Conceptual Framework for Financial Reporting

Classification of income and expenses
Classification is applied to:
(a)
income and expenses resulting from the unit of account selected for an
asset or liability; or
(b)
components of such income and expenses if those components have
different characteristics and are identified separately. For example, a
change in the current value of an asset can include the effects of value
changes and the accrual of interest (see Table 6.1). It would be
appropriate to classify those components separately if doing so would
enhance the usefulness of the resulting financial information.
Profit or loss and other comprehensive income
Income and expenses are classified and included either:
(a)
in the statement of profit or loss;
11
or
(b)
outside the statement of profit or loss, in other comprehensive income.
The statement of profit or loss is the primary source of information about an
entity’s financial performance for the reporting period. That statement
contains a total for profit or loss that provides a highly summarised depiction
of the entity’s financial performance for the period. Many users of financial
statements incorporate that total in their analysis either as a starting point for
that analysis or as the main indicator of the entity’s financial performance for
the period. Nevertheless, understanding an entity’s financial performance for
the period requires an analysis of all recognised income and expenses—
including income and expenses included in other comprehensive income—as
well as an analysis of other information included in the financial statements.
Because the statement of profit or loss is the primary source of information
about an entity’s financial performance for the period, all income and
expenses are, in principle, included in that statement. However, in developing
Standards, the Board may decide in exceptional circumstances that income or
expenses arising from a change in the current value of an asset or liability are
to be included in other comprehensive income when doing so would result in
the statement of profit or loss providing more relevant information, or
providing a more faithful representation of the entity’s financial performance
for that period.
Income and expenses that arise on a historical cost measurement basis (see
Table 6.1) are included in the statement of profit or loss. That is also the case
when income and expenses of that type are separately identified as a
component of a change in the current value of an asset or liability. For
example, if a financial asset is measured at current value and if interest
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7.15
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7.17
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11 The Conceptual Framework does not specify whether the statement(s) of financial performance
comprise(s) a single statement or two statements. The Conceptual Framework uses the term
‘statement of profit or loss’ to refer to a separate statement and to a separate section within a
single statement of financial performance. Likewise, it uses the term ‘total for profit or loss’ to
refer both to a total for a separate statement and to a subtotal for a section within a single
statement of financial performance.
Conceptual Framework
© IFRS Foundation
A87

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income is identified separately from other changes in value, that interest
income is included in the statement of profit or loss.
In principle, income and expenses included in other comprehensive income in
one period are reclassified from other comprehensive income into the
statement of profit or loss in a future period when doing so results in the
statement of profit or loss providing more relevant information, or providing
a more faithful representation of the entity’s financial performance for that
future period. However, if, for example, there is no clear basis for identifying
the period in which reclassification would have that result, or the amount
that should be reclassified, the Board may, in developing Standards, decide
that income and expenses included in other comprehensive income are not to
be subsequently reclassified.