Results from UKEB Auditors Questionnaire on IFRS 18

The UKEB launched a questionnaire for members of the UKEB Accounting Firms and Institutes Advisory Group (AFIAG) to gather their views on IFRS 18 Presentation and Disclosure in Financial Statements as part of its outreach activities. The questionnaire closed on 30 September 2024. The information collected from this questionnaire helped the UKEB assess the impact of IFRS 18 on UK organisations adopting the Standard if it were adopted for use in the UK. Responses were used by the UKEB as evidence for the assessment of the endorsement and adoption of IFRS 18.

Background

1This paper presents the results from the questionnaire distributed to members of the UKEB Accounting Firms and Institutes Advisory Group (AFIAG) on IFRS 18 Presentation and Disclosure in Financial Statements.

2The aims of this exercise were:

1. to obtain auditors' insight on the requirements of IFRS 18 and on the impact of this Standard in their audit processes; and
2. to explore whether the views from auditors were aligned with the views from preparers.

3Given that distribution was limited to UKEB AFIAG members the questionnaire does not formally qualify as a survey.

Overview of questionnaire responses

Technical accounting

4Auditors broadly supported the requirements in IFRS 18.

Incremental one-off audit costs

5On incremental one-off costs respondents indicated that:

1. Some minor to significant extra one-off costs will be incurred as a result of IFRS 18. These will be largely attributable to:
   1. training;
   2. changes to templates;
   3. changes to reporting guidance; and
   4. changes in extraction of underlying data.
2. Costs will depend on the nature and complexity of the business rather than its size. Considering IFRS 18 requirements, audit costs will be higher depending on:
   1. the assessment of the presence of specified main business activities;
   2. the number and nature of MPMs;
   3. the prevalence of foreign exchange transactions; and
   4. the change in the level of judgement about disaggregation based on the new requirements.

Incremental ongoing audit costs

6Auditors indicated that incremental ongoing costs will depend on the conclusions of the initial assessment, but are expected to be more contained than the expected increase in one-off audit costs.

Impact of audit and advisory fees on audited entities

7There were a number of comments from AFIAG members relating to the potential impact of the implementation of IFRS 18 on audit and advisory fees:

1. There was some indication that extra fees may disproportionately affect smaller entities rather than larger entities.
2. Extra costs for auditors will likely translate into higher fees. AFIAG members indicated that it was too early to provide reliable estimates of the absolute or relative increase in fees. Some respondents indicated that the increase in one-off fees may be sizable.
3. Whether there is a permanent increase in fees will largely depend on the nature and complexity of the business, e.g. number of MPMs.
4. AFIAG members indicated that there will likely be additional advisory fees for consulting services on the implementation of IFRS 18.