Under IFRS, companies must classify income statement items by
A)function.
B)nature.
C)nature or function
D)date incurred.

Question

Quizplus · Accepted Answer

Under IFRS, companies have the option to classify income statement items either by their nature (such as revenue, cost of sales, depreciation, interest) or by their function (such as cost of goods sold, selling and distribution expenses, administrative expenses). The standard encourages the use of the function approach, but allows the nature approach if it provides more relevant and reliable information. Companies must disclose the method used for classification and report additional information on the nature and function of expenses when necessary for understanding its financial performance. Therefore, the most accurate answer is C, as companies have the flexibility to use either nature or function classification.

Under IFRS, Companies Must Classify Income Statement Items by