The Accounting Standards Board of Canada (AcSB) chair Armand Capisciolto told CPA Canada about the impact of IFRS 18 on financial reporting and the importance of early preparation for income statement changes.
IFRS 18 was released in April 2024, by the International Accounting Standards Board and will be effective from 2027.
It is expected to bring new operating profit subtotal and categorise expenses and income into financing, investing, and operating segments.
IFRS 18 marks a departure from the minimal presentation guidance of its predecessor, IAS 1.
The new standard aims to eliminate inconsistencies by providing clear definitions of operating income, which currently lacks guidance.
Armand Capisciolto said: “There isn’t even guidance in the current standard on what makes up operating income.”
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By GlobalDataThe upcoming standard is anticipated to offer a more transparent and consistent reporting framework, aligning with investor needs.
The new standard mandates that gains and losses related to long-term debt, investments, and accounts payable be sorted into the newly defined categories.
Moreover, management performance measures such as adjusted EBITDA will be standardised, ensuring comparability and clarity.
Gabriela Kegalj, KPMG global IFRS presentation leader, advises companies to undertake a ‘comprehensive gap analysis’ to adapt to the new standard.
This entails aligning current non-GAAP metrics with the forthcoming IFRS 18 requirements, including detailed reconciliations in financial statement notes.
Armand Capisciolto also highlighted the need for greater focus on the aggregation and disaggregation of information, which he considers the most complex aspect of IFRS 18.
Capisciolto further stated: “Identifying those changes early is going to be critical, because changing your Chart of Accounts, making system changes for automated entries—it’s not something that can be done overnight.
“It’s something that’s very difficult to be done after the fact as well.”
In 2023, the UK Endorsement Board (UKEB) and AcSB discussed the adoption of IFRS within their respective frameworks.
They exchanged insights on the challenges they face and shared perspectives on financial reporting topics, including international tax reform.
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The new standard mandates that gains and losses related to long-term debt. Credit: Drozd Irina/Shutterstock.
Image link: https://www.shutterstock.com/image-photo/wooden-cubes-word-ifrs-on-financial-2194624667
Source: https://www.cpacanada.ca/news/analysis/ifrs18
