Profit before financing and income taxes

Learning objectives

• Identify the composition of profit or loss before financing and income taxes.L2
• Calculate this subtotal from operating profit or loss and the investing category.L2, L3

Normative references

• IFRS 18 §69The statement of profit or loss presents operating profit or loss (total of the operating category, para. 70), profit or loss before financing and income taxes (operating profit or loss plus the investing category, para. 71) and profit or loss (total of all categories, para. 72); the second subtotal is not presented by an entity that, providing financing to customers as a main business activity, classifies in operating the income and expenses from liabilities unrelated to that activity (paras. 73 and 74).

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

3 questions

• Profit before financing and income taxes equals operating profit less the expenses of the financing category.L2
• Sorbier SA has operating profit of {operating_profit}. Its other income and expenses for the year are: share of profit of an equity-accounted joint venture, {jv_share_of_profit}; interest received on cash and cash equivalents, {interest_income_on_cash}; loss on an unconsolidated subsidiary, {unconsolidated_subsidiary_loss}; interest on a bank loan taken out to raise finance, {bank_loan_interest} (entity with no specified main business activity, case convention). Calculate profit before financing and income taxes.L2
• Genêt SA, with no specified main business activity (case convention), reports: operating profit EUR 640,000; share of profit of an equity-accounted associate EUR 55,000; interest expense on a loan raised to obtain finance EUR 120,000; income tax expense EUR 90,000; profit from a discontinued operation EUR 25,000. What is its profit before financing and income taxes?L3