Example IFRS 18 Statement of Profit or Loss for a retail, wholesale, manufacturing or service business

Line item

Classification

Why

Revenue from contracts with customers (IFRS 15)

Operating category

Income from assets that do not generate a return individually and largely independently of the entity’s other resources (IFRS 18.B48)

Finance income on contract assets (IFRS 15)

Operating category

Gain on sale of PPE (IAS 16)

Operating category

Modification gains/losses on contracts (IFRS 15.21(b))

Operating category

IFRS 15.21(b) requires that the effect that the modification has on the transaction price and the entity’s measure of progress towards complete satisfaction of the performance obligation is recognised as an adjustment to revenue. The adjustment is reflected as an adjustment to revenue which has previously been classified in the operating category.

Inventories expensed, including cost of sales and write-downs to net realisable value (IAS 2)

Operating category

Expenses from assets that do not generate a return individually and largely independently of the entity’s other resources (IFRS 18.B48)

Depreciation of property, plant and equipment (PPE) (IAS 16)

Operating category

Loss on sale of PPE (IAS 16)

Operating category

Impairment of PPE assets and reversals of impairment (IAS 36)

Operating category

Amortisation of intangible assets (software) (IAS 38)

Operating category

Depreciation of right-of-use assets classified as PPE (IFRS 16)

Operating category

Expected credit losses on trade receivables (IFRS 9)

Operating category

Variable lease payments not included in measuring lease liability (IFRS 16)

Operating category

Refer to Note 1 below

Lease payments on short-term leases (IFRS 16)

Operating category

The expense does not meet the criteria to be classified in any of the other four categories.

Foreign exchange differences on foreign currency trade payable (IAS 21)

Operating category

Refer to Note 2 below

Lease modification gains/losses (IFRS 16)

Operating category

The lease liability arises from a transaction that does not involve only the raising of finance (IFRS 18.59(b)), but the modification gain/loss is NOT (see IFRS 18.61):

1. Interest income and expense identified for the purpose of applying IFRS® Accounting Standards, and
2. Income and expenses arising from changes in interest rates.

Provisions recognised as an expense (IAS 37)

Operating category

The liability for the provision arises from a transaction that does not involve only the raising of finance (IFRS 18.59(b)), but the provision expense is NOT (see IFRS 18.61):

1. Interest income and expense identified for the purpose of applying IFRS® Accounting Standards, and
2. Income and expenses arising from changes in interest rates.

Share-based payment expense – employee compensation (IFRS 2)

Operating category

The expense does not meet the criteria to be classified in any of the other four categories.

Share-based payment expense – other services obtained (IFRS 2)

Operating category

Operating profit

Mandatory sub-total

Sum of the operating category

Interest income on cash and cash equivalents

Investing category

For entities without specified main business activities, income and expenses relating to cash and cash equivalents are classified in the investing category (IFRS 18.53(b))

Profit before financing and income taxes

Mandatory subtotal

Sum of the operating and investing categories

Finance expenses on contract liabilities (IFRS 15)

Financing category

The liability arises from a transaction that does not involve only the raising of finance, and interest expense is identified for the purposes of applying IFRS® Accounting Standards (IFRS 18.61(a))

Finance expense on lease liabilities (IFRS 16)

Financing category

Interest expense on provision liabilities (IAS 37)

Financing category

Interest expense on loans measured at amortised cost - foreign exchange borrowing (IFRS 9)

Financing category

The liability arises from a transaction that involves only the raising of finance (IFRS 18.60(a))

Foreign exchange differences on foreign currency loans (IAS 21)

Refer to Note 3 below

Profit before income taxes

Additional subtotal

Income tax expense (current and deferred)

Income taxes category

Income and expenses within the scope of IAS 12

Profit from continuing operations

Additional subtotal

Results from discontinued operations (IFRS 5)

Discontinued operations category

Income and expenses presented as a single line item in accordance with IFRS 5.33(a) are classified in the discontinued operations category (IFRS 18.68)

Profit

Mandatory total

Sum of all categories

Note 1: Refer to BDO’s IFRS in Practice, Example 3.9.2-3

Note 2: Trade payables with extended credit terms are considered liabilities arising from transactions that don’t involve only the raising of finance. Judgement is required to determine whether foreign exchange differences on these trade payables are considered (in total) as either operating or financing. Our article provides more information.

Note 3: Our article explains that foreign exchange differences on foreign currency liabilities that arise from transactions involving only the raising of finance (and where the entity does not provide financing to customers) are classified in the financing category.