The International Accounting Standards Board (IASB) has concluded its efforts to enhance the usefulness of information presented and disclosed in financial statements. The new standard, IFRS 18 Presentation and Disclosure in Financial Statements, aims to provide investors with more clear and comparable information regarding companies’ performance financially, thus facilitating more informed investment decisions. This standard will impact all companies that use IFRS Accounting Standards.
IFRS 18 introduces three new sets of requirements to improve the reporting of financial performance and offer investors a better foundation for investigating and comparing companies:
Transparency of Management-Defined Performance Measures Enhanced
Many companies offer company-specific measures, often called alternative performance measures, which investors find useful. However, most companies currently do not provide sufficient information for investors to understand how these measures are calculated and how they relate to the required measures in the income statement.
To address this, IFRS 18 mandates that companies disclose explanations of those company-specific measures related to the income statement, known as management-defined performance measures. These new requirements will enhance the discipline and transparency of management-defined performance measures, making them subject to audit.
