The note on expenses by nature

Learning objectives

• Identify the expenses by nature to be disclosed.L2
• Calculate the total of an expense by nature from the amounts in the case, including amounts capitalised in assets.L2, L3

Normative references

• IFRS 18 §83An entity that presents in the operating category one or more line items comprising expenses classified by function discloses in a single note the total depreciation of property, plant and equipment (together with that of investment property and right-of-use assets), the amortisation of intangible assets, employee benefits (including services received under IFRS 2), impairment losses within IAS 36 and their reversals, and write-downs of inventories and their reversals; for each total, it discloses the amount relating to each line item in the operating category and a list of line items outside that category that include part of it (amounts may include amounts capitalised in an asset: para. B84).
• IFRS 18 §B84The amounts presented or disclosed by nature may not be those recognised as expenses in the period and may include amounts capitalised in the carrying amount of an asset; an entity that discloses such amounts in the note required by para. 83 explains this qualitatively, identifying the assets concerned: inclusion is therefore permitted, not required.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

5 questions

• Brio SA presents its operating expenses in a mix: the lines "Cost of sales" and "Distribution costs" are classified by function, while the line "Depreciation and amortisation" is classified by nature (case facts). What additional information must Brio provide?L3
• Which statements about the presentation of operating expenses under IFRS 18 are correct? More than one answer is possible.L2
• Fjord SA presents a line of operating expenses by function. Which of the following items enter the single note of information by nature that the standard requires? More than one answer is possible.L2
• Algue SA presents its operating expenses by function and provides the note by nature. For the year, employee benefits recognised in operating expenses are {employee_benefits_expensed} and those included in the cost of a self-constructed asset {employee_benefits_capitalised}; depreciation of property, plant and equipment recognised in expenses is {depreciation_expensed} and that included in the cost of assets {depreciation_capitalised}. Case convention: Algue includes in the note the amounts included in the cost of assets, which the standard permits. Calculate the employee benefits and depreciation amounts disclosed in the note.L3
• In the note on expenses by nature required when it presents its expenses by function, Orbis SA may disclose only amounts recognised as expenses in the period: an amount of salaries included in the carrying amount of inventories can never be included in it.L2