An important clarification is that it is necessary in some specific cases to think very carefully about what the main area of operations for some businesses might be. For example, a business investing in certain types of assets or providing financing to customers, would include items which might for others sit in investing or financing categories in the operating category, because the transactions involved reflect the main business activities of the entity. Context is all. The investing category is used where an organisation is investing in something outside of its main business.
There are three specific scenarios identified by IFRS 18 which may be appropriate. These are:
Income and expenditure from investments in associates, joint ventures and unconsolidated activities. Income and expenditure from cash and cash equivalents. Income and expenditure from specific assets if they generate a return that is largely separate from the entity’s main business activities.
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The kind of things you might find here are rental incomes from investment properties or the share of profits or losses from associates or joint ventures. However, things like depreciation on assets held as part of the main business activity would be regarded as operating expenses.
Think carefully about the main area of operations before classifying items
IFRS 18 | THE STRUCTURE OF THE STATEMENT OF PROFIT OR LOSS
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