Income Statements That Work as Hard as You Do

25 Mar

Preview

Let’s be honest—no one becomes an accountant just to argue over whether the statement of comprehensive income should be one page or two. But Section 5 of the IFRS for SMEs is one of those technical areas that, if misunderstood, can land you in trouble—or worse, make your reports look sloppy and amateurish.

Whether you’re handling year-end for a client or preparing financials for a board pack, this section tells you exactly how to present financial performance. And the truth is, many small firms and in-house teams still get this wrong.

One Statement or Two? Pick a Lane—And Stick to It

Section 5 gives you two ways to present total comprehensive income:

A single statement that shows everything—revenue, expenses, profit, and all the weird stuff like exchange differences and revaluation gains.
Two statements: one for profit or loss (your “classic” income statement) and another for the rest (things that sit outside of P&L, like actuarial gains or cash flow hedge adjustments).

Whichever you choose, you need to stay consistent changing between the two is treated as a change in accounting policy. That means proper disclosure and justification under Section 10. No flip-flopping.

Show the Right Stuff, the Right Way

Here’s what your statements must include if you're following the rules—no shortcuts:

Revenue
Finance costs
Tax expenses (excluding the tax on comprehensive income items)
Discontinued operations (if applicable)
Profit or loss
Other comprehensive income, split into two buckets:

Items that will never go to profit or loss
Items that might, if certain conditions are met

Total comprehensive income
And yes, if you’ve got a group structure—show what belongs to the parent and what belongs to non-controlling interests

In a two-statement approach, the first statement ends with profit or loss, and the second picks up from there to cover other comprehensive income. Simple structure but often messed up in practice.

Don’t Call Anything “Extraordinary”

This is not the 1990s. IFRS for SMEs doesn’t allow the term “extraordinary items.” If it happened and it affects income or expense, it goes in the statement somewhere—no dramatic labels, no hiding behind vague footnotes.

Nature or Function? Pick the Expense Layout That Tells the Better Story

You’ve got two ways to show expenses:

By nature: Show each type of expense—salaries, depreciation, fuel, etc. No reallocation.
By function: Group expenses into business areas, cost of sales, admin, distribution, etc. If you go this route, you must show cost of sales clearly.

Whichever method gives a clearer picture of the business should win. Don’t overcomplicate it.

Why This Matters to You

If you’re a practitioner, this is about credibility. Clients don’t just want compliance—they want confidence that their reports will stand up under scrutiny. Getting the statement layout right is a basic way to show professionalism.

If you’re in commerce, sloppy presentation could cost you trust at the boardroom table—or worse, result in errors that attract SARS attention.

And for both groups: clear, well-structured financials are a subtle sales tool. They show clients or execs that you know what you’re doing. That’s how you start charging more for your expertise—not just your time.

Bottom Line

Section 5 isn’t glamorous, but it’s essential. Nail this, and your statements won’t just meet the standard, they’ll show you’re a cut above the rest. And if you’re still winging it when it comes to which statement format to use or how to show other comprehensive income, now’s the time to fix that.

Need help? CIBA’s got your back. Our technical desk is here to make sure your work not only complies—but shines.

Join CIBA for a CPD on Concepts and Pervasive Principles under the IFRS for SMEs here.

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