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Strategic Business Reporting (International) · Discussion of issues in financial reporting

Exposure Drafts and Proposed Changes to IFRS Standards

Updated 11 October 2026 · Fact-checked

An exposure draft is the IASB's published proposal for a new or amended IFRS Accounting Standard, issued for public comment. A discussion paper is an earlier, more open document. In SBR you explain the proposal, show its effect on a reporting entity, weigh pros and cons, and give a reasoned view.

Understand Exposure Drafts and Proposed Changes to IFRS Standards

The IASB does not issue a standard in one step. It follows a due process so that preparers, users, auditors and regulators can comment before rules change. The main steps are a research stage, often a discussion paper, then an exposure draft, then comment letters, redeliberation and a final standard.

A discussion paper sets out issues and possible approaches. It usually asks for views and does not propose precise wording. An exposure draft (ED) is more advanced. It contains proposed requirements, often draft text, a basis for conclusions and specific questions for respondents. Until a final standard is issued, an ED has no authority and entities must keep applying current IFRS Accounting Standards.

SBR does not ask you to recite an ED paragraph by paragraph. It asks you to evaluate the impact on a reporting entity: on profit or loss, the statement of financial position, disclosures, key performance measures, systems, contracts with lenders and investor communication. You must also judge whether the change improves the usefulness of information, using the qualitative characteristics in the Conceptual Framework.

This page does not cover a specific current exposure draft, because the examinable list changes between sittings. To show the impact method, it uses IFRS 18 Presentation and Disclosure in Financial Statements as an illustration. IFRS 18 is a final standard, not an exposure draft. It was issued in April 2024 and applies to periods beginning on or after 1 January 2027. It replaces IAS 1. Until the effective date, IAS 1 still applies, but IAS 8 requires an entity to disclose known or reasonably estimable information about the impact of an issued standard that is not yet effective. IFRS 18 brings defined categories and subtotals in the statement of profit or loss, disclosure of management-defined performance measures in the notes, and tighter rules on aggregation and disaggregation. Check any current IASB projects against the ACCA examinable documents and the latest articles, because the list changes between sittings.

Treat the topic as a skills topic. A marker rewards a clear explanation of the change, a link to the scenario figures, a balanced view and a sensible conclusion. Professional skills marks reward analysis, commercial awareness and clear communication, for example in a briefing note to the board.

Key rules to remember

IASB due process (simplified order)
Research → Discussion paper → Exposure draft → Comment letters → Final standard
Not every project uses a discussion paper. Only the final standard is mandatory.
Status rule
Exposure draft or discussion paper = not authoritative until a standard is issued
Keep applying current IFRS Accounting Standards in the financial statements until then.
IFRS 18 profit or loss categories
Three main categories: Operating, Investing, Financing. Also shown separately: Income taxes and Discontinued operations.
IFRS 18 is a final standard used here only to illustrate the impact method. It is not an exposure draft. Required subtotals are operating profit and profit before financing and income taxes. Operating is the residual category. Check the exact wording against current ACCA material.
Impact evaluation checklist
Change → Effect on numbers → Effect on disclosure → Effect on users → Cost → Verdict
Use this order to structure any impact answer.
Usefulness test
Relevance + Faithful representation, enhanced by comparability, verifiability, timeliness, understandability
Use Conceptual Framework language to judge whether a proposal improves reporting.

How to solve Exposure Drafts and Proposed Changes to IFRS Standards questions

Use this method for any question on an exposure draft, discussion paper or new standard. Stay anchored to the scenario.

  1. 1Read the requirement. Note whether it asks you to explain, evaluate, advise or discuss, and who the audience is.
  2. 2State the status. Say whether the document is a discussion paper, an exposure draft or a final standard, and what that means for the entity today.
  3. 3Explain the proposed change in two or three plain sentences. Name the problem it tries to solve, such as inconsistent presentation or unclear performance measures.
  4. 4Apply it to the scenario. Say which figures, line items, notes or measures would change, and give numbers where the question supplies them.
  5. 5Assess the effects on users and the entity: comparability, transparency, system and process costs, covenants, bonuses and investor messaging.
  6. 6Give both sides. Name at least one benefit and one weakness or cost, linked to the Conceptual Framework.
  7. 7Conclude with a clear view or recommendation, such as what management should do now to prepare, and keep professional tone.

Quickest way: Change – Effect – Verdict in three blocks

When to use it: Use when time is short, for a 5 to 10 mark part where you need a tight structured answer.

  1. Block 1 (change): one or two sentences on what is proposed and its status.
  2. Block 2 (effect): two or three bullets tied to the scenario, each stating what moves, what is disclosed or what is harder to do.
  3. Block 3 (verdict): one benefit, one cost and a final recommendation in a sentence.
  4. Check that every bullet refers to the entity in the question and not to theory alone.

Common mistakes in Exposure Drafts and Proposed Changes to IFRS Standards

  • Applying an exposure draft in the financial statements as if it were a standard.

    Students see the word 'proposed' but still adjust the numbers.

    Fix: State that an ED is not authoritative. Current standards still apply. Discuss the effect only as a future impact or disclosure of expected changes.

  • Listing the features of IFRS 18 without linking them to the entity.

    It is easier to recall content than to analyse it.

    Fix: After each feature, add 'for this company this means...' and refer to named line items or measures in the scenario.

  • Giving only benefits or only drawbacks.

    Students assume the IASB's proposal must be good, or are critical without balance.

    Fix: Always give both sides and then a conclusion. Judge by relevance, faithful representation and comparability.

  • Confusing a discussion paper with an exposure draft.

    Both are consultation documents and the names sound similar.

    Fix: Remember that a discussion paper floats ideas and asks for views, while an ED contains proposed requirements and invites comment on them.

  • Quoting dates, paragraph numbers or details you are unsure of.

    Students try to look precise.

    Fix: Describe the principle and effect instead. Give a date only if the question or your current ACCA material states it.

  • Ignoring professional skills marks.

    Students treat the question as a technical write-up.

    Fix: Use headings or short paragraphs, a clear opening, commercial points such as lender and investor reaction, and a recommendation.

Worked examples

Example 1

Tamas Group reports profit from operations in its own way. The $14m figure includes $2m of net rental income from investment property the group holds. Tamas's main business activities are not investing or providing finance to customers. Management says IFRS 18, the new IASB presentation standard, is 'not effective yet so we can ignore it'. Explain whether management is right and how IFRS 18 could change the profit measure. (6 marks)

Show the solution
  1. Status: IFRS 18 is a final standard that has been issued but is not yet effective. It applies to periods beginning on or after 1 January 2027, so IAS 1 still applies to this year's statements. By contrast, a mere exposure draft would have no authority at all.
  2. Disclosure: management cannot ignore it. IAS 8 requires disclosure of known or reasonably estimable information about the impact of an issued standard that is not yet effective.
  3. Planning: the standard has a fixed effective date and comparatives will be restated. Management should assess now what will change and prepare.
  4. Effect on the measure: IFRS 18 defines operating, investing and financing categories and requires defined subtotals, which limits how freely entities build their own profit line. Operating is the residual category. Income from assets that generate returns individually and largely independently of the entity's other resources, such as investment property, goes to the investing category for an entity like Tamas.
  5. Numbers: the $2m rental income is included in management's $14m, but under IFRS 18 it would be shown in investing. IFRS operating profit would be $14m − $2m = $12m, a fall of about 14.3% (2 ÷ 14). This assumes the other $12m is made up of items that stay in operating. The rental income is still reported in the statement of profit or loss, in a different category.
  6. Users: comparability improves, because operating profit no longer mixes returns from investments with the results of the main trading activities. Bonuses or covenants set on the old $14m measure could be affected.
  7. Conclusion: management should not ignore IFRS 18. They should disclose its expected impact, map line items to categories, check contracts that rely on operating profit and explain the change to investors.

Answer: Management is correct that IAS 1 still applies until IFRS 18 takes effect, but wrong to ignore it. IFRS 18 is a final standard, and IAS 8 requires disclosure of its expected impact. The $2m net rental income from investment property would move from operating to investing. Operating profit would fall from $14m to $12m, about 14.3%, on the stated assumption about the other items. Management should plan for this, review covenants and bonus terms and communicate early.

Example 2

Kiran plc discloses a management-defined measure, 'adjusted profit', of $9m in its annual report. It starts from IFRS operating profit of $6m and adds back restructuring costs of $2.5m and impairment of $0.5m. Regulators and investors want more transparency on such measures. Evaluate the impact of the IFRS 18 requirements on disclosure of management-defined performance measures in the notes. (8 marks)

Show the solution
  1. Check the figures: 6 + 2.5 + 0.5 = 9, so the adjusted profit of $9m reconciles to IFRS operating profit of $6m.
  2. Status: IFRS 18 is a final standard, issued in April 2024 and effective for periods beginning on or after 1 January 2027. Kiran must apply it from its first period beginning on or after that date, and until then should disclose the expected impact.
  3. Explain the requirement: IFRS 18 requires management-defined performance measures that communicate management's view of the entity's performance to be identified, explained and reconciled in a single note. The reconciliation is to the most directly comparable subtotal listed in IFRS 18 or total or subtotal required by IFRS Accounting Standards. For each adjustment it must also show the income tax effect and the effect on non-controlling interests. Confirm the details against current ACCA material.
  4. Apply: Kiran would need to show the $3m of adjustments (2.5 + 0.5) as a reconciliation to IFRS operating profit of $6m and explain why management thinks the measure is useful. The $3m is a pre-tax figure. Kiran would also need to show the income tax effect and any non-controlling interest effect of each adjustment. The question gives no tax rate or NCI information, so these cannot be calculated here. Say that the after-tax effect of the adjustments would be smaller than $3m. Kiran would also need to say if the calculation changes between periods.
  5. Benefits: users can see how far the measure departs from IFRS operating profit. This improves transparency, faithful representation and comparability. The adjusted profit is 50% above IFRS operating profit (3 ÷ 6), so the gap is material.
  6. Costs and risks: extra systems and audit effort, because the note is part of the financial statements, and less scope to present a favourable figure without explanation. Some argue that restructuring costs recurring each year are not 'one-off'. Disclosure may expose this.
  7. Conclusion: Kiran should prepare the reconciliation now, including the tax and NCI effects, review whether items labelled one-off recur, and tell investors why the measure remains useful.

Answer: IFRS 18 would require Kiran to reconcile its $9m adjusted profit to IFRS operating profit of $6m, showing $3m of pre-tax adjustments. It must also show the income tax and non-controlling interest effects of each adjustment, which cannot be quantified from the information given. This increases transparency and comparability, at the cost of more disclosure work and less scope for flattering measures. Kiran should prepare now and challenge whether its adjustments are really non-recurring.

Exam tips

  • Name the status first (discussion paper, ED or final standard). It is a quick mark and avoids the error of applying a proposal as current rules.
  • Use the scenario numbers. A short calculation of the effect on profit or a ratio shows analysis that earns professional skills marks.
  • Always include a benefit, a cost and a verdict. Use Conceptual Framework terms such as relevance and comparability.
  • Check recent ACCA technical articles and the examinable documents before your sitting, because the examinable list of new standards and projects changes.
  • If you cannot recall a detail, describe the principle and its effect. Do not invent paragraph numbers or dates.

Practice questions from Discussion of issues in financial reporting

Exposure Drafts and Proposed Changes to IFRS Standards: frequently asked questions

Is there a fixed list of examinable exposure drafts in SBR?

The list changes, so rely on the examinable documents and the latest ACCA technical articles for your sitting. Questions focus on the main proposals and their effects, not on recalling every paragraph.

What is the difference between an exposure draft and a discussion paper?

A discussion paper is an early document that sets out issues and asks for views. An exposure draft contains specific proposed requirements and invites comment on them. Neither is authoritative until a final standard is issued.

How is IFRS 18 examined in SBR?

Expect to explain its main presentation changes, such as the profit or loss categories and subtotals and the disclosure of management-defined performance measures. You will then apply them to a scenario and evaluate the effect on users and the entity.

How do I answer an exposure draft question when I do not know the proposal well?

Use the Change, Effect and Verdict structure. Explain the likely problem being addressed, apply it to the scenario figures, give benefits and costs, and conclude. A reasoned answer using the Conceptual Framework can still earn good marks.