Presentation and Disclosure Under IFRS 18
IFRS 18 emphasizes the importance of transparency and clarity in the presentation and
disclosure of revenue in financial statements. Below are the key aspects related to presentation and
disclosure under this standard:
1. Presentation of Revenue
- Separate Line Items: Revenue should be presented as a separate line item in the
statement of profit or loss, distinguishing it from other income.
- Performance Obligations: If applicable, revenue should be disaggregated based
on performance obligations to provide a clear view of how revenue is earned.
- Classification: Entities must classify revenue into categories that reflect how
it is earned, allowing users to understand the different sources of revenue.
2. Disclosure Requirements
IFRS 18 mandates specific disclosures to enhance the understanding of revenue
recognition practices and their effects on financial statements. These disclosures include:
- Nature of Revenue: A description of the nature of the revenue recognized,
including the significant products or services offered and the timing of revenue recognition.
- Performance Obligations: Information about performance obligations, including
when the obligations are satisfied, and details on contracts with customers.
- Transaction Price: The amount of the transaction price allocated to each
performance obligation, along with any variable consideration.
- Contract Balances: Disclosure of contract assets and liabilities, including
changes from the previous reporting period, providing insights into the entity's contracts with
customers.
- Significant Judgments: Entities must disclose significant judgments and
estimates made in applying the revenue recognition principles, including any assumptions used to
determine the transaction price or assess performance obligations.
- Timing of Revenue Recognition: An explanation of how the timing of revenue
recognition aligns with the transfer of control over goods or services.
3. Overall Impact
The enhanced presentation and disclosure requirements under IFRS 18 aim to provide
users of financial statements with comprehensive and relevant information about an entity's revenue,
enabling better decision-making and a deeper understanding of financial performance. By promoting
transparency, IFRS 18 helps build trust among stakeholders, including investors, analysts, and
regulatory bodies.