Paul Bevan (X) Jun 14, 2017:

@Charles On reflection, I’m inclined to agree. IFRS doesn’t have a standardised sub-total for these items - actually, a proposal to show a subtotal “Net Finance Cost” in the Income Statement was rejected by IFRIC unless the individual line items are also shown.

https://www.iasplus.com/en/meeting-notes/ifrs-ic/not-added/2...

However, the terms I have seen used (e.g. “Net Finance Cost” -Unilever; "Net financial income/(expense)" -Nestlé) do include items 16 and 18, according to the Notes to the Financial Statements.
Unilever states : “Net gain/(loss) on transactions for which hedge accounting is not applied
*On foreign exchange derivatives
*Exchange difference on underlying items”.
Nestle states : “These headings also include other income and expense such as exchange differences on net debt and results on related foreign currency and interest rate hedging instruments.”

While I don’t think it would be actually wrong to use “Net Finance Cost”, particularly as it would be a defined term (Sigma items 14-19), I do agree with you on the principle that “Localisation must never trump accuracy”.

Charles Davis Jun 13, 2017:

@Paul Just to clarify, "Total Interest Income" was proposed for this in the translatorscafe question mentioned by the asker, which is what I was referring to by "TC page".

On your other points: "net finance costs" is commonly used in accounts and certainly covers 14-15, and probably 19, which is a catch-all, but does it cover fair value adjustments and depreciation of financial assets? I would say not, at least not unambiguously.

If precisely this category is normally called something else, then fine, use that something else. But if the question is rather that this precise category is not normally used in corporate accounts in the UK and the US, as it is in Spain, then using another term with a similar but not identical meaning is bad translation practice. Localisation must never trump accuracy. I believe this is so; I think 16 and 18 normally appear elsewhere.

Paul Bevan (X) Jun 13, 2017:

The problem with using "Financial result" is that it is not a term that is commonly used in corporate finance. A very similar term "Financial results" is very commonly used, and applies generally to the financial results of business operations. Another result from financing is also analyzed in the Cash Flow statement, but is a different formula than the one in the text being translated. For these reasons, in the investment community and in many companies' financial reports, you will see "Net Finance Cost", the definition of which comprises all items 14-19. I don't think anyone proposed "Total Interest Income".

Charles Davis Jun 12, 2017:

Hi Ruth There's nothing objectively wrong with it and the term is sometimes used, but not usually, I think.

Ruth Ramsey (asker) Jun 12, 2017:

Hi Charles, that's very helpful. By the way, I can see that "gastos financieros" can be translated as "interest expenses" or "borrowing expenses", but would "financial expenses" be incorrect?

Charles Davis Jun 12, 2017:

I've just read the TC page. Oh dear.
This is quite definitely not total interest income. That simply means the total of interest income when it's broken down into different categories in profit and loss accounts/income statements.

The financial result is a standard item in the Spanish Plan General de Contabilidad but doesn't always appear as such in US and UK income statements. Net interest income/loss is only part of it (the first two elements). Other elements of the financial result sometimes appear under other headings; for example, other financial income and expenses may come under Non-Operating Income, and write-downs/write-ups for financial assets and securities may be under Other Operating Expenses. There are different ways of doing things, but that's no excuse for using a term that means something else just because you find it in an income statement in English.

EU-style income statements do include the financial result as an item.

Charles Davis Jun 12, 2017:

PS. The much-maligned Wikipedia is perfectly sound on this, by the way:
https://en.wikipedia.org/wiki/Financial_result

Charles Davis Jun 12, 2017:

It usually, or at least often, does give a negative figure.

The resultado financiero / financial result is the difference between earnings before interest and tax (EBIT) and earnings before tax (EBT). In other words, it's the net result of the company's financial activities.

Ingresos financieros, strange thought it may seem, is interest income: what the company has made on its investments, essentially. Gastos financieros is interest expense: the interest it has been charged on borrowing.

Jo Hance Jun 12, 2017:

Re: profit It might be a negative result, ie not a profit! Adding all the preceding points together (particularly disposals of financial instruments such as derivatives) might give a negative figure.