20 ALRAQABA . ISSUE 20 To that end, IFRS 18 was issued by IASB in April 2024 and will be effective as of January 2027. This new standard will supersede the IAS 1 Presentation of Financial Statements. Main factors leading to the issuance of IFRS 18: • Current reporting practices lack consistency and are considerably diverse, as different methods are used to calculate operating profits. In a study of 100 companies, the IASB found that 63 companies reported operating profit figures using different calculation methods with at least nine different definitions. • Comparability across entities under current practice is challenging due to the diversity of methods used to calculate operating profits in income statements. • The main concept behind introducing this new standard is to help users have a better understanding of an entity’s income statement as well as to enhance its comparability with other entities. IFRS 18 is intended to improve the quality of financial reporting by introducing improvements with a focus on three main areas: Improvements Introduced by IFRS 18 Enhanced requirements for classification and the presentation of new subtotals in income statements Disclosures on Management-defined Performance Measures (MPMs) to ensure transparency Enhanced requirements for aggregation, disaggregation, and presentation to provide quality information 1 2 3 (1) Enhanced requirements for classification and the presentation of new subtotals in income statements: IFRS 18 introduces enhanced requirements for the classification of line items in the statement of profit and loss (income statement), as well as requirements for new subtotals to be presented to improve comparability and financial analysis. It requires classifying items of the income statement into three new categories, like those used in the statement of cash flows, namely: • Category 1: Operating • Category 2: Investing • Category 3: Financing Audit F F in inaa annnc ce ia&l i Standdards Auddiit &
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