New Categorization of Income and Expenses in the Statement of Profit or Loss

Abstract

Investors and other users of information from financial statements demand relevance, credibility and transparency in the presentation of entity's financial statements. They are also interested in greater comparability between financial statements, both between different entities, and between financial statements of an entity from several different periods. Their requirements are recognized in the new International Financial Reporting Standard 18 - Presentation and disclosure in financial statements. The aim of the paper is to familiarize with the new approach in the presentation of the statement of profit or loss that will result after the application of the newly adopted standard starting in 2027. With the entry into force of IFRS 18, there should be an improvement in the structure of the statement of profit or loss, and improvement of the comparability of information on the entity's financial performance. The standard will also introduce new specific requirements for disclosure of management-defined performance measures, and criteria with detailed instructions for (dis)aggregation of financial statements’ items. The application of the new provisions from IFRS 18 will enable entities to make their financial statements a truer picture of their operations and financial performance. In this way it will be responded to investors' demand for better information about entities' financial performance. The paper is primarily intended for theoreticians and practitioners in the field of accounting and auditing, regulatory bodies, investors, as well as for all interested parties who use information from financial statements when making business decisions.