What is the loan’s classification?
On 14 June 2024, the Malaysian Accounting Standards Board (MASB) issued MFRS 18 'Presentation and Disclosure in Financial Statements’. This new standard is identical to IFRS 18 ‘Presentation and Disclosure in Financial Statements’ issued by the International Accounting Standards Board (IASB).
Upon adoption, MFRS 18 will replace the current MFRS 101 ‘Presentation of Financial Statements’.
What Caused the Change?
MFRS 101 provides a general structure that allows flexibility in presenting information in the statement of profit or loss. For examples:
- Insurers often invest in associates and joint ventures as part of the assets backing their insurance liabilities and report the results from these investments under ‘operating profit’. In contrast, other entities may present these results outside of operating activities. The variability in presentation under the present MFRS 101 makes it challenging for users of financial statements to compare financial performance across different entities, even within the same industry.
- In addition, some entities include 'operating profit' in their statements of profit or loss, while others do not. Even when 'operating profit' is presented, its definition can vary among entities, and it is not always clear how this measure is calculated or how it reconciles with the figures presented in the financial statements.
Key Changes Compared to the Exposure Draft of IFRS 18
In July 2021, we published a write-up highlighting the key points of the exposure draft of IFRS 18.
The following are the key differences between the exposure draft and IFRS 18:-
| Proposals in Exposure Draft | IFRS 18 |
| To segregate information on integral and non-integral associates and joint ventures | The IASB has decided not to move forward with the proposal. Under IFRS 18, entities will classify all income and expenses from associates and joint ventures accounted for using the equity method within the investing category. |
| To classify income and expenses under the investing category | The IASB has refined the definition of the investing category. |
| To classify income and expenses under the financing category | The IASB has decided that entities should classify all income and expenses from cash and cash equivalents under the investing category rather than the financing category. |
| No accounting choice for presenting operating expenses by nature or by function | The IASB has chosen not to prohibit the mixed presentation of expenses by both nature and function. |
| Unusual income and expenses | The IASB has decided not to proceed with the requirement to disclose and explain unusual items (commonly known as extraordinary items) in a single note. |
Key New Requirements
MFRS 18 introduces new requirements for presenting information in the statement of profit or loss, including specific totals and subtotals. It also requires the disclosure of management-defined performance measures and imposes new criteria for aggregation and disaggregation of financial information in the primary financial statements and accompanying notes. In addition, it includes consequential amendments to other accounting standards.
