ITEMS PRESENTED AND DISCUSSED AT THE SEPTEMBER 17, 2026 MEETING
IFRS 18: Management-defined Performance Measures – Public Communications
Background
IFRS 18 Presentation and Disclosure in Financial Statements will replace IAS 1 Presentation of Financial Statements. While IFRS 18 will not change how entities recognize and measure items in the financial statements, it will affect how they present and disclose those items, especially in the income statement.
IFRS 18 introduces the concept of management-defined performance measures (MPMs) and requires their disclosure in the financial statements, making them part of the audited financial statements for the first time. MPMs are subtotals of income and expenses used in public communications outside of the financial statements to communicate management’s view of an aspect of the entity’s financial performance. This concept captures some, but not all, non-generally accepted accounting principles (GAAP) measures that companies commonly use today.
IFRS 18 is effective for annual reporting periods beginning on or after January 1, 2027, and applies retrospectively with early application permitted. Entities are currently in the process of identifying and analyzing which of their performance metrics will qualify as MPMs and will therefore be subject to disclosure in the financial statements. The MPM requirements apply to all entities applying IFRS Accounting Standards, including private companies and publicly accountable enterprises.
Paragraph 117 of IFRS 18 defines an MPM as:
a subtotal of income and expenses that…
(a) an entity uses in public communications outside financial statements;
(b) an entity uses to communicate to users of financial statements management’s view of an aspect of the financial performance of the entity as a whole;
and
(c) is not listed in paragraph 118 of IFRS 18 or specifically required to be presented or disclosed by IFRS Accounting Standards.
The Group considered how to determine whether a communication is a “public communication” under paragraph 117(a) of IFRS 18. IFRS 18 does not define “public communications”. Paragraph BC335 of the Basis for Conclusions on IFRS 18 notes that some interested and affected parties previously raised concerns that “public communications” is not defined and could be interpreted broadly.
Agenda Paper 21B from the IASB’s November 2021 meeting discusses some factors the IASB considered in deciding not to provide a definition. One factor is that providing a definition could have unintended consequences for other IFRS Accounting Standards that use the term “public”. The example provided in the Agenda Paper is that IAS 37 Provisions Contingent Liabilities and Contingent Assets refers to the term “public statement” in the context of constructive obligations. Another example is IFRS 10 Consolidated Financial Statements, which refers to “financial statements that are available for public use” in the exemption from consolidation requirements under paragraph 4(a)(iv) of IFRS 10. Neither IAS 37 nor IFRS 10 define these terms, but in practice, a reasonable interpretation of “available for public use” is that a member of the public should be able to obtain the financial statements without undue cost or effort.
Agenda Paper 21B also outlines what the IASB staff think may be understood as “public communications”. The staff think the common interpretation of “public” is wide in scope. They considered dictionary definitions of “public” and similar concepts in regulations. For example, they noted that the Merriam-Webster Dictionary definition for “public” as an adjective is: “(a) exposed to general view: open, (b) well-known, prominent, (c) perceptible, material.”
Accordingly, an entity would need to consider the facts and circumstances surrounding a communication and apply judgment in assessing whether it constitutes a public communication.
In June 2026, the IFRS Interpretations Committee (the Interpretations Committee) issued a tentative agenda decision on this topic. Since this agenda decision was tentative as of the date of this discussion, the Interpretations Committee’s conclusions may change after it deliberates respondents’ feedback.
The submission
The submission the Interpretations Committee received asked whether presentations provided on a confidential basis to a small number of identifiable shareholders or potential investors are public communications for the purpose of identifying an MPM. The submission described a fact pattern in which:
- a private entity prepares and shares presentations (including pitch materials) with a small number of identifiable shareholders or potential investors. The presentations contain performance measures that could otherwise meet the definition of an MPM;
- the presentations are shared under agreements that require confidentiality and prevent redistribution of the presentations to other parties; and
- the presentations are not published online, included in press releases, distributed to analysts, or otherwise made accessible to a broader or undefined external audience.
Tentative agenda decision and the Interpretations Committee’s preliminary conclusions
To help entities assess whether a communication is a public communication, paragraph B119 of IFRS 18 lists particular communications that “public communications” include and exclude. The paragraph states:
A subtotal meets the definition of a management-defined performance measure only if an entity uses it in public communications outside its financial statements. Public communications include management commentary, press releases and investor presentations. For the purpose of defining
management-defined performance measures, public communications exclude oral communications, written transcripts of oral communications and
social media posts.
The Interpretations Committee observed that the reference to “investor presentations” in paragraph B119 of IFRS 18 should not be read to mean that all presentations provided to investors are public communications.
The Interpretations Committee noted that an entity applies judgment in assessing whether a particular communication is a public communication. Paragraph BC335 of the Basis for Conclusions on IFRS 18 states:
…the IASB observed that an entity actively decides how it communicates publicly and the performance measures it includes in those communications.
An entity usually has systems and processes in place to monitor and control its communications to comply with laws and regulations restricting the type
and timing of information permitted to be provided to the market…
The Interpretations Committee tentatively concluded that the presentations described in the fact pattern are not public communications for the purposes of identifying an MPM when applying IFRS 18, and that IFRS 18 provides an adequate basis for the entity to assess whether they are public communications. Consequently, the Interpretations Committee tentatively decided that a standard-setting project was not needed to address the request.
Fact Pattern for Issue 1
- A private entity prepares an annual presentation containing performance measures that could otherwise qualify as MPMs.
- The presentation is not published on the entity’s website or otherwise made generally accessible online. Instead, the entity emails the presentation to all the shareholders.
- The presentation is not subject to confidentiality agreements, non-disclosure provisions, or any other restrictions that would prohibit shareholders from sharing or redistributing the presentation to third parties.
Issue 1: Does the entity’s annual presentation constitute a “public communication” for the purposes of applying IFRS 18?
Analysis
View 1a: Yes, the annual presentation is a public communication
Proponents of this view note that the annual presentation would be considered a public communication because the entity distributes it to all its shareholders (i.e., a broad external group), rather than to a limited subset of investors or others. There are no restrictions on further dissemination of the presentation. Shareholders and management can distribute the information to others, meaning the presentation can reach a wider group beyond the original recipients.
Under this view, emphasis is placed on the breadth of distribution and the unrestricted nature of access by recipients. The fact that the presentation is not published on the entity’s website or otherwise made generally accessible online would not prevent it from being considered a public communication.
View 1b: No, the annual presentation is not a public communication
Proponents of this view note that the annual presentation would not be considered a public communication because it is provided only to a specific group of financial statement users, namely the entity’s shareholders, rather than being made readily available to the public at large.
Proponents of this view further note that a defining characteristic of a public communication is that any member of the public can access it without needing to belong to a particular class of financial statement user or to have a specific relationship with the entity. Access to the entity’s presentation is dependent on being a shareholder, which inherently limits the communication to a defined group.
Under this view, the relevant consideration is whether the entity itself has made the information publicly available, not whether recipients are permitted to share the information. The fact that there were no confidentiality or non-disclosure restrictions preventing shareholders from redistributing the presentation may not be sufficient to constitute a public communication. Furthermore, shareholders are under no obligation to provide the presentation to third parties who request access. As a result, members of the public cannot obtain the presentation as a matter of right, and the information is not freely accessible in the same manner as information published on a website, filed with a regulator, or otherwise made available to the general public.
The Group’s Discussion
Many Group members supported View 1b because the entity distributes the annual presentation only to a specific group of financial statement users and does not make it readily available to the public. They noted that a member of the public could not obtain the information directly from the entity and would need to have a relationship with a shareholder to gain access. That shareholder would also need to be willing to share the information.
A few Group members supported View 1a. One Group member highlighted that the entity does not have any controls in place to prevent broader distribution of the annual presentation (such as non-disclosure provisions). A few Group members focused on the intention of the MPM requirements, which paragraph BC342 of the Basis for Conclusions on IFRS 18 states is “…to provide transparency and discipline over measures communicated to users outside the financial statements, regardless of whether the entity is public or private.” One Group member noted that communications provided to shareholders in this fact pattern may be similar in substance to communications that would give rise to MPM disclosures in a public company context. Another Group member added that securities regulation concepts may be informative in assessing whether a communication is public, such as the concept of information that is “reasonably likely to be made available to the public” under National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure in Canada.
A few Group members commented on the intended audience for MPMs. They noted that performance measures communicated to all shareholders may not be subject to the MPM disclosure requirements if the communication is not available to the public at large, even when the shareholders are the intended users of the financial statements. One Group member also reflected on how the concept of communicating with “the market” in paragraph BC335 of the Basis for Conclusions on IFRS 18 would be interpreted for a private entity, noting that communications distributed solely to existing shareholders may not address the information needs of potential investors or other users.
Most Group members agreed that assessing whether the annual presentation is a public communication requires consideration of the specific facts and circumstances, such as the size and nature of the shareholder base and the likelihood that information would be shared beyond shareholders. For example, some Group members suggested that redistribution may be less likely when shareholders are family members or governmental bodies and more likely when they are venture capital firms, private equity funds, or a large number of individuals. Some Group members also thought that the entity’s intent may be relevant to the assessment, such as the entity’s rationale for not publishing the annual presentation on its website or for not implementing confidentiality agreements or non-disclosure provisions.
Fact Pattern for Issue 2
- A credit union association with approximately 500 members publishes an annual report containing performance measures that would otherwise qualify as MPMs.
- The annual report is made available through the credit union association’s website. However, access to the report requires users to log in using member credentials before the report can be viewed or downloaded.
- Membership in the credit union association is available to any Canadian resident who agrees to purchase a nominal membership share, typically ranging from $1 to $5. Upon becoming a member, individuals are provided with login credentials that enable access to member-only resources, including the annual report.
Issue 2: Does the credit union association’s annual report constitute a “public communication” for the purposes of applying IFRS 18?
Analysis
View 2a: Yes, the annual report is a public communication
Proponents of this view note that the annual report would be considered a public communication because it is made available to the entire membership base of the credit union association, and membership itself is broadly accessible to the public. Although a login is required to access the report, the membership requirements are minimal and are not designed to exclude significant portions of the public. Any Canadian resident who purchases the nominal membership share can become a member and obtain access credentials.
Under this view, the login requirement serves primarily as an administrative or security measure rather than a substantive restriction on access. Since membership is open to any eligible member of the public and the annual report is provided to all members without selective distribution, the report may be viewed as being communicated to a sufficiently broad external audience to constitute a public communication.
View 2b: No, the annual report is not a public communication
Proponents of this view note that the annual report would not be considered a public communication because access is restricted to a specific group of financial statement users, namely members of the credit union association.
Under this view, a key feature of a public communication is that it is made readily available to the public at large without requiring individuals to satisfy membership criteria or obtain special access rights. The credit union association’s annual report is not freely accessible to any member of the public who visits the website. Rather, access is contingent upon membership status and successful authentication through a member portal. These access restrictions suggest that the annual report is directed to a defined and limited audience rather than the public generally. Accordingly, proponents of this view would conclude that the annual report does not constitute a public communication because it is not openly and unrestrictedly available to all external users.
The Group’s Discussion
Some Group members supported View 2a because they considered the barriers to accessing the annual report to be minimal and administrative in nature. They observed that membership is broadly available, the cost is nominal, and that anyone willing to satisfy those requirements could effectively obtain access to the report. One Group member suggested that information could be public even if there is a cost to access it, provided it is available to all members of the public on similar terms.
Some Group members supported View 2b, viewing the membership requirement to be a substantive and intentional restriction on access. For example, Group members commented that obtaining access requires completing a transaction and may also require spending time to set up a financial account with the credit union association. A few Group members noted that even if information is capable of becoming public, this does not necessarily make it public. Access to the information is contingent on becoming a specific class of financial statement user (i.e., a member of the credit union association), rather than simply creating login credentials for administrative or marketing purposes.
Similar to Issue 1, several Group members emphasized that assessing whether the annual report is a public communication requires consideration of the specific facts and circumstances, such as the size and nature of the membership base and the credit union association’s intent in making the information available. For example, one Group member noted that a credit union association’s objective is often to attract new members and deposits, and, therefore, it may intend to make the information available to a broader audience. Another Group member suggested that if the intent was to grow membership, the credit union association could have instead chosen to publish the annual report on its website to facilitate broader access to the information.
Group members also considered how their views would change if, instead of requiring a member login, the credit union association made its annual report available to anyone upon request (rather than only to members), with information on its website explaining how to request the report. One Group member noted that this fact may have led them to favour View 2a because it would make the annual report accessible to anyone without a membership requirement. A few Group members commented that it would again be important to consider the specific facts and circumstances, such as the credit union association’s intent in making the annual report available in this manner and the location and prominence of the information on the website explaining how to access the report.
Overall, the Group’s discussion raised awareness of factors an entity might consider when determining whether a communication may be considered a “public communication” for the purpose of identifying an MPM when applying IFRS 18. The Group recommended the AcSB continue to monitor developments related to the IFRS Interpretations Committee’s tentative agenda decision and broader implementation issues arising from IFRS 18.
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IFRS 18: Management-defined Performance Measures – Hypothetical Income and Expenses
Background
At its meeting in May 2025, the Group discussed disclosures about management-defined performance measures (MPMs). As part of that discussion, the Group discussed factors an entity might consider to determine whether a reported metric qualifies as an MPM under IFRS 18 Presentation and Disclosure in Financial Statements. One example the Group explored was whether a subtotal of income and expenses based on hypothetical events or transactions can meet the definition of an MPM.
In June 2026, the IFRS Interpretations Committee (the Interpretations Committee) issued a tentative agenda decision on this topic. The Group discussed the implications of this tentative agenda decision for Canadian entities and other factors to consider. Since this agenda decision was still tentative on the date of this discussion, the Interpretations Committee’s analysis may change after it deliberates respondents’ feedback.
Issue 1: The IFRS Interpretations Committee’s tentative agenda decision on hypothetical income and expenses
Analysis
Background
Paragraph 117 of IFRS 18 defines an MPM as:
a subtotal of income and expenses that…
(a) an entity uses in public communications outside financial statements;
(b) an entity uses to communicate to users of financial statements management’s view of an aspect of the financial performance of the entity as a whole; and
(c) is not listed in paragraph 118 or specifically required to be presented or disclosed by IFRS Accounting Standards.
Paragraphs 118-120 and B113-B122 of IFRS 18 contain additional guidance on identifying MPMs.
The submission asked whether a performance measure that includes hypothetical income and expenses can meet the definition of an MPM in IFRS 18. The submission defines hypothetical income and expenses as income and expenses that an entity has not recognized and will never recognize in its statement of financial performance applying IFRS Accounting Standards.
The submission
The submission raised two items for consideration:
- Can a performance measure that includes hypothetical income and expenses constitute a subtotal of income and expenses for the purposes of identifying an MPM under IFRS 18?
- In applying paragraph 117(b) of IFRS 18, should an entity interpret the requirement “management’s view of an aspect of the financial performance of the entity as a whole” as a single, integrated requirement or separately assess whether the measure reflects “an aspect of financial performance of the entity” independently from “management’s view”?
The submission emphasized that IFRS 18 places no explicit restrictions on how to calculate an MPM, while simultaneously requiring MPM disclosures to faithfully represent management’s view of financial performance. This has led to uncertainty about whether measures containing hypothetical adjustments can qualify as MPMs.
The submission highlighted IFRS 18 requirements that some entities may view as conflicting, which might lead to differing interpretations:
- Paragraph BC357 in the Basis for Conclusions on IFRS 18 explains that the IASB intentionally chose not to restrict how an entity calculates an MPM (i.e., there are no restrictions in paragraph 117 of IFRS 18). This suggests that a measure that includes hypothetical adjustments can meet the definition of an MPM, provided it meets the requirements in paragraph 117.
- Paragraph 117 of IFRS 18 requires a measure to be a “subtotal of income and expenses” to qualify as an MPM. It might be unclear whether hypothetical amounts may qualify as income and expenses when the underlying transactions or events have never and will never occur. Such amounts may not meet the definitions of “income” and “expenses” as defined in paragraphs 4.68 and 4.69 of the Conceptual Framework for Financial Reporting (this was View A in the submission).
- Paragraph BC358(a) in the Basis for Conclusions on IFRS 18 states that “[an MPM] needs to faithfully represent the aspect of an entity’s financial performance it purports to represent.” For example, MPMs are subject to the general requirements applicable to information included in the financial statements. This raises the question of whether a measure that incorporates hypothetical amounts can ever faithfully represent an aspect of financial performance when it reflects events that did not and will not occur. View B in the submission presents the idea that such measures cannot faithfully represent financial performance of the entity and, therefore, cannot be MPMs. View C in the submission presents the idea that such measures may qualify as MPMs, provided the hypothetical amounts do not impair faithful presentation or render the measure misleading.
Paragraph 119 of IFRS 18 contains a rebuttable presumption that a subtotal of income and expenses that an entity uses in public communications outside its financial statements communicates management’s view of an aspect of the financial performance of the entity as a whole. Some entities might think the rebuttable presumption suggests that any measure that is publicly communicated meets the definition of an MPM, if it meets the other criteria, even when the measure incorporates hypothetical amounts. This was presented as View D in the submission.
Overall, the submission highlighted the lack of clarity in IFRS 18 on the measures that qualify as MPMs, which may lead to inconsistent application of the requirements. If entities conclude that measures containing hypothetical adjustments are not MPMs and therefore omit related disclosures, this might result in reduced transparency. Conversely, if entities conclude that such measures are MPMs, it might result in inappropriate disclosures.
Key elements of the Interpretations Committee’s discussion
The Interpretations Committee generally thought that entities should apply the MPM requirements to any subtotal of income and expenses that management communicates publicly as a measure of financial performance. Several Committee members observed that the MPM requirements in IFRS 18 intentionally scope in a broad range of measures, with the accompanying disclosure and reconciliation requirements serving as important safeguards.
While Committee members generally thought measures containing hypothetical adjustments based on actual transactions or events can be MPMs, many questioned whether measures derived from scenarios that did not occur could faithfully represent financial performance. The discussion highlighted the distinction between objective, auditable and supportable adjustments and highly subjective theoretical measures. Several Committee members expressed concerns that such measures may reflect management’s expectations, assumptions, or aspirations rather than actual performance, potentially reducing their verifiability and usefulness to investors. Committee members therefore emphasized that MPMs should provide a faithful and non-misleading depiction of financial performance. In doing so, they also emphasized that the assessment of faithful representation should be independent of whether a measure is perceived as “good” or “bad.”
A central theme of the discussion was whether hypothetical income and expenses can reflect an entity’s financial performance. Although neither the IFRS Accounting Standards nor the Conceptual Framework for Financial Reporting define financial performance, Committee members observed that commonly understood interpretations of the term are often linked to actual results, outcomes, or achievements. The discussion highlighted an important distinction about whether a measure faithfully represents management’s view of financial performance or whether it faithfully represents financial performance in a broader conceptual sense. A key question raised in the submission was the extent to which IFRS 18 requires entities to consider these assessments separately.
The discussion also emphasized the importance of the disclosure framework accompanying the MPM requirements. Committee members highlighted that MPMs originate from measures communicated publicly outside the financial statements and that transparent disclosure of the basis of preparation, methodology, and key assumptions is critical. Attention was also given to paragraph 121 of IFRS 18, which states the objective of MPM disclosures is to help users understand both the aspect of financial performance that management seeks to communicate and how the measure compares with measures defined by the IFRS Accounting Standards. Committee members viewed paragraph 121(b), together with paragraphs B134 and B135, as important safeguards requiring MPMs to be clearly labelled, appropriately described, and presented in a manner that is understandable and not misleading.
Several Committee members emphasized that a measure cannot qualify as an MPM unless it is communicated publicly outside the financial statements. Accordingly, the Interpretations Committee viewed paragraph 117(a) of IFRS 18 as a fundamental starting point in the assessment, reinforcing that the MPM requirements are intended to apply only to measures that management has chosen to communicate externally.
Tentative agenda decision and the Interpretations Committee’s preliminary conclusions
The Interpretations Committee tentatively concluded that a performance measure containing hypothetical income and expenses can be a subtotal of income and expenses and can faithfully represent what it purports to represent – that is, management’s view of an aspect of financial performance of the entity as a whole.
The Interpretations Committee noted that if a performance measure meets all relevant criteria in paragraph 117 of IFRS 18, it is an MPM, and the entity should apply the disclosure requirements in paragraphs 121-125 of IFRS 18. These include the requirement in paragraph 123 to “label and describe each [MPM] in a clear and understandable manner that does not mislead users of financial statements.” The Interpretations Committee tentatively concluded that IFRS 18 provides an adequate basis for an entity to determine whether a measure containing hypothetical income and expenses can meet the definition of an MPM.
The Interpretations Committee tentatively decided that a standard-setting project was not needed to address the request.
The Group’s Discussion
Most Group members agreed with the analysis in the tentative agenda decision and with the Interpretations Committee’s tentative conclusion that some measures containing hypothetical adjustments may meet the definition of an MPM. However, they emphasized that not all measures containing hypothetical adjustments will meet the definition of an MPM and that entities must apply judgment in determining whether a measure meets the criteria in paragraph 117 of IFRS 18.
Several Group members thought the tentative agenda decision would be more helpful if it included more detailed explanations of how to determine whether a measure containing hypothetical adjustments depicts management’s view of financial performance. They think adding detailed examples and a discussion of how the concept of management’s view of financial performance aligns with the guidance in The Conceptual Framework for Financial Reporting would provide greater clarity.
One Group member raised that paragraph 119 of IFRS 18 requires entities to presume that any subtotal of income and expenses that it uses in public communications outside the financial statements communicates management’s view of an aspect of the entity’s financial performance. They noted that an entity would need to provide reasonable and supportable information to demonstrate that a measure does not communicate management’s view of performance to rebut this presumption. They think this rebuttable presumption applies even when a measure includes hypothetical adjustments.
Some Group members noted that, while IFRS 18 does not place specific restrictions on how an entity calculates an MPM, regulatory requirements relating to non-GAAP measures may prevent entities from including misleading or inappropriate measures in their public disclosures. However, one Group member raised that many Canadian private entities applying IFRS Accounting Standards are not subject to the securities regulatory requirements. Therefore, these regulatory requirements do not provide the same guardrails for all entities applying IFRS Accounting Standards.
Some Group members also thought the tentative agenda decision should place greater emphasis on the disclosure requirements in paragraph 123 of IFRS 18. They noted that detailed information about an MPM and its reconciling items is critical to enabling users of financial statements to understand and assess measures containing hypothetical adjustments.
Issue 2: Examples included in the submission
Analysis
Background
The submission included three examples of performance measures that incorporate hypothetical income and expenses. The fact pattern in the submission included the following assumptions:
- The entity uses the performance measures in its public communication outside the financial statements.
- The performance measures relate to the entity as a whole.
- The measures are not listed in paragraph 118 of IFRS 18 or specifically required to be presented or disclosed by the IFRS Accounting Standards.
- The entity does not rebut the presumption in paragraphs 119-120 of IFRS 18 after considering the requirements in paragraph B124.
- For each of the three examples, the measures are communicated with prominence, and management uses the subtotals internally to assess or monitor the entity’s financial performance.
If the measures are MPMs, the related disclosure requirements in IFRS 18 would apply. This includes labelling and describing them in a clear and understandable manner (as per paragraph 123 of IFRS 18), and in a way that faithfully represents their characteristics (as per paragraph B135 of IFRS 18).
The examples of hypothetical performance measures in the submission fit into two categories:
- Measures comprising a subtotal of income and expenses: These measures are based on hypothetical income and expense amounts rather than amounts recognized in accordance with the IFRS Accounting Standards. Examples 1 and 3 in the submission fit into this category.
- Measures that adjust a recognized IFRS Accounting Standards subtotal, such as net profit or operating profit, using hypothetical amounts to arrive at an alternative performance measure. Example 2 in the submission fits into this category.
Examples
The Group was asked whether the three examples included in the submission meet the criteria in paragraph 117(b) of IFRS 18. The fact pattern in the submission assumes that the measures meet the criteria in paragraphs 117(a) and 117(c).
Example 1 is annualized rental income minus non-recoverable property expenses (such as service charges and ground rent). This measure is used in the real estate industry as a numerator (per paragraph B117 of IFRS 18) to calculate the yield on a property. The annualized rent is calculated by multiplying the rental income for the last month of the reporting period as recognized in accordance with IFRS 16 Leases by 12 months. If the entity owned and leased out the property during the reporting period, this might be different than the rental income recognized in accordance with IFRS 16 for the reporting period (e.g., due to rent increases agreed on during the reporting period). This measure reflects the rental income as if the rent increases existed at the beginning of the reporting period and provides information about the current yield of the property at the reporting date.
Example 2 is net profit excluding the effects of a major crisis, such as a pandemic or a geopolitical conflict. The entity in the example estimates the income it would have generated and expenses it would have incurred if the major crisis did not happen. This may include removing recognized income and expenses (which are not considered hypotheticals) but also adding estimated income and expenses (which are considered hypotheticals).
Example 3 is pro forma gross profit, comprising the revenue and cost of sales recognized and measured in accordance with IFRS Accounting Standards for a combined entity as if a business combination happened at the beginning of the reporting period. This measure is not specifically required by paragraph B64(q)(ii) of IFRS 3 Business Combinations (paragraph 117(c) of IFRS 18) and because it includes gross profit before the acquisition date, this is not a subtotal as described in paragraph 118(a) of IFRS 18. For example, assume the depreciation and amortization of the fair value adjustments recognized in the purchase price allocation do not affect gross profit.
The Group’s Discussion
Group members noted that determining whether a measure meets the definition of an MPM requires entities to carefully assess all relevant facts and circumstances. While Group members did not share specific views on whether the examples in the submission would constitute MPMs, some noted that net profit excluding the effects of a major crisis (i.e., Example 2 in the submission) would likely not meet the definition of an MPM. A representative from the Canadian Securities Administrators (CSA) further noted that, in 2021, the CSA issued Staff Notice 51-362, Staff Review of COVID-19 Disclosures and Guide for Disclosure Improvements, which includes guidance on disclosures that would, and those that would not, be acceptable from a regulatory perspective.
Overall, the Group’s discussion raised awareness of the implications of the Interpretations Committee’s tentative agenda decision on Management-defined Performance Measures – Hypothetical Income and Expenses. Since this agenda decision was still tentative on the date of this discussion, the Group encouraged Canadians to continue to monitor its status. No further actions were recommended to the AcSB.
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IAS 28: Election to Measure Investments in Associates and Joint Ventures at Fair Value Through Profit or Loss
Background
IAS 28 Investments in Associates and Joint Ventures generally requires an investor with significant influence over an associate, or an interest in a joint venture, to apply the equity method to account for the investment. However, paragraph 18 of IAS 28 permits entities to elect to measure investments held by, or indirectly through, a venture capital organization, mutual fund, unit trust, or similar entity, including investment-linked insurance funds at fair value through profit or loss (FVTPL) in accordance with IFRS 9 Financial Instruments. Entities can make this election separately for each associate or joint venture at initial recognition.
In June 2026, the IASB issued Amendments to the Fair Value Option for Investments in Associates and Joint Ventures (Amendments to IAS 28), clarifying which entities are eligible to apply the election. Paragraph BC19J in the Basis for Conclusions on the amendments notes that interested and affected parties, particularly those in the insurance industry, informed the IASB about diversity in how entities apply the requirements for the fair value option in IAS 28. In particular, entities are reaching different conclusions regarding the meaning of “similar entities” for the purposes of applying this election.
The diversity arising from the IAS 28 fair value option risked being compounded by IFRS 18 Presentation and Disclosure in Financial Statements because IFRS 18 has different presentation requirements depending on whether an entity accounts for an associate or joint venture using the equity method or FVTPL. Therefore, the IASB undertook a narrow-scope project ahead of IFRS 18’s effective date to expand the scope of the fair value election to include entities with a specified main business activity of investing in particular types of assets (i.e., applying the concept in paragraph 49(a) of IFRS 18). The amendments to IAS 28 are effective when an entity adopts IFRS 18.
Issue 1: Which entities qualify for the expanded fair value option?
Analysis
Under the amended IAS 28, an entity may qualify for the fair value option in one of two ways:
- Venture capital organizations, mutual funds, unit trusts, and other similar entities (i.e., the historical categories) continue to qualify as the IASB intends to preserve existing practice. If an entity holds an investment in one of these categories, it does not need to demonstrate that investing in assets is a specified main business activity.
- An entity can also qualify if it has a specified main business activity of investing in particular types of assets, as highlighted in paragraph 49(a) of IFRS 18.
The application guidance in IFRS 18 notes that whether investing in assets is a main business activity is a matter of fact rather than management’s assertion. Paragraphs B33-B38 of IFRS 18 require entities to apply judgment supported by evidence when making this assessment. Relevant evidence may include:
- how management explains operating performance externally;
- the measures used internally to assess and monitor performance;
- information used for operating segment reporting; and
- the nature of the activities of the reporting entity as a whole.
An entity can have more than one main business activity. The fact that an entity also has a manufacturing, insurance, property-leasing, or other operating activity does not necessarily preclude its activity of investing in particular types of assets from also being a specified main business activity.
An important consequence of the amendments is that eligibility is based on the nature and activities of the investor rather than on the purpose of each individual associate or joint venture (i.e., the investee). Once an entity meets the criteria in paragraph 18 of IAS 28 by investing in assets as one of its main business activities, it may elect to measure any investment in an associate or joint venture at fair value. The IASB considered limiting the election to investments that are themselves part of the specified main business activity. However, it rejected this approach because it would create an eligibility principle that differs from the one currently applied to venture capital organizations and investment funds.
The expanded scope of the election may make the fair value option available to a broader range of companies than was previously the case. For example, real estate investment trusts that have a specified main business activity of investing in property can apply the fair value option and measure associates or joint ventures at FVTPL. Some real estate investment entities may prefer this over the equity method of accounting.
The amendments are intentionally narrow. They do not permit every entity applying IFRS Accounting Standards to elect to apply the election, and some entities with significant investments in associates and joint ventures may not be eligible to measure them at FVTPL. Consider a mining company that has significant operating mines on its balance sheet and several investments through associates and joint ventures. Although the entity invests in mining assets, the company’s main business activity is the exploration, development, and production of mineral resources. Therefore, the entity would be ineligible to apply the election to measure its investments in associates and joint ventures at FVTPL.
The Group discussed which types of entities may qualify for the expanded scope of the election and other relevant factors to consider.
The Group’s Discussion
Group members thought the amendments to IAS 28 provide an opportunity for qualifying entities to reassess their accounting for associates and joint ventures and consider whether measuring them at FVTPL would better reflect how they manage the investments and monitor their performance. Group members noted that entities in the insurance and real estate industries may be particularly interested in this option because they often hold investments that could qualify with the expanded scope. However, some Group members highlighted practical challenges associated with transitioning from the equity method to FVTPL. For example, determining the fair value of an investment can be complex because it may require an entity to use complex valuation techniques which may require significant judgment. In addition, entities may have established processes for applying the equity method and providing related information and reconciliations in their management discussion and analysis (MD&A), which could be difficult to modify. Accordingly, Group members noted that entities would need to weigh the potential benefits of the fair value option against the costs.
Issue 2a: At what level is eligibility assessed for indirectly held investments?
Analysis
Paragraph 18 of IAS 28 applies when an investment is “held by, or held indirectly through,” an eligible entity. This raises an important distinction between the measurement assessment under IAS 28 and the presentation assessment under IFRS 18.
For an investment that an entity holds indirectly, it should determine whether it is eligible for the IAS 28 fair value option by reference to the entity that holds the investment. Accordingly, an entity could measure an associate at FVTPL in its consolidated financial statements if it holds the associate through a subsidiary with a main business activity of investing in assets. This is the case even if investing in assets is not a main business activity of the consolidated group.
Under IFRS 18, an entity should determine the classification of income and expenses in the consolidated financial statements by assessing the specified main business activities of the consolidated reporting entity. Consequently, measurement and presentation may not align. An associate that an entity holds through an investment subsidiary may qualify for measurement at FVTPL under IAS 28, but the resulting fair value gains and losses could still be classified in the investing category in the consolidated income statement if the consolidated entity does not invest in those assets as a main business activity. For example, consider a pharmaceutical group with a main business activity of developing and selling pharmaceutical products that also has a venture capital subsidiary that invests in biotechnology companies. Associates that the entity holds through that subsidiary may qualify for measurement at FVTPL under IAS 28. However, if investing in these types of assets is not a main business activity of the pharmaceutical group as a whole, the resulting fair value gains and losses would be classified in the investing category in the group’s consolidated financial statements under IFRS 18.
Issue 2b: Does electing FVTPL result in operating classification under IFRS 18?
Analysis
IFRS 18 requires entities to present income and expenses from associates, joint ventures, and unconsolidated subsidiaries that it accounts for using the equity method in the investing category, irrespective of whether investing in those entities is part of the investor’s main business activities. Conversely, an entity is not automatically required to present an investment in an associate, joint venture, or unconsolidated subsidiary measured at FVTPL in the investing category. Paragraphs 53(a) and 55 of IFRS 18 require entities to present income and expenses from associates, joint ventures, and unconsolidated subsidiaries in the operating category if the reporting entity invests in them as a main business activity. If the entity does not invest in them as a main business activity, it should classify income and expenses in the investing category.
An entity might therefore be eligible to measure an associate at FVTPL while still being required to classify income and expenses arising from the associate in the investing category if the investment is not part of its main business activity. That is because the IASB did not make an entity’s eligibility to measure an associate at FVTPL under IAS 28 dependent on its presentation outcome under IFRS 18.
For insurance entities, asset managers, investment property businesses, and other investment-focused entities, this distinction may be significant. Many insurance entities regard returns from associates and joint ventures as part of operating performance. Under IFRS 18, if an investor applies the equity method, it would be required to classify profit or loss in the investing category. Assuming the investment in the associate is considered a specified main business activity of the insurer, electing to measure the associate at FVTPL allows the entity to include its returns in the operating profit.
The Group’s Discussion
Group members noted that this issue highlights the interaction between IAS 28 and IFRS 18, emphasizing that IAS 28 is a measurement standard applied at the investor level, whereas IFRS 18 is a presentation standard applied at the reporting entity level. One member observed that determining the appropriate presentation of an associate or joint venture may require entities to navigate requirements across IAS 28, IFRS 9, and IFRS 18. Another member noted that entities may not always achieve their preferred presentation outcome and, in such circumstances, may communicate that presentation through a management-defined performance measure.
Issue 3: What opportunity exists on first-time adoption of IFRS 18 and what are some of the costs involved in electing FVTPL?
Analysis
IAS 28 requires entities to make the fair value election separately for each associate or joint venture at initial recognition. Upon transition to IFRS 18, an entity eligible to apply paragraph 18 of IAS 28 is permitted to change its election for measuring an investment in an associate or joint venture from the equity method to FVTPL. Entities should apply this change retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
If an entity qualifies for the fair value option under amended paragraph 18 of IAS 28, it may need to review its existing associates and joint ventures on an investment-by-investment basis. This review may include assessing:
- whether fair value provides more relevant information about how the entity manages and evaluates the investment;
- the effect of replacing equity-accounted earnings with fair value movements, including potential volatility;
- the resulting IFRS 18 classification of income and expenses;
- whether sufficiently robust IFRS 13 Fair Value Measurement valuation processes exist, particularly for Level 3 investments;
- disclosure implications under IFRS 12 Disclosure of Interests in Other Entities, IFRS 13, and for MD&A;
- the effect of retrospective application of the election, including challenges associated with reliably measuring the investment, such as determining historical fair values and reconstructing equity method accounting, including historical bargain purchase gains;
- the need for an opening balance sheet on transition to IFRS 18 to reflect material changes in the balance sheet arising from the election; and
- tax, regulatory capital, covenant, and compensation consequences arising from the different accounting results.
An entity might need to evaluate the potential benefit of the election against the consequences of retrospectively adopting fair value measurement.
FVTPL may better reflect how management evaluates investment performance and may bring the associated returns into operating profit when an entity meets the IFRS 18 requirements. However, it can also introduce significantly greater earnings volatility and additional controls over valuation and IFRS 13 disclosures. Entities will need to balance these considerations and consider consistency of communications to investors. Depending on the size and complexity of the investment portfolio, it may be easier to limit retrospective adjustments to more recent investments. Some entities may prefer to use the election for investments it enters into after adopting IFRS 18 to minimize the complexity associated with retrospective adjustments and to explain the gradual shift to investors. Alternatively, entities may choose to apply the election for only the most significant investments, enabling them to describe the change to investors along with other changes arising from adopting IFRS 18, while minimizing the transition effort.
Given the mandatory effective date of IFRS 18 is January 1, 2027, entities with material associates or joint ventures are encouraged to complete the eligibility and investment-by-investment analysis as part of their IFRS 18 implementation rather than after the transition.
The Group’s Discussion
The Group agreed with the analysis. When discussing Issue 1, the Group highlighted practical challenges and associated costs when an entity first adopts the election.
Overall, the Group’s discussion raised awareness of the Amendments to the Fair Value Option for Investments in Associates and Joint Ventures. The discussion focused on how entities can determine whether an investment qualifies for the expanded scope and on the factors an entity might consider when assessing whether the benefits of applying the election outweigh the associated costs. No further actions were recommended to the AcSB.
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OTHER MATTERS
IASB Exposure Draft: Proposed Targeted Amendments to the IFRS Foundation Constitution
In August 2026, the IFRS Foundation Trustees published the Exposure Draft, “Proposed Targeted Amendments to the IFRS Foundation Constitution” to operationalize their 2025 decision to gradually reduce the size of the International Accounting Standards Board (IASB) and the International Sustainability Standards Board (ISSB). The amendments proposed in the Exposure Draft would provide an appropriate governance framework for the smaller boards, facilitating their effective functioning and giving clarity about their governance arrangements.
The Exposure Draft addresses matters including:
- board size;
- attributes of board members;
- voting arrangements; and
- other related governance amendments.
Canadians are encouraged to respond to the IASB by completing a survey, which they can find on the IASB website, or by submitting a comment letter to the IFRS Foundation by November 16, 2026.
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Risk Mitigation Accounting – Proposed Amendments to IFRS 9 and IFRS 7
In December 2025, the IASB issued the Exposure Draft, “Risk Mitigation Accounting – Proposed amendments to IFRS 9 and IFRS 7.” The Exposure Draft proposes amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures. The IASB is proposing:
- to add a risk mitigation accounting model for companies managing repricing risk on a net basis; and
- to require a company to disclose its strategy for managing repricing risk and the effects of its risk management activities.
The IASB is also seeking feedback on the proposed withdrawal of IAS 39 Financial Instruments: Recognition and Measurement. The IASB extended the comment letter deadline for this Exposure Draft from July 31, 2026, to November 30, 2026, to align it with the final submission date for the fieldwork results. Canadians are encouraged to submit comment letters to the IASB by November 30, 2026.
Recent Amendments Made to IFRS Accounting Standards
IFRS 20 Regulatory Assets and Regulatory Liabilities
In May 2026 the IASB issued IFRS 20 Regulatory Assets and Regulatory Liabilities, a new accounting standard for companies subject to a specific type of rate regulation. It aims to help investors better understand how that rate regulation affects a company’s financial performance, its financial position, and its prospects for future cash flows. It supplements the information a company provides when applying IFRS 15 Revenue from Contracts with Customers and replaces IFRS 14 Regulatory Deferral Accounts. IFRS 20 is effective for annual reporting periods beginning on or after January 1, 2029, with early application permitted.
Amendments to the Fair Value Option for Investments in Associates and Joint Ventures (Amendments to IAS 28 Investments in Associates and Joint Ventures)
In June 2026 the IASB issued targeted amendments to clarify which investments in associates and joint ventures a company is eligible to measure using the fair value option in IAS 28. As companies prepare to implement IFRS 18 Presentation and Disclosure in Financial Statements, interested and affected parties have reported diverse interpretations of how its new requirements interact with the fair value option in IAS 28. The IASB concluded that clarifying the meaning of a “similar entity” using the requirements in IFRS 18 that refer to specified main business activities would resolve the identified concerns. This issue has direct consequences for how income and expenses are classified in the statement of profit or loss. The amendments take effect when a company first applies IFRS 18.
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