Recent Developments in Financial Reporting Regulations: An

Analysis of IFRS and US GAAP

Executive Summary

This report provides a comprehensive analysis of recent significant changes in

financial reporting regulations, focusing on both International Financial Reporting
Standards (IFRS) and United States Generally Accepted Accounting Principles (US
GAAP). The analysis identifies key regulatory updates, elaborates on their impact on
the preparation and presentation of financial statements, and discusses the potential
benefits and challenges faced by companies in adhering to these new requirements.
Recent amendments and new standards introduced by the International Accounting
Standards Board (IASB) and the Financial Accounting Standards Board (FASB) aim to
enhance the transparency, comparability, and overall quality of financial reporting.
These changes span various aspects of financial reporting, including revenue
recognition, financial instruments, lease accounting, sustainability disclosures, and
the presentation of financial performance. While these updates offer potential
benefits such as increased investor confidence and improved decision-making, they
also present challenges for companies in terms of implementation costs, the need for
updated systems and processes, and the interpretation of complex new rules. This
report underscores the importance for companies to proactively understand and
adapt to these evolving regulatory landscapes to ensure compliance and maintain
effective communication with stakeholders.

Recent Significant Changes in International Financial Reporting Standards

(IFRS)

This section outlines the recent updates and amendments to major IFRS standards.

The IASB has issued a significant update to the IFRS for SMEs Accounting Standard,
which is currently required or permitted in 85 jurisdictions. This revised standard,
effective for annual periods beginning on or after 1 January 2027, with early
application permitted, is the result of a periodic comprehensive review. The primary
objective is to strike a balance between the information needs of lenders and other
users of small and medium-sized entities' (SMEs) financial statements and the limited
resources typically available to these entities. Key changes include a revised model for
revenue recognition, the consolidation of fair value measurement requirements into a
single location within the standard, and updated requirements for business
combinations, consolidations, and financial instruments.1 This update reflects the
IASB's ongoing effort to ensure that accounting standards remain relevant and
appropriately scaled for different types of entities. The decision to conduct a
thorough review and update of the SME standard demonstrates a commitment to
supporting this significant sector of the global economy with a reporting framework
that is both simplified and robust. The specific areas targeted for revision—revenue
recognition, fair value, and complex accounting topics like business
combinations—are fundamental to financial reporting, indicating a drive to ensure
these core principles are well-addressed within the SME context. The extended
effective date provides SMEs with sufficient time to understand and implement these
changes.

IFRS Change Effective Date Primarily Affected Financial

Statements

Update to the IFRS for SMEs January 1, 2027 Balance Sheet, Income
Accounting Standard Statement, Notes

Amendments to IAS 7 & IFRS January 1, 2024 Balance Sheet, Cash Flow
7: Supplier Finance Statement, Notes
Arrangements

Amendment to IAS 21: Lack of January 1, 2025 Balance Sheet, Income

Exchangeability Statement, Notes

Amendments to IFRS 9 & IFRS January 1, 2026 Balance Sheet, Income

7: Classification and Statement, Notes
Measurement of Financial
Instruments

Amendments to IFRS 9 & IFRS January 1, 2026 Balance Sheet, Income

7: Contracts Referencing Statement, Notes
Nature-dependent Electricity
(Power Purchase Agreements)

IFRS 18 Presentation and January 1, 2027 Income Statement, Notes

Disclosure in Financial
Statements (replaces IAS 1)

IFRS 19 Subsidiaries without January 1, 2027 Notes

Public Accountability:
Disclosures
 IFRS S1 General Requirements January 1, 2024 Separate Sustainability Report
for Disclosure of
Sustainability-related
Financial Information

IFRS S2 Climate-related January 1, 2024 Separate Sustainability Report

Disclosures

Amendments to IAS 7, Statement of Cash Flows and IFRS 7, Financial Instruments:

Disclosures regarding supplier finance arrangements became effective on 1 January
2024. These amendments require a buyer to disclose both qualitative and quantitative
information about its supplier finance arrangements.2 The required disclosures include
the terms and conditions of these arrangements, such as extended payment terms,
and details about their impact on the entity's liabilities, cash flows, and exposure to
liquidity risk. The increasing prevalence of supplier finance arrangements in various
industries necessitated these amendments to enhance transparency for users of
financial statements. By requiring specific disclosures in both the statement of cash
flows and the financial instruments disclosures, the IASB aims to provide a
comprehensive understanding of these arrangements and their financial implications.
The effective date of these amendments underscores the importance of this
information for stakeholders in their assessment of a company's financial health.

The amendments to IAS 21, The Effects of Changes in Foreign Exchange Rates,
addressing the lack of exchangeability of currencies, are effective from 1 January
2025.2 These amendments clarify the criteria for determining when one currency can
be exchanged into another and provide guidance on how an entity should estimate a
spot exchange rate for currencies that lack exchangeability. Furthermore, new
disclosure requirements have been introduced to assist financial statement users in
evaluating the impact of using an estimated exchange rate. In an increasingly
interconnected global economy where businesses operate across diverse currency
environments, this amendment seeks to ensure consistent and transparent reporting
of foreign exchange transactions, particularly in situations involving less liquid or
freely convertible currencies. By addressing both the definition and the estimation
process for exchange rates in such circumstances, and by mandating additional
disclosures, the IASB aims to improve the reliability and understandability of financial
reporting in this area.

Effective 1 January 2026, amendments to IFRS 9, Financial Instruments and IFRS 7,

Financial Instruments: Disclosures clarify the classification and measurement of
financial instruments.2 These amendments specify that financial assets and financial
liabilities are generally recognized and derecognized at the settlement date. However,
a new exception has been introduced for certain financial liabilities settled via
electronic payment systems, allowing for earlier derecognition. The amendments also
provide further clarity on the classification of financial assets based on their
contractual terms, specifically addressing those consistent with a basic lending
arrangement and those with non-recourse features. These clarifications are intended
to reduce inconsistencies in the application of IFRS 9 and provide more precise
guidance on the accounting for financial instruments, which are fundamental to the
financial statements of most entities. The focus on settlement dates and classification
criteria directly affects the amounts and timing of recognition in the balance sheet
and income statement.

Amendments to IFRS 9 and IFRS 7 concerning contracts referencing

nature-dependent electricity, often structured as power purchase agreements (PPAs),
will also be effective from 1 January 2026.2 These amendments address the
application of the 'own use' requirements and hedge accounting for PPAs that meet
specific criteria related to electricity generated from nature-dependent sources. If a
PPA qualifies for the 'own use' exemption, it will be accounted for as an executory
contract rather than as a derivative. Additionally, new disclosure requirements have
been introduced to enable investors to better understand the impact of these
contracts on a company's financial performance and cash flows. The increasing use
of PPAs as companies seek to secure their electricity supply from renewable sources
like wind and solar power has prompted the IASB to provide specific accounting
guidance for these contracts. The clarification of the 'own use' exemption and the
permission for hedge accounting offer practical solutions for companies involved in
these arrangements, ensuring that their financial statements accurately reflect the
economic substance of these contracts.

IFRS 18, Presentation and Disclosure in Financial Statements, which replaces IAS 1,
Presentation of Financial Statements, will be effective for annual reporting periods
beginning on or after 1 January 2027.2 This new standard introduces significant
changes to the structure and content of the income statement. It mandates the
classification of income and expenses into three new categories: operating, investing,
and financing. Furthermore, it requires the presentation of new defined subtotals,
including operating profit and profit or loss before financing and income taxes.
Operating expenses must be presented directly on the face of the income statement,
classified either by nature (e.g., employee compensation), by function (e.g., cost of
sales), or using a mixed presentation with more detailed disclosures about their
nature when presented by function. IFRS 18 also enhances guidance on the
aggregation and disaggregation of information in the financial statements and
introduces new disclosure requirements for management-defined performance
measures (MPMs). Notably, it eliminates classification options for interest and
dividends in the statement of cash flows. This standard represents the most
substantial change to the presentation of financial performance in over two decades,
aiming to improve the comparability of income statements across companies and
provide investors with a more consistent and insightful view of financial performance.
The focus on MPMs also addresses concerns about the transparency and consistency
of company-specific performance metrics.

IFRS 19, Subsidiaries without Public Accountability: Disclosures, is a new standard

effective for annual reporting periods beginning on or after 1 January 2027.3 This
optional standard permits certain subsidiaries that do not have public accountability
to reduce the extent of disclosures required in their financial statements. This
acknowledges that the information needs of users of financial statements for
non-publicly accountable subsidiaries may differ from those of publicly listed entities,
potentially reducing the reporting burden for eligible companies. The optional nature
of this standard provides flexibility for subsidiaries while maintaining the fundamental
requirements of IFRS.

IFRS S1, General Requirements for Disclosure of Sustainability-related Financial

Information, is effective for annual reporting periods beginning on or after 1 January
2024.14 This standard requires entities to disclose material information about
sustainability-related risks and opportunities that could reasonably be expected to
affect the entity's cash flows, its access to finance, or cost of capital over the short,
medium, or long term. It sets out general requirements for the content and
presentation of sustainability-related financial disclosures, covering areas such as
governance, strategy, risk management, and metrics and targets. The introduction of
IFRS S1 marks a significant step towards integrating sustainability considerations into
the core of financial reporting, recognizing the increasing importance of
environmental, social, and governance (ESG) factors for investors and other
stakeholders in their assessment of a company's value and prospects.

IFRS S2, Climate-related Disclosures, also effective for annual reporting periods
beginning on or after 1 January 2024, specifies the disclosures related to
climate-related risks and opportunities.14 This standard requires disclosures about
climate-related physical risks and transition risks, as well as climate-related
opportunities. It mandates disclosures across the four pillars of the Task Force on
Climate-related Financial Disclosures (TCFD) framework: governance, strategy, risk
management, and metrics and targets, including greenhouse gas emissions. IFRS S2
provides detailed and specific requirements for reporting on climate-related matters,
reflecting the global urgency and significance of climate change and the need for
comparable and reliable information to enable investors and other stakeholders to
make informed decisions.

Impact of Recent IFRS Changes on Financial Statement Preparation and

Presentation

The recent changes in IFRS will have notable effects on how companies prepare and
present their financial statements.

IFRS 18 will significantly alter the presentation of the statement of profit or loss
(income statement).2 The introduction of the operating, investing, and financing
categories will provide a more structured format, aiming to improve comparability
across entities. The new required subtotals, such as operating profit and profit before
financing and income taxes, will offer investors consistent metrics for analyzing
profitability. The enhanced guidance on presenting operating expenses, whether by
nature or function, will require companies to reconsider their current presentation and
potentially provide more detailed disclosures, especially when using a functional
classification. Furthermore, the new requirements for disclosing and reconciling
MPMs to IFRS-defined subtotals will necessitate greater transparency and discipline in
the use of these company-specific performance measures. This shift in income
statement presentation will require companies to adapt their reporting systems and
processes to accommodate the new categories and subtotals. The increased focus on
MPMs will also demand careful consideration of how these measures are defined,
calculated, and communicated to stakeholders, ensuring they are clearly linked to the
IFRS-based financial results.

While IFRS 18 primarily impacts the income statement, other amendments will affect
the balance sheet and cash flow statement. The amendments to IAS 21 on the lack of
exchangeability of currencies may influence the presentation of foreign currency
balances on the balance sheet, particularly for entities operating in countries with
restricted currency exchange. Companies may need to adjust their valuation methods
and provide additional disclosures regarding the impact of using estimated exchange
rates.2 The amendments to IFRS 9 regarding the settlement date of financial
instruments will refine the timing of recognition and derecognition of these items on
the balance sheet. Additionally, IFRS 18 eliminates the previous classification options
for interest and dividends in the statement of cash flows, requiring a more
standardized presentation of these items, typically within the financing and investing
activities, respectively.2

The new and enhanced disclosure requirements under several IFRS standards will
significantly impact the presentation of financial information. IFRS 18 mandates
detailed disclosures about MPMs, including reconciliations to the most directly
comparable IFRS subtotals.2 This will provide users with a clearer understanding of
how management views the company's performance and how these measures relate
to the standardized IFRS metrics. IFRS 19 offers an option for certain subsidiaries
without public accountability to reduce their disclosure requirements, potentially
leading to less extensive notes to the financial statements for these entities.3 IFRS S1
introduces comprehensive disclosure requirements related to sustainability, covering
governance structures for overseeing sustainability risks and opportunities, the
entity's strategy for managing these, the processes used to identify, assess, and
monitor them, and the entity's performance against related metrics and targets.16
Similarly, IFRS S2 requires specific climate-related disclosures, including details about
governance, strategic implications of climate risks and opportunities, risk
management processes, and metrics and targets such as greenhouse gas emissions
and transition plans.2 These increased disclosure obligations will require companies to
collect and present a broader range of financial and non-financial information,
demanding robust data management and reporting processes.

Recent Significant Changes in United States Generally Accepted Accounting

Principles (US GAAP)

This section outlines the recent updates and amendments to major US GAAP
standards.

ASU 2024-03, Disaggregation of Income Statement Expenses, issued in November

2024, will be effective for annual reporting periods beginning after December 15,
2026, and interim periods within those annual reporting periods beginning after
December 15, 2027.26 This update requires public business entities (PBEs) to disclose,
in a tabular format within the footnotes to the financial statements, disaggregated
information about certain income statement expense captions. The disaggregation
includes specified natural expense categories such as purchases of inventory,
employee compensation, depreciation, intangible asset amortization, and
depreciation, depletion, and amortization related to oil and gas producing activities.
The ASU also mandates the disclosure of the total amount of selling expenses and, for
annual reporting periods, the entity's definition of selling expenses. This standard
aims to provide investors with a more detailed understanding of a PBE's cost
structure, thereby enhancing the transparency and comparability of expense
information across different entities. The FASB's objective is to address investor
feedback indicating a need for greater granularity in expense reporting to better
assess a company's performance and future prospects.

GAAP Change Effective Date (Non-Public) Primarily Affected Financial

Statements

ASU 2024-03: Disaggregation After December 15, 2026 Income Statement, Notes
of Income Statement
Expenses

ASU 2023-08: Accounting for After December 15, 2024 Balance Sheet, Income
and Disclosure of Crypto Statement, Notes
Assets

ASU 2024-01: Scope After December 15, 2025 Notes

Application of Profits Interest
and Similar Awards

ASU 2023-09: Improvements After December 15, 2024 Notes

to Income Tax Disclosures

ASU 2023-01: Common After December 15, 2023 Balance Sheet, Income
Control Arrangements for Statement, Notes
Leases

Updates Related to Reference Through December 31, 2024 Balance Sheet, Income
Rate Reform (Topic 848) Statement, Notes

ASU 2020-06: Debt with After December 15, 2023 Balance Sheet, Income
Conversion and Other Options Statement, Notes
(Smaller Reporting
Companies)

ASU 2022-04: After December 15, 2022 Balance Sheet, Cash Flow
Liabilities—Supplier Finance Statement, Notes
Programs (Subtopic 405-50)

ASU 2022-03: Fair Value After December 15, 2022 Balance Sheet, Notes
Measurement of Equity
Securities Subject to
Contractual Sale Restrictions
 (Topic 820)

ASU 2023-08, Accounting for and Disclosure of Crypto Assets, is effective for fiscal
years beginning after December 15, 2024.26 This standard mandates that all entities
measure certain crypto assets at fair value, with changes in fair value recognized in
net income in each reporting period. Crypto assets meeting specific criteria must be
presented separately from other intangible assets on the balance sheet, and the
changes in their fair value should be presented distinctly in the income statement. The
ASU also requires enhanced disclosures about an entity's holdings of crypto assets,
including their name, cost basis, fair value, and the number of units held. This update
addresses the increasing significance of crypto assets in the financial landscape and
aims to provide more relevant and transparent financial reporting by adopting a fair
value approach, moving away from the previous cost-less-impairment model which
was criticized for not fully reflecting the economic realities of these volatile assets.

Issued in March 2024, ASU 2024-01, Scope Application of Profits Interest and Similar
Awards, clarifies when profits interests should be accounted for under ASC 718,
Compensation—Stock Compensation.27 The ASU includes illustrative examples to
provide authoritative guidance on the application of these rules. It is effective for
non-public entities for annual periods beginning after December 15, 2025, with early
adoption permitted. This guidance seeks to reduce diversity in practice regarding the
accounting for profits interest awards, ensuring more consistent and transparent
financial reporting of these compensation arrangements, which are often used in
private equity and other industries.

Effective for fiscal years beginning after December 15, 2024, ASU 2023-09,
Improvements to Income Tax Disclosures, enhances the disclosure requirements for
income taxes.27 This update requires entities to provide more detailed information
about income tax expense, income tax paid, deferred tax assets and liabilities, and the
effective tax rate reconciliation. The goal of these improvements is to provide users of
financial statements with better insights into an entity's tax positions and the potential
impacts on future cash flows, thereby increasing the transparency of income tax
reporting.

ASU 2023-01, Leases (Topic 842): Common Control Arrangements, is effective for
fiscal years beginning after December 15, 2023.27 This ASU provides a practical
expedient for private companies and nonprofit organizations to use the written terms
and conditions of a common control arrangement to determine whether a lease exists
and how to classify and account for that lease. It also requires all entities to amortize
leasehold improvements associated with common control leases over the useful life of
the common control group. This update simplifies the accounting for lease
arrangements between entities under common control for private companies and
nonprofits, addressing a specific area where the application of the lease accounting
standard had proven complex.

Updates related to Reference Rate Reform (Topic 848) address the discontinuation of
LIBOR and similar reference rates.27 These updates allow companies to continue
applying certain relief provisions through December 31, 2024, to facilitate the
transition to alternative reference rates. These provisions are intended to ease the
burden of updating contracts and financial instruments that reference LIBOR,
mitigating potential disruptions in financial reporting during this significant market
transition.

ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20),
simplifies the accounting for convertible instruments and contracts in an entity's own
equity.50 This update is effective for smaller reporting companies (SRCs) for fiscal
years beginning after December 15, 2023. It reduces the number of accounting
models for convertible debt and convertible preferred stock and amends the guidance
on earnings per share. This simplification aims to reduce the complexity and cost
associated with accounting for these types of financial instruments, particularly for
smaller entities.

ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50), mandates

new disclosures related to supplier finance programs, enhancing transparency about
the obligations under such arrangements.50 These disclosures are effective for fiscal
years beginning after December 15, 2022, and require companies to provide detailed
information about these programs, including a rollforward of the outstanding
obligations during the annual period. Similar to the IFRS amendments on this topic,
these updates in US GAAP address the need for greater transparency regarding
supplier finance programs and their impact on a company's financial position and
liquidity.

ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual

Sale Restrictions (Topic 820), introduces new rules for measuring the fair value of
equity securities that are subject to contractual sale restrictions.50 This update,
effective for fiscal years beginning after December 15, 2022, requires companies to
consider these restrictions when determining the fair value of the equity securities.
This guidance aims to provide more specific direction on how to account for these
restrictions, leading to more accurate and consistent fair value measurements.

Impact of Recent US GAAP Changes on Financial Statement Preparation and

Presentation

The recent changes in US GAAP will also have significant effects on the preparation
and presentation of financial statements.

ASU 2024-03 will require PBEs to provide more detailed information about their
expenses in the footnotes to the income statement.26 While the face of the income
statement itself may not change, the enhanced disclosures will offer investors a more
granular view of a company's cost structure. This includes the disaggregation of
relevant expense captions into natural expense categories, providing insights into the
underlying costs of goods sold, operating expenses, and other expense categories.
The requirement to disclose total selling expenses and the entity's definition of these
expenses annually will further enhance transparency in this area. This increased level
of detail in expense reporting is intended to aid investors in better analyzing a
company's profitability, efficiency, and overall financial performance.

The implementation of the fair value model for crypto assets under ASU 2023-08 will
have a direct impact on both the income statement and the balance sheet.26 Changes
in the fair value of crypto assets will now be recognized in net income each reporting
period, potentially introducing greater volatility in reported earnings. On the balance
sheet, crypto assets meeting the specified criteria will need to be presented
separately from other intangible assets, reflecting their fair value. Additionally,
enhanced disclosures about the company's holdings of crypto assets, including their
cost basis and fair value, will provide greater transparency for financial statement
users interested in this asset class. This shift to fair value accounting aims to provide a
more current and market-based valuation of crypto assets, offering a more complete
picture of their economic performance.

Several other ASUs introduce changes primarily to disclosure requirements. ASU

2022-04 mandates new disclosures related to supplier finance programs, requiring
companies to provide more detailed information about these arrangements and their
impact on the balance sheet and cash flow statement.50 ASU 2023-01 requires all
entities to amortize leasehold improvements associated with common control leases
over the useful life of the common control group, potentially affecting the
presentation of depreciation expense. ASU 2023-09 will lead to more detailed
disclosures about various aspects of income taxes, providing users with better
insights into a company's tax position and potential future cash flow impacts.27 These
increased disclosure obligations across different areas of accounting reflect a
broader trend towards greater transparency in financial reporting under US GAAP.

Potential Benefits of Complying with New Regulatory Requirements (IFRS &

GAAP)

Compliance with the new financial reporting regulations under both IFRS and US
GAAP offers several potential benefits.

IFRS 18's standardized income statement structure and the requirement to disclose
and reconcile MPMs are expected to significantly increase the comparability of
financial performance across different companies and reporting periods.10 By defining
categories for operating, investing, and financing activities and mandating specific
subtotals like operating profit, the standard aims to provide investors with a more
consistent framework for analysis. The enhanced transparency around MPMs will
allow users to better understand how management views performance and how these
measures relate to the IFRS-based results.

Similarly, the disaggregation of expenses required by ASU 2024-03 will offer investors
a clearer and more detailed understanding of a company's cost structure.29 By
breaking down broad expense categories into their natural components, users will be
better equipped to analyze trends, compare cost efficiency across entities, and
assess the sustainability of a company's profitability.

The shift to fair value accounting for crypto assets under ASU 2023-08 provides a
more accurate and timely representation of their economic value on the financial
statements.40 This approach reflects the current market value of these volatile assets,
offering investors more relevant information for decision-making compared to the
previous cost-less-impairment model.

Overall, these new regulations share a common theme of enhanced transparency in

financial reporting. Increased transparency, coupled with improved comparability and
more relevant accounting for emerging asset classes, can lead to greater investor
confidence in the reliability and understandability of financial statements. This, in turn,
can contribute to more informed decision-making by investors, creditors, and other
stakeholders, potentially leading to more efficient capital allocation and a stronger
financial reporting ecosystem.

Regulatory Change Key Benefit Primary Beneficiaries

 IFRS 18 Presentation and Increased comparability of Investors, Analysts
Disclosure in Financial income statements, enhanced
Statements transparency of MPMs

IFRS S1 & S2 Improved transparency and Investors, Stakeholders,

Sustainability-related and accountability regarding Regulators
Climate-related Disclosures sustainability efforts

ASU 2024-03 Disaggregation More detailed understanding Investors, Analysts

of Income Statement of cost structure, enhanced
Expenses comparability

ASU 2023-08 Accounting for More accurate and timely Investors, Regulators
and Disclosure of Crypto representation of crypto asset
Assets values

Potential Challenges Faced by Companies in Complying with New Regulatory

Requirements (IFRS & GAAP)

Companies may encounter several challenges in complying with the new financial
reporting regulations under both IFRS and US GAAP.

Implementing these new requirements will likely involve significant costs associated
with updating accounting systems, processes, and internal controls.36 Finance teams
will need to invest time and resources to understand the new rules, modify existing
procedures, and potentially adopt new software solutions to capture and report the
required information.

Many of the new regulations are complex and will require companies to exercise
considerable judgment in their interpretation and application.46 This is particularly true
for areas like the classification of income and expenses under IFRS 18, the definition
and disclosure of MPMs, the fair value measurement of crypto assets under ASU
2023-08, and the determination of materiality for sustainability disclosures under IFRS
S1 and S2. The need for specialized expertise and training for finance teams will be
crucial to ensure accurate and consistent application of these complex rules.

Gathering and reporting the new types of information required by these standards
can also be challenging.35 For instance, disaggregating expenses under ASU 2024-03
at the required level of detail may necessitate significant effort in tracking and
categorizing various cost components. Similarly, compiling comprehensive data on
sustainability-related risks and opportunities, including scope 3 greenhouse gas
emissions under IFRS S2, can be particularly demanding as it often requires
information from across the company's value chain.

The changes in accounting policies and presentation formats mandated by these new
regulations may also impact key performance indicators (KPIs) and potentially affect
how investors and other stakeholders perceive a company's financial performance.58
Companies will need to carefully analyze these potential impacts and effectively
communicate them to their stakeholders.

Regulatory Change Key Challenges Potential Impact on

Companies

IFRS 18 Presentation and Classifying income/expenses, Increased implementation

Disclosure in Financial defining/disclosing MPMs, costs, potential for reduced
Statements significant system/process comparability initially due to
changes varied interpretations of
MPMs

IFRS S1 & S2 Defining materiality for Significant data collection

Sustainability-related and sustainability information, efforts, need for new
Climate-related Disclosures gathering comprehensive expertise, potential
data across the value chain, reputational risks
potential for greenwashing
concerns

ASU 2024-03 Disaggregation Tracking and disaggregating Increased data collection and
of Income Statement expenses at the required level processing efforts, potential
Expenses of detail, defining selling for increased audit scrutiny
expenses

ASU 2023-08 Accounting for Fair value measurement Potential earnings volatility,
and Disclosure of Crypto complexities, especially for need for specialized valuation
Assets assets without active markets, expertise, ongoing monitoring
determining current vs. of market values
noncurrent holdings

Conclusion

The financial reporting landscape is continually evolving, with recent significant

changes under both IFRS and US GAAP reflecting a global drive towards greater
transparency, comparability, and relevance. The update to the IFRS for SMEs
Accounting Standard, the introduction of IFRS 18, IFRS 19, IFRS S1, and IFRS S2,
alongside various amendments to existing IFRS standards, will reshape how
companies present their financial performance and disclose critical information,
including sustainability-related aspects. Similarly, US GAAP has seen substantial
updates with ASUs addressing expense disaggregation, crypto assets, profits interest,
income taxes, leases, and supplier finance programs, among others.

These regulatory changes will undoubtedly affect the preparation and presentation of
financial statements. IFRS 18 will lead to a restructured income statement with new
categories and subtotals, while other amendments will impact the balance sheet and
cash flow statement. Both IFRS and US GAAP are witnessing an increase in disclosure
requirements, demanding more detailed information on financial performance,
sustainability practices, and specific transactions.

The potential benefits of these changes include increased transparency for investors,
improved comparability across companies and reporting periods, and enhanced
investor confidence in the reliability of financial reporting. However, companies will
also face considerable challenges in complying with these new requirements,
including implementation costs, the need for specialized expertise, and the
complexities of interpreting and applying the new rules.

Ultimately, navigating this evolving financial reporting landscape effectively will

require companies to be proactive in understanding these changes, investing in
necessary resources and training, and adapting their systems and processes
accordingly. By embracing these new standards, companies can enhance their
communication with stakeholders and contribute to a more transparent and reliable
global financial reporting environment.

Works cited

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mes-accounting-standard/
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