The effects on classification

Learning objectives

• Determine the classification of income and expenses of an entity with a specified main business activity.L2
• Record the reclassification of an item of income from the investing to the operating category.L2, L3

Normative references

• IFRS 18 §50An entity with a specified main business activity classifies in the operating category, by applying paras. 55 to 58, 65 and 66, certain income and expenses that would otherwise be classified in investing or financing (for example the rental income and fair value changes of an investment property company, or the interest on a lender's loans); it discloses that it has such a main business activity (para. 51).

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

2 questions

• Crédit du Lac SA has as its main business activity providing financing to customers, which it discloses in its financial statements (case facts: specified main business activity). In which category does it classify the interest received on loans granted to its customers?L2
• Pierre-Rente SA has as its main business activity investing in investment property, which it discloses in its financial statements (case facts: specified main business activity). Its draft statement of profit or loss classified in the investing category rental income of {rental_income_reclassified}. Record the presentation entry that reclassifies this rental income to the operating category.L2