IFRS Framework and IFRS 18: Key Financial Reporting Updates

Posted on Aug 15, 2025 in Financial and Accounting Management

Framework Overview and Key Concepts

IASB’s Role and IFRS Application

  • Help IASB:
    • Development and review of IFRSs.
    • Promote harmonization.
    • Auditor compliance.
    • Support IFRS application.

Fundamental Qualitative Characteristics

Recognition Criteria: Information is recognized if it provides relevant information and a faithful representation (free from error, complete, and neutral).

Enhancing Qualitative Characteristics

  • Comparability: Allows users to identify and understand similarities and differences among items.
  • Timeliness: Information is available to decision-makers in time to be capable of influencing their decisions.
  • Verifiability: Helps assure users that information faithfully represents the economic phenomena it purports to represent.
  • Understandability: Information is classified, characterized, and presented clearly and concisely.

Derecognition Principles

  • Assets: Derecognized when control is lost.
  • Liabilities: Derecognized when the present obligation no longer exists (in part or in full).

Disclosure Requirements

  • Comparability vs. Flexibility: Balancing the need for consistent reporting with the flexibility required for specific circumstances.
  • Objectives and Principles: Adherence to stated disclosure objectives and underlying principles.
  • Classification: Proper categorization of financial statement elements.
  • Aggregation: Appropriate grouping of similar items for clarity and conciseness.

IFRS 18: Presentation and Disclosure

Key Changes in IFRS 18

  • Introduction of new categories and defined subtotals in the Statement of Profit or Loss.
  • Enhanced requirements to improve aggregation and disaggregation of financial information.
  • New focus on Management Performance Measures (MPMs) to increase transparency, promote disciplined reporting, and ensure a single location for key management insights.

Understanding Management Performance Measures (MPMs)

Definition and Purpose of MPMs

An MPM is a subtotal of income or expense designed to provide information on a specific aspect of financial performance from a management’s perspective.

MPM Disclosure and Comparison with IFRS

Companies must disclose how MPMs compare with measures defined by IFRS. This includes detailed information on:

  • How the MPM is calculated.
  • The usefulness of the information provided by the MPM.
  • A reconciliation between the MPM and the most directly comparable IFRS measure.