The IASB is currently developing a new standard on presentation of financial statements. In discussing the draft standard, the Board is considering requiring disclosure of the amounts included in each line item in the statement of profit or loss for depreciation, amortisation and employee benefits. In addition, the IASB may consider an approach whereby an entity discloses information about all operating expenses disclosed in the notes, the amounts included in each line item in the statement of profit or loss (P&L).
As part of the preparation of the new financial statement presentation standard, the IASB intends to require entities that present an analysis of operating expenses by destination in the PL to also disclose, in a separate note, an analysis of their total operating expenses by nature. In doing so, the IASB will explore the possibility of exempting an entity from disclosing operating expenses by nature to the extent that such disclosure would require unreasonable cost or effort. But such an exemption is not planned to apply:
- to depreciation and employee benefit expenses;
- any other operating expenses that are subject to the specific disclosure requirements of IFRS.
As a result, the IASB believes that:
- for depreciation and employee benefits, there should be a specific quantitative disclosure requirement as these costs are likely to be included in more than one line item in P&L;
- impairment and write-downs of inventories do not need a specific quantitative disclosure requirement as these costs are expected to be included in a separate P&L line item, so a general qualitative explanation requirement is sufficient to provide material information;
- other items of expense that are likely to be included in more than one line item in the P&L, the quantitative requirement should only be considered in conjunction with cost reductions.
Thus, the IASB may require an entity to disclose the amounts included in each line item in P&L for depreciation, amortisation and employee benefits. It is also considering whether to disclose this information in a separate note.