A new era for financial reporting
By Mulala Ratshitanga, SAICA Project Director: Financial Reporting
A new era for financial reporting has arrived as a new accounting standard has been launched. The latest accounting standard introduces fundamental changes to how companies present and disclose information in their financial statements. The new accounting standard, IFRS 18 – Presentation and Disclosures in Financial Statements, will affect all companies across all sectors in South Africa which apply IFRS Accounting Standards.
IFRS 18 will improve comparability in the income statement (statement of profit or loss), enhance both the transparency of financial statements by disclosing management defined performance measures (MPMs), and the grouping of information in the financial statements.
One of the most significant changes that have been introduced will impact on how the information is presented in the income statement. Companies will be required to classify income and expenses into operating, investing and financing categories in the income statement and to present two new defined subtotals: operating profit and profit before financing and income taxes. There are limited changes affecting the balance sheet, statement of cash flows and statement of changes in equity.
IFRS 18 replaces the current IFRS Accounting Standard, IAS 1 – Presentation of Financial Statements and to some extent, carries across some requirements to IFRS 18. The requirements which remain unchanged include those relating to debt covenants and material accounting policies.
As with any change in reporting standards, there may be challenges during the transition period. However, companies are encouraged to carefully assess the impact of the standard on their financial reporting processes. As a result, the overall objective is to create opportunities for more efficient reporting, allowing businesses to allocate resources more effectively and focus on their core operations.
IFRS 18 will become effective for annual periods beginning on or after 1 January 2027 and early application is permitted.
For more information on IFRS 18, visit the SAICA website https://www.saica.org.za/resources/corporate-reporting/financial-reporting/eduifrs-18---presentation-and-disclosure-in-financial-statements .
About SAICA
The South African Institute of Chartered Accountants (SAICA), South Africa’s pre-eminent accountancy body, is recognised as the world’s leading accounting institute and is home to the leading CA designation in the world The Institute provides a wide range of support services to more than 60 000 members and associates who are chartered accountants (CAs[SA]), as well as associate general accountants (AGAs[SA]) and accounting technicians (ATs[SA]), who hold positions as CEOs, MDs, board directors, business owners, chief financial officers, auditors and leaders in every sphere of commerce and industry, and who play a significant role in the nation’s highly dynamic business sector and economic development.
SAICA is a member of Chartered Accountants Worldwide (CAW), a global family that connects over 1,8 million fellow Chartered Accountants and students in more than 190 countries. Together, we support, develop, and promote the role of Chartered Accountants as trusted business leaders, difference makers, and advisers.
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