The first major change to the Income Statement (IS) in over two decades is set to transform the way companies report their financial performance.
By Vinicius Silva, External Audit Manager
On April 7, 2024, the International Accounting Standards Board (IASB) approved significant changes to IAS 1, introducing a new approach to the presentation of financial statements. The objective is to provide more transparent and comparable information, standardizing the way companies’ financial performance is presented, which promises to facilitate analysis and comparison among companies within the same industry.
These changes affect companies that follow international IFRS accounting standards, a common practice in Brazil since the enactment of Law No. 11.638/07, which aligned local accounting standards with international ones. With the introduction of IFRS 18, the Income Statement will be reorganized into three main categories: Operating, Investing and Financing, in addition to other sections for Income Tax and Social Contribution and Discontinued Operations.
The new model not only organizes financial data more effectively, but also reinforces transparency in operating expenses and mandates the presentation of essential subtotals, such as Operating Profit/Loss and Profit/Loss before Financing and Income Tax.
With an effective date of January 1, 2027, early adoption is possible, where permitted by regulators, offering companies and auditors a preparation window. It is important to note that the standard will still require adaptations to the Brazilian context, and it is therefore essential to remain attentive to communications from the CFC, CVM and other regulators.
Despite these changes to the presentation structure, IFRS 18 does not alter the recognition or measurement standards applicable to accounting transactions.
Another relevant aspect is that this change will occur simultaneously with the transition period of the tax reform, which will require heightened attention from accountants, auditors and tax specialists.
Would you like to know how these changes may impact your company? Our External Audit team is available to help. Contact us here to schedule a conversation and clarify any questions.
