparable subtotal listed in

paragraph 118

or total or subtotal specifically required to be presented or disclosed by

IFRS Accounting Standards

(see

paragraphs B136–B140

(d)

the income tax effect (determined by applying

paragraph B141

) and the effect on non-controlling interests for each item disclosed in the reconciliation required by (c).

(e)

a description of how the entity applies paragraph B141 to determine the income tax effect required by (d).

124

If an entity changes how it calculates a

management-defined performance measure

, adds a new management-defined performance measure, ceases using a previously disclosed management-defined performance measure or changes how it determines the income tax effects of the reconciling items required by

paragraph 123(d)

, it shall disclose:

(a)

an explanation that enables users of financial statements to understand the change, addition or cessation and its effects.

(b)

the reasons for the change, addition or cessation.

(c)

restated comparative information to reflect the change, addition or cessation unless it is impracticable to do so. An entity’s selection of a management-defined performance measure is not an accounting policy choice. Nonetheless, in assessing whether restating the comparative information is impracticable, an entity shall apply the requirements in

paragraphs 50–53 of

125

If an entity does not disclose the restated comparative information required by

paragraph 124(c)

because it is impracticable to do so, it shall disclose that fact.

Capital

[

Refer:

Basis for Conclusions paragraphs BCZ391–BCZ406

]

126

An entity shall disclose in the

notes

information that enables users of financial statements to evaluate the entity’s objectives, policies and processes for managing capital.

[

Refer:

Illustrative Examples Example III-1

]

127

To comply with

paragraph 126

an entity shall disclose in the

notes

(a)

qualitative information about its objectives, policies and processes for managing capital, including:

(i)

a description of what it manages as capital;

(ii)

when an entity is subject to externally imposed capital requirements, the nature of those requirements and how those requirements are incorporated into the management of capital; and

(iii)

how it is meeting its objectives for managing capital.

(b)

summary quantitative data about what it manages as capital. Some entities regard some financial liabilities (for example, some forms of subordinated debt) as part of capital. Other entities regard capital as excluding some components of equity (for example, components arising from cash flow hedges).

(c)

any changes in (a) and (b) from the preceding reporting period.

(d)

whether during the reporting period it complied with any externally imposed capital requirements to which it is subject.

(e)

when it has not complied with such externally imposed capital requirements, the consequences of such non-compliance.

[

Refer:

Illustrative Examples Example III-2

]

128

An entity shall base the note disclosures in

paragraph 127

on the information provided internally to key management personnel.

129

An entity may manage capital in a number of ways and be subject to a number of different capital requirements. For example, a conglomerate may include entities that undertake insurance activities and banking activities and those entities may operate in several jurisdictions. When an aggregate disclosure of capital requirements and how capital is managed would not provide useful information or would distort a financial statement user’s understanding of an entity’s capital resources, the entity shall disclose separate information for each capital requirement to which the entity is subject.

Other disclosures

130

An entity shall either present in the statement of financial position or the statement of changes in equity or disclose in the

notes

(a)

for each class of share capital:

(i)

the number of shares authorised;

(ii)

the number of shares issued and fully paid, and issued but not fully paid;

(iii)

par value per share, or a statement that the shares have no par value;

(iv)

a reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period;

(v)

the rights, preferences and restrictions attaching to that class, including restrictions on the distribution of dividends and the repayment of capital;

(vi)

shares in the entity held by the entity or by its subsidiaries or associates; and

(vii)

shares reserved for issue under options and contracts for the sale of shares, including terms and amounts; and

(b)

a description of the nature and purpose of each reserve within equity.

131

An entity without share capital, such as a partnership or trust, shall disclose information equivalent to that required by

paragraph 130(a)

, showing changes during the reporting period in each category of equity interest, and the rights, preferences and restrictions attaching to each category of equity interest.

132

An entity shall disclose in the

notes

(a)

the amount of dividends proposed or declared before the financial statements were authorised for issue

[

Refer:

IAS 10 paragraphs 3–7

]

but not recognised as a distribution to

owners

during the reporting period, and the related amount per share; and

(b)

the amount of any cumulative preference dividends not recognised.

Appendices

Appendix A

Defined terms

This appendix is an integral part of the IFRS Accounting Standard.

aggregation

The adding together of assets, liabilities, equity, income, expenses or cash flows that share characteristics and are included in the same

classification

The sorting of assets, liabilities, equity, income, expenses and cash flows based on shared characteristics.

disaggregation

The separation of an item into component parts that have characteristics that are not shared.

general purpose financial reports

Reports that provide financial information about a reporting entity that is useful to primary users in making decisions relating to providing resources to the entity. Those decisions involve decisions about:

(a)

buying, selling or holding equity and debt instruments;

(b)

providing or settling loans and other forms of credit; or

(c)

exercising rights to vote on, or otherwise influence, the entity’s management’s actions that affect the use of the entity’s economic resources.

General purpose financial reports include—but are not restricted to—an entity’s

general purpose financial statements

and sustainability-related financial disclosures.

general purpose financial statements

A particular form of

general purpose financial reports

that provide information about the reporting entity’s assets, liabilities, equity, income and expenses.

IFRS Accounting Standards

Accounting standards issued by the International Accounting Standards Board. They comprise:

(a)

International Financial Reporting Standards;

(b)

International Accounting Standards;

(c)

IFRIC Interpretations; and

(d)

SIC Interpretations.

IFRS Accounting Standards were previously known as International Financial Reporting Standards, IFRS, IFRSs and IFRS Standards.

[

Refer:

Basis for Conclusions

paragraphs BC424–BC425

]

management-defined performance measure

A subtotal of income and expenses that:

(a)

an entity uses in public communications outside financial statements;

(b)

an entity uses to communicate to users of financial statements management’s view of an aspect of the financial performance of the entity as a whole; and

(c)

is not listed in

paragraph 118

, or specifically required to be presented or disclosed by

IFRS Accounting Standards

material information

Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of

general purpose financial statements

make on the basis of those financial statements, which provide financial information about a specific reporting entity.

[

Refer:

paragraphs 15

and

B1–B5

Basis for Conclusions

paragraphs BCZ26–BCZ44

Conceptual Framework paragraph 2.11

]

[

Note:

IFRS

Practice Statement 2

Making Materiality Judgements

notes

Information in financial statements provided in addition to that presented in the

primary financial statements

operating profit or loss

The total of all income and expenses classified in the operating category.

other comprehensive income

Items of income and expense (including

reclassification adjustments

) that are recognised outside

profit or loss

as required or permitted by other

IFRS Accounting Standards

owners

Holders of claims classified as equity.

primary financial statements

The statement(s) of financial performance, the statement of financial position, the statement of changes in equity and the statement of cash flows.

profit or loss

The total of income less expenses included in the statement of profit or loss.

profit or loss before financing and income taxes

The total of

operating profit or loss

and all income and expenses classified in the investing category.

reclassification adjustments

Amounts reclassified to

profit or loss

in the current reporting period that were included in

other comprehensive income

in the current or prior periods.

total comprehensive income

The change in equity during a reporting period resulting from transactions and other events, other than those changes resulting from transactions with

owners

in their capacity as owners.

useful structured summary

A structured summary provided in a primary financial statement of a reporting entity’s recognised assets, liabilities, equity, income, expenses and cash flows that is useful 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

Appendix B

Application guidance

This appendix is an integral part of the IFRS Accounting Standard. It describes the application of

paragraphs 1–132

and has the same authority as the other parts of the IFRS Accounting Standard.

General requirements for financial statements

Materiality

[

Refer:

paragraph 15

Basis for Conclusions paragraphs BCZ26–BCZ44

]

Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.

Materiality depends on the nature or magnitude of information, or both. An entity assesses whether information, either individually or in combination with other information, is material in the context of its financial statements taken as a whole.

Information is obscured if it is communicated in a way that would have a similar effect for primary users of financial statements to omitting or misstating that information. The following are examples of circumstances that may result in

material information

being obscured:

(a)

material information about an item, transaction or other event is disclosed in the financial statements but the language used is vague or unclear;

(b)

material information about an item, transaction or other event is scattered throughout the financial statements;

(c)

dissimilar items, transactions or other events are inappropriately aggregated;

(d)

similar items, transactions or other events are inappropriately disaggregated; and

(e)

the understandability of the financial statements is reduced as a result of material information being hidden by immaterial information to the extent that a primary user is unable to determine what information is material.

Assessing whether information could reasonably be expected to influence decisions made by the primary users of a specific reporting entity’s

general purpose financial statements

requires an entity to consider the characteristics of those users while also considering the entity’s own circumstances.

Many existing and potential investors, lenders and other creditors cannot require reporting entities to provide information directly to them and must rely on

general purpose financial statements

for much of the financial information they need. Consequently, they are the primary users to whom

general purpose financial statements

are directed. Financial statements are prepared for users who have a reasonable knowledge of business and economic activities and who review and analyse the information diligently. At times, even well-informed and diligent users may need to seek the aid of an adviser to understand information about complex economic phenomena.

The roles of the primary financial statements and the notes

[

Refer:

paragraphs 15–24

Basis for Conclusions paragraphs BC45–BC63

]

Applying

paragraph 17(a)

, an entity provides in the

notes

information necessary for users of financial statements to understand the line items presented in the

primary financial statements

. Examples of such information include:

(a)

disaggregation

of the line items presented in the primary financial statements;

(b)

descriptions of the characteristics of the line items presented in the primary financial statements; and

(c)

information about the methods, assumptions and judgements used in recognising, measuring and presenting the items included in the primary financial statements.

Applying

paragraph 17(b)

, an entity supplements the

primary financial statements

with additional information necessary to achieve the objective of financial statements—that is:

(a)

information specifically required by

IFRS Accounting Standards

(see

paragraph 19

)—for example:

(i)

information required by

Provisions, Contingent Liabilities and Contingent Assets

about an entity’s unrecognised contingent assets and contingent liabilities; and

(ii)

information required by

IFRS 7

Financial Instruments: Disclosures

about an entity’s exposure to various types of risks, such as credit risk, liquidity risk and market risk; and

(b)

information additional to that specifically required by IFRS Accounting Standards (see

paragraph 20

Information presented in the primary financial statements

Paragraph 23

explains that 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

, even if the line item is required by

IFRS Accounting Standards

. For example, an entity need not present a line item listed in

paragraph 75

if doing so is not necessary for the statement of profit or loss to provide a useful structured summary of income and expenses, or a line item listed in

paragraph 103

if doing so is not necessary for the statement of financial position to provide a useful structured summary of assets, liabilities and equity. If an entity does not present the line items listed in paragraphs 75 and 103, it shall disclose the items in the

notes

if the resulting information is material (see

paragraph 42

Conversely, applying

paragraph 24

, an entity shall present additional line items to those listed in

paragraphs 75

and

103

if such presentations are necessary for the statement of profit or loss to provide a

useful structured summary

of income and expenses or for the statement of financial position to provide a useful structured summary of assets, liabilities and equity (see

paragraphs B78–B79

and

B109–B111

Identification of the financial statements

[

Refer:

paragraphs 25–27

]

B10

Paragraph 25

requires an entity to clearly identify the financial statements and distinguish them from other information in the same published document. An entity meets these requirements by providing appropriate headings for pages, statements,

notes

, columns and the like. Judgement is required in determining the best way of providing such information. For example, if an entity provides the financial statements electronically, an entity considers other ways to meet the requirements—for example, by appropriate digital tagging of information provided in the financial statements.

B11

An entity often makes financial statements more understandable by providing information in thousands or millions of units of the presentation currency. This practice is acceptable as long as the entity discloses the level of rounding and does not omit

material information

Consistency of presentation, disclosure and classification

[

Refer:

paragraph 30

]

B12

Paragraph 30(a)

requires an entity to change the presentation, disclosure or

classification

of items in the financial statements if it is apparent that another presentation, disclosure or classification would be more appropriate. For example, a significant acquisition or disposal, or a review of the financial statements, might suggest that the financial statements need to be changed. An entity is permitted to change the presentation, disclosure or classification of items in its financial statements only if the change provides information that is more useful to users of financial statements and if the entity is likely to continue using the revised presentation, disclosure or classification, so that inter-period comparability is not impaired. When making such changes, an entity reclassifies its comparative information in accordance with

paragraphs 33–34

Comparative information

[

Refer:

paragraphs 31–40

Basis for Conclusions paragraphs BCZ64–BCZ70

]

Required comparative information

B13

In some cases, narrative information provided in the financial statements for the preceding reporting period(s) continues to be relevant in the current period. For example, an entity discloses in the current period details of a legal dispute, the outcome of which was uncertain at the end of the preceding period and is yet to be resolved. Users of financial statements might benefit from the disclosure of information that the uncertainty existed at the end of the preceding period and from the disclosure of information about the steps that have been taken during the period to resolve the uncertainty.

Additional comparative information

B14

An entity may provide comparative information in addition to the comparative information required by

IFRS Accounting Standards

, as long as that information is prepared in accordance with IFRS Accounting Standards. This additional comparative information may consist of one or more of the

primary financial statements

referred to in

paragraph 10

, but need not comprise a complete set of financial statements. When this is the case, the entity shall disclose in the

notes

information for those additional primary financial statements.

B15

For example, an entity may present a third statement (or statements) of financial performance (thereby presenting the current reporting period, the preceding period and one additional comparative period). However, the entity is not required to present a third statement of financial position, a third statement of cash flows or a third statement of changes in equity (that is, an additional primary financial statement comparative). The entity is required to disclose in the

notes

the comparative information related to that additional statement(s) of financial performance.

Aggregation and disaggregation

Principles of aggregation and disaggregation

[

Refer:

paragraphs 41–43

Basis for Conclusions paragraphs BC71–BC80

]

Process of aggregation and disaggregation

B16

Financial statements result from entities processing large numbers of transactions and other events. These transactions and other events give rise to assets, liabilities, equity, income, expenses and cash flows.

B17

To apply the requirements in

paragraph 41

, an entity shall aggregate items based on shared characteristics (that is, aggregate items that have similar characteristics) and disaggregate items based on characteristics that are not shared (that is, disaggregate items that have dissimilar characteristics). In doing so, an entity shall:

(a)

identify the assets, liabilities, equity, income, expenses and cash flows that arise from individual transactions or other events;

(b)

classify and aggregate assets, liabilities, equity, income, expenses and cash flows into items based on their characteristics (for example, their nature, their function, their measurement basis or another characteristic) so as to result in the presentation in the

primary financial statements

of line items and disclosure in the

notes

of items that have at least one similar characteristic; and

(c)

disaggregate items based on dissimilar characteristics:

(i)

in the primary financial statements, as necessary to provide

useful structured summaries

(as described in

paragraph 16

); and

(ii)

in the notes, as necessary to provide

material information

(as described in

paragraph 17

B18

An entity may apply the steps in

paragraphs B17(a)–B17(c)

in varying order to apply the principles of

aggregation

and

disaggregation

paragraph 41

Basis of aggregation and disaggregation

B19

Paragraphs B16–B18

explain that an entity uses its judgement to aggregate and disaggregate assets, liabilities, equity, income, expenses and cash flows from individual transactions and other events based on similar and dissimilar characteristics.

Paragraphs B78

and

B110

set out examples of characteristics an entity considers in making its judgements.

B20

The more similar the characteristics of assets, liabilities, equity, income, expenses and cash flows are, the more likely it is that aggregating them will fulfil the role of the

primary financial statements

(that is, to provide

useful structured summaries

as described in

paragraph 16

) or the

notes

(that is, to provide

material information

as described in

paragraph 17

). The more dissimilar the characteristics of assets, liabilities, equity, income, expenses and cash flows are, the more likely it is that disaggregating the items will fulfil the roles of the primary financial statements or the notes.

B21

The items aggregated and presented as line items in the

primary financial statements

shall have at least one similar characteristic other than meeting the definition of assets, liabilities, equity, income, expenses or cash flows. However, because the role of the primary financial statements is to provide

useful structured summaries

, the line items in the primary financial statements are also likely to aggregate items that have sufficiently dissimilar characteristics that information about the disaggregated items is material.

B22

Applying

paragraph 41

, an entity shall disaggregate items that have dissimilar characteristics when the resulting information is material. A single dissimilar characteristic could result in information about disaggregated items being material.

B23

For example, an entity might present in the statement of financial position financial assets that comprise equity investments and debt investments separately from non-financial assets. The financial assets have dissimilar characteristics because they have different measurement bases—some are measured at fair value through profit or loss and others at amortised cost. The entity might therefore determine that to provide a

useful structured summary

it is necessary to present line items that disaggregate the financial assets based on those measurement bases. That

disaggregation

results in a line item comprising equity investments and debt investments measured at fair value through profit or loss and a line item comprising debt investments measured at amortised cost. Because equity investments are dissimilar to debt investments in that each exposes the entity to different risks, the entity would assess whether further disaggregation in the statement of financial position of financial assets measured at fair value through profit or loss into equity investments and debt investments is needed to provide a useful structured summary. If not, and if the resulting information were material, the entity would need to disclose in the

notes

the equity investments separately from the debt investments. In addition if, for example, the equity investments had other dissimilar characteristics, the entity would be required to disaggregate further those equity investments in the notes if the resulting information were material.

Description of items

[

Refer:

Supporting materials Figure 7—Determining informative labels and information for aggregated items

]

B24

Paragraph 43

requires an entity to label and describe items presented or disclosed in a way that faithfully represents the characteristics of the item. Such items will often be

aggregations

of items arising from individual transactions or other events and could vary in whether they are aggregations of items for which information is material and items for which information is immaterial. Specifically, in either the

primary financial statements

or in the

notes

(a)

an item for which information is material could be aggregated with other items for which information is also material—an entity might provide such an aggregation to summarise information but would also be required to disclose information about each item;

(b)

an item for which information is material could be aggregated with items for which information is not material—an entity would be required to provide information about disaggregated items only if immaterial information obscured the

material information

; or

(c)

an item for which information is not material could be aggregated with other items for which information is not material—an entity might provide such an aggregation to complete a list of items and would not be required to disclose information about disaggregated items, subject to

paragraph B26(b)

B25

An entity shall label items presented or disclosed as ‘other’ only if it cannot find a more informative label. Examples of how an entity might find a more informative label are:

(a)

if an item for which information is material is aggregated with items for which information is not material, finding a label that describes the item for which information is material; and

(b)

if items for which information is not material are aggregated:

(i)

aggregating items that share similar characteristics and describing them in a way that faithfully represents the similar characteristics; or

(ii)

aggregating items with other items that do not share similar characteristics and describing them in a way that faithfully represents the dissimilar characteristics of the items.

B26

If an entity cannot find a more informative label than ‘other’:

(a)

for any

aggregation

—the entity shall use a label that describes the aggregated item as precisely as possible, for example, ‘other operating expenses’ or ‘other finance expenses’.

(b)

for an aggregation comprising only items for which information is not material—the entity shall consider whether the aggregated amount is sufficiently large that users of financial statements might reasonably question whether it includes items for which information could be material. If so, information to resolve that question is

material information

. Accordingly, in such cases, the entity shall disclose further information about the amount—for example:

(i)

an explanation that no items for which information would be material are included in the amount; or

(ii)

an explanation that the amount comprises several items for which information would not be material, with an indication of the nature and amount of the largest item.

Offsetting

[

Refer:

paragraphs 44–45

]

B27

Paragraph 44

prohibits an entity from offsetting assets and liabilities or income and expenses unless required or permitted by an IFRS Accounting Standard. For example,

IFRS 15

Revenue from Contracts with Customers

requires an entity to measure revenue from contracts with customers at the amount of consideration to which the entity expects to be entitled in exchange for transferring promised goods or services. The amount of revenue recognised reflects any trade discounts and volume rebates the entity allows. In contrast, an entity might undertake, in the course of its ordinary activities, other transactions that do not generate revenue but are incidental to the main revenue-generating activities. The entity would present in the

primary financial statements

or disclose in the

notes

the results of such transactions, when this presentation or disclosure reflects the substance of the transaction or other event, by netting any income with related expenses arising on the same transaction. For example:

(a)

an entity presents in the primary financial statements or discloses in the notes gains and losses on the disposal of non-current assets by deducting from the amount of consideration on disposal the carrying amount of the asset and related selling expenses; and

(b)

an entity may net expenditure related to a provision that is recognised in accordance with

and reimbursed under a contractual arrangement with a third party (for example, a supplier’s warranty agreement) against the related reimbursement.

[

Refer:

paragraph 54

]

B28

In addition, an entity presents on a net basis gains and losses arising from a group of similar transactions—for example, foreign exchange gains and losses or gains and losses arising on financial instruments held for trading that are included in the same category of the statement(s) of financial performance applying

paragraphs 47–68

. However, an entity shall disclose such gains and losses separately in the

notes

if doing so provides

material information

Statement of profit or loss

Categories in the statement of profit or loss

[

Refer:

paragraphs 47–48

Basis for Conclusions paragraphs BC81–BC87

]

B29

Paragraph 47

requires an entity to classify income and expenses included in the statement of profit or loss in one of five categories. The operating category comprises all income and expenses included in the statement of profit or loss that are not classified in the other categories (see

paragraph 52

). Income and expenses classified in the discontinued operations category applying

paragraph 68

are not subject to the requirements for classifying items of income and expense in the categories listed in paragraphs 47(a)–(d). Income and expenses classified in the income taxes category applying

paragraph 67

are not subject to the requirements for classifying items of income and expense in the categories listed in paragraphs 47(a)–(c).

Assessment of specified main business activities

[

Refer:

paragraphs 49–51

Basis for Conclusions paragraphs BC94–BC102

]

B30

Paragraph 49

requires an entity to assess whether it invests in assets or provides financing to customers as a main business activity. An entity may have more than one main business activity. For example, an entity that manufactures a product and also provides financing to customers may determine that both its manufacturing activity and customer-finance activity are main business activities. To classify income and expenses into the categories of operating, investing and financing as required by this Standard, an entity need only determine whether either of, or both, investing in assets and providing financing to customers are main business activities.

B31

Examples of entities that might invest in assets as a main business activity include:

(a)

investment entities as defined by

IFRS 10

Consolidated Financial Statements

;

(b)

investment property companies; and

(c)

insurers.

B32

Examples of entities that might provide financing to customers as a main business activity include:

(a)

banks and other lending institutions;

(b)

entities that provide financing to customers to enable those customers to buy the entity’s products; and

(c)

lessors that provide financing to customers in finance leases.

B33

Whether investing in assets or providing financing to customers is a main business activity of the entity is a matter of fact and not merely an assertion. An entity shall use its judgement to assess whether investing in assets or providing financing to customers is a main business activity and that assessment shall be based on evidence.

B34

In general, investing in assets or providing financing to customers is likely to be a main business activity of an entity if the entity uses a particular type of subtotal as an important indicator of operating performance. The particular type of subtotal is a subtotal similar to gross profit (see

paragraph B123

) that includes income and expenses that would be classified in the investing or financing categories if investing in assets or providing financing to customers were not main business activities.

B35

Evidence that subtotals similar to gross profit described in

paragraph B123

are important indicators of operating performance includes using such subtotals to:

(a)

explain operating performance externally; or

(b)

assess or monitor operating performance internally.

B36

Information about segments may provide evidence that investing in assets or providing financing to customers is a main business activity if an entity applies

IFRS 8

Operating Segments

. Specifically:

(a)

if a reportable segment comprises a single business activity, this indicates that the performance of the reportable segment is an important indicator of the entity’s operating performance and that the business activity of the reportable segment is a main business activity of the entity; and

(b)

if an operating segment comprises a single business activity, this indicates that the business activity might be a main business activity of the entity if the performance of the operating segment is an important indicator of the entity’s operating performance as described in

paragraph B34

B37

An entity shall assess whether investing in assets or providing financing to customers is a main business activity for the reporting entity as a whole. Accordingly, the assessment of whether investing in assets or providing financing to customers is a main business activity by a reporting entity that is a consolidated group and a reporting entity that is one of the subsidiaries in the consolidated group could have different outcomes.

B38

An entity shall assess whether it invests as a main business activity in associates, joint ventures and unconsolidated subsidiaries not accounted for using the equity method (see

paragraphs B43(b)–(c)

and

B44(b)–(c)

) by individual asset or using groups of assets with shared characteristics. If an entity prepares separate financial statements as specified in

Separate Financial Statements

and performs the assessment for groups of assets, the entity shall use groups of assets that are consistent with the categories used to determine their measurement basis applying

paragraph 10 of

. An entity need not assess whether it invests as a main business activity in associates, joint ventures and non-consolidated subsidiaries accounted for using the equity method (see paragraphs B43(a) and B44(a)) because it is required to classify the income and expenses from those investments in the investing category (see

paragraph 55(a)

B39

An entity need not assess whether it invests as a main business activity in cash and cash equivalents (see

paragraph 53(b)

). An entity is required to classify income and expenses from cash and cash equivalents in the investing category unless

paragraphs 56(a) or 56(b)

apply.

B40

An entity shall assess whether it invests as a main business activity in other assets that generate a return individually and largely independently of the entity’s other resources (see

paragraph 53(c)

) by assessing an individual asset or groups of assets with shared characteristics. When performing the assessment for groups of financial assets an entity shall use groups of financial assets that are consistent with the classes of financial assets identified by the entity in applying

paragraph 6 of

IFRS 7

B41

An entity shall assess whether investing in assets or providing financing to customers is a main business activity based on the facts at the time, so a change in the outcome of the assessment does not change the outcome of the previous assessments. Accordingly, an entity classifies and presents income and expenses applying the change in the outcome of the assessment prospectively from the date of the change and does not reclassify amounts presented before the date of the change. Unless it is impracticable to do so,

paragraph 51(c)(ii)

requires an entity to disclose the amount and

classification

Operating

[

Refer:

paragraph 52

Basis for Conclusions paragraphs BC88–BC93

and

BC407–BC413

]

B42

The requirements in

paragraphs 47–66

result in an entity classifying income and expenses from its main business activities in the operating category of the statement of profit or loss, except for any such income and expenses from investments accounted for using the equity method. Furthermore, the operating category is not limited to income and expenses from an entity’s main business activities. It includes all income and expenses that are not classified by an entity in the other categories applying

paragraphs 53–68

, including such income or expenses that are volatile or non-recurring.

Investing

[

Refer:

paragraphs 53–58

Basis for Conclusions paragraphs BC103–BC147

]

Investments in associates, joint ventures and unconsolidated subsidiaries

B43

Paragraphs 53

and

set out requirements for the

classification

of income and expenses from investments in associates and joint ventures. These investments comprise:

(a)

investments in associates and joint ventures accounted for using the equity method in accordance with

paragraph 16 of

IAS 28

Investments in Associates and Joint Ventures

and

paragraph 10(c) of

;

(b)

investments in associates and joint ventures (or a portion thereof) that an entity elects to measure at fair value through profit or loss in accordance with

applying

paragraphs 18–19 of

IAS 28

and

paragraph 11 of

; and

(c)

investments in associates and joint ventures in separate financial statements that are accounted for at cost applying

paragraph 10(a) of

or in accordance with

applying paragraph 10(b) of

B44

Paragraphs 53

and

also set out requirements for the

classification

of income and expenses from unconsolidated subsidiaries. Investments in unconsolidated subsidiaries comprise:

(a)

investments in subsidiaries in separate financial statements accounted for using the equity method in accordance with

paragraph 10(c) of

;

(b)

investments in subsidiaries held by an investment entity that are measured at fair value through profit or loss in accordance with

paragraph 31 of

IFRS 10

and

paragraph 11A of

; and

(c)

investments in subsidiaries in separate financial statements that are accounted for at cost applying paragraph 10(a) of

or in accordance with

applying paragraph 10(b) of

Assets that generate a return individually and largely independently of the entity’s other resources

B45

Paragraph 53(c)

requires an entity to identify assets that generate a return individually and largely independently of the entity’s other resources. The return could be positive or negative.

B46

Assets that generate a return individually and largely independently of the entity’s other resources in

paragraph 53(c)

typically include:

(a)

debt or equity investments; and

(b)

investment properties, and receivables for rent generated by those properties.

B47

Income and expenses specified in

paragraph 54

from such assets typically include:

(a)

interest;

(b)

dividends;

(c)

rental income;

(d)

depreciation;

(e)

impairment losses and reversals of impairment losses;

(f)

fair value gains and losses; and

(g)

income and expenses from the derecognition of the asset, or its

classification

and remeasurement as held for sale (see

paragraphs B60–B64

Assets that do not generate a return individually and largely independently of the entity’s other resources

B48

Assets that an entity uses in combination to produce or supply goods or services do not generate a return individually and largely independently of the entity’s other resources. Such assets typically include:

(a)

property, plant and equipment;

(b)

assets that arise from the production or supply of goods and services for which the income and expenses are classified in the operating category (for example, receivables for such goods and services); and

(c)

if the entity provides financing to customers as a main business activity, any loans to a customer.

B49

Income and expenses from the assets described in

paragraph B48

are classified in the operating category—for example:

(a)

revenue for goods or services produced or supplied by the entity using a combination of assets;

(b)

interest income;

(c)

depreciation and amortisation;

(d)

impairment losses and reversals of impairment losses;

(e)

income and expenses from the derecognition of the asset, or its

classification

and remeasurement as held for sale (see

paragraphs B60–B64

); and

(f)

income and expenses arising on a business combination that includes assets that will give rise to income and expenses that will be classified in the operating category, such as a gain on a bargain purchase and remeasurements of contingent consideration.

Financing

[

Refer:

paragraphs 59–66

Basis for Conclusions paragraphs BC148–BC199

]

Liabilities arising from transactions that involve only the raising of finance

B50

Paragraph 59(a)

requires an entity to identify liabilities that arise from transactions that involve only the raising of finance. In such transactions, an entity:

(a)

receives finance in the form of cash, or an extinguishment of a financial liability, or receipt of the entity’s own equity instruments; and

(b)

at a later date, will return in exchange cash or its own equity instruments.

B51

Liabilities arising from transactions that involve only the raising of finance include:

(a)

a debt instrument that will be settled in cash, such as debentures, loans,

notes

, bonds and mortgages—an entity receives cash and will return cash in exchange;

(b)

a liability under a supplier finance arrangement when the payable for goods or services is derecognised—an entity is discharged of the financial liability for the goods or services and will return cash in exchange;

(c)

a bond that will be settled through delivery of an entity’s shares—an entity receives cash and will return its own equity instruments in exchange; and

(d)

an obligation for an entity to purchase its own equity instruments—an entity receives its own equity instruments and will return cash in exchange.

B52

Examples of income and expenses from such liabilities that

paragraph 60

requires an entity to classify in the financing category include:

(a)

interest expenses (for example, on debt instruments issued);

(b)

fair value gains and losses (for example, on a liability designated at fair value through profit or loss);

(c)

dividends on issued shares classified as liabilities; and

(d)

income and expenses from the derecognition of the liability (see

paragraph B61

Liabilities arising from transactions that do not involve only the raising of finance

B53

Paragraph 59(b)

requires an entity to identify liabilities that arise from transactions that do not involve only the raising of finance. Such liabilities include:

(a)

payables for goods or services that will be settled in cash—an entity receives goods or services, not finance in the form described in

paragraph B50(a)

;

(b)

contract liabilities—an entity will return goods and services, not cash or its own equity instruments as described in paragraph B50(b);

[

Refer:

IFRS 15

Appendix A (definition of a

contract liabilitycontract liability

)

]

(c)

lease liabilities—an entity receives a right-of-use asset, not finance in the form described in paragraph B50(a);

[

Refer:

IFRS 16

Appendix A (definition of a

leaselease

)

]

(d)

defined benefit pension liabilities—an entity receives employee services, not finance in the form described in paragraph B50(a);

[

Refer:

paragraph 8 (definition of

defined benefit plansdefined benefit plans

)

]

(e)

decommissioning or asset restoration provisions—an entity receives an asset that is not finance in the form described in paragraph B50(a); and

(f)

a litigation provision—an entity does not receive finance as described in paragraph B50(a).

B54

Examples of income and expenses from such liabilities that

paragraph 61

requires an entity to classify in the financing category include:

(a)

interest expenses on payables arising from the purchase of goods or services, applying

;

(b)

interest expenses on a contract liability with a significant financing component as specified by

IFRS 15

;

(c)

interest expenses on a lease liability, applying

IFRS 16

;

(d)

net interest expense (income) on a net defined benefit liability (asset), applying

; and

(e)

the increase in the discounted amount of a provision arising from the passage of time and the effect of any change in the discount rate on provisions, applying

B55

Examples of income and expenses that arise from transactions that do not involve only the raising of finance but that are not in the scope of

paragraph 61

, and accordingly are classified in the operating category, include:

(a)

expenses recognised for consumption of the purchased goods or services described in

paragraph B54(a)

;

(b)

current and past service cost arising from a defined benefit plan, applying

; and

(c)

remeasurements of the fair value of a liability for contingent consideration in a business combination recognised applying

IFRS 3

Business Combinations

Classification of income and expenses from hybrid contracts containing a host that is a liability

[

Refer:

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

]

B56

How an entity classifies income and expenses from a hybrid contract with a host that is a liability depends on whether the embedded derivative is separated from the host contract. If the embedded derivative:

(a)

is separated from the host liability:

(i)

for the separated host liability—an entity applies the requirements for income and expenses from liabilities, as specified in

paragraphs 52

59–61

64(b)

and

65–66

; and

(ii)

for the separated embedded derivative—an entity applies the requirements for income and expenses from derivatives, as specified in

paragraphs B70–B76

;

(b)

is not separated from the host liability and if the hybrid contract arises from a transaction that involves only the raising of finance—an entity applies the requirements for liabilities that arise from such transactions, as specified in paragraphs 52,

and 65–66;

(c)

is not separated from the host liability and if the hybrid contract does not arise from a transaction that involves only the raising of finance:

(i)

if the host liability is a financial liability within the scope of

that is measured at amortised cost—an entity classifies in the financing category income and expenses specified in paragraph 60 from the contract after initial recognition (instead of the income and expenses specified in

paragraph 61

) (see

paragraph B59

);

(ii)

if the hybrid contract is an insurance contract within the scope of

—an entity applies the requirements in

paragraphs 52

and 64(b); and

(iii)

otherwise—an entity applies the requirements for income and expenses from liabilities that arise from such transactions, as specified in paragraphs 52 and 61.

B57

An entity shall apply

paragraphs B56(b)

and B56(c) to all hybrid contracts containing a host liability for which the embedded derivative is not separated, regardless of whether the embedded derivative is not separated by the entity applying

paragraph 4.3.3 of

or applying

paragraph 4.3.5 of

Liabilities arising from issued investment contracts with participation features

B58

Paragraph 64(a)

sets out requirements for income and expenses from liabilities arising from issued investment contracts with participation features recognised applying

. Examples of such investment contracts are:

(a)

an investment contract with participation features issued by an insurer that does not meet the definition in

of an investment contract with discretionary participation features; and

(b)

an investment contract with participation features issued by an investment entity.

Income and expenses classified in the operating category by an entity that provides financing to customers as a main business activity

B59

Paragraph 65

requires an entity that provides financing to customers as a main business activity to classify in the operating category income and expenses from some or all liabilities that arise from transactions that involve only the raising of finance. An entity shall also apply the requirements in that paragraph to income and expenses from a derivative relating to a transaction that involves only the raising of finance specified in

paragraph B73(a)

, but not to the income and expenses from a hybrid contract specified in

paragraph B56(c)(i)

Derecognition and changes in classification

[

Refer:

Basis for Conclusions paragraphs BC200–BC206

]

Derecognition of an asset or liability, or classification and remeasurement of an asset as held for sale

B60

Paragraphs B47(g)

and

B49(e)

refer to income and expenses from the derecognition of an asset, or its

classification

as held for sale. An entity shall classify income and expenses on the derecognition of an asset, or its classification as held for sale and any subsequent measurement while held for sale, in the same category as it classified the income and expenses from the asset immediately before its derecognition. For example, an entity shall classify gains and losses:

(a)

on the disposal of property, plant and equipment—in the operating category;

(b)

on the disposal of an investment property that an entity does not invest in as a main business activity—in the investing category; and

(c)

from the remeasurement of an investment in an associate previously accounted for using the equity method on the step acquisition of a subsidiary—in the investing category.

B61

An entity shall classify income and expenses from the derecognition of a liability by applying the requirements in

paragraphs 52

and

59–60

. For example, the entity classifies income and expenses from the derecognition of a liability:

(a)

in the financing category—if the liability arises from a transaction that involves only the raising of finance by an entity that does not provide financing to customers as a main business activity; and

(b)

in the operating category—if as part of a supplier finance arrangement an entity derecognises a payable to a supplier and recognises a liability under that arrangement.

[

Refer:

paragraphs 44F–44H

]

Change in use of an asset

B62

A transaction or other event might change the category in the statement of profit or loss in which an entity classifies income and expenses from an asset, without the asset being derecognised. In such cases, an entity shall classify the income and expenses from the transaction or other event in the category in which it classified income and expenses from the asset immediately before the transaction or event. For example, an entity shall classify in the operating category any income or expenses recognised in the statement of profit or loss on the transfer of property from the scope of

to investment property in the scope of

IAS 40

Groups of assets and liabilities

B63

Paragraphs B60–B62

set out requirements for income and expenses from an asset or liability from its derecognition,

classification

and subsequent measurement while held for sale, or from its change in use. A transaction or other event might result in these outcomes for a group of assets (or a group of assets and liabilities) that generated income and expenses that an entity classified in different categories immediately before the transaction or other event. An entity shall classify income or expenses from such a transaction or other event:

(a)

in the investing category if, other than any income tax assets, all the assets in the group generated income and expenses that the entity classified in the investing category immediately before the transaction or other event; and

(b)

in the operating category otherwise.

B64

For example, an entity classifies:

(a)

in the operating category—gains and losses on the disposal of a consolidated subsidiary, if the subsidiary included assets that generated income and expenses that the entity classified in the operating category immediately before the disposal. The gains and losses include the reclassification from equity to

profit or loss

of foreign exchange differences required by

paragraph 48 of

(b)

in the operating category—an impairment loss arising on the

classification

of a disposal group as held for sale by the entity applying

, if the disposal group included assets that generated income and expenses that the entity classified in the operating category immediately before its classification as held for sale.

(c)

in the investing category—gains and losses on disposal of a consolidated subsidiary, if the only assets of the subsidiary were investment property that the consolidated reporting entity did not invest in as a main business activity and related income tax assets. The gains and losses include the reclassification from equity to

profit or loss

of foreign exchange differences required by paragraph 48 of

Classification of foreign exchange differences and the gain or loss on the net monetary position

[

Refer:

Basis for Conclusions paragraphs BC207–BC222

]

B65

To apply

paragraph 47

, an entity shall classify foreign exchange differences included in the statement of profit or loss applying

in the same category as the income and expenses from the items that gave rise to the foreign exchange differences, unless doing so would involve undue cost or effort (see

paragraph B68

B66

For example, an entity classifies foreign exchange differences on:

(a)

a receivable described in

paragraph B48(b)

denominated in a foreign currency, in the same category as the income and expenses from that asset—that is, in the operating category; and

(b)

a debt instrument that is a liability described in

paragraph B51(a)

denominated in a foreign currency, in the same category as the income and expenses on that liability—that is, in the financing category (unless the entity provides financing to customers as a main business activity and classifies the income and expenses from the liability in the operating category applying

paragraph 65

B67

An entity might classify in more than one category income and expenses from a transaction that does not involve only the raising of finance. For example, the purchase of services in a transaction denominated in a foreign currency and negotiated on extended credit terms could give rise to an expense for the purchase of the services classified in the operating category (see

paragraph B55(a)

) and interest expenses classified in the financing category (see

paragraph B54(a)

). In such cases, subject to

paragraph B68

, an entity shall use its judgement to determine whether the foreign exchange difference relates to the amount classified in the financing category—and classify it in that category—or whether it relates to the amount classified in another category—and classify it in that category. An entity shall not allocate between categories a foreign exchange difference arising on a liability from a transaction that does not involve only the raising of finance. In making its judgements about how to classify the foreign exchange differences, an entity need not classify in the same category the foreign exchange differences on all such liabilities. However, an entity shall classify in the same category foreign exchange differences on similar liabilities.

B68

If applying the requirements in

paragraphs B65

and

B67

would involve undue cost or effort, an entity shall instead classify the affected foreign exchange differences in the operating category. An entity shall assess whether classifying foreign exchange differences as described in paragraphs B65 and B67 involves undue cost or effort for each item that gives rise to foreign exchange differences. The assessment is specific to the facts and circumstances related to each item. If the same facts and circumstances relate to a number of items, an entity could apply the same assessment to each of the items.

B69

Applying

paragraph 28 of

IAS 29

Financial Reporting in Hyperinflationary Economies

, an entity might present the gain or loss on the net monetary position with other income and expense items associated with the net monetary position, such as interest income and expenses and foreign exchange differences. If the entity does not present the gain or loss on the net monetary position with the associated income and expenses, it shall classify the gain or loss in the operating category.

Classification of gains and losses on derivatives and designated hedging instruments

[

Refer:

Supporting materials Figure 5—Classification of gains and losses on derivatives

Basis for Conclusions paragraphs BC223–BC235

]

B70

Paragraph 47

requires an entity to classify income and expenses in categories in the statement of profit or loss. To apply paragraph 47, an entity shall classify gains and losses included in the statement of profit or loss on a financial instrument designated as a hedging instrument applying

in the same category as the income and expenses affected by the risks the financial instrument is used to manage. However, if doing so would require the grossing up of gains and losses, an entity shall classify all such gains and losses in the operating category (see

paragraphs B74–B75

B71

An entity shall classify gains and losses on an undesignated component of a designated hedging instrument in the same category as gains and losses on the designated component. An entity shall classify ineffective portions of a gain or loss in the same category as the effective portions.

B72

An entity shall also apply the requirements in

paragraph B70

to gains and losses on a derivative that is not designated as a hedging instrument applying

, but is used to manage identified risks. However, if doing so would require the grossing up of gains or losses (see

paragraphs B74–B75

) or involve undue cost or effort, the entity shall instead classify all gains and losses on the derivative in the operating category.

B73

An entity shall classify gains and losses on a derivative that is not used to manage identified risks:

(a)

in the financing category, if the derivative relates to a transaction that involves only the raising of finance (for example, a purchased call option that allows the issuing entity to exchange a fixed amount of a foreign currency for a fixed number of the entity’s equity instruments), unless the entity that provides financing to customers as a main business activity classifies the gains and losses in the operating category applying

paragraph B59

; and

(b)

in the operating category, if the conditions in (a) are not met.

B74

Paragraphs B70

and

B72

prohibit the grossing up of gains and losses on financial instruments designated as hedging instruments and derivatives not designated as hedging instruments. The grossing up of gains and losses might arise from situations in which:

(a)

an entity uses such financial instruments to manage the risks of a group of items with offsetting risk positions (see

paragraph 6.6.1 of

for the criteria for a group of items to be an eligible hedged item); and

(b)

the risks managed affect line items in more than one category of the statement of profit or loss.

B75

For example, an entity may use a derivative to manage both the net foreign currency risk on revenue (classified in the operating category) and interest expenses (classified in the financing category). In such cases, the foreign exchange differences on the revenue are offset by the foreign exchange differences on the interest expenses and the gains or losses on the derivative. However, the entity classifies the foreign exchange differences on the revenue in a different category from the foreign exchange differences on the interest expenses. To present the gain or loss on the derivative in each category, an entity would need to present in each category a larger gain or loss than occurred on the derivative. Applying the requirements in

paragraphs B70–B73

, an entity shall not gross up the gains or losses in this manner and instead shall classify any gain or loss on the derivative in the operating category.

B76

The requirements in

paragraphs B70–B75

specify only how to classify income and expenses into categories of the statement of profit or loss. They do not prescribe the line item (or line items) in which to include such income and expenses, nor do they override the requirements in other

IFRS Accounting Standards

Items to be presented in the statement of profit or loss or disclosed in the notes

[

Refer:

paragraphs 75–85

Basis for Conclusions paragraphs BC236–BC276

]

B77

An entity may be required to present a line item listed in

paragraph 75

, or specified in another IFRS Accounting Standard, in more than one of the categories listed in

paragraph 47

. For example, an entity that does not invest in assets or provide financing to customers as a main business activity may be required to present the line item specified in paragraph 75(b)(ii) of impairment losses determined in accordance with

Section 5.5 of

in:

(a)

the operating category—if it relates to receivables for goods and services as described in

paragraph B48(b)

; and

(b)

the investing category—if it relates to financial assets that generate a return individually and largely independently of the entity’s other resources as described in

paragraph B46

B78

Paragraphs 24

and

41(c)

require an entity to present additional line items in the statement of profit or loss if doing so is necessary to provide a

useful structured summary

of the entity’s income and expenses. An entity uses its judgement to make this determination (including whether it is necessary to disaggregate the line items listed in

paragraph 75

Paragraphs 20

and 41(d) require an entity to disaggregate items to disclose

material information

in the

notes

. An entity also uses its judgement to make this determination. Paragraph 41 requires the entity to base its judgements on an assessment of whether the items have characteristics that are shared (similar characteristics) or characteristics that are not shared (dissimilar characteristics). Such characteristics include:

(a)

nature (see

paragraph 80

);

(b)

function (role) within the entity’s business activities (see

paragraph 81

);

(c)

persistence (including the frequency of the item of income or expense or whether it is recurring or non-recurring);

(d)

measurement basis;

(e)

measurement uncertainty or outcome uncertainty (or other risks associated with an item);

(f)

size;

(g)

geographical location or regulatory environment;

(h)

tax effects (for example, if different tax rates apply to items of income or expense); and

(i)

whether the income or expenses arise on initial recognition of a transaction or event or from a subsequent change in estimate relating to the transaction or event.

B79

Income and expenses that might have sufficiently dissimilar characteristics that presentation in the statement of profit or loss is necessary to provide a

useful structured summary

or disclosure in the

notes

is necessary to provide

material information

include:

(a)

write-downs of inventories, as well as reversals of such write-downs;

(b)

impairment losses for property, plant and equipment, as well as reversals of such impairment losses;

(c)

income and expenses from restructurings of an entity’s activities and reversals of any provisions for restructuring;

(d)

income and expenses from disposals of property, plant and equipment;

(e)

income and expenses from disposals of investments;

(f)

income and expenses from litigation settlements;

(g)

reversals of provisions; and

(h)

non-recurring income and expenses not included in (a)–(g).

Presentation and disclosure of expenses classified in the operating category

[

Refer:

paragraphs 78–85

Basis for Conclusions paragraphs BC246–BC276

]

Use of characteristics of nature and function

B80

In determining how to use the characteristics of nature and function to provide the most

useful structured summary

as required by

paragraph 78

, an entity shall consider:

(a)

what line items provide the most useful information about the main components or drivers of the entity’s profitability. For example, for a retail entity a main component or driver of profitability might be cost of sales. Presenting a cost of sales line item might provide relevant information about whether the revenue generated from the sale of goods covers what, for retailers, are mainly direct costs, and by what margin. However, cost of sales is unlikely to provide relevant information about the important components or drivers of profitability if the link between revenue and costs is less direct. For example, for some service entities, information about operating expenses classified by nature, such as employee benefits, might be more relevant to users of financial statements because these expenses are the main drivers of profitability.

(b)

what line items most closely represent the way the business is managed and how management reports internally. For example, a manufacturing entity managed on the basis of major functions might classify expenses by function for internal reporting purposes. In contrast, an entity that has a single predominant function, such as providing financing to customers, might determine that line items comprising expenses classified by nature provide the most useful information for internal reporting purposes.

(c)

what standard industry practice entails. If expenses are classified in the same way by entities in an industry, users of financial statements can more easily compare expenses between entities in the same industry.

(d)

whether the allocation of particular expenses to functions would be arbitrary to the extent that the line items presented would not provide a faithful representation of the functions. In such cases, an entity shall classify these expenses by nature.

B81

In some cases, an entity considering the factors set out in

paragraph B80

could determine that classifying and presenting some expenses by nature and other expenses by function provides the most

useful structured summary

. For example:

(a)

the factors in paragraphs B80(a)–(b) might indicate that classifying and presenting expenses by function provides the most useful structured summary, except for particular expenses for which the allocation to functions would be arbitrary (see paragraph B80(d)); and

(b)

an entity having two different types of main business activities might classify and present some expenses by function and other expenses by nature to provide information about the main drivers of its profitability.

B82

If an entity classifies and presents some expenses by nature and other expenses by function in the statement of profit or loss, it shall label the resulting line items in a way that clearly identifies what expenses are included in each line item. For example, if an entity includes some employee benefits in a function line item and other employee benefits in a nature line item, the label for the nature line item would clearly identify that it does not include all employee benefits (for example, ‘employee benefits other than those included in cost of sales’).

B83

Applying

paragraph 30

, an entity shall classify and present expenses consistently from one reporting period to the next unless paragraphs 30(a) or 30(b) apply. For example, if an entity presents impairment of goodwill as a nature line item in one reporting period, it shall also present any similar impairment of goodwill as a nature line item in subsequent reporting periods unless paragraphs 30(a) or 30(b) apply. If there is no similar impairment of goodwill in a subsequent period, the fact that there is an expense of nil in that subsequent period does not constitute a change in

classification

and presentation.

B84

An entity will either present expenses by nature, or applying

paragraph 83

, disclose some expenses by nature. The amounts presented or disclosed need not be the amounts recognised as an expense in the period. They could include amounts that have been recognised as part of the carrying amount of an asset. If an entity:

(a)

presents amounts that are not the amounts recognised as an expense in the period, it will also present an additional line item for the change in the carrying amount of the affected assets. For example, applying

paragraph 39 of

, an entity might present a line item for changes in inventories of finished goods and work in progress.

(b)

discloses, applying paragraph 83(b), amounts that are not the amounts recognised as an expense in the period, the entity shall give a qualitative explanation of that fact, identifying the assets involved.

Aggregation of operating expenses

B85

To apply

paragraph 78

, an entity shall consider what level of

aggregation

for operating expenses provides the most

useful structured summary

. For example, an entity might have various administrative activities (such as human resources, information technology, legal and accounting). To provide a useful structured summary, the entity might aggregate operating expenses relating to those activities based on their shared characteristic—all are expenses for resources consumed in administrative activities. Accordingly the entity might present them in a line item labelled as ‘administrative expenses’. The entity might also have expenses for resources consumed in selling activities. These expenses have a dissimilar characteristic from the administrative expenses—selling expenses arise from resources consumed in selling activities and administrative expenses arise from resources consumed in administrative activities. These characteristics are sufficiently dissimilar that

disaggregation

—presentation in separate line items for selling expenses and administrative expenses—might be necessary to provide a useful structured summary of the entity’s expenses.

Statement presenting comprehensive income

Other comprehensive income

[

Refer:

paragraphs 88–95

Basis for Conclusions paragraphs BCZ277–BCZ284

]

B86

Some

IFRS Accounting Standards

specify circumstances when an entity includes particular items outside the statement of profit or loss in the current reporting period.

specifies two such circumstances: the correction of errors and the effect of changes in accounting policies. Other IFRS Accounting Standards require or permit an entity to exclude from

profit or loss

components of other comprehensive income that meet the

Conceptual Framework for Financial Reporting

’s definition of income or expenses (see

paragraph B87

B87

Appendix A

defines ‘

other comprehensive income

’. The components of other comprehensive income include:

(a)

changes in revaluation surplus (see

and

);

(b)

remeasurements of

defined benefit plansdefined benefit plans

(see

);

(c)

gains and losses arising from translating the financial statements of a foreign operation (see

);

(d)

gains and losses from investments in equity instruments designated at fair value through other comprehensive income in accordance with

paragraph 5.7.5 of

;

(e)

gains and losses on financial assets measured at fair value through other comprehensive income in accordance with

paragraph 4.1.2A of

;

(f)

the effective portion of gains and losses on hedging instruments in a cash flow hedge and the gains and losses on hedging instruments that hedge investments in equity instruments designated at fair value through other comprehensive income in accordance with

paragraph 5.7.5 of

(see

Chapter 6 of

);

(g)

for particular liabilities designated as at fair value through profit or loss, the amount of the change in fair value that is attributable to changes in the liability’s credit risk (see

paragraph 5.7.7 of

);

(h)

changes in the value of the time value of options when separating the intrinsic value and time value of an option contract and designating as the hedging instrument only the changes in the intrinsic value (see Chapter 6 of

);

[

Refer:

paragraph 6.2.4(a)

]

(i)

changes in the value of the forward elements of forward contracts when separating the forward element and spot element of a forward contract and designating as the hedging instrument only the changes in the spot element, and changes in the value of the foreign currency basis spread of a financial instrument when excluding it from the designation of that financial instrument as the hedging instrument (see Chapter 6 of

);

[

Refer:

IFRS 9 paragraph 6.2.4(b)

]

(j)

insurance finance income and expenses from contracts issued within the scope of

excluded from

profit or loss

when total insurance finance income or expenses is disaggregated to include in profit or loss an amount determined by a systematic allocation applying

paragraph 88(b) of

, or by an amount that eliminates accounting mismatches with the finance income or expenses arising on the underlying items, applying

paragraph 89(b) of

; and

(k)

finance income and expenses from reinsurance contracts held excluded from profit or loss when total reinsurance finance income or expenses is disaggregated to include in profit or loss an amount determined by a systematic allocation, applying paragraph 88(b) of

B88

Reclassification adjustments

arise, for example, on disposal of a foreign operation (see

) and when some hedged forecast cash flows affect

profit or loss

(see

paragraph 6.5.11(d) of

in relation to cash flow hedges).

B89

Paragraph 90

requires an entity to present in the statement presenting comprehensive income or disclose in the

notes

reclassification adjustments

relating to components of

other comprehensive income

. Reclassification adjustments do not arise on changes in revaluation surplus recognised in accordance with

or on remeasurements of defined benefit plans recognised in accordance with

. An entity recognises these components in other comprehensive income and does not reclassify them to

profit or loss

in subsequent reporting periods. An entity may transfer changes in revaluation surplus to retained earnings in subsequent periods as the asset is used or when it is derecognised (see

and

). In accordance with

, reclassification adjustments do not arise if a cash flow hedge or the accounting for the time value of an option (or the forward element of a forward contract or the foreign currency basis spread of a financial instrument) results in amounts that an entity removes from the cash flow hedge reserve or a separate component of equity, respectively, and includes directly in the initial cost or other carrying amount of an asset or a liability. An entity transfers these amounts directly to assets or liabilities.

Statement of financial position

Classification of assets and liabilities as current or non-current

[

Refer:

paragraphs 96–98

]

B90

In applying

paragraph 96

, when an entity supplies goods or services within a clearly identifiable operating cycle, separate

classification

of current and non-current assets and liabilities in the statement of financial position provides useful information by distinguishing the net assets that are continuously circulating as working capital from those used in the entity’s long-term operations. Such separate classification also highlights assets that an entity expects to realise within the current operating cycle and liabilities that are due for settlement within the same period.

B91

For some entities, such as financial institutions, a presentation of assets and liabilities in increasing or decreasing order of liquidity provides a more

useful structured summary

than a current/non-current presentation because the entity does not supply goods or services within a clearly identifiable operating cycle.

B92

In applying

paragraph 96

, an entity is permitted to present some of its assets and liabilities using a current/non-current

classification

and others in order of liquidity when doing so provides a more

useful structured summary

. The need for a mixed basis of presentation might arise when an entity has diverse operations.

B93

Information about expected dates of realisation of assets and liabilities is useful in assessing the liquidity and solvency of an entity.

IFRS 7

requires disclosure of the maturity analysis of financial assets and financial liabilities. Financial assets include trade and other receivables, and financial liabilities include trade and other payables. Information on the expected date of recovery of non-monetary assets, such as inventories, and the expected date of settlement for liabilities, such as provisions, is also useful, whether assets and liabilities are classified as current or as non-current. For example, an entity discloses in the

notes

the amount of inventories that it expects to recover more than 12 months after the reporting period.

Current assets

[

Refer:

paragraphs 99–100

Basis for Conclusions paragraph BCZ288

]

B94

Paragraph 100

requires an entity to classify as non-current all assets not classified as current. This Standard uses the term ‘non-current’ to include tangible, intangible and financial assets of a long-term nature. It does not prohibit the use of alternative descriptions as long as the meaning is clear.

B95

The operating cycle of an entity is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. When an entity’s normal operating cycle is not clearly identifiable, it is assumed to be 12 months. Current assets include assets (such as inventories and trade receivables) that are sold, consumed or realised as part of the normal operating cycle even when they are not expected to be realised within 12 months after the reporting period. Current assets also include assets held primarily for the purpose of trading (examples include some financial assets that meet the definition of held for trading in

) and the current portion of non-current financial assets.

Current liabilities

[

Refer:

paragraphs 101–102

Basis for Conclusions paragraphs BCZ285–BCZ312

]

Normal operating cycle (see

paragraph 101(a)

)

B96

Some current liabilities, such as trade payables and some accruals for employee and other operating costs, are part of the working capital used in an entity’s normal operating cycle. An entity classifies such items as current liabilities even if they are due to be settled more than 12 months after the reporting period. The same normal operating cycle applies to the

classification

of the entity’s assets and liabilities. When the entity’s normal operating cycle is not clearly identifiable, it is assumed to be 12 months.

Held primarily for the purpose of trading (see

paragraph 101(b)

) or due to be settled within 12 months (see paragraph 101(c))

B97

Other current liabilities are not settled as part of the normal operating cycle, but are due for settlement within 12 months after the reporting period or held primarily for the purpose of trading. Examples are some financial liabilities that meet the definition of held for trading in

, bank overdrafts, and the current portion of non-current financial liabilities, dividends payable, income taxes and other non-trade payables. Financial liabilities that provide financing on a long-term basis (that is, are not part of the working capital used in the entity’s normal operating cycle) and are not due for settlement within 12 months after the reporting period are non-current liabilities, subject to

paragraphs B99–B103

B98

An entity classifies its financial liabilities as current when they are due to be settled within 12 months after the reporting period, even if:

(a)

the original term was for a period longer than 12 months; and

(b)

an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the financial statements are authorised for issue.

[

Refer:

IAS 10

paragraphs 3–7

]

Right to defer settlement for at least 12 months (

paragraph 101(d)

)

B99

An entity’s right to defer settlement of a liability for at least 12 months after the reporting period must have substance and, as illustrated in

paragraphs B100–B103

, must exist at the end of the reporting period.

B100

An entity’s right to defer settlement of a liability arising from a loan arrangement for at least 12 months after the reporting period may be subject to the entity complying with conditions specified in that loan arrangement (hereafter referred to as ‘covenants’). For the purposes of applying

paragraph 101(d)

, such covenants:

(a)

affect whether that right exists at the end of the reporting period—as illustrated in

paragraphs B102–B103

—if an entity is required to comply with the covenant on or before the end of the reporting period. Such a covenant affects whether the right exists at the end of the reporting period even if compliance with the covenant is assessed only after the reporting period (for example, a covenant based on the entity’s financial position at the end of the reporting period but assessed for compliance only after the reporting period).

(b)

do not affect whether that right exists at the end of the reporting period if an entity is required to comply with the covenant only after the reporting period (for example, a covenant based on the entity’s financial position six months after the end of the reporting period).

B101

If an entity has the right, at the end of the reporting period, to roll over an obligation for at least 12 months after the reporting period under an existing loan facility, it classifies the obligation as non-current, even if it would otherwise be due within a shorter period. If the entity has no such right, the entity does not consider the potential to refinance the obligation and classifies the obligation as current.

B102

When an entity breaches a covenant of a long-term loan arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand, it classifies the liability as current, even if the lender agreed, after the reporting period and before the authorisation of the financial statements for issue, not to demand payment as a consequence of the breach. The entity classifies the liability as current because, at the end of the reporting period, it does not have the right to defer its settlement for at least 12 months after that date.

B103

However, an entity classifies the liability as non-current if the lender agreed by the end of the reporting period to provide a period of grace ending at least 12 months after the reporting period, within which the entity can rectify the breach and during which the lender cannot demand immediate repayment.

B104

Classification

of a liability is unaffected by the likelihood that the entity will exercise its right to defer settlement of the liability for at least 12 months after the reporting period. If a liability meets the criteria in

paragraphs 101–102

for classification as non-current, it is classified as non-current even if management intends or expects the entity to settle the liability within 12 months after the reporting period, or even if the entity settles the liability between the end of the reporting period and the date the financial statements are authorised for issue. However, in either of those circumstances, the entity may need to disclose information about the timing of settlement to enable users of financial statements to understand the impact of the liability on the entity’s financial position (see

paragraphs 6C(c) of

and

B105(d)

B105

If the following events occur between the end of the reporting period and the date the financial statements are authorised for issue, those events are disclosed as non-adjusting events in accordance with

IAS 10

Events after the Reporting Period

(a)

refinancing on a long-term basis of a liability classified as current (see

paragraph B98

);

(b)

rectification of a breach of a long-term loan arrangement classified as current (see

paragraph B102

);

(c)

the granting by the lender of a period of grace to rectify a breach of a long-term loan arrangement classified as current (see

paragraph B103

); and

(d)

settlement of a liability classified as non-current (see

paragraph B104

B106

In applying

paragraphs 101–102

and

B96–B103

an entity might classify liabilities arising from loan arrangements as non-current when the entity’s right to defer settlement of those liabilities is subject to the entity complying with covenants within 12 months after the reporting period (see

paragraph B100(b)

). In such situations, the entity shall disclose information in the

notes

that enables users of financial statements to understand the risk that the liabilities could become repayable within 12 months after the reporting period, including:

(a)

information about the covenants (including the nature of the covenants and when the entity is required to comply with them) and the carrying amount of related liabilities.

(b)

facts and circumstances, if any, that indicate the entity may have difficulty complying with the covenants—for example, the entity having acted during or after the reporting period to avoid or mitigate a potential breach. Such facts and circumstances could also include the fact that the entity would not have complied with the covenants if they were to be assessed for compliance based on the entity’s circumstances at the end of the reporting period.

[

Note:

Paragraphs 81–83

of IFRS

Practice Statement 2

Making Materiality Judgements

provides non-mandatory guidance on assessing the materiality of information about covenants.]

Settlement (

paragraphs 101(a), 101(c) and 101(d)

)

B107

For the purpose of classifying a liability as current or non-current, settlement refers to a transfer to the counterparty that results in the extinguishment of the liability. The transfer could be of:

(a)

cash or other economic resources—for example, goods or services; or

(b)

the entity’s own equity instruments, unless

paragraph B108

applies.

B108

Terms of a liability that could, at the option of the counterparty, result in its settlement by the transfer of the entity’s own equity instruments do not affect its

classification

as current or non-current if, applying

IAS 32

, the entity classifies the option as an equity instrument, recognising it separately from the liability as an equity component of a compound financial instrument.

Items to be presented in the statement of financial position or disclosed in the notes

[

Refer:

paragraphs 103–106

Basis for Conclusions paragraphs BC313–BC315

]

B109

Paragraphs 24

and

41(c)

require an entity to present additional line items in the statement of financial position if doing so is necessary to provide a

useful structured summary

of the entity’s assets, liabilities and equity. An entity uses its judgement to make this determination (including whether it is necessary to disaggregate the line items listed in

paragraph 103

). Paragraph 41 requires the entity to base its judgements on an assessment of whether the items have characteristics that are shared (similar characteristics) or characteristics that are not shared (dissimilar characteristics). For additional line items for assets and liabilities, an entity bases its judgements on an assessment of the nature or function of the assets or liabilities. The characteristics listed in

paragraphs B110(c)–(k)

might assist an entity in identifying the nature or function of assets and liabilities.

B110

Paragraphs 20

and

41(d)

require an entity to disaggregate items to disclose

material information

in the

notes

. An entity uses its judgement to do this based on an assessment of whether the items have characteristics that are shared (similar characteristics) or characteristics that are not shared (dissimilar characteristics). Such characteristics include:

(a)

nature;

(b)

function (role) in the entity’s business activities;

(c)

duration and timing of recovery or settlement (including whether an asset or liability is classified as current or non-current or whether its recovery or settlement forms part of the entity’s operating cycle);

(d)

liquidity;

(e)

measurement basis;

(f)

measurement uncertainty or outcome uncertainty (or other risks associated with an item);

(g)

size;

(h)

geographical location or regulatory environment;

(i)

type, for example, the type of good, service or customer;

(j)

tax effects—for example, if assets or liabilities have different tax bases; and

(k)

restrictions on the use of an asset or on the transferability of a liability.

B111

Assets, liabilities and items of equity that might have sufficiently dissimilar characteristics that presentation in the statement of financial position is necessary to provide a

useful structured summary

or disclosure in the

notes

is necessary to provide

material information

include:

(a)

property, plant and equipment disaggregated into classes in accordance with

;

(b)

receivables disaggregated into amounts receivable from trade customers, amounts receivable from related parties, prepayments and other amounts;

(c)

inventories disaggregated, applying

, into items such as merchandise, production supplies, materials, work in progress and finished goods;

(d)

trade payables disaggregated, applying

, to provide separately the amounts of those payables that are part of supplier finance arrangements;

(e)

provisions disaggregated according to their nature, such as, provisions for employee benefits, decommissioning liabilities, or other items; and

(f)

equity capital and reserves disaggregated into various classes, such as paid-in capital, share premium and reserves.

Notes

Structure

[

Refer:

paragraphs 113–116

Basis for Conclusions paragraphs BCZ319–BC324

]

B112

Paragraph 114

requires an entity to present

notes

in a systematic manner, so far as is practicable. Examples of systematic ordering or grouping of the notes include:

(a)

giving prominence to the areas of its activities that an entity considers to be most important to an understanding of its financial performance and financial position, such as grouping together information about particular business activities;

(b)

grouping together information about items measured similarly such as assets measured at fair value; or

(c)

following the order of the line items in the statement(s) of financial performance and the statement of financial position, such as:

(i)

statement of compliance with

IFRS Accounting Standards

(see

paragraph 6B of

);

(ii)

material accounting policy information (see

paragraph 27A of