Response 4 - Aviva

Deadline for completion of this Invitation to Comment: Close of business, 7 October 2025

Please submit to: [email protected]

Introduction

The objective of this Invitation to Comment is to obtain input from stakeholders on the endorsement and adoption of IFRS 18 Presentation and Disclosure in Financial Statements, published by the International Accounting Standards Board (IASB) in April 2024. IFRS 18 replaced IAS 1 Presentation of Financial Statements. IFRS 18 sets out general presentation and disclosure requirements that apply across the primary financial statements and the notes. It has an effective date of 1 January 2027 with earlier application permitted (subject to the UKEB adoption in the UK). The information collected from this Invitation to Comment is intended to help with the endorsement assessment.

UK endorsement and adoption process

The requirements for UK adoption are set out in Statutory Instrument 2019/685¹.

The powers to formally adopt international accounting standards for use in the UK were delegated to the UK Endorsement Board in May 2021².

Who should respond to this Invitation to Comment?

Stakeholders with an interest in the quality of accounts prepared in accordance with IFRS Accounting Standards.

How to respond to this Invitation to Comment

Please download this document, answer any questions on which you would like to provide views, and return it to [email protected] by close of business on 7 October 2025.

Brief responses to individual questions are welcome, as well as comprehensive responses to all questions.

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Assessment against endorsement criteria

Our draft assessment [tentatively] concludes that:

• IFRS 18 meets the criteria of relevance, reliability, understandability and comparability required of the financial information needed for making economic decisions and assessing the stewardship of management, as required by SI 2019/685 (see Regulation 7(1)(c));
• application of IFRS 18 is not contrary to the principle that an entity's accounts must give a true and fair view as required by SI 2019/685 (see Regulation 7(1)(a)); and
• that IFRS 18 is likely to be conducive to the long term public good in the UK as required by SI 2019/685 (see Regulation 7(1)(b)), having considered:
  • whether they will generally improve the quality of financial reporting;
  • the costs and benefits that are likely to result from their use; and
  • whether they are likely to have an adverse effect on the economy of the UK, including on economic growth.

Our draft assessment also concludes that IFRS 18 is not likely to lead to a significant change in accounting practice and therefore does not meet the criteria for a post-implementation review under Regulation 11 in SI 2019/685.

Our assessment is set out in Sections 3–6 of the [Draft] ECA.

Questions

Technical accounting criteria assessment

1. Do you agree with the draft assessment of IFRS 18 against the technical accounting criteria? (please select one option)

2. Please include any comments you may have in response to question 1:

In our view, IFRS 18 does not meet the criteria of relevance, understandability and comparability required of the financial information because operating profit is not a fair reflection of performance in the period for insurers that use the fair value through profit or loss ('FVTPL') approach for valuing financial assets under IFRS 9 and insurance liabilities under IFRS 17. IFRS 18 requires insurance finance income and expenses (which includes the change in discount rate of insurance liabilities) to be presented in operating profit. It leads to reduced comparability of financial information for the insurance industry, as operating profit could differ significantly depending on the insurer's accounting policy choices that they make under IFRS 9 and IFRS 17. For example, an insurer that chooses to apply the fair value through profit or loss approach in the valuation of insurance liabilities under IFRS 17 and financial assets under IFRS 9 would experience a significantly more volatile operating profit than insurers that choose the fair value through other comprehensive income approach.

We believe that disaggregating the fair value investment variances and economic assumption changes, which are often large and have no predictive value, is necessary to gain an understanding of the operating performance in the period. Thus, additional non-GAAP measures will be necessary to enable users of the accounts to understand an insurer's underlying profitability.

Furthermore, IFRS 18 requires companies to classify income and expenses from investments in associates and joint ventures accounted for under the equity method in the investing category, even when such investments are closely linked to the company's operations. In our view, this reduces the relevance of operating profit, and companies should be permitted to classify income and expenses from investments in associates and joint ventures accounted for using the equity method within the operating category.

UK long term public good assessment

3. Do you agree with the initial overall assessment of the costs likely to arise from the implementation of IFRS 18? (please select one option).

4. Please include any comments you may have in response to question 3 including, if applicable, any costs that may have been omitted from the analysis:

We agree with the UKEB that the majority of the implementation costs are expected to be one-off and incurred on implementing the changes to the statement of profit or loss presentation. Costs are expected to be higher for complex groups that will have to prepare different proformas for the statement of profit or loss and statement of cash flows, since the assessment of the specified main business activities needs to be performed separately for group and legal entities. Furthermore, we anticipate that the majority of our costs will be incurred in the implementation of IFRS 18 for legal entities – an area that typically receives less focus from analysts. As a result, users and preparers are unlikely to derive significant benefits from these costs.

5. Do you agree with the initial overall assessment of the benefits likely to arise from the implementation of IFRS 18? (please select one option).

6. Please include any comments you may have in response to question 5 including, if applicable, any benefits that may have been omitted from the analysis:

We agree with the assessment for preparers that IFRS 18 is not expected to bring any direct benefits or cost savings. The DECA states that for users, “a more consistent structure for the statement of profit or loss should result in more efficient use of time spent analysing financial statements and an increase in the quality of analysis/reports.” We believe these benefits to be less relevant to the insurance industry due to the issues noted in the response to question 2.

7. Do you agree with the draft assessment that IFRS 18 is likely to be conducive to the long term public good in the UK? (please select one option)

8. Please include any comments you may have in response to question 7 including, if applicable, any economic effects that have been omitted from the analysis:

We do not have any comments for this question.

9. In our assessment of implementation costs we have concluded that implementing IFRS 18 will not be disproportionately costly for listed small- and medium-cap entities. Do you agree with this assessment? (please select one option).

10. Please include any comments you may have in response to question 9:

We do not have any comments for this question.

True and fair view assessment

11. Do you agree with the draft assessment that IFRS 18 is not contrary to the true and fair view requirement? (please select one option)

12. Please include any comments you may have in response to question 11:

The UKEB's interpretation of a true and fair view is to “present fairly the financial position, financial performance and cash flows of an entity.” Please see response to question 2 where we note that the requirement to present insurance finance income and expenses in the operating category is not a fair reflection of an insurer's financial performance, as it introduces a significant inconsistency for the insurance industry depending on the accounting policy choices made under IFRS 9 and IFRS 17 – with operating profit for those entities adopting FVTPL for financial assets appearing more volatile than peers using FVOCI.

Is IFRS 18 likely to lead to a significant change in accounting practice?

13. The UKEB's tentative view is that IFRS 18 is not likely to lead to a significant change in accounting practice because:

1. Approximately 80% of the requirements in IAS 1 have been carried forward into IFRS 18 (or into IAS 8 Changes in Accounting Policies, Estimates and Errors or IFRS 7 Financial Instruments: Disclosures) with limited or no changes. Likewise, a few of the new requirements in IFRS 18 are based on previous requirements in IAS 1.
2. It does not include requirements on how entities recognise and measure items in the financial statements.
3. Current financial reporting practices in the UK may already align with certain aspects of the new requirements in IFRS 18. Therefore, implementing IFRS 18 is unlikely to result in a fundamental change to existing accounting practices.

14. The UKEB observes, however, that there are arguments supporting that IFRS 18 is likely to lead to a significant change in accounting practice, notably that:

1. IFRS 18 introduces new requirements that extend beyond the scope of IAS 1 that are expected to affect most if not all entities, such as:
   
   1. A new structure and newly defined subtotals, including operating profit in the statement of profit or loss, that may affect how entities present and communicate financial performance.
   2. Mandatory disclosure of management defined performance measures (MPMs) in a single note. In practice there may not be much change considering that most entities already provide detailed reconciliations of their alternative performance measures (APMs). However, entities will need to reassess and potentially expand the information they disclose publicly.
   3. New guidance on aggregation and disaggregation, which may require entities to revisit how they group, disaggregate information across the financial statements.
2. IFRS 18 is more than a standard on presentation and disclosure. It represents a long-awaited response to user demands for more relevant, transparent and comparable information. Users have widely acknowledged that IFRS 18 will significantly impact and reshape the presentation and disaggregation of information (primarily on the statement of profit or loss).

15. Taking into consideration the arguments presented above, do you agree with the tentative assessment in the [Draft] ECA that IFRS 18 is not likely to lead to a significant change in accounting practice? (please select one option):

16. Please provide your rationale for the answer to Question 15—namely, the reasons for concluding whether or not IFRS 18 is likely to lead to a significant change in accounting practice:

We agree that IFRS 18 is not likely to lead to a significant change in accounting practice because there is no impact on the recognition or measurement of assets and liabilities. In addition, there is overlap between the ESMA guidelines for Annual Performance Measures and the IFRS 18 requirements for MPMs, which means that there is less of an impact for companies that already comply with the ESMA guidelines.

17. Do you have any other comments you would like to add?

We have no further comments.

Thank you for completing this Invitation to Comment

Please submit this document by close of business on 7 October 2025 to: [email protected]