#1IFRS® Foundation GPF Meeting, March 2018 Agenda paper 3B Primary Financial Statements Presentation of the share of profit or loss of associates and joint ventures Denise Durant | [email protected] | +44 (0) 20 7246 6469 The views expressed in this presentation are those of the presenter, not necessarily those of the International Accounting Standards Board (Board) or the IFRS Foundation. Copyright 2018 IFRS Foundation. All rights reserved $IFRS#2Agenda • • • Objective of the discussion Why improve the presentation of the share of profit or loss of associates and joint ventures? Recap of previous discussions • Potential presentation alternatives • Questions for GPF members 2 Slide(s) 3 4 5-9 10-11 12-14 $IFRS#33 Objective of the discussion Location in the statement(s) of performance Where should the share of the profit or loss of associates and joint ventures be presented? Separating 'integral' and 'non- integral' results Should preparers separate the results of 'integral' and 'non- integral' associates and joint ventures? Should 'integral' be defined? If so, how? $IFRS#4Why improve the presentation of the share of profit or loss of associates and joint ventures? Diversity in practice-results are presented in different locations which makes it hard for investors to do their analysis • Investors' needs Comparability Ease of analysis Lack of information- preparers do not explain their choice of location 4 $IFRS#5IFRS Foundation Copyright © 2018 IFRS Foundation. All rights reserved Recap of previous discussions $IFRS#6Location in the statement(s) of performance 6 Definition of 'income/expenses from investments' category Meeting November 2017 Board meeting Outcome The Board tentatively decided to introduce an 'income/expenses from investments' category in the statement of financial performance and define it using a principle-based approach as: 'income/expenses from assets that generate a return individually and largely independently of other resources held by the entity' The Board also decided to provide a list of some of the items that would typically be treated as 'income/expenses from investments'. For example: rental income on investment property for companies that do not treat such investments as a significant part of their operations; or, dividends on non-consolidated equity investments.#7Location in the statement(s) of performance Should the share of profit or loss of associates and joint ventures be presented within the 'income/expenses from investments' category? Meeting November 2017 Board meeting Outcome Mixed views: 7 View 1: present results from all associates and joint ventures within the 'income/expenses from investments' category. View 2: split results from associates and joint ventures between 'integral' (within 'business' results) and 'non-integral' (within the 'income/expenses from investments' category). $IFRS#8Separation of 'integral' results Why is it useful to separate the share of profit or loss of 'integral' associates and joint ventures? Meeting Jan 2018 Board meeting Outcome Board members supported separate presentation, because there seems to be a need for users to be able to identify separately the results of integral and non-integral associates and joint ventures. 8 $IFRS#9How to distinguish between 'integral' and 'non- integral' associates or joint ventures? Meeting Jan 2018 Board meeting (cont'd) Outcome Board members analysed the following views: 9 View 1: treat all joint ventures as 'integral' and all associates as 'non- integral. • View 2: (favoured by the Board)-use our proposed definition of 'income/expenses from investments' (refer to slide # 6) to make the split between 'integral' and 'non-integral' and provide further guidance to help making this distinction. View 3: develop a definition of 'integral'. ⚫ are the activities of an associate or joint venture integrated into an entity's business/operating activities? are the activities of an associate or joint venture essential and fundamental to the investor?#10Potential presentation alternatives Alt 1-no split, the share of results from associates and JVs within the investing section Revenue Profit before investments, financing and income tax Income/expense from investments Share of profit or loss of associates and JVs Other investing income Profit before financing and income tax Finance income Finance expense Pre-tax profit Taxation Profit or loss 10 Alt 2-split of 'integral/non-integral' share of results within the investing section Revenue Profit before investments, financing and income tax Income/expense from investments Share of profit or loss of integral associates and JVs Share of profit or loss of non integral associates and JVs Other investing income Profit before financing and income tax Finance income Finance expense Pre-tax profit Taxation Profit or loss#11Potential presentation alternatives Alt 3-split of 'integral' and 'non-integral' share of results above and below investing Revenue Share of profit or loss of integral associates and JVs Profit before investments, financing and income tax Income/expense from investments Share of profit or loss of nonintegral associates and JVs Other investing income Profit before financing and income tax Finance income Finance expense Pre-tax profit Profit Taxation 11 Alt 4-Require additional subtotal so that 'integral' results are shown in separate section Revenue Business profit subtotal Share of profit or loss of integral associates and JVs Profit before investments, financing and income tax Income/expense from investments Share of profit or loss of non-integral associates and JVs Other investing income Profit before financing and income tax subtotal Finance income Finance expense Pre-tax profit Taxation Profit Alternative favoured by the Board#12IFRS Foundation Copyright © IFRS Foundation. All rights reserved Questions for GPF members $IFRS#13Questions for GPF members Q1 Do you agree with having a split between the share of profit or loss of 'integral' associates and joint ventures and the share of profit or loss of 'non-integral' associates or joint ventures in the statement(s) of financial performance? (a) Would your investors find the split useful? (b) How difficult or costly would it be to provide the split? 13 $IFRS#14Questions for GPF members Q2 14 How do you think 'integral' associates or joint ventures could be distinguished from 'non-integral' associates or joint ventures (see slide 9 for the alternatives considered by the Board)? Q3 Which of the alternatives in slides # 10 and # 11, do you support for presenting the share of the profit or loss of 'integral' and 'non- integral' associates and joint ventures, and why? $IFRS#15Contact us 15 Keep up to date @IFRSFoundation in IFRS Foundation www.ifrs.org IFRS Foundation Comment on our work go.ifrs.org/comment $IFRS