With less than four months until IFRS 18 comes into effect, businesses reporting under IFRS Accounting Standards should be moving beyond awareness and into implementation.
The standard applies to annual reporting periods beginning on or after 1 January 2027, with earlier application permitted. For calendar-year reporters, 2026 is already the comparative period, making preparations increasingly important..
Whilst IFRS 18 does not fundamentally change how profit is measured, it introduces the most significant changes to financial statement presentation in more than 20 years. For many organisations, the challenge now is not understanding the new rules, but ensuring systems, processes and reporting structures are ready in time.
And because comparative information will need to be restated, preparations cannot wait until the first IFRS 18 reporting period begins.
Why IFRS 18 matters now
IFRS 18 replaces IAS 1, which has long formed the basis of presentation requirements under IFRS Accounting Standards.
The objective is to improve the consistency, transparency and comparability of financial statements, particularly within the statement of profit or loss. Whilst recognition and measurement requirements remain largely unchanged, the way businesses present financial performance could look very different.
For finance teams, investors and stakeholders, these presentation changes may alter how performance is analysed and understood.
The key areas businesses should be reviewing
As implementation approaches, there are several areas that deserve attention.
1. Income statement presentation
IFRS 18 introduces a more structured approach to the statement of profit or loss. Income and expenses must be classified into defined categories:
- Operating
- Investing
- Financing
- Income taxes
- Discontinued operations
For some organisations, particularly those with significant investment activities or complex financing arrangements, this may result in items being presented differently from current practice. Specific classification requirements can also apply where investing in assets or providing financing to customers is a main business activity.
Now is the time to assess where key income and expense items will sit under the new framework and understand the impact on reported performance.
2. New mandatory profit subtotals
One of the most visible changes is the introduction of two new mandatory defined subtotals, subject to limited exceptions for certain businesses that provide financing to customers as a main business activity:
- Operating profit
- Profit or loss before financing and income taxes
These measures are intended to improve comparability between businesses by providing more consistency in how operating performance is presented.
Companies should consider how these new subtotals compare with existing internal and external performance measures, particularly where stakeholders are accustomed to alternative metrics.
3. Management-defined performance measures (MPMs)
Businesses that use adjusted profit measures or alternative performance metrics may see significant changes under IFRS 18.
Not every KPI or alternative performance measure will qualify as an MPM. Broadly, MPMs are subtotals of income and expenses used in public communications to communicate management’s view of an aspect of financial performance.
Where a measure falls within the definition, IFRS 18 introduces specific disclosure requirements, including explaining:
- Why the measure is used
- How it is calculated
- How it reconciles to IFRS figures
For many companies, this will involve reviewing how performance measures are communicated across annual reports, presentations and other public communications.
4. Financial reporting systems and data
IFRS 18 is more than a disclosure exercise. Many organisations will need to assess whether current systems can produce the additional information required for the new presentation and disclosure requirements.
This may include:
- Reviewing chart of accounts structures
- Updating reporting packs
- Revisiting management reporting processes
- Identifying additional data requirements
Leaving these reviews until later in the implementation process risks limiting the time available to act on any necessary changes.
5. Cash flow statement impacts
IFRS 18 also introduces consequential amendments to IAS 7.
Under the indirect method, operating profit or loss will become the required starting point for reporting cash flows from operating activities. The classification requirements for interest and dividend cash flows will also change, with the treatment depending in some cases on the nature of the entity’s main business activities.
Although these amendments do not affect cash generation, they may impact trend analysis, key performance measures and stakeholder interpretation.
Preparing for comparative reporting
One of the most important considerations for your business is the requirement to present comparative information under the new format.
IFRS 18 is applied retrospectively, which means businesses adopting it in 2027 will need to restate comparative information. For calendar-year reporters, that means 2026 is already the comparative period.
For many finance teams, the practical work required to produce comparatives will begin during 2026 and continue throughout the first year of adoption.
Questions finance teams should be asking today
As 2027 approaches, businesses should be considering:
- Do our current financial statements align with IFRS 18 presentation requirements?
- Which performance measures will qualify as MPMs?
- Are our systems capable of producing the necessary disclosures?
- How will key metrics and KPIs be affected?
- Are we capturing the information needed to prepare comparative figures?
- Do investors, lenders and other stakeholders need advance communication regarding any changes in presentation?
Addressing these questions now can help avoid last-minute implementation challenges and provide a smoother transition to the new reporting framework.
How Moore Stephens can help?
Our audit and accounting specialists are already working with clients to assess the practical implications of IFRS 18 and develop implementation plans ahead of the effective date.
If you would like to discuss how the new requirements could affect your financial statements, reporting processes or stakeholder communications, please get in touch with a member of our team.