Comprehensive Guide to IFRS 18 EducationalSession for Financial Institutions, Insurance, and Conglomerates
This detailed guide is intended to providea thorough understanding of the IFRS 18 Educational Session held on June 11,2024. This session was tailored to assist financial institutions, insurancecompanies, and conglomerates in comprehending and implementing the IFRS 18standard. The guide covers all key aspects discussed in the session, includingthe new structure of financial statements, transparency of performancemeasures, and enhanced information grouping.
IFRS 18 is a new standard by theInternational Accounting Standards Board (IASB) aimed at improving thepresentation and disclosure of financial statements. The goal is to providemore transparent, comparable, and useful information for investors, enhancingtheir ability to make better investment decisions.
- Defined Categories: IFRS 18 introducesthree specific categories for income and expenses:
- Operating: Regular businessoperations.
- Investing: Activities related toinvestments.
- Financing: Financial activities,including debt and equity financing.
- Standardized Subtotals: Companies must now present defined subtotals,including an operating profit, which ensures consistency and improvescomparability across different entities.
- Example: A company will show revenue, less operating expenses, to reach theoperating profit, then separately list investing and financing items to providea clear and consistent view of financial performance.
- Disclosure Requirements: Companies mustexplain any alternative performance measures (APMs) they use, detailing:
- How these measures are calculated.
- Their relation to the standardfigures in the income statement.
- Enhanced Discipline: This requirement aims to improve transparency and ensurethat these measures are reliable and useful for investors.
- Audit Inclusion: These performance measures will be subject to audit, whichensures their accuracy and consistency.
- Example: If a company reports a unique measure such as 'adjusted EBITDA,' itmust explain what adjustments are made and how this measure relates to thestandard EBITDA figure.
- Guidance on Organization: IFRS 18provides guidelines on how to organize information in the primary financialstatements and notes.
- Balanced Detail: Companies must strike a balance between too much and toolittle detail, aiding investor analysis.
- Transparency of Operating Expenses: Companies need to provide clearerreporting on operating expenses, helping investors find and understand criticalfinancial information.
- Example: Detailed breakdowns of cost categories like raw materials, labor,and overheads to enhance clarity.
- Organizers: The sessions are organized byEFRAG and IASB.
- Purpose: To assist various stakeholder groups, including financialinstitutions and insurance companies, in understanding and implementing IFRS18.
- Format: Interactive webinars with Q&A segments to address practicalchallenges and participant queries.
- Web Resources: IFRS 18 implementationwebpage offers various resources such as illustrative examples, projectsummaries, and feedback statements.
- Guides and Tutorials: Additional educational videos and documents areavailable to help understand specific requirements and practical applications.
- Challenge: Updating IT systems to complywith the new reporting requirements.
- Solution: Investing in updated software and training for staff to handle thenew data structures and reporting formats.
- Challenge: Ensuring that all relevantstaff understand the changes and can implement them correctly.
- Solution: Comprehensive training programs and workshops focusing on the newstandards and their practical applications.
- Challenge: Communicating the changeseffectively to all stakeholders.
- Solution: Clear and detailed explanations of the new standards and theirimpacts, along with regular updates and Q&A sessions.
For more detailed information and access tosupporting materials, visit the following resources:
- [IFRS 18 Presentation and Disclosure in FinancialStatements](https://www.ifrs.org)
- [EFRAG’s Educational Session Recordings](https://www.efrag.org)
- [IASB Implementation Webpage](https://www.ifrs.org/implementation)
The IFRS 18 educational session providedinvaluable insights into the new standard, focusing on enhancing thecomparability, transparency, and usefulness of financial statements. Byfollowing the steps outlined in this guide, financial institutions, insurancecompanies, and conglomerates can better prepare for and implement the changesintroduced by IFRS 18.
For further assistance, please refer to the official IFRS and EFRAG websites orcontact your financial reporting advisor. This guide ensures that stakeholdersare well-equipped to navigate the significant changes brought by IFRS 18,leading to better financial reporting and investor decision-making.
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