A key issue in the introduction of IFRS 18:

IFRS 18, which will soon be mandatory, brings significant changes to the presentation of financial statements, in particular through the introduction of three new categories in the income statement: "operating", "investing" and "financing". These categories are intended to improve the comparability of earnings figures and reduce heterogeneity - including in the reporting of financial instruments. A key issue currently occupying many treasurers and accountants is the question of how to deal with foreign currency effects - in particular from intragroup loans. These effects can be material, differ from the previous allocation to the income statement items and influence the comparability of financial reporting. As IFRS 18 does not contain any explicit requirements for the classification of these effects in consolidated financial statements, there is currently considerable uncertainty regarding their practical implementation.

In September, the IFRS Interpretations Committee (IFRIC) therefore addressed the question of how foreign currency differences from intragroup monetary receivables or liabilities should be classified in the consolidated financial statements in accordance with IFRS 18. According to IFRS 18 B65, such differences should be recognised in the same category as the associated income and expenses. This becomes problematic if these income and expenses have been eliminated in the consolidated financial statements. In this specific case, it concerned an intragroup loan between the parent company and subsidiary with different functional currencies. Although the loan is eliminated in the consolidated financial statements, the foreign currency difference is recognised in profit or loss in accordance with IAS 21.

Three proposed views are rejected by the IFRIC. The first is a fundamental classification of the effects as 'financing'. This classification is based on the reasoning that intragroup loans have the purpose of raising capital. Furthermore, the proposal to allow a general classification as 'investing' was discussed, as the transaction involves a conversion of cash. This proposal, as well as the idea that each company could determine its own accounting policy for this, was not approved by the IFRIC.

Seven committee members considered only View I to be acceptable, while the other seven considered both views to be acceptable. However, this is currently only a preliminary agenda decision by the IFRIC. It therefore remains to be seen how the IFRIC will react to the comments from interested members of the public (the comment period ends on 25 November 2025), i.e. whether there will be any changes in the IFRIC's final agenda decision and whether the IASB will ultimately approve the IFRIC's final agenda decision.

This discussion clearly shows how important it is to analyse the effects of IFRS 18 on the consolidated financial statements at an early stage and in a well-founded manner - particularly with regard to the treatment of intragroup foreign currency effects. Against the background of the usual hedging of foreign currency effects using derivatives, it is advisable to analyse existing hedging strategies at an early stage with regard to their classification and presentation under IFRS 18 and to adjust them if necessary.

It is also fundamentally important to allow sufficient time and budget for any necessary adjustments to treasury IT. Treasury transactions are generally mass transactions (e.g. intragroup cash pooling), which means that correct, system-based mapping is essential.