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IFRS 18 changes financial performance reporting

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IFRS 18 requires all companies using IFRS standards to provide relevant information that enhances transparency in their financial performance.

In brief
  • IFRS 18 replaces IAS 1 and responds to investors’ demand for better information about companies' financial performance.
  • New requirements include: new categories and subtotals in the statement of profit or loss, disclosure of MPMs and enhanced requirements for grouping information.

The International Accounting Standards Board (IASB) published IFRS 18 Presentation and Disclosure in Financial Statements in April 2024. This new standard will help companies to provide information about their financial performance that is useful to users of financial statements in assessing the prospects for future net cash inflows to the company and in assessing management’s stewardship of the company’s economic resources. It represents the completion of a major standard-setting project on the presentation of financial statements and, therefore, will have significant implications for many companies reporting under IFRS. 

IFRS 18 represents the most significant changes to the presentation of financial performance in recent times and requires companies to reconsider the overall structure of the statement of financial performance.

New features of primary financial statements

One of the key features of IFRS 18 is to require companies to classify all items of income and expenses into one of the five categories of operating, investing, financing, income taxes and discontinued operations. The first three categories are new; IFRS 18 provides specific guidance to assist preparers in identifying items to be classified in each respective category especially for companies with specified main business activities of investing in assets or providing finance to customers. The categories are complemented by the requirement to present subtotals and totals for “operating profit or loss,” “profit or loss before financing and income taxes” and “profit or loss”.

The new standard also provides that the aggregation and disaggregation of items of assets, liabilities, equity, revenue, expenses and cash flows are based on shared characteristics. Companies are required to aggregate or disaggregate items to present line items in the primary financial statements to provide useful structured summaries. Furthermore, in the notes to the financial statements, companies are required to aggregate or disaggregate items to provide material information, but in doing so, must not obscure material information. 

When IFRS 18 becomes effective, it is expected that the new guidance and requirements applicable to categories, subtotals and totals will enhance their comparability across companies. For example, operating profit or loss is a defined term under IFRS 18 applicable to all companies allowing users to better understand the performance of a company’s operations and compare operating profit or loss across companies.  

IFRS 18 creates an opportunity for companies to revisit and change their communication strategy for their financial performance and determine the MPMs going forward.

Management-defined performance measures (MPMs)

Another important feature of the new standard is management-defined performance measures. An MPM is a subtotal of income and expenses not listed in IFRS accounting standards, nor specifically required to be presented or disclosed by an IFRS accounting standard. Companies use MPMs in public communications outside financial statements to communicate to users management’s view of an aspect of the financial performance of the company as a whole.

Furthermore, IFRS 18 requires companies to disclose information about all their MPMs in a single note to the financial statements. It also requires disclosure of how the measure is calculated, how it provides useful information to users and a reconciliation to the most comparable subtotal specified by IFRS accounting standards.

As MPMs are required disclosures under IFRS 18, they will be subject to audit. The disclosure requirements will also enhance transparency and communication effectiveness of a company’s financial performance.

The successful implementation of IFRS 18 will require companies to update their financial statement close process and make the necessary changes to its information systems, also taking into due consideration the information needs of users of financial statements, especially investors.

Effective date and transition

IFRS 18 is effective for annual reporting periods beginning on or after 1 January 2027, and is to be applied retrospectively for comparative periods. The effective date of the standard will depend on the local regulatory requirements in different jurisdictions. Earlier application is permitted and must be disclosed in the notes. If a company applies IAS 34 Interim Financial Statements in preparing condensed interim financial statements in the first year of applying the standard, the company is required to present headings it expects to use in applying IFRS 18 and subtotals consistent with the requirements in the standard. In addition, a company is required to disclose reconciliations for each line item presented in the statement of financial performance for the comparative periods immediately preceding the current and cumulative current periods.

Between now and the date of initial application, companies will need to redesign the income statement and the cash flow statement, re-evaluate the disclosures to be included in the notes to the financial statements, restate comparatives (both annual and interim financial statements) and prepare the reconciliations for transition disclosure purposes. Companies need to plan ahead in a timely manner as the process could take considerable time and involve financial reporting, legal and investor relations personnel, among others.


IFRS 18 replaces IAS 1 Presentation of Financial Statements as the primary source of requirements in IFRS accounting standards for financial statement presentation which will provide better information to users. Some of the changes it introduces include new presentation requirements related to the statement of profit or loss, including three new categories for items of income and expense – operating, financing, investing.

IFRS 18 requires companies to improve labelling, as well as aggregation and disaggregation of information in financial statements. Companies will also need to disclose management-defined performance measure in the notes to the financial statement.

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