New Accounting Standard - IFRS 18 Presentation and Disclosure in Financial Statements

In May 2024, the International Accounting Standards Board (IASB) issued IFRS 18, ‘Presentation & Disclosure in Financial Statements.’ The new standard will replace IAS 1, effective from 1st January 2027, although entities can apply the new standard before this date.

IFRS 18 aims to bring a fresh, standardised approach to financial reporting. By defining subtotals and incorporating more disclosures on management-defined performance measures, it aims to improve how companies communicate their performance in financial reports. This change responds to feedback highlighting the difficulty analysts and other users faced due to the varied presentation of results across different entities.

IFRS 18 impacts all financial statements, with the most significant changes relating to the statement of profit or loss and the notes to the accounts.

As a hedge accounting expert, I’m particularly excited to share insights on the classification of gains and losses on derivatives. The decision tree below, taken from the illustrative examples in IFRS 18, should be a valuable resource for those navigating these classifications for the first time under the new standard.

Key takeaways include:

• Classifying gains and losses in the same category as the hedged item.

• If the derivative is used solely for raising finance, it’s essential to distinguish whether providing finance is your organisation's primary business activity.

Hedge Effective Advisory is here to help, so feel free to reach out to our team if you have any questions.

Let's navigate these changes together.