Response 5 - ICAEW

ICAEW REPRESENTATION 80/25 Issued 6 October 2025

ICAEW welcomes the opportunity to comment on the [Draft] Endorsement Criteria Assessment of IFRS 18 Presentation and Disclosure in Financial Statements published by the UK Endorsement Board (UKEB) on 9 July 2025, a copy of which is available from this link.

ICAEW agrees that IFRS 18 Presentation and Disclosure in Financial Statements meets the statutory endorsement criteria and supports the endorsement of IFRS 18 for use in the UK.

This response of 6 October 2025 has been prepared by the ICAEW Corporate Reporting Faculty. Recognised internationally as a leading authority on corporate reporting, the faculty, through its Financial and Non-Financial Reporting committees, is responsible for formulating ICAEW policy on corporate reporting issues and makes submissions to standard setters and other external bodies on behalf of ICAEW. The faculty provides an extensive range of services to ICAEW members and faculty subscribers including providing practical assistance with common corporate reporting problems.

ICAEW is a world-leading professional body established under a Royal Charter to serve the public interest. In pursuit of its vision of a world of sustainable economies, ICAEW works with governments, regulators and businesses and it leads, connects, supports and regulates more than 172,000 chartered accountant members in over 150 countries. ICAEW members work in all types of private and public organisations, including public practice firms, and are trained to provide clarity and rigour and apply the highest professional, technical and ethical standards.

KEY POINTS

1ICAEW welcomes the opportunity to comment on the [Draft] Endorsement Criteria Assessment (DECA) of IFRS 18 Presentation and Disclosure in Financial Statements. It is clear that the UK Endorsement Board (UKEB) has put considerable work into its assessment, making efforts to engage with UK stakeholders wherever possible.

2We support the endorsement of IFRS 18 for use in the UK. We have made some comments in our detailed response to the individual consultation questions, included in the appendix below, that the UKEB may wish to consider as it finalises the Endorsement Criteria Assessment.

APPENDIX – DETAILED RESPONSE

Invitation to Comment

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.

Privacy and other policies

The data collected through submitting this document will be stored and processed by the UKEB. By submitting this document, you consent to the UKEB processing your data for the purposes of influencing the development of and adopting IFRS Accounting Standards for use in the UK. For further information, please see our Privacy Statements and Notices and other Policies (e.g. Consultation Responses Policy and Data Protection Policy)³.

The UKEB's policy is to publish on its website all responses to formal consultations issued by the UKEB unless the respondent explicitly requests otherwise. A standard confidentiality statement in an e-mail message will not be regarded as a request for non-disclosure. If you do not wish your signature to be published, please provide the UKEB with an unsigned version of your submission. The UKEB prefers to publish responses that do not include a personal signature. Other than the name of the organisation/individual responding, information contained in the “Your Details” document will not be published. The UKEB does not edit personal information (such as telephone numbers, postal or e-mail addresses) from any other response document submitted; therefore, only information that you wish to be published should be submitted in such responses.

Assessment against endorsement criteria

The UKEB's 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.

The UKEB's assessment is set out in Sections 3–6 of the [Draft] ECA.

Questions

Technical accounting criteria assessment

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

(Yes [x] No [])

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

While we broadly agree with the UKEB's draft assessment of IFRS 18 against the technical accounting criteria, we have heard concerns relating to the use of IFRS 18 by entities in the insurance sector.

We note that the DECA reflects some concerns raised by preparers in the insurance sector relating to the classification of income and expenses from associates and joint ventures (paragraphs B8 and B10) and acknowledge that the UKEB has highlighted how other requirements in IFRS 18 can be used to mitigate these concerns (paragraph B15).

Our members have highlighted a further concern relevant to the insurance sector. As described in paragraphs 19 - 22 of our response to the IASB's Exposure Draft General Presentation and Disclosures (Primary Financial Statements) we have concerns with the requirement in paragraph 64(b) of IFRS 18 regarding the treatment of insurance finance income and expenses. We believe this requirement leads to a lack of comparability between insurers who, under paragraph 88 of IFRS 17 Insurance Contracts have an accounting policy choice between:

• a fair value through profit or loss approach (meaning all movements in assets and liabilities, including fair value movements, are recognised in the statement of profit or loss); and
• disaggregating insurance finance income or expense and including only a systematic allocation of the expected total insurance finance income or expense within profit or loss, with the remainder reported in other comprehensive income.

UK long term public good assessment

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

(Yes [x] No [])

4Please 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 broadly agree with the UKEB's initial overall assessment of the costs likely to arise from the implementation of IFRS 18. That said, we have some observations that the UKEB may wish to reflect on as it finalises the adoption of IFRS 18.

As noted in our response to question 16 (below), we have concerns that not all entities have assessed the impact of the Standard in detail yet. As the Standard's effective date approaches and entities develop a greater understanding of its requirements, entities may find that the costs of implementation are higher than initially estimated. Our observations lead us to question the UKEB's comment in paragraph D5(d) of the DECA that preparers may have exercised caution when responding to survey and interview questions on the topic of implementation costs and that cost estimates may therefore lie at the higher end of the distribution.

Additionally, we recommend that the UKEB considers the completeness of its cost estimates with respect to implementation of IFRS 18 in the insurance sector. Where insurers have a number of subsidiaries with different main business activities (for example, investing in assets, providing finance to customers and service activities), the subsidiaries will each classify income and expenses differently. This can create challenges, and therefore additional costs, in the production of consolidated financial statements.

Finally, it is not clear to us how the circumstances of unlisted IFRS preparers have been considered in establishing cost estimates. We anticipate that unlisted entities may face additional difficulties when identifying management-defined performance measures (MPMs) as it may not be immediately obvious which measures management have used in communications outside the financial statements. This may give rise to additional implementation costs that are not captured in the initial estimates.

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

(Yes [x] No [])

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

No comments

7Do 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)

(Yes [x] No [])

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

No comments

9In 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).

(Yes [x] No [])

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

Please see our comments in response to questions 4 and 16, which indicate our concern that entities may have underestimated the amount of work that will be required to implement IFRS 18, meaning there is a risk that initial estimates of the costs to implement the Standard are too low.

True and fair view assessment

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

(Yes [x] No [])

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

No comments

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

13The 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.

14The 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).

15Taking 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):

(Yes [x] No [])

16Please 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:

While we agree that IFRS 18 is not likely to lead to a significant change in accounting practice, we are conscious that all entities applying the Standard will need to give thought to its requirements for classifying income and expenses in one of five categories (IFRS 18 paragraph 47). In line with the UKEB's findings noted in paragraph 4.58(a) of the DECA, our members have reported incidences that suggest entities have assessed the impact of the key themes of IFRS 18 on the financial statements at a high level but are yet to fully consider the impact of the new requirements in detail. We have concerns that when entities consider IFRS 18 in greater detail as the effective date approaches, it may become apparent that the Standard does require more significant changes in accounting practice than had been initially anticipated.

We agree with the UKEB that the new presentation and classification requirements and subtotals will not affect all entities in the same way and anticipate that some types of entity will be more affected by the requirements than others.

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

No comments

Thank you for completing this Invitation to Comment

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

ICAEW Chartered Accountants' Hall Moorgate Place London EC2R 6EA UK T +44 (0)1908 248 250 F +44 (0)20 7920 0547 icaew.com The Institute of Chartered Accountants in England and Wales (ICAEW) incorporated by Royal Charter (RC000246) Registered office: Chartered Accountants' Hall Moorgate Place London EC2R 6EA UK

ICAEW 2025 All rights reserved. This document may be reproduced without specific permission, in whole or part, free of charge and in any format or medium, subject to the conditions that: - it is appropriately attributed, replicated accurately and is not used in a misleading context; - the source of the extract or document is acknowledged and the title and ICAEW reference number are quoted. Where third-party copyright material has been identified application for permission must be made to the copyright holder. For more information, please contact: Corporate Reporting – [email protected]

Footnotes