IAS 1 ‚Presentation of Financial Statements‘ sets out the general framework and requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for the content of financial statements.
On 17 December 2019, the IASB published the ED/2019/7 to replace IAS 1 and amend other standards relating to presentation and disclosure issues. The reason for this is the strong need of investors for better comparability and a uniform structure of the income statements. In addition, the use of different performance indicators of companies has often been criticised because the determination of such indicators is not explained in detail in the financial statements.
With regard to the use of performance indicators in the annual financial statements, the IASB specifically addresses so-called management performance measures in the ED/2019/7:
- Subtotals of income and expenses used in public communication with users of financial statements outside the financial statements;
- Totals or subtotals that are included in the IFRS or provide management’s view of a company’s financial performance.
In addition to the guidelines on the disclosure and explanation of management performance measures in the notes of the financial statement, there are further material changes in connection with presentation and disclosure issues expected in order to create uniformity, comparability and transparency:
- Guidelines on disclosure and explanation of unusual income and expenses in the notes
- Implementation of defined subtotals and categories in the income statement
- Implementation of rules to improve aggregation and disaggregation
- Implementation of targeted improvements in the cash flow statement
The comment period for the ED/2019/7 runs until 30 June 2020. It is currently not known exactly when the standard will take effect. According to the IASB, the standard is to be applied between 18 and 24 months after its adoption.