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Nature or function of expenses
An entity should present an analysis of expenses
either by the nature of expenses or by their function,
but not a mixture of both [IAS1R.88] .
The analysis may be presented on the face of the
income statement or in the notes. The two basic
styles of presentation are as follows:
Analysis by nature of expense [IAS1R.91]:
Analysis by function of expense [IAS1R.92]:
The format that will give the fairest presentation
of the entity's performance should be chosen [IAS1R.94] . Where a functional analysis is followed
however, the entity must also disclose information
on the nature of expenses, including depreciation,
amortisation, and staff costs [IAS1R.93].
Other income should include income that is incidental
or ancillary to the entity's operations. Separate
disclosure should be given if material .
The classification of costs within a functional
income statement requires the exercise of judgement.
Costs directly associated with generating revenues
should be included in cost of sales. This will include,
for example, depreciation of assets used in production.
The classification of costs not directly attributable
to revenue generation, including head-office and
research and development costs, should be included
in administrative expenses unless distribution costs
is a more appropriate heading.
The amortisation of goodwill should be included
either as administrative expenses or as other expenses
[IAS1R.91,92]. Restructuring charges
should also be classified within other expenses
and if material, separate disclosure should be given
[IAS1R.86-87]. .
Impairment charges should be classified according
to how the depreciation or amortisation of the particular
asset is classified. A similar approach should be
taken for provisions for inventory obsolescence,
which should be charged to cost of sales.
The use of the caption "other" in providing
an analysis of revenues or expenses should be avoided.
Where "other" is used, an analysis of
its composition should be given in the notes. The
analysis of "other" should not include
a sub-category titled "other" as a material
sub-component.
Other gains and losses
All items of income and expense should be included
in the income statement [IAS1R.78]. Standards require
certain gains and losses to be excluded from the recognition
of net income or loss for the period [IAS1R.80]. Examples
of such gains and losses include fair value gains
and losses on property, plant and equipment
[IAS16R.39-40], currency translation differences on
entities consolidated using the net investment method
[IAS21R.39]
and the tax on such
items [IAS12.61]. These gains and
losses should be recognised in the statement of total
recognised gains and losses or in the statement of
changes in equity .
Fair value gains and losses that must be included
in the income statement, for example in respect
of investment properties. These gains and losses
should be disclosed as a separate line on the face
of the income statement, either before or after
administrative expenses .
Dividends per share
The amount of dividends per share should be disclosed
on the face of the income statement [IAS1R.95].
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