AASB 18 Presentation and Disclosure in Financial Statements

EXECUTIVE SUMMARY

On 14 June 2024, the AASB released
AASB 18  Presentation and Disclosure in Financial Statements (“the Standard”). AASB 18 replaces AASB 101 Presentation of Financial Statements. The Standard aims to improve how entities communicate in their financial statements, with a focus on information about financial performance in the statement of profit or loss.

Consequential amendments have also been made to other accounting standards, including AASB 108 which will have its title changed from “Accounting Policies, Changes in Accounting Estimates and Errors” to “Basis of Preparation of Financial Statements”, with content moved from AASB 101 to that standard.

WHO IS AFFECTED?

The Standard affects all entities preparing Tier 1 general purpose financial statements.  

WHAT IS REQUIRED?

The key changes introduced by AASB 18 include the following:

• Statement of profit or loss:
  • Income and expenses will now be categorised as operating, financing and investing in the statement of profit or loss; and
  • Two new required subtotals, namely, operating profit and profit before income and taxes, have been introduced to improve analysis;
• Notes to the financial statements:
  • A new note has been introduced which will disclose all management-defined performance measures (MPMs), including:
    • a statement that the MPM reflects management’s view;
    • an explanation of why the MPM is reported and how it is calculated;
    • a reconciliation to the most directly comparable subtotal listed in AASB 18 or total or subtotal required by Australian Accounting Standards; and
    • an explanation of any changes to MPMs;
  • A requirement to disclose by nature specified expenses included in each line item in the operating category;
• Both primary financial statements and notes now have:
  • enhanced requirements for aggregating and disaggregating information;
  • guidance on whether information should be in the primary financial statements or in the notes; and
  • disclosures about items labelled “other”.

For many entities, the impact of AASB 18 will be profound and require revisiting mapping of transactions to ensure that similar transactions are allocated to the appropriate class in the statement of profit or loss, amongst other impacts.

WHEN IS IT EFFECTIVE?

For the majority of entities, the Standard applies to annual reporting periods beginning on or after 1 January 2027 with earlier application permitted.

Entities that are required to apply the Standard for annual reporting periods beginning on or after 1 January 2028 with earlier application permitted include:

(a)  not-for-profit private sector entities;

(b)  not-for-profit public sector entities; and

(c)  superannuation entities applying AASB 1056 Superannuation Entities.