IFRS 18: Preparing for the new Presentation and Disclosure Standard

IFRS 18 - Presentation and Disclosure in Financial Statements (“IFRS 18”) will significantly change how entities present and disclose financial performance in their financial statements. Early planning can help minimise disruption, strengthen reporting clarity, and support a smoother transition ahead of the effective date of 1 January 2027 (periods beginning on or after).

On 9 April 2024, the International Accounting Standards Board (IASB) issued IFRS 18, replacing IAS 1 - Presentation of Financial Statements. The new standard is designed to improve the relevance, reliability and transparency of information relating to an entity’s assets, liabilities, equity, income and expenses.

Why IFRS 18 matters

IFRS 18 introduces a more structured and consistent presentation framework for financial statements. Its purpose is to improve clarity and support users in better understanding an entity’s financial performance.

By strengthening the communication of performance-related information, the standard aims to provide investors and other stakeholders with greater transparency and more comparable financial data.

Key changes at a glance

New structure for the statement of profit or loss

IFRS 18 introduces a revised structure that classifies income and expenses into three categories:

• Operating
• Investing
• Financing

It also introduces two new mandatory subtotals:

1. Operating profit or loss
2. Profit or loss before financing and income taxes

Management-Defined Performance Measures (MPMs)

An MPM is a subtotal of income and expenses that is not specified under IFRS and is not required to be presented or disclosed. IFRS 18 introduces enhanced disclosure requirements and requires all MPMs to be presented in a single note within the financial statements. Entities must disclose:

• How each measure is calculated
• Why the measure is useful to users
• A reconciliation to the most comparable subtotal defined by IFRS standards
• The effects on income tax and non-controlling interest for each item disclosed in the MPM reconciliation
• Any changes to the MPMs, including the reason for those changes
• This brings MPMs – such as EBITDA – into the audited financial statements, increasing scrutiny and requiring greater consistency and discipline.

Aggregation and disaggregation

IFRS 18 requires entities to aggregate or disaggregate information in the primary financial statements and the accompanying notes based on shared or distinct characteristics, ensuring that material information is not obscured. The standard also requires clear labelling and descriptions of all totals, subtotals, line items and disclosures to accurately reflect their nature. Additionally, offsetting of assets, liabilities, income and expenses is prohibited unless explicitly permitted under IFRS.

Other amendments

IFRS 18 also introduces limited changes to IAS 7 - Statement of Cash Flows, including:

• Requiring operating profit or loss to be used as the starting point for reconciling operating cash flows
• Removing existing options for presenting interest and dividends paid and received

Who is impacted and what are the implications?

IFRS 18 applies to all entities that prepare financial statements under IFRS, regardless of size, sector or listing status.

However, the practical implications will vary. Key considerations include:

• Income and expense allocation must be determined at the reporting-entity level
• Classifications may differ between an entity’s standalone and consolidated financial statements
• Entities already presenting operating profit may still need to reassess whether certain items meet the criteria for operating, investing or financing categories
• Equity-accounted results from associates and joint ventures will now be presented within the investing category

Entities must also reassess and update their existing MPMs, such as EBITDA, to ensure compliance with the new requirements. The inclusion of these measures within audited financial statements places greater emphasis on governance, consistency and audit readiness.

Get ready early

IFRS 18 is applied retrospectively and is effective for periods beginning on or after 1 January 2027. For December year-ends, this means a transition date of 1 January 2026- the start of the comparative period. For many organisations, this means preparation should already be underway.

Early action will help reduce implementation risk, avoid last-minute disruption and ensure financial reporting remains clear, consistent and decision-useful.

We’re here to help

The introduction of IFRS 18 represents a significant shift in how financial performance is presented and disclosed. Our team provides tailored, practical support to help you navigate the transition with confidence, including:

Impact assessment

We assess how IFRS 18 affects your current financial statements, disclosures and reporting framework, helping you identify priority areas for action.

Financial statement redesign and implementation support

We help redesign structures, categories and subtotals so they align with the new standard and support clearer communication of financial performance. We also assist with implementation, including updates to systems, processes and data capture, as well as comparative restatements from IAS 1 to IFRS 18.

Management‑Defined Performance Measures (MPMs)

We support the review and development of Management-Defined Performance Measures, including reconciliations and required disclosures.

Training for finance teams and stakeholders

We provide targeted training to help finance teams and stakeholders understand both the technical requirements and the practical implications of IFRS 18.

If you would like to understand how IFRS 18 may affect your organisation, or what steps you should be taking now, please get in touch with your Azets adviser or a member of our Technical Accounting team.