IFRS Framework: Comprehensive Income Disclosure - Company Analysis

This report provides an analysis of the disclosure of comprehensive income by three companies: Macmohan Holdings Ltd, Mercantile Investment Company Ltd, and Maca Limited, highlighting similarities and differences in their reporting practices under IFRS. It also examines the current IFRS framework in relation to EBIT (Earnings Before Interest and Tax) and operating profit, noting the lack of a clear and sufficient definition for these terms according to the IFRS board. The report references concerns raised by Mr. Hoogervorst regarding the inconsistent application of EBIT and operating profit across different industries, making comparisons challenging. It concludes that the current IFRS framework lacks sufficient clarity and definition for the application and understanding of EBIT and operating profit, offering only a practice of calculation without clear rules.

ANSWER
PART I ANSWER 2
Similarity and Difference in relation to the disclosure of comprehensive Income
Following are the similarities and differences between the disclosure of comprehensive income
of three companies – Macmohan Holdings Ltd, Mercantile Investment Company Ltd and Maca
Limited.
- In case of the Macca Limited and the Macmohan Holdings Limited there has been the
value of exchange differences on the translating foreign operations and in case of the
Mercantile Investment Limited, it has not been present which details that the transactions
in relation to that has not been mentioned (Company Official Website, 2017).
- The Macca Limited has lost the amount of 1829 thousand dollars on account of exchange
differences whereas Macmohan Holdings Limited has earned 13028 thousand dollars for
the year ending 2017.
- Gain has been booked on the fair value of the net investments by Macca Limited and
Mercantile Investment Limited for the year ending 2017 and has not been recorded by the
Macmohan Holdings Limited (Company Official Website, 2017).
- In case of Macca Limited and Mercantile Investment Limited the amount attributable to
the non controlling interest for profit and loss and comprehensive income is the same and
proper bifurcation has been provided detailing the amount attributable to the parent entity
and non controlling interest. The same has not been reflected in case of Macmohan
Holdings Limited (Company Official Website, 2017).
-
PART 2 ANSWER 2
Current IFRS framework in relation to EBIT and Operating Profit
As per the framework adopted by the IFRS board, it cannot be inferred that the definition of the
operating profit and the EBIT is sufficient and clear in relation to the application and usefulness
of the terms. At the time when Mr. Hoogervorst has chaired the board for the approval of the
draft internal financial reporting standards relating to financial instruments, revenue from

contracts, leases and insurance contracts, he has mentioned that the board has been receiving the
number of calls from the companies as well as the users of the financial reports of the company
as to what is the meaning and significance of the Operating profit and the Earnings before
interest and tax. On the basis of these calls he has mentioned in the meeting that IFRS has
defined only the sale or revenue and the profit and loss but the Earnings before interest and tax
and operating profit has not been given any definition which otherwise should have been made
on the defined and prescribed principles (IASB, 2017). Both the users of the financial reports and
the persons who are involved in the preparation of the financial statements usually bring down
the numbers and the required figures as per the required given format.
If the application of the earnings before interest and tax and operating income is considered then
it can be analysed that the measure has different perspectives for each of the companies
operating in different industries. There is the major flaw that the aspect of both of the terms
cannot be applied consistently and more accurately across all the companies operating in the
world. Due to this factor, the comparison is also not possible across the companies even if the
companies are operating in the similar industries there sometimes comes lot of challenges which
needs to be inferred before making the comparison as per the defined criteria.
IFRS has only laid down the practice of the calculating the operating profit and earnings before
in interest and tax, it has defined much as said by Mr. Hoogervorst and Melissa Brown who is
currently the partner at Dao bridge Capital (PWC, 2017). The difference in the two terms is only
of the non operating income and expenses which are duly covered by the Earnings before interest
and tax and is not covered by the operating profit and in case some companies if does not have
the non operating income and expenses then the operating profit in that case will be equals to the
Earnings before interest and tax.
If the focus is laid down on the clarity of the aforementioned terms through the guidance note if
any issued by the IFRS board, then the answer is no. In the current reporting framework, the two
figures are only calculated down line the numbers and no clear rule of its application and the
definition has been given.

Therefore, it can be interpreted that as per the current scenario of the IFRS, there is no sufficient
definition as well as the clarity for the application and understanding of the results of Earnings
before interest and tax and operating profit.
REFERENCES
Company Official Website, (2017), “Annual Report 2017”, available at
http://www.macmahon.com.au/ accessed on 06-09-2018
Company Official Website, (2017), “Annual Report 2017”, available at
http://www.mercantileinvestment.com.au accessed on 06-09-2018
Company Official Website, (2017), “Annual Report 2017”, available at http://www.maca.net.au
accessed on 06-09-2018
IASB, (2017), “Primary Financial Statements – Cover Note”, available at
https://www.iasplus.com/en/meeting-notes/iasb/2017/march/primary-financial-statements
accessed on 06-09-2018.
PWC, (2017), “Value IFRS Plc”, available at
https://www.pwc.com/gx/en/audit-services/ifrs/publications/ifrs-9/pwc-illustrative-ifrs-
consolidated-financial-statements-2018-year-end.pdf accessed on 06-09-2018