IFRS 18 main business activities: banks, insurers and property companies

For a manufacturer, interest income is a side issue. For a bank, it is the business. IFRS 18 deals with this by asking each company whether investing in assets or financing customers is a main business activity, and changing the classification if it is.

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

Short answer

IFRS 18 has special rules for a company whose main business activity is investing in particular assets or providing financing to customers. Such a company classifies in the operating category income and expenses that other companies would put in investing or financing, so that operating profit still reflects its main business. Banks, insurers and investment property companies are the usual examples.

At a glance

Two specified activities
Investing in assets; financing customers
Effect
Related income moves to operating
Assessed
As a matter of fact, not a choice
Evidence
How performance is explained and managed
Associates' results
Still investing
Banks
A policy choice on other financing costs
IFRS 18 main business activities: banks, insurers and property companiesTwo specified activities: Investing in assets; financing customers; Effect: Related income moves to operating; Assessed: As a matter of fact, not a choice; Evidence: How performance is explained and managed; Associates' results: Still investing; Banks: A policy choice on other financing costs.KEY FACTS AT A GLANCEIFRS 18 main business activities: banks, insurersand property companiesTwo specified activitiesInvesting in assets;financing customersEffectRelated income moves tooperatingAssessedAs a matter of fact, nota choiceEvidenceHow performance isexplained and managedAssociates' resultsStill investingBanksA policy choice on otherfinancing costsChecked against official sourcesTax BakersIFRS 18 main business activities: banks, insurers and property companiesTwo specified activities: Investing in assets; financing customers; Effect: Related income moves to operating; Assessed: As a matter of fact, not a choice; Evidence: How performance is explained and managed; Associates' results: Still investing; Banks: A policy choice on other financing costs.KEY FACTS AT A GLANCEIFRS 18 main business activities:banks, insurers and propertycompaniesTwo specified activitiesInvesting in assets; financing customersEffectRelated income moves to operatingAssessedAs a matter of fact, not a choiceEvidenceHow performance is explained and managedAssociates' resultsStill investingBanksA policy choice on other financing costsChecked against official sourcesTax Bakers
Key facts at a glance, as set out in this guide.

What is a specified main business activity?

IFRS 18 names two. The first is investing in particular types of assets, such as investment property or financial assets. The second is providing financing to customers, such as bank lending or customer credit offered by a manufacturer's finance arm. A company can have one, both or neither.

How do you decide whether you have one?

It is a matter of fact, based on evidence, not an accounting policy choice. Useful evidence includes whether the company uses a measure such as gross profit or net interest income from that activity to explain its performance to investors, and whether the activity is a reportable segment. The assessment is made for the reporting entity, so a group and one of its subsidiaries can reach different answers.

What changes if you have one?

ItemGeneral companyCompany with the specified activity
Rent and fair value gains on investment propertyInvestingOperating, if investing in property is a main business activity
Interest income on loans to customersInvestingOperating, if financing customers is a main business activity
Interest expense on funding for customer loansFinancingOperating
Interest income on cashInvestingGenerally operating for companies that invest in financial assets or finance customers as a main activity
Share of profit of associates and joint venturesInvestingInvesting

A company that finances customers also has a policy choice for borrowings that do not relate to customer financing: it can classify their interest in financing or in operating. If it puts all of it in operating, it does not present the subtotal profit before financing and income taxes.

What does an example look like?

A property company earns CU 80 million of rent on investment property, has CU 10 million of interest income on deposits and pays CU 25 million of interest on bank loans. Investing in property is its main business activity, so the CU 80 million is operating income. The loans are not customer financing, so the CU 25 million stays in financing. Because its main activity is investing in non-financial assets, the deposit interest stays in investing.

A retailer with the same CU 80 million of rent from a few surplus buildings has no such main activity, so its rent goes to investing and falls outside operating profit.

What should groups watch for?

A subsidiary that leases property to other group companies may treat it as a main business activity in its own financial statements, while the group does not. Classification then differs between the two sets of accounts, and consolidation adjustments are needed. See also the categories for the general rules.

Getting ready for IFRS 18?

We help finance teams map their income statement to the new categories, restate comparatives and prepare the new disclosures.

Book a call Chat on WhatsApp

Questions people ask

Do banks present operating profit under IFRS 18?

Yes. Interest income and expense from lending to customers are classified in operating, so operating profit reflects the banking business.

Is having a main business activity a choice?

No. It is assessed from evidence about how the business is run and how performance is explained.

Where do insurers put investment returns?

In operating, where investing in financial assets is a main business activity.

Can a company have more than one specified main business activity?

Yes. A company can both invest in particular assets and provide financing to customers as main business activities, and each changes how the related income and expenses are classified.

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 18Operating profit under IFRS 18: what is in and what is outIFRS 18IFRS 18 explained: what changes and when

More in IFRS 18

Next in this topicManagement-defined performance measures (MPMs) under IFRS 18TopicAll 12 guides in IFRS 18

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