Insights into MFRS 18
Classification of income and expenses in the statement of profit or loss
Our ‘Insights into MFRS 18’ series explains the new requirements of MFRS 18, highlighting some areas of the Standard that we believe will be challenging to apply in practice. They also aim to help users of MFRS financial statements to understand how financial statements will change when applying the new Standard.
MFRS 18 has given the statement of profit or loss a major facelift. It requires two new subtotals above the already existing ‘profit or loss’ total, dividing the statement into the following five discrete sections or categories – operating, investing, financing, income taxes and discontinued operations.
Classification in accordance with MFRS 18 is not just a technical exercise – it directly impacts how users interpret financial performance. Misclassification can distort operating profit, affect covenant compliance, and influence investor perception. Preparers should understand the principles and exceptions thoroughly to avoid unintended consequences.
This article provides a comprehensive analysis of MFRS 18’s classification requirements, exceptions, and practical challenges. It builds on the high-level overview in our ‘Get ready for MFRS 18’ publication and goes deeper into application issues.
How we can help
We hope you find the information in this article helpful in giving you some insight into aspects of MFRS 18. If you would like to discuss any of the points raised, please speak to your usual Grant Thornton contact.
