Section 4: Statement(s) of Financial Performance (AASB1061_04-26)

This section requires an entity to present its total comprehensive income for a reporting period – ie its financial performance for the period – across one or two financial statements. It sets out the information to be presented in those statements and how to present it.

An entity shall present its total comprehensive income for a period either: 

(a) in a single statement of profit or loss and other comprehensive income, in which case the statement presents all items of income and expense recorded in the period; or 

(b) in two statements – a statement of profit or loss and a statement of comprehensive income – in which case the statement of profit or loss presents all items of income and expense recorded in the period except those that are recorded in total comprehensive income outside profit or loss as permitted or required by this Standard.

An entity’s total comprehensive income for a reporting period is the change in equity during that period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners. It comprises all components of ‘profit or loss’ and of ‘other comprehensive income’. This Standard requires different treatment of items of income and expense in the following circumstances: 

(a) the effects of corrections of prior period errors and changes in accounting policies are presented as retrospective adjustments of prior periods instead of as part of the total comprehensive income for the current period (see Section 9); and 

(b) items of other comprehensive income are recorded outside profit or loss when they arise.

A change between presenting total comprehensive income using the single-statement approach and the two-statement approach is not a change in accounting policy.

Under the single-statement approach, the statement of profit or loss and other comprehensive income shall include all items of income and expense recorded in a period unless this Standard requires otherwise. 

An entity shall include, in the statement of profit or loss and other comprehensive income, line items that present the following amounts for the period when those amounts are material to an understanding of the entity’s financial performance: 

(a) revenue; 

(b) finance costs; 

(c) share of the profit or loss of investments in associates and joint ventures accounted for using the equity method or, where applicable, the share of the profit or loss of investments in notable relationship entities accounted for using the equity method; 

(d) tax expense; 

(e) profit or loss (if an entity has no items of other comprehensive income, this line need not be presented); 

(f) each item of other comprehensive income classified by nature (excluding amounts in (g)). 

(g) share of the other comprehensive income of associates and joint ventures accounted for using the equity method or, where applicable, the share of the other comprehensive income of notable relationship entities accounted for using the equity method; and 

(h) total comprehensive income (if an entity has no items of other comprehensive income, it may use another term for this line, such as ‘profit or loss’).

An entity shall disclose separately the following items in the statement of profit or loss and other comprehensive income as allocations for the period: 

(a) profit or loss for the period attributable to: 

(i) non-controlling interests; and 

(ii) owners of the parent; and 

(b) total comprehensive income for the period attributable to: 

(i) non-controlling interests; and 

(ii) owners of the parent.

Under the two-statement approach, the statement of profit or loss shall present, as a minimum, line items that present the amounts in paragraphs 4.6(a)–(e) for the period, with profit or loss as the last line. The statement of comprehensive income shall begin with profit or loss as its first line and shall present, as a minimum, line items that present the amounts in paragraphs 4.6(f)–(h) and paragraph 4.7 for the period.

An entity shall present additional line items, headings and subtotals in the statement(s) of financial performance when such presentation is relevant to an understanding of the entity’s financial performance.

An entity shall not present or describe any items of income and expense as ‘extraordinary items’ in the statement(s) of financial performance or in the notes.

An entity shall present a structured summary of its expenses in the statement of profit or loss and other comprehensive income, or in the notes, classifying expenses by the nature of expenses or the function of expenses within the entity, or both, whichever way provides the most useful structured summary of its expenses.

Classification by nature of expense

(a) Under this method of classification, expenses are aggregated according to their nature (for example, depreciation, materials used, grants and donations made, transport costs, employee benefits, information technology support and advertising costs) and are not reallocated among various functions within the entity.

Classification by function of expense

(b) Under this method of classification, expenses are aggregated according to their function as part of the costs of pursuing the entity’s mission, for example the costs of providing educational services, advice or other community services, the cost of sales and the costs of distribution or administrative activities.

In determining how to use the characteristics of nature and function to provide the most useful structured summary of expenses, an entity shall consider the main components and drivers of the entity’s financial performance, how the entity’s operations are managed and the classifications commonly used by entities in the same industry. An entity shall not classify expenses to a function if the allocation of expenses to that function would be so arbitrary that the amount presented would not provide a faithful representation of that function.

If an entity classifies and presents some expenses by nature and other expenses by function, it shall label the resulting items in a way that clearly identifies which expenses are included in each item presented. For example, if an entity includes some employee benefits in a function line item and other employee benefits in a nature line item, the label for the nature line item would clearly identify that it does not include all employee benefits (eg ‘employee benefits excluding those included in cost of sales’).

An entity that classifies and presents some or all expenses by function within the entity shall nonetheless disclose the items of expense that are required to be disclosed by other sections of this Standard (eg impairment losses).