HKFRS 18 NAVIGATORNAVIGATING IFRS AGENDA DECISIONSON HKFRS 18OCTOBER 2026 ISSUE 8As IFRS 18 implementation progresses, questions are increasingly moving from “what does theStandard require?” to “how does it apply to our facts?” Recent agenda decisions issued by the IFRSInterpretations Committee (IC) provide useful insights into practical application questions arising fromIFRS 18. Covering agenda decisions and tentative agenda decisions published up to October 2026,this issue highlights what preparers should consider now and which developments to watch.ADs vs TADsAgenda decisions (ADs) explain how the applicable principles and requirements inIFRS Accounting Standards apply to the fact pattern considered. They do not add orchange the requirements in standards.Tentative agenda decisions (TADs) remain subject to due process. Their conclusionsmay change before they are finalised.AGENDA DECISIONS Consider the implications nowClassification of a foreign exchange difference from an intragroupmonetary liability (or asset)
Relevant toGroups with intragroup loans or other monetary balances between entities with differentfunctional currencies, where the resulting foreign exchange differences remain in consolidatedprofit or loss.What the IC concludedHow should foreign exchange differences remaining in consolidated profit or loss after eliminationof the related intragroup balances be classified? The IC identified two reasonable readings ofIFRS 18’s classification requirements.The foreign exchange difference can be classified:
in the operating category as the default category; orin the category in which income and expenses from the intragroup balance would have beenclassified before elimination, subject to the undue cost or effort relief.Practical considerationsIdentify intragroup balances giving rise to foreign exchange differences remaining inconsolidated profit or loss, and develop, apply and document an accounting policy based oneither approach above in accordance with IAS 8 Basis of Preparation of FinancialStatements.Assess how the classification of the remaining foreign exchange differences could affectsystems, processes and supporting documentation.HKFRS 18 NAVIGATORNAVIGATING IFRS AGENDA DECISIONSON HKFRS 18OCTOBER 2026 ISSUE 8Classification of gains and losses on a derivative managing aforeign currency exposureRelevant toGroups that use derivatives not designated as hedging instruments applying IFRS 9 FinancialInstruments to manage the foreign currency risk of a net exposure, particularly groups without aspecified main business activity (SMBA).What the IC concludedIn the fact pattern considered, the external derivative manages a net liability exposure, ratherthan the gross investing asset and financing liability that make up that exposure. It is notdesignated as a hedging instrument applying IFRS 9. The IC concluded that an entity is requiredto classify any gain or loss on the external derivative in the same category as the income andexpenses affected by the risks that the derivative is used to manage. In this fact pattern, the gainor loss is therefore classified in the financing category of the consolidated statement of profit orloss. This conclusion does not require the derivative gain or loss to be grossed up.Practical considerationsIdentify and document the risk managed by each derivative to support the classification of itsgain or loss.Involve financial reporting and treasury teams in reviewing existing derivative arrangements toidentify any changes in presentation needed.Assessment of a specified main business activity for the purposesof the separate financial statements of a parentRelevant toParents that hold investments in subsidiaries and prepare separate financial statements.What the IC concludedIn the fact pattern considered, holding and managing investments in subsidiaries is the parent’sonly substantive activity. The IC concluded that this can provide sufficient evidence that investingin unconsolidated subsidiaries is an SMBA for the purposes of the parent’s separate financialstatements.Where the parent undertakes more than one substantive activity, the assessment may be lessstraightforward and require judgement based on the parent’s particular facts and circumstances.Practical considerationsIdentify the parent’s substantive activities and assess the evidence supporting its SMBAconclusion, particularly where it undertakes multiple activities.HKFRS 18 NAVIGATORNAVIGATING IFRS AGENDA DECISIONSON HKFRS 18OCTOBER 2026 ISSUE 8Scope of the requirement to disclose expenses by natureRelevant toEntities presenting some or all of their expenses by function.What the IC concludedThe IC concluded that paragraph 83 of IFRS 18 contains no exceptions or exclusions limiting itsapplication to specific function line items. Accordingly, the related disclosure requirements applywhen any expenses are presented by function in the operating category in the statement of profitor loss. Paragraph B84 of IFRS 18 also states that the amounts disclosed in accordance withparagraph 83 need not be the amounts recognised as an expense in the period. The amountsdisclosed could include amounts that have been recognised as part of the carrying amount of anasset.Practical considerationsIncorporate the relevant disclosure requirements into the implementation plan if anyoperating expenses will be presented by function.TENTATIVE AGENDA DECISIONS Developments to watchThe TADs below remain subject to due process, and their conclusions may change before they arefinalised.Rather than treating the TADs as settled positions, identify those relevant to implementationdecisions currently being made and monitor their progress through the IC’s due process.Classification in profit or lossincome and expenses from cash andcash equivalents for entities with anSMBA;
income and expenses from financingliabilities where providing financing tocustomers is an SMBA; andthe assessment of whether assetsgenerate returns individually and largelyindependently of other resources.Management-defined performance measures(MPMs)
performance measures containing hypotheticalincome and expenses;
the assessment of whether presentationsprovided on a confidential basis to a smallnumber of identifiable shareholders or potentialinvestors are public communications; andlabels used for subtotals that are also MPMs.SMBAthe assessment of a manufacturer-lessor’s activities, including its financeand operating lease activities.Presentation of operating expenseswhen mixed presentation is required andwhether expenses of the same nature can bedisaggregated into line items presented bynature and line items presented by function.HKFRS 18 NAVIGATORNAVIGATING IFRS AGENDA DECISIONSON HKFRS 18OCTOBER 2026 ISSUE 8IMPLEMENTATION FOCUSConsider whether any of these developing issues affect decisions currently being made.Where a TAD is relevant, implementation plans may need to remain flexible until the ICcompletes its due process.LOOKING AHEAD: WHAT’S NEXT IN OUR SERIESThe final issue will use illustrative examples to show how the new requirements may affect financialstatements.H1Q3Q4
1.Getting ready
2.Navigating the newstructure
3.Defining what you do:
Determination of mainbusiness activities
4.Management-definedPerformance Measures
5.Insights for financialinstitutions
6.A deep-dive into income,expenses & informationgrouping
7.Beyond the headlines:
Changes to other HKFRSAccounting Standards
8.Navigating IFRSagenda decisions onHKFRS 18
9.From theory to practiceThis publication has been prepared by staff of the HKICPA for information or illustration purposes. Members of the HKICPAand other users should also read the full HKFRS Accounting Standards, as set out in the HKICPA Members' Handbook forfurther reference, and seek professional advice where necessary.
HKFRS 18 Navigator Issue 8: Navigating IFRS agenda decisions on HKFRS 18
下载原件HKFRS 18 NAVIGATORNAVIGATING IFRS AGENDA DECISIONSON HKFRS 18OCTOBER 2026 ISSUE 8As IFRS 18 implementation progresses, questions are increasingly moving from “what does theStandard require?” to “how does it apply to our facts?” Recent agenda decisions issued by the IFRSInterpretations Committee (IC) provide useful insights into practical application questions arising fromIFRS 18. Covering agenda decisions and tentative agenda decisions published up to October 2026,this issue highlights what preparers should consider now and which developments to watch.ADs vs TADsAgenda decisions (ADs) explain how the applicable principles and requirements inIFRS Accounting Standards apply to the fact pattern considered. They do not add orchange the requirements in standards.Tentative agenda decisions (TADs) remain subject to due process. Their conclusionsmay change before they are finalised.AGENDA DECISIONS Consider the implications nowClassification of a foreign exchange difference from an intragroupmonetary liability (or asset)
Relevant toGroups with intragroup loans or other monetary balances between entities with differentfunctional currencies, where the resulting foreign exchange differences remain in consolidatedprofit or loss.What the IC concludedHow should foreign exchange differences remaining in consolidated profit or loss after eliminationof the related intragroup balances be classified? The IC identified two reasonable readings ofIFRS 18’s classification requirements.The foreign exchange difference can be classified:
in the operating category as the default category; orin the category in which income and expenses from the intragroup balance would have beenclassified before elimination, subject to the undue cost or effort relief.Practical considerationsIdentify intragroup balances giving rise to foreign exchange differences remaining inconsolidated profit or loss, and develop, apply and document an accounting policy based oneither approach above in accordance with IAS 8 Basis of Preparation of FinancialStatements.Assess how the classification of the remaining foreign exchange differences could affectsystems, processes and supporting documentation.HKFRS 18 NAVIGATORNAVIGATING IFRS AGENDA DECISIONSON HKFRS 18OCTOBER 2026 ISSUE 8Classification of gains and losses on a derivative managing aforeign currency exposureRelevant toGroups that use derivatives not designated as hedging instruments applying IFRS 9 FinancialInstruments to manage the foreign currency risk of a net exposure, particularly groups without aspecified main business activity (SMBA).What the IC concludedIn the fact pattern considered, the external derivative manages a net liability exposure, ratherthan the gross investing asset and financing liability that make up that exposure. It is notdesignated as a hedging instrument applying IFRS 9. The IC concluded that an entity is requiredto classify any gain or loss on the external derivative in the same category as the income andexpenses affected by the risks that the derivative is used to manage. In this fact pattern, the gainor loss is therefore classified in the financing category of the consolidated statement of profit orloss. This conclusion does not require the derivative gain or loss to be grossed up.Practical considerationsIdentify and document the risk managed by each derivative to support the classification of itsgain or loss.Involve financial reporting and treasury teams in reviewing existing derivative arrangements toidentify any changes in presentation needed.Assessment of a specified main business activity for the purposesof the separate financial statements of a parentRelevant toParents that hold investments in subsidiaries and prepare separate financial statements.What the IC concludedIn the fact pattern considered, holding and managing investments in subsidiaries is the parent’sonly substantive activity. The IC concluded that this can provide sufficient evidence that investingin unconsolidated subsidiaries is an SMBA for the purposes of the parent’s separate financialstatements.Where the parent undertakes more than one substantive activity, the assessment may be lessstraightforward and require judgement based on the parent’s particular facts and circumstances.Practical considerationsIdentify the parent’s substantive activities and assess the evidence supporting its SMBAconclusion, particularly where it undertakes multiple activities.HKFRS 18 NAVIGATORNAVIGATING IFRS AGENDA DECISIONSON HKFRS 18OCTOBER 2026 ISSUE 8Scope of the requirement to disclose expenses by natureRelevant toEntities presenting some or all of their expenses by function.What the IC concludedThe IC concluded that paragraph 83 of IFRS 18 contains no exceptions or exclusions limiting itsapplication to specific function line items. Accordingly, the related disclosure requirements applywhen any expenses are presented by function in the operating category in the statement of profitor loss. Paragraph B84 of IFRS 18 also states that the amounts disclosed in accordance withparagraph 83 need not be the amounts recognised as an expense in the period. The amountsdisclosed could include amounts that have been recognised as part of the carrying amount of anasset.Practical considerationsIncorporate the relevant disclosure requirements into the implementation plan if anyoperating expenses will be presented by function.TENTATIVE AGENDA DECISIONS Developments to watchThe TADs below remain subject to due process, and their conclusions may change before they arefinalised.Rather than treating the TADs as settled positions, identify those relevant to implementationdecisions currently being made and monitor their progress through the IC’s due process.Classification in profit or lossincome and expenses from cash andcash equivalents for entities with anSMBA;
income and expenses from financingliabilities where providing financing tocustomers is an SMBA; andthe assessment of whether assetsgenerate returns individually and largelyindependently of other resources.Management-defined performance measures(MPMs)
performance measures containing hypotheticalincome and expenses;
the assessment of whether presentationsprovided on a confidential basis to a smallnumber of identifiable shareholders or potentialinvestors are public communications; andlabels used for subtotals that are also MPMs.SMBAthe assessment of a manufacturer-lessor’s activities, including its financeand operating lease activities.Presentation of operating expenseswhen mixed presentation is required andwhether expenses of the same nature can bedisaggregated into line items presented bynature and line items presented by function.HKFRS 18 NAVIGATORNAVIGATING IFRS AGENDA DECISIONSON HKFRS 18OCTOBER 2026 ISSUE 8IMPLEMENTATION FOCUSConsider whether any of these developing issues affect decisions currently being made.Where a TAD is relevant, implementation plans may need to remain flexible until the ICcompletes its due process.LOOKING AHEAD: WHAT’S NEXT IN OUR SERIESThe final issue will use illustrative examples to show how the new requirements may affect financialstatements.H1Q3Q4
1.Getting ready
2.Navigating the newstructure
3.Defining what you do:
Determination of mainbusiness activities
4.Management-definedPerformance Measures
5.Insights for financialinstitutions
6.A deep-dive into income,expenses & informationgrouping
7.Beyond the headlines:
Changes to other HKFRSAccounting Standards
8.Navigating IFRSagenda decisions onHKFRS 18
9.From theory to practiceThis publication has been prepared by staff of the HKICPA for information or illustration purposes. Members of the HKICPAand other users should also read the full HKFRS Accounting Standards, as set out in the HKICPA Members' Handbook forfurther reference, and seek professional advice where necessary.