IFRS 18 aggregation and disaggregation: grouping items and the end of "other"

A line called other expenses tells a reader nothing. IFRS 18 tightens the rules on how items are combined and labelled, and adds a note that shows what sits inside function lines such as cost of sales.

By Mirza Fahad Baig, Chartered Accountant. Reviewed by Muhammad Bilal, Chartered Accountant. Checked against official sources on . 2 minute read.

Short answer

IFRS 18 requires items to be grouped by shared characteristics and split when their characteristics differ. The primary statements give a useful structured summary and the notes add the detail. The label "other" is allowed only when no more informative label exists. A company that presents operating expenses by function must also disclose, for each function line, five specified expenses by nature.

At a glance

Principle
Group by shared characteristics
Primary statements
A useful structured summary
Notes
Further material detail
Label "other"
Only as a last resort
Expenses
By nature, by function, or mixed
Function format
Note of 5 expenses by nature
IFRS 18 aggregation and disaggregation: grouping items and the end of "other"Principle: Group by shared characteristics; Primary statements: A useful structured summary; Notes: Further material detail; Label "other": Only as a last resort; Expenses: By nature, by function, or mixed; Function format: Note of 5 expenses by nature.KEY FACTS AT A GLANCEIFRS 18 aggregation and disaggregation: groupingitems and the end of "other"PrincipleGroup by sharedcharacteristicsPrimary statementsA useful structuredsummaryNotesFurther material detailLabel "other"Only as a last resortExpensesBy nature, by function,or mixedFunction formatNote of 5 expenses bynatureChecked against official sourcesTax BakersIFRS 18 aggregation and disaggregation: grouping items and the end of "other"Principle: Group by shared characteristics; Primary statements: A useful structured summary; Notes: Further material detail; Label "other": Only as a last resort; Expenses: By nature, by function, or mixed; Function format: Note of 5 expenses by nature.KEY FACTS AT A GLANCEIFRS 18 aggregation anddisaggregation: grouping items andthe end of "other"PrincipleGroup by shared characteristicsPrimary statementsA useful structured summaryNotesFurther material detailLabel "other"Only as a last resortExpensesBy nature, by function, or mixedFunction formatNote of 5 expenses by natureChecked against official sourcesTax Bakers
Key facts at a glance, as set out in this guide.

What is the basic rule?

Items that share characteristics, such as nature, function, measurement basis or risk, are combined. Items whose characteristics differ are shown separately if the resulting information is material. The test is applied twice: once to decide what appears as a line in the primary statements, and again to decide what detail goes in the notes.

When can you use the label "other"?

Only when you cannot find a more informative one. If a group of unrelated immaterial items has to be combined, the label should be as precise as possible, such as "other operating expenses". If the total is large enough that readers might wonder whether it hides something material, explain what it contains, for example by stating that no single item exceeds a certain amount.

How are operating expenses presented?

By nature, by function, or by a mixture, whichever gives the most useful structured summary. A service business whose costs are mainly staff may find nature more useful. A manufacturer may prefer function, with cost of sales shown separately. IFRS 18 allows a mixed presentation, for example function lines plus a separate line for impairment, provided the labels make clear what each line includes.

What is the specified expenses by nature note?

A company that presents one or more operating expense lines by function discloses, in a single note, the total of each of five expenses by nature and how much of each sits in every function line: depreciation, amortisation, employee benefits, impairment losses and reversals, and write-downs of inventories and reversals.

Northline Telecom, CU millionCost of servicesSelling and distributionAdministrativeSeparate lineTotal
Depreciation150510165
Amortisation200525
Employee benefits1204060220
Impairment losses1212
Write-downs of inventories22

What does disaggregation look like in practice?

Under IAS 1, Northline showed "other income" of CU 25 million and "other expenses" of CU 15 million. Under IFRS 18 those lines are broken up, because their contents have different characteristics and belong to different categories:

  • Gain on disposal of towers, CU 10 million: its own line in operating.
  • Exchange gain on trade payables, CU 4 million: operating.
  • Rental income, CU 8 million, and dividends, CU 3 million: investing.
  • Impairment of network equipment, CU 12 million: its own line in operating.
  • Exchange loss on a US dollar loan, CU 3 million: financing.

What does this mean for the chart of accounts?

General ledger accounts that mix items, such as a single exchange differences account or a miscellaneous income account, need to be split or analysed, because their contents now go to different categories. Function-based reporters also need the five expenses by nature analysed by function, which often means a cost centre report that does not exist today.

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Questions people ask

Can you still have an "other expenses" line under IFRS 18?

Only if no more informative label exists, and the label should be as precise as possible.

Which five expenses must be disclosed by nature?

Depreciation, amortisation, employee benefits, impairment losses and reversals, and write-downs of inventories and reversals.

Does IFRS 18 require expenses by nature or by function?

Either, or a mixture, whichever gives the most useful structured summary.

Does IFRS 18 change the balance sheet?

Slightly. Goodwill is presented as a separate line, and the grouping and labelling principles apply to every primary statement.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IFRS 18 Presentation and Disclosure in Financial Statements
  2. Australian Accounting Standards Board: AASB 18, the Australian equivalent of IFRS 18 (full text)
  3. IFRS Foundation: IFRS 18, the new requirements (presentation)

Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.

IFRS 18IFRS 18 income statement categories: operating, investing and financingIFRS 18Management-defined performance measures (MPMs) under IFRS 18IFRS 18IFRS 18 worked example: a telecom income statement before and after

More in IFRS 18

Next in this topicIFRS 18: where foreign exchange differences and derivatives goTopicAll 12 guides in IFRS 18

This guide is general information. It is not tax or legal advice for your situation.