Project Initiation Plan - IFRS 18 Presentation and Disclosure in Financial Statements
Project Type: Endorsement and adoption Project Scope: Significant
Purpose
1This paper sets out the plan to assess whether to adopt for use in the UK[^1] the forthcoming International Accounting Standards Board (IASB) standard IFRS 18 Presentation and Disclosure in Financial Statements. IFRS 18 will replace IAS 1 Presentation of Financial Statements.
2IFRS 18 is expected to be published by the IASB in April 2024. IFRS 18 will be effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted (subject to the UKEB adoption in the UK).
3The UKEB's statutory functions mean that the Board must assess the requirements in IFRS 18 against the statutory adoption criteria before IFRS 18 can be formally adopted for use in the UK.
Background
4The Primary Financial Statements (PFS) project was added to the IASB's research agenda in July 2014 in response to investors' concerns about the comparability and transparency of companies' performance reporting. Following stakeholder feedback on the IASB's 2015 Agenda Consultation[^2], the project was added to the active standard-setting projects.
5In December 2019, the IASB published the Exposure Draft ED/2019/7 General Presentation and Disclosures (ED). The IASB's snapshot summarises the ED's proposals. At the time the UKEB had not been established. However, the UKEB Secretariat (Secretariat) response[^3] to the ED was submitted in September 220, following public consultation. The Secretariat's feedback statement (published in October 2020) summarises the outreach work undertaken, stakeholder views, and the final position on the proposals in the ED.
6The IASB received 216 comment letters in response to the ED. It also conducted significant additional outreach activities during the development of IFRS 18. The IASB redeliberated the proposals in the ED from March 2021 to June 2023.
7The IASB conducted targeted outreach between October 2022 and December 2022, including attending UKEB's Advisory Groups meetings[^4], to obtain feedback on specific tentative decisions made by the IASB.
8In July 2023 the IASB began its balloting process of the forthcoming IFRS 18 and stated its intention to publish the final standard in April 2024. This included seeking views on a first draft[^5] of the forthcoming standard from International Forum of Accounting Standard Setters (IFASS) members, which includes the UKEB. The Secretariat submitted comments to the IASB staff.
9In October and November 2023, the Secretariat held education sessions with the UKEB's Advisory Groups with the support of the IASB PFS staff[^6]. The purpose was to obtain feedback on key aspects of IFRS 18 to help identify any significant endorsement concerns and start identifying any likely costs and benefits resulting from the application of the new requirements.
10Consistent with paragraphs 4.18–4.19 of the UKEB's Due Process Handbook, the Board has received regular progress reports on the PFS project, including updates of tentative decisions made by the IASB, commentary on how those decisions changed the ED proposals and the consistency with UKEB's comments.
11As a result of this activity, the UKEB Board and Secretariat has fulsome understanding of the expected requirements of IFRS 18.
Description of the main requirements in IFRS 18
12A description of the main requirements in IFRS 18 and of the expected effects derived from these requirements is presented in the table below.
| Requirements in IFRS 18 The table below illustrates a proposed extended timeline for a scenario where critical evidence emerges during the endorsement assessment of IFRS 18. |
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Project plan
13The project plan is guided by the following factors.
Identification of required evidence
14The Secretariat has commenced identifying issues for further consideration as part of the UKEB's endorsement work. The principal components of this work are set out below.
- Desk-based research (see paragraph 16);
- Preliminary views of the UKEB's Advisory Groups ahead of the publication of IFRS 18 (see paragraphs 17–19);
- User and preparer surveys (see paragraphs 20–26);
- Subsequent consultations with UKEB Advisory Groups/UKEB Financial Instruments Working Group (FIWG) (see paragraphs 27–28);
- Educational webcasts/webinars in coordination with IASB staff (see paragraphs 29–30); and
- In-house research on long-term public good (see paragraphs 31–37).
15If critical evidence emerges from the preparer and user survey responses and/or from feedback derived from other outreach activities, the Board will be asked to confirm whether additional activities should be carried out (refer to paragraph 26 and paragraphs 38–44).
Desk-based research
16We have carried out desktop analysis of a draft version of IFRS 18 and the basis for its requirements (when a first draft version was shared with IFASS members[^7]) and of commentaries/articles issued in advance of the publication of the standard, for example by accounting firms. The Secretariat will continue carrying out this type of analysis once IFRS 18 is published.
Preliminary views from advisory groups
17The preliminary feedback from members of these groups during Q4 2023 indicated overall support for the presentation and disclosure requirements of IFRS 18. In their view the requirements in IFRS 18 will provide greater comparability and consistency of financial information and reduce diversity in practice.[^8]
18However, they identified three main topics requiring further detailed consideration prior to the endorsement of IFRS 18 (see table below).[^9]
| IFRS 18 requirements