July-August 2026

Hey everyone,

I hope you had a fantastic summer and can’t wait to see what happened in IFRS while you were soaking up the sun 😉

Technical Publications

Overview of IFRIC agenda decisions on IFRS 18

You’ve probably noticed that the summaries of recent IFRS Interpretations Committee meetings have swollen quite a lot. The reason is simple: most companies have started preparing for IFRS 18 and implementation questions have started to pop up. To help us navigate all these agenda decisions, PwC has put together a useful summary that they promise to update regularly.

Effects of IFRS 18 on the statement of cash flows

When we think about IFRS 18, we tend to focus on the new P&L geography, but that’s not the only effect of the new standard. BDO’s latest publication highlights how IFRS 18 will affect the statement of cash flows.

In essence, there are two major changes:

  • Operating profit or loss replaces profit or loss as the mandatory starting point for companies presenting operating cash flows under the indirect method; and
  • The optionality in the classification of cash flows from interest and dividends will largely be removed.

Regarding the first point, BDO says on page 3 that “Prior to the adoption of IFRS 18, IAS 7 did not state which subtotal or total line item in the statement of profit or loss should be the starting point for entities that use the indirect method.” I’d say IAS 7.18(b) and IAS 7.20 did specify that profit or loss should be the starting point, though some companies didn’t follow this requirement.

Classification of loans as current or non-current

BDO had quite a productive summer, as they’ve also updated their guidance on the classification of loans as current or non-current. Don’t worry, though, these requirements were carried forward from IAS 1 to IFRS 18 essentially unchanged. The BDO team has simply replaced references to IAS 1 with the corresponding paragraphs in IFRS 18 and made some design improvements as well. It’s a useful publication, though, so it’s worth having the updated version in your digital library.

Pitfalls of the equity method

The Footnotes Analyst team highlighted the enormous, but arguably artificial, gains and losses reported by Renault on its investment in Nissan, and Microsoft on its stake in OpenAI. These resulted from the limitations of the equity method, which moves beyond cost but remains detached from fair value. In their usual style, Steve and Dennis carefully looked at the explanatory notes and underlying economics of these gains and losses, so it’s much more than raw technical analysis.

You may recall from previous editions of Reporting Period that one of the IASB’s ongoing projects is to amend IAS 28 to resolve some common application issues with the equity method. However, these amendments (expected in H1 2027) won’t solve the issues highlighted by the Footnotes Analyst piece above. In fact, many in the financial reporting and investing community have long argued for abandoning the equity method altogether in favour of fair value, but the IASB hasn’t been convinced.

Fair value of debt

If you’re ever tasked with assessing the fair value of a debt instrument, the new IVSC series on private debt valuation will come in handy as a primer. The first paper in the series, Private Debt Valuation: Selecting a Valuation Method, outlines factors we should consider when assessing the issuer, the instrument and the transaction, as well as when evaluating financial and credit performance. The paper also discusses the use of market evidence and calibration, discounted cash flow and yield analysis for performing debt, and net recovery or liquidation methods where an issuer is distressed.

Work in Progress at the IASB

Presentation of substitutes for income tax under IFRS 18

The IASB is considering amending IFRS 18 to allow certain tax charges that are outside the scope of IAS 12 to be classified in the income taxes category under IFRS 18 when they are imposed as a direct substitute for income tax. Examples of taxes likely to be affected include:

  • Saudi Arabian zakat, where zakat and income tax apply to different ownership interests;
  • tonnage taxes in the UK (and possibly other jurisdictions), where eligible shipping companies may be taxed by reference to fleet tonnage instead of taxable profits; and
  • certain hybrid tax regimes where a company pays taxes on taxable profits but is still subject to a minimum amount of tax calculated using a measure other than profit.

The IASB expects to publish an Exposure Draft in Q4 2026.

Miscellany

Can a subsidiary have assets and liabilities?

Peter Clark looks at a conceptual tension around whether a subsidiary can show any assets or liabilities in its separate financial statements. By definition, a subsidiary is controlled by another entity – the parent – so isn’t it the parent that controls the subsidiary’s assets? And, by definition, two parties cannot control the same asset, right?

This discussion sounds a bit abstract, I’ll admit, but it resonated with me because I’ve been involved in countless technical debates about whether an investment in a subsidiary, together with the underlying assets, can be considered one of the assets comprising a broader CGU in the parent’s separate financial statements. For example, if a subsidiary is essentially an outsourcing centre for the parent, does it make sense to test the investment in that subsidiary for impairment separately from the parent’s assets?

New IASB chair

The IFRS Foundation announced that Sam Woods will chair the IASB for the next five years. Never heard of him? Well, apparently this role is more about politics than technical accounting…

Things I posted on LinkedIn

Here’s a quick round-up of my LinkedIn posts that resonated most with my followers:

That’s all for this edition of Reporting Period. Thanks for reading and see you in the next issue!

Best regards,
Marek