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      Why are IFRS important?


      The IFRS Accounting Standards (IFRS) are globally recognized accounting standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB). They aim to ensure consistent, transparent and comparable financial reporting by companies, particularly in an international context.

      IFRS play a key role in improving the cross-border comparability of financial statements. They are especially beneficial for capital market-oriented companies that operate internationally, as they provide a unified framework for financial reporting. In the European Union, IFRS have been mandatory for listed companies since 2005, and in Switzerland, they are widely used by publicly traded and internationally active entities.

      Areas of application: 

      • Consolidated and individual financial statements of listed companies
      • International subsidiaries of large corporations
      • International investors: IFRS improve transparency and strengthen investor confidence 
      • Mergers and acquisitions (M&A): IFRS provide a consistent basis for valuation
      Martin Stevka
      Martin Stevka

      Partner, Head Regional Market Zurich, Head Accounting Advisory Services Corporates

      KPMG Switzerland

      Daniel Haas
      Daniel Haas

      Partner, Co-Head Accounting Advisory Services Corporates

      KPMG Switzerland

      What are the benefits of IFRS?

      • Comparability and access to capital markets

        Uniform standards for international financial statements

      • Consistent valuation basis

        Reliable foundation for consolidated financial statements

      • Transparency and clarity

        Clear rules build trust with investors

      IFRS 18 - The new era of IFRS presentation and disclosures

      What is IFRS 18?


      IFRS 18 replaces the previous standard, IAS 1, and introduces new requirements aimed at improving the structure and comprehensibility of financial statements, particularly the income statement. Its objective is to enhance the clarity and transparency of financial reporting and to enable better comparability between companies. The standard is mandatory for financial years beginning on or after 1 January 2027, although early adoption is permitted.

      Key changes – what’ s new?
       

      • New income categories

        The income statement is classified into three newly defined categories: operating, investing and financing

      • Standardized profit subtotals

        Two new subtotals are introduced:
        1. Operating profit or loss
        2. Profit or loss before financing and income tax

      • Disclosure of MPMs

        New IFRS 18 disclosure requirements apply to management-defined performance measures (MPMs) and reflect management’s view of company performance.

      • Clearer expense breakdowns

        Enhanced guidance on aggregation and disaggregation is provided, including a mandatory breakdown of certain expenses in the notes when companies present operating expenses by function or in a mixed presentation.

      How IFRS 18 impacts companies
       

      System changes ahead


      Companies must fundamentally change how they present their financial reporting and accounting data, which could affect subtotals and expenses.
       

      Complex classifications


      Classifying income and expenses into the new categories can be complex and time-consuming, particularly for companies with diverse business operations.
       

      New performance metrics


      The introduction of new requirements for management performance metrics can affect how companies communicate their financial performance to investors and other stakeholders.

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      IFRS 18 – A new era of presentation and disclosure under IFRS

      Learn more

      IFRS implications for cloud-based software

      What are cloud computing arrangements?


      In cloud computing arrangements, customers pay vendors for access to computing services (software and/or hardware) delivered via the internet.

      These arrangements include software as a-service (SaaS) arrangements, where customers obtain access to software hosted by the software vendor (or a third party on its behalf), as well as other “as a service” arrangements, such as infrastructure as a service (IaaS) and platform as a service (PaaS) arrangements.

      Frank Richter
      Frank Richter

      Partner, Head of DPP IFRS

      KPMG Switzerland

      Is there ‘control’ over the underlying software in a cloud computing arrangement?

      Determining if the customer controls the software, resulting in an intangible asset under IAS 38, is crucial for proper accounting of software licenses and related implementation costs.

      Generally, control over the underlying software exists if the customer can obtain the future economic benefits flowing from the software (without the software vendor’s hosting services) or restrict others from obtaining those benefits from the software.

      Key indicators to assess control over the underlying software include:

      • Does the customer have a substantial right to take possession of a copy of the software and run it on own / third party’s IT infrastructure?
      • Does the customer have exclusive rights to use the software or ownership of the intellectual property of the software?

      How are software and related implementation costs accounted for in a cloud computing arrangement?
       

      The accounting of the underlying software and costs incurred for implementing the software depends on whether there is control over the underlying software, i.e. there is a software intangible asset, or, if not, the customer has a service contract.
       

      Software intangible asset


      If the customer controls the underlying software, the arrangement gives rise to a software intangible asset. The cost of this software intangible asset is determined based on the guidance in IAS 38 and includes the directly attributable costs of preparing the software for its intended use.

      Thus, like for on-premise software licenses, many implementation costs can be capitalized as part of the cost of the software intangible asset.
       

      Service contract


      If there is no control over the underlying software, the arrangement is accounted for as a service contract, and the related expenditure for the software is recognized as the customer receives the services – i.e. over the term of the cloud computing arrangement / underlying software.

      Implementation costs (e.g., configuration) are generally expensed as incurred, unless the service is not distinct from the access to the software or gives rise to a separate intangible asset. If not distinct, costs are recognized over the contract term (e.g. customization).

      What are the accounting implications of migrating to cloud computing arrangements?
       

      Migrating to a cloud solution can significantly impact IFRS financial statements. Each migration is unique, so it’s essential to assess the accounting treatment early to avoid surprises and ensure compliance with IFRS.

      In case of software migrations often the following questions may arise:

      • New software licenses

        Does the software license give rise to a software intangible asset? Or is it a service contract?

      • Previously used software licenses

        Are they required to be derecognized when licenses cease to be used? Does this also apply for previously capitalized implementation costs? Does the remaining useful life need to be adjusted accordingly? What are the accounting implications of discounts granted for the new licenses in exchange for returning previously used licenses?

      • Costs incurred to migrate to/implement the new software

        Are these eligible for capitalization?

      How can we help?
       

      At KPMG, we understand the challenges involved in the accounting of cloud computing arrangements.

      Our support for the accounting of cloud computing arrangements includes:
       

      • Reviewing contracts and control rights

        to determine if they qualify for capitalization.

      • Drafting technical accounting papers

        to assess contracts against the guidance, document judgments and communicate with auditors.

      • Draft internal accounting policies/manuals

        and provide training.

      • Hold workshops with the finance and IT teams

        to review the guidance and arrangements.


      More information

      This guide explains how to account for implementation costs in cloud computing arrangements under IFRS.

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      FAQs

      IFRS stands for International Financial Reporting Standards. IFRS accounting standards are a set of rules developed by the International Accounting Standards Board (IASB).

      They serve as a globally consistent framework for corporate financial reporting, aiming to ensure transparency, comparability and uniformity of financial statements across countries and industries.

      In Switzerland, IFRS are generally not legally mandatory, but they may be required or voluntarily adopted under certain circumstances. Publicly listed companies on the SIX Swiss Exchange or BX Swiss must apply either IFRS, Swiss GAAP FER, or US GAAP for their consolidated or individual financial statements.

      Many internationally active Swiss companies voluntarily choose IFRS to enhance the international comparability of their financial statements and to meet the expectations of global investors.

      For non-listed companies, the use of IFRS is voluntary and is usually driven by strategic or group-internal considerations. However, for individual financial statements, compliance with Swiss Code of Obligations (OR) requirements remains mandatory by law.

      A company must transition to IFRS when it is subject to legal or regulatory requirements that mandate the use of IFRS for example, when listed on the SIX Swiss Exchange, unless the consolidated financial statements are prepared under Swiss GAAP FER or US GAAP.

      A transition may also be advisable or necessary in cases such as planned international expansion, integration into a group that uses IFRS, or to meet investor requirements.

      The exact timing depends on the specific circumstances, but it should be planned well in advance, as an IFRS transition requires lead time for adjusting processes, systems, and training, as well as for preparing the first set of financial statements in accordance with IFRS.

      IFRS were introduced to establish uniform and comparable accounting standards worldwide. Their purpose is to enhance the transparency, understandability and reliability of financial statements.

      For internationally active companies and investors, IFRS facilitate the flow of capital and enable the comparison of financial information across countries. This builds trust in financial markets and supports efficient capital allocation.

      Learn more about our IFRS Accounting Standards Services

      What IFRS means for your business – and how we can support you.

      KPMG understands the industry-specific challenges and provides support with transactions, IFRS implementation, and enhancing communication with stakeholders to improve financial reporting.

      Learn more about our solutions

      Meet our experts

      Martin Stevka
      Martin Stevka

      Partner, Head Regional Market Zurich, Head Accounting Advisory Services Corporates

      KPMG Switzerland

      Daniel Haas
      Daniel Haas

      Partner, Co-Head Accounting Advisory Services Corporates

      KPMG Switzerland

      Frank Richter
      Frank Richter

      Partner, Head of DPP IFRS

      KPMG Switzerland

      Contact our experts

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