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Hi All,

Does IFRS/IAS define the term "Gross Margin" anywhere ?

Reason for the query: A Logistics entity spends USD 10 million on its payroll, $ 7M of which relates to employees working in its warehouse/transportation business and $ 3M on Administrative and Sales staff salaries. So also Depreciation - total $ 5M, of which $ 4M relates to its warehouse building & equipment, and $ 1M on its admin office building and equipment.

If it wants to show "Gross Profit/Loss" on the face of its P&L (ie. adopt the classification by Function under IAS 1), would it be acceptable under IFRS to include the entire $ 10M of Salaries and entire $ 5M of Depreciation below the gross margin line, thereby wrongly inflating what we normally call "Gross Profit" ? In other words, the entity does not split its Salaries and Depreciation expense into respective "Functions" - Operations and Admin. It is in effect, adopting a hybrid approach - it shows Gross Profit/Loss, but does not split certain line items into respective "Functions", instead discloses them based on their "Nature" (Payroll / Depreciation). Is this acceptable under IFRS ?

not yet

Thanks JRSB.

Will it be possible under IFRS 18 ?

I'm mean there is no definition so you can do what you want as long as it's consistent and not misleading.

I don't think the hybrid approach is possible, either a P&L by nature or by function.

I've seen companies doing a "hybrid" P&L, with items by function, but putting an intermediary sub-total "EBITDA" and depreciation & amortisation coming after that. This has been rejected by the auditors. In this situation, you can show "EBITDA" only if you prepare a P&L by nature.

OK, thanks everyone for your inputs!