How Should a Statement of Cash Flows be Presented Following IFRS 18
It is appropriate to undertake a fresh reconsideration of the relevance of the current structure of the statement of cash flows to meet investors' needs that have evolved over the years. These needs are further highlighted considering the change in the structure of the statement of profit or loss in accordance with IFRS 18. The model we propose creates full coherence between the statement of cash flows and the new statement of profit or loss. The core of the proposed reform focuses on the operating category, which will be prepared using the direct method and will include two sections: the first represents the cash flows from operating activities as it is today (excluding taxes). The second section includes cash flows for investments in operating assets, that is, payments for the purchase/investment in assets used in operating activities, as well as receipts from their disposal. Additionally, we recommend requiring a disclosure
The Crypto Industry: Current Accounting Standards Lead to Inflated Statement of Profit or loss
Companies engaged in crypto asset trading that are publicly traded in the United States currently report their revenue from trading in crypto assets on a gross basis, under both IFRS and US GAAP. This reporting stems from the accounting principle of control over assets, which has been adopted in both Frameworks as the basis for distinguishing between gross reporting (principal) and net reporting (agent). Crypto industry companies argue that this form of reporting leads to inflated revenue and cost of sales, resulting in minimal gross profit margins that completely contradict their business model, which generates profit from fees and spreads. To prevent loss of relevance to the point of misleading investors, we believe that global standard-setting bodies should amend the rules on this matter, similar to the intervention implemented approximately a year and a half ago in the United States (and, we believe, should be implemented in IFRS as well)
Inherent Distortion in IFRS 18: the Expected Impact on Operating Results of Companies Whose Main Business Activity Includes Investing in Associates and Joint Ventures Accounted for Using the Equity Method
Companies that Invest in associates and joint ventures accounted for using the equity method as part of their main business activities may “fall between the cracks” under IFRS 18. This could be the case, for example, with holding companies, developers in the renewable energy sector and companies that expand their global operations through local partners […]
Off-Balance Sheet Financing: The Proposed Amendment to IAS 37 Demonstrates the Need to Recognise a Liability for the Acquisition of an Asset in Exchange for Performance-Based Contingent Consideration
Currently, IFRS does not provide an answer to the fundamental question of whether a financial liability arises from an obligation for contingent consideration that depends on the future performance of the acquirer in relation to the acquired asset, unless it involves a business combination. As a result, the practice in this area varies, and the acquisition of property, plant and equipment or an intangible asset in exchange for such contingent consideration may not appear at all in the statement of financial position.
The Missing Twist in the New Proposal for Amendments to IAS 28 on the Equity Method
The New ED Proposal deliberately avoids fundamental issues of what exactly is significant influence and whether the equity method is a measurement basis or a one-line consolidation. However, the key issue that should have been addressed is why a fair value model, which is more relevant to investors, is not adopted for associates. A preferable alternative solution is that a fair value measurement for investments in listed associates should be required, while it will be optional for non-listed associates.
