The financing category

Learning objectives

• Distinguish financing expenses from other interest expenses.L1
• Record the reclassification of an expense between the operating and financing categories.L1, L2, L3

Normative references

• IFRS 18 §59For the financing category, the entity distinguishes liabilities arising from transactions that involve only the raising of finance, whose measurement income and expenses and incremental issue and extinguishment costs are classified in financing (para. 60), from other liabilities (trade payables, lease liabilities, defined benefit plans, decommissioning provisions, etc., B53), for which only interest income and expenses and the effects of changes in interest rates identified for the purpose of applying other Standards are classified in financing (para. 61); derivatives, investment contracts with participation features and insurance finance income and expenses follow paras. 63 and 64.

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

3 questions

• Interest on a bank loan taken out to raise finance falls in the operating category, like the other expenses of the period.L1
• Hélios SA, an industrial entity with no specified main business activity (case convention), operates a site for which it has recognised a decommissioning provision. The unwinding of the discount on that provision for the year is EUR 18,000. In which category is it classified?L2
• Rivage SA, an entity with no specified main business activity, presented in the operating category an interest expense of {interest_expense_reclassified} on a bank loan taken out solely to raise finance (classification error found at the year end, case fact). Record the presentation entry that reclassifies it to the financing category.L2