Malaysian companies face a financial reporting shake-up by 2027. Are you ready?

New accounting standards will fundamentally change how companies present their performance to investors.

In brief

• From January 2027, MFRS 18 will transform corporate reporting in Malaysia, requiring companies to clearly categorize income and expenses for better investor comparison.
• The new standard mandates disclosure of non-GAAP measures with reconciliation to official figures, enhancing credibility and transparency in financial reporting.
• Companies must prepare early by reviewing financial structures and aligning investor communications to meet MFRS 18 requirements or risk being unprepared in 2026.

Malaysian companies have less than two years to prepare for one of the most significant changes to corporate reporting. Yet many chief financial officers (CFOs) and finance teams may not fully realize what’s coming.

From 1 January 2027, MFRS 18 will replace the current accounting standard that governs how companies present their financial statements. This isn’t just a technical accounting update. It will fundamentally change how companies communicate their financial performance to investors, analysts and stakeholders.

Why the change matters

The problem is straightforward: investors cannot easily compare companies anymore.

Right now, a Malaysian bank, plantation group and manufacturer might all report “profit from operations”, but each calculates it differently. Companies use alternative measures like “normalized profit” in investor presentations without clear links to their audited financials. Important details get buried under vague line items like “other expenses”.

This flexibility was meant to reflect how different businesses operate. Instead, it has created confusion. It limits investors’ ability to compare performance across companies and undermines trust in reported results.

What’s changing?

MFRS 18 introduces three major shifts.

First, companies must now classify all income and expenses into five clear categories: operating, investing, financing, income tax and discontinued operations. Two new mandatory subtotals will become standard: “operating profit” and “profit before financing and income tax”.

Take a Malaysian bank. Its interest income will appear in the operating category because lending is its main business. But for a manufacturer, similar income would fall under investing activities. This distinction helps investors compare performance across different industries.

Second, companies that use non-generally accepted accounting principles (GAAP) measures (terms like “underlying profit” or “adjusted EBITDA” that often appear in investor presentations) must now disclose them in a dedicated note. These must be fully reconciled to official accounting figures. More importantly, auditors will now review these measures. This significantly increases their credibility.

Third, the standard tightens rules on how companies’ group and separate items. Companies can no longer bury impairment charges on property and equipment under “other expenses”. Material items must be separately disclosed.

The clock is ticking

January 2027 may seem far away. But transitioning to MFRS 18 will not be a simple systems update.

Companies need to review their current financial statements structure against the new requirements. Many will need to modify their systems and chart of accounts to capture data for the new categories. Finance teams and boards need training on the new subtotals and disclosure rules.

Perhaps most critical: investor presentations, analyst packs and press releases will need to be reworked to align with the audited MFRS 18 measures. Banks and lenders may need to renegotiate loan covenants tied to profit metrics that will be calculated differently.

Getting it right

MFRS 18 creates immediate challenges, yes. But it also offers Malaysian companies something valuable.

Companies that prepare early and communicate clearly with investors will stand out as leaders in transparent reporting. Clear, comparable financial statements will strengthen investor confidence. This matters especially as Malaysia competes for foreign capital in an increasingly selective global market.

The standard addresses real investor concerns that have built up over years. By delivering more structured, comparable financial information, MFRS 18 should help rebuild trust between companies and their stakeholders.

What should companies do now? Start with a gap analysis. Run pilot financial statements under the new format. Talk to your auditors and advisors about implementation challenges.