The solution
How should these transactions be presented in the profit or loss account as per the requirements of IFRS 18?
The first issue to consider is how these should be divided into different categories. There are five in IFRS 18: operating, investing and financing categories, and income and expenditure from tax, and costs relating to discontinued operations. The operating category would include the following:
Then there is the investing category to consider, which in this case is the loss from the joint venture of $5 million. The loss before financing and tax should then be shown which is going to give a profit before financing and tax of $5 million. The other categories would need to be shown separately, as follows:
$4m
Financing category would include interest costs
$75m $40m $20m $5m
Total revenues
Income tax costs
$10m $15m
Staff expenses
Other operating expenses Depreciation costs
Discontinued operations
Taking all these other items into account results in an overall loss for the year of $24 million.
This results in an operating profit of $10 million which should be shown as a separate sub-total in the profit or loss account.
IFRS 18 | HOW DOES THIS WORK IN PRACTICE?
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