FRS 18: more submissions to IFRS IC

Below, we examine three of the seven tentative decisions, which provide practical clarifications on topics that may pose implementation challenges at first-time application of IFRS 18. 

Labels of sub-totals 

The Committee was asked whether the label of a sub-total in the statement of profit or loss that is a management-defined performance measure (MPM) should specify all the elements included or excluded from its calculation. 

In its tentative decision, the IFRS IC reminded issuers that deciding on an appropriate label requires the use of judgement. In particular, it emphasised that: 

• the label for a sub-total or an MPM should faithfully represent the characteristics of the measure; 
• an MPM should be presented in a way that is clear, understandable and not misleading to the users of financial statements; 
• the information required to understand the measure does not necessarily need to be included in the label itself, but can be provided in the notes. 

Thus, the Committee concluded that a label for a sub-total that is an MPM does not need to explicitly list all the elements included or excluded from its definition, provided that the label used, together with any information and description in the notes that are necessary to understand it, meet the requirements of IFRS 18. 

Presentation of operating expenses 

The Committee was asked about the conditions under which an entity would be required to use a mixed presentation for operating expenses (i.e. by nature and by function) and whether it can disaggregate expenses of the same nature across line items presented by nature and line items presented by function. 

In its tentative decision, the IFRS IC emphasised that a mixed presentation is required if it provides the most useful structured summary of operating expenses. Drawing primarily on the example in paragraph B821 of IFRS 18, the Committee also reminded preparers that using a mixed presentation does not require all expenses of the same nature to be presented entirely by nature or entirely by function. Expenses of the same nature may be disaggregated across line items presented by nature and line items presented by function, provided that the labels allow users to easily identify the expenses included in each line. 

Measures that include hypothetical income and expenses 

The Committee was asked whether a performance measure that includes hypothetical income and expenses can be classified as an MPM. Hypothetical income and expenses are those that are not, and will never be, recognised in accordance with IFRS. 

In its tentative decision, the IFRS IC emphasised that: 

• the definition of an MPM does not impose any restrictions on how a sub-total of income and expenses is calculated, and therefore does not prohibit the inclusion of hypothetical income and expenses; 
• faithful representation does not imply that the measure is “good” or “bad”, but simply whether it faithfully reflects management’s view of an aspect of the financial performance of the entity.  

Therefore, the Committee concluded that such a measure could meet the definition of an MPM as defined in IFRS 18. In this case, the entity must meet the disclosure requirements set out for MPMs, notably by using a label that is clear, understandable and not misleading to the users of financial statements. 

Other decisions 

The IFRS IC has also published four other agenda decisions relating to IFRS 18: 

• the concept of “public communications” for the purpose of identifying MPMs for private entities; 
• the classification of income and expenses when an entity’s main business activity is providing financing to customers; 
• assessing the main business activities of a manufacturer-lessor, particularly in relation to the identification of “specified main business activities”; 
• the classification of income and expenses related to cash and cash equivalents. 

Comment period deadline

The comment period for all these tentative decisions closes on 9 September 2026.