Primary Financial Statements

The IASB met on 21 and 22 March 2023 to redeliberate the proposals in its Exposure Draft General Presentation and Disclosures relating to: 

• disclosure of operating expenses by nature (Agenda Paper 21A);
• management performance measures (Agenda Papers 21B–21D);
• categories in the statement of profit or loss (Agenda Paper 21E); and
• entities with specified main business activities (Agenda Paper 21F).

Disclosure of operating expenses by nature in the notes (Agenda Paper 21A) 

The IASB tentatively decided:

1. to change the specific disclosure requirement for operating expenses by nature proposed in the Exposure Draft to require an entity to disclose the amounts of depreciation, amortisation, employee benefits, impairments and write-downs of inventory included in each function line item in the statement of profit or loss.
   All 13 IASB members agreed with this decision.
2. to confirm the proposal in the Exposure Draft that an entity would disclose the information described in (a) in a single note.
   All 13 IASB members agreed with this decision.
3. to provide application guidance clarifying that the amounts described in (a) are not required to be expense amounts.
   All 13 IASB members agreed with this decision.
4. to require an entity to provide a qualitative explanation if part of the amount disclosed has been included in the carrying amount of assets. The explanation would include identifying in which assets the amounts have been included.
   All 13 IASB members agreed with this decision.
5. to expand the scope of the proposed exemption from the general requirement to disaggregate material information that the IASB tentatively decided on in January 2023. As a result, an entity would be exempt from disclosing:
   1. in relation to function line items in the statement of profit or loss, the amounts of nature expenses included therein (beyond those specifically required); and
   2. in relation to nature expenses that are required to be disclosed by an IFRS Accounting Standard, the amounts included in each function line item in the statement of profit or loss.
      

Twelve of 13 IASB members agreed with this decision.

Management performance measures—rebuttable presumption (Agenda Paper 21B) 

The IASB previously tentatively decided to introduce a rebuttable presumption that a subtotal of income and expenses included in an entity’s public communications outside the financial statements represents management’s view of an aspect of the entity’s financial performance. The IASB also previously tentatively decided to add application guidance about what reasonable and supportable information the entity would need to rebut the presumption.

The IASB tentatively decided to develop further the application guidance to explain that reasonable and supportable information for rebutting the presumption would include management communicating or using a subtotal in a way that is consistent with the assertion that the subtotal does not communicate management’s view. The IASB also tentatively decided to include some examples of when this could be the case.

All 13 IASB members agreed with these decisions.

Management performance measures—Relationship with the requirements of other IFRS Accounting Standards (Agenda Paper 21C) 

In relation to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, the IASB tentatively decided:

1. to confirm the proposal that if an entity changes the calculation of its management performance measures, introduces a new management performance measure or removes a previously disclosed management performance measure from its financial statements, it would be required:
   1. to disclose sufficient explanation for users of financial statements to understand the change, addition or removal and its effects; and
   2. to disclose the reasons for the change, addition or removal (see paragraphs 108(a) and 108(b) of the Exposure Draft).
2. to amend the proposed disclosure requirement in paragraph 108(c) of the Exposure Draft to say that an entity need not provide comparative information when the entity changes a management performance measure or introduces a new one, if it is impracticable to do so.
3. to add a requirement that if an entity does not provide comparative information about a new or changed management performance measure because it is impracticable to do so, the entity shall disclose that fact.
4. to clarify that the choice of a management performance measure, including how the measure is calculated, is not an accounting policy as defined in IAS 8.

All 13 IASB members agreed with these decisions.

In relation to IAS 34 Interim Financial Reporting, the IASB tentatively decided:

1. to confirm the proposal to amend IAS 34 to require the disclosure in interim financial reports of the management performance measures set out in paragraph 106 of the Exposure Draft.
2. to expand the proposed amendment to IAS 34 to include the requirements that apply to changes in an entity’s management performance measures (see paragraph 108 of the Exposure Draft) in the list of ‘other disclosures’ required by paragraph 16A of IAS 34.

All 13 IASB members agreed with these decisions.

Management performance measures—tax disclosure (Agenda Paper 21D) 

The IASB continued a discussion begun at its May 2022 meeting on the requirement to disclose the tax effect of reconciling items, and tentatively decided:

1. to retain the option of calculating the tax effects of the reconciling items at the statutory tax rate(s) applicable to the underlying transaction(s) in the relevant jurisdiction(s); and
2. to replace the alternative option of adding an allocation of other income tax effects to the tax effects described in (a), with options:
   1. to calculate the tax effects of the reconciling items on the basis of a reasonable pro rata allocation of the current and deferred tax of the entity in the tax jurisdiction(s) concerned; or
   2. to calculate the tax effects of the reconciling items by another method that achieves a more appropriate allocation in the circumstances.

All 13 IASB members agreed with these decisions.

Issues for categories in the statement of profit or loss (Agenda Paper 21E)

The IASB tentatively decided:

1. to require an entity to use its judgement to determine in which category in the statement of profit or loss to classify foreign exchange differences on a liability that arises from a transaction that involves operating activities in addition to the raising of finance. All 13 IASB members agreed with this decision.
2. to require an entity to classify in the financing category of the statement of profit or loss all income and expenses arising after initial recognition from hybrid contracts:
   1. with host liabilities that arise from transactions that do not involve only the raising of finance; and
   2. that are measured at amortised cost in their entirety.

Twelve of 13 IASB members agreed with this decision.

Issues related to the proposals for entities with specified main business activities (Agenda Paper 21F)

The IASB tentatively decided:

1. to confirm the accounting policy choice proposed in paragraph 51 of the Exposure Draft for the classification of income and expenses arising from cash and cash equivalents for entities that provide financing to customers as a main business activity; and
2. to clarify that the requirement in paragraph 52(a) of the Exposure Draft applying to an entity that invests in financial assets as a main business activity would apply regardless of whether the entity has any other specified main business activity.

All 13 IASB members agreed with these decisions.