IFRS 18 Presentation and Disclosure in Financial Statements becomes effective for annual reporting periods beginning on or after 1 January 2027. For finance teams, however, implementation begins before that date.
A calendar-year entity applying IFRS 18 from 1 January 2027 will present 2026 comparative information under the new Standard. This means transactions, account mappings, management performance measures, cash-flow classifications and disclosure data being generated during 2026 may ultimately need to support an IFRS 18 presentation.
IFRS 18 replaces IAS 1 Presentation of Financial Statements. Its most visible effect is on the statement of profit or loss, but implementation reaches much further: chart-of-account design, consolidation mappings, management reporting, investor communications, treasury classifications, expense analysis, comparative restatement, financial reporting controls and audit evidence may all need attention.
The International Accounting Standards Board issued IFRS 18 in April 2024 to improve the comparability and transparency of financial performance reporting. The Standard introduces defined categories in the statement of profit or loss, new required subtotals, disclosures for management-defined performance measures, and strengthened principles for aggregation and disaggregation.
For organisations already using IFRS Accounting Standards, the appropriate question is therefore not simply:
A better implementation question is:
This guide explains the major requirements and then translates them into an implementation programme for finance teams, controllers, CFOs, auditors, ERP teams and audit committees.
1. Why IFRS 18 was introduced
Under IAS 1, entities have had considerable flexibility over the subtotals used in the statement of profit or loss. Many companies report "operating profit", but historically that label has not always represented the same underlying calculation from one company to another.
The IASB identified this as a comparability problem. Investors often use operating profit and other subtotals to compare performance, yet similarly named measures may include or exclude different items. IFRS 18 therefore creates a more consistent structural foundation for analysing performance.
The new architecture can be understood as:
That architecture is important. IFRS 18 does not prevent management from communicating its own view of performance. Instead, it makes the relationship between management's measures and IFRS-defined performance more transparent.
2. What changes - and what does not
IFRS 18 replaces IAS 1, but it does not redesign every accounting principle previously contained in IAS 1. The IASB focused particularly on improving the presentation of financial performance. Some IAS 1 requirements were retained, while others were moved to standards such as IAS 8, now titled Basis of Preparation of Financial Statements, and IFRS 7.
For many organisations, IFRS 18 will therefore change presentation, disclosure and reporting architecture more than recognition and measurement.
| Area | Main IFRS 18 impact |
|---|---|
| Statement of profit or loss | Defined operating, investing and financing categories, alongside income taxes and discontinued operations. |
| Subtotals | Mandatory presentation of operating profit or loss and profit or loss before financing and income taxes, together with profit or loss. |
| Management measures | New disclosures for qualifying management-defined performance measures (MPMs). |
| Operating expenses | More disciplined assessment of presentation by nature, function, or a mixture, plus specified nature disclosures where relevant. |
| Aggregation and disaggregation | Stronger principles for grouping, separating and labelling information. |
| Cash flow statement | Operating profit becomes the starting point for the indirect method; classification choices for certain interest and dividend cash flows are reduced. |
| Comparatives | Retrospective application creates a requirement to restate comparative information. |
| Systems and controls | Account mappings, reporting packs, consolidation logic, disclosure controls and management-reporting processes may need redesign. |
A company may therefore report the same total profit while presenting operating, investing and financing results very differently.
3. The five categories in the statement of profit or loss
IFRS 18 requires income and expenses in the statement of profit or loss to be classified into five categories:
- Operating
- Investing
- Financing
- Income taxes
- Discontinued operations
The operating category captures income and expenses that are not classified in one of the other four categories. The income-tax category contains tax income and expenses arising from applying IAS 12, together with related items required by IFRS 18. Discontinued operations are presented using the requirements of IFRS 5.
The difficult work for many finance teams will be distinguishing operating, investing and financing items consistently.
4. Operating profit now has an IFRS-defined foundation
IFRS 18 defines operating profit or loss as the total of income and expenses classified in the operating category.
This sounds simple, but one misconception needs to be removed immediately:
An item does not leave operating profit merely because management considers it exceptional. Depending on the facts and applicable IFRS requirements, restructuring expenses, litigation costs, impairment losses or unusual transformation costs may remain in the operating category.
If management wants to explain performance excluding selected items, that is a separate question. A qualifying adjusted subtotal may become a management-defined performance measure and carry specific disclosure requirements.
5. The investing category
For an entity that does not invest in relevant assets as a main business activity, the investing category generally captures income and expenses arising from specified investments and assets that generate returns individually and largely independently of the entity's other resources.
Examples can include:
- income and expenses from investments in associates, joint ventures and unconsolidated subsidiaries;
- income and expenses from cash and cash equivalents;
- returns from debt or equity investments that meet the relevant criteria;
- investment-property income and related measurement effects where the applicable classification requirements point to investing.
Finance teams should therefore avoid assuming that the existing ledger caption "finance income" maps automatically to one IFRS 18 category.
A single finance-income account might contain bank-deposit interest, interest on customer financing, related-party loan income, foreign-exchange effects and investment returns. Those amounts may require different classifications.
A useful exception: equity-accounted investments
The ACCA technical material on IFRS 18 highlights an important limitation to the specified-main-business-activity rules: income and expenses arising from assets accounted for using the equity method, such as the share of profit or loss of associates, remain in the investing category even where investing in assets is otherwise a main business activity.
6. The financing category - and why component analysis matters
The financing category captures specified income and expenses arising from liabilities associated with financing.
The ACCA explanation is particularly practical because it distinguishes two types of liabilities.
Liabilities arising only from raising finance
Examples include bank loans, loan notes and debentures. Income and expenses arising from the initial and subsequent measurement of these liabilities - including relevant interest, fair-value movements and derecognition effects - are generally presented in the financing category, subject to the detailed IFRS 18 requirements and any specified-main-business-activity considerations.
Liabilities arising from transactions that are not only financing transactions
Examples include lease liabilities, contract liabilities, decommissioning provisions and defined-benefit pension liabilities. For these liabilities, the interest or unwinding component may be classified in financing while other components remain operating.
A defined-benefit pension obligation provides a useful illustration. The service-cost component relates to the entity's operations, while the net-interest component represents the financing effect associated with the liability.
7. Foreign-exchange differences: follow the underlying item
IFRS 18 generally classifies foreign-exchange differences in the same category as the income and expenses from the items that generated them, subject to specific application guidance and exceptions.
The ACCA examples make this principle easy to see:
| Underlying item | Illustrative FX result | Likely category |
|---|---|---|
| Trade receivable from ordinary sales | Foreign-exchange gain or loss | Operating |
| Bank borrowing | Foreign-exchange gain or loss | Financing |
| Investment asset | Foreign-exchange gain or loss | Depends on the classification of the underlying investment and IFRS 18 application guidance |
This creates a systems challenge. If the general ledger posts all foreign-exchange movements into one account, the reporting process may need enough underlying transaction data to allocate those movements correctly.
8. Specified main business activities
IFRS 18 requires an entity to assess whether either of two activities is a main business activity: investing in assets or providing financing to customers.
This assessment matters because certain income and expenses that would otherwise be investing or financing may be operating when the relevant activity is part of the entity's main business.
A property-investment business, for example, may classify specified income and expenses from investment properties in operating where investing in those assets is a main business activity. A bank or finance company may classify income from customer financing in operating because lending is central to its business model.
In 2026, the IFRS Interpretations Committee reiterated an important governance point: whether investing in assets or providing financing to customers is a main business activity is a matter of fact and judgement supported by evidence, not merely an assertion by management.
Evidence may include how the entity describes its business, how management evaluates performance, how resources are deployed, and which subtotals are used as important indicators of operating performance.
FGL control implication
The conclusion should exist as a documented accounting judgement. A good paper would explain:
- the reporting entity being assessed;
- the relevant business activities;
- the evidence considered;
- management's judgement;
- the impact on classification;
- whether the conclusion differs between separate and consolidated financial statements;
- who prepared and reviewed the judgement;
- when the conclusion will be reassessed.
9. Mandatory subtotals under IFRS 18
The ACCA technical material usefully highlights three mandatory totals or subtotals in the statement of profit or loss:
- operating profit or loss;
- profit or loss before financing and income taxes;
- profit or loss.
These are presented even where two amounts happen to be the same. By contrast, gross profit and profit before income taxes are not universally mandatory subtotals. Many entities will still present them where needed to provide a useful structured summary.
10. A simplified IFRS 18 income statement
Consider a fictional manufacturing company that does not have a specified main business activity of investing in assets or providing financing to customers.
| Item | CU'000 | IFRS 18 category |
|---|---|---|
| Revenue | 1,000 | Operating |
| Cost of sales | (650) | Operating |
| Distribution expenses | (100) | Operating |
| Administrative expenses | (80) | Operating |
| Impairment reversal | 5 | Operating |
| Operating profit | 175 | Required subtotal |
| Share of profit from associate | 20 | Investing |
| Interest on surplus cash | 5 | Investing |
| Profit before financing and income taxes | 200 | Required subtotal |
| Interest on bank borrowing | (30) | Financing |
| Relevant unwinding of discount | (2) | Financing |
| Profit before tax | 168 | Additional subtotal if useful |
| Income tax expense | (50) | Income taxes |
| Profit for the period | 118 | Required total |
The example also demonstrates why companies should be cautious about casually relabelling IFRS 18's "profit before financing and income taxes" as EBIT. Its composition follows IFRS 18 classification rules, not every entity's historical definition of EBIT.
11. Why existing charts of accounts may not be enough
An account called "finance income" may be sufficient for the current reporting process, but IFRS 18 may require more granular information. The balance could include bank-deposit interest, interest on customer receivables, related-party loan income, foreign-exchange gains, investment returns, fair-value movements and treasury results.
The same problem can arise with "finance costs", which may contain borrowing interest, lease interest, unwinding of provisions, pension interest, foreign-exchange effects and derivatives.
If not, the first IFRS 18 statements might still be produced through spreadsheets, but the process may be difficult to control, explain, audit and repeat.
| Account / transaction | Current presentation | IFRS 18 category | Technical rationale | Data source | Owner |
|---|---|---|---|---|---|
| Product revenue | Revenue | Operating | Ordinary operating activity | GL | Financial accountant |
| Payroll | Administration / cost of sales | Operating | Operating expense | Payroll + GL | Accountant |
| Associate profit | Other income | Investing | Equity-method result | Consolidation | Group accountant |
| Deposit interest | Finance income | Investing for a typical non-financial entity | Return on cash/cash equivalent | Treasury | Treasury accountant |
| Bank loan interest | Finance cost | Financing | Financing liability | Treasury | Treasury accountant |
| Income tax | Tax | Income taxes | IAS 12 | Tax provision | Tax manager |
12. Derivatives: hedge accounting and IFRS 18 classification are different questions
Where a derivative is used to manage an identified risk, gains or losses are generally classified in the same category as the income and expenses affected by the risk being managed, subject to the Standard's detailed rules.
The ACCA technical article gives a useful example: if a futures contract is used to manage the future purchase price of inventories, gains or losses recognised in profit or loss may be operating because the risk being managed relates to operating items. That presentation logic can apply even where the derivative is not formally designated as a hedging instrument under IFRS 9.
In March 2026, the IFRS Interpretations Committee also addressed a derivative used to manage a foreign-currency exposure. Its analysis reinforced the principle that an undesignated derivative used to manage an identified risk generally follows the category affected by that risk, unless applying that approach would require grossing up gains and losses or involve undue cost or effort, in which case operating classification may apply under the relevant guidance.
13. Management-defined performance measures: where IFRS 18 becomes a governance project
Companies frequently use measures such as adjusted operating profit, underlying earnings, adjusted EBIT, adjusted EBITDA, normalised profit or recurring operating profit.
IFRS 18 introduces a specific disclosure regime for qualifying management-defined performance measures.
Broadly, an MPM is a subtotal of income and expenses that is used in public communications outside the financial statements, communicates management's view of an aspect of the financial performance of the entity as a whole, and is not one of the specified measures excluded from the MPM definition or otherwise required by IFRS Accounting Standards.
This is a major governance shift because an MPM may originate outside the financial reporting department. Investor relations may use it. Corporate communications may publish it. Management may present it to shareholders. Once the measure satisfies the IFRS 18 definition, finance may need to support audited disclosures around it.
14. What is not automatically an MPM?
The ACCA extract is particularly useful here. An MPM must be a subtotal of income and expenses. Accordingly, not every alternative performance measure is an MPM.
| Measure | Could it be an IFRS 18 MPM? | Reason |
|---|---|---|
| Adjusted operating profit | Potentially yes | It may be a subtotal of income and expenses used publicly to communicate management's view of performance. |
| Underlying profit | Potentially yes | Depends on how the measure is calculated and communicated. |
| Free cash flow | No, not as an MPM merely on that basis | It is a cash-flow measure rather than a subtotal of income and expenses. |
| Net debt | No, not as an MPM merely on that basis | It is generally a balance-sheet / financing measure rather than a subtotal of income and expenses. |
| Return on capital | Not automatically | It is a ratio rather than a subtotal of income and expenses. |
15. What must be disclosed for an MPM?
If a performance measure qualifies as an MPM, IFRS 18 requires related information to be presented in a single note. The disclosure framework includes a description of the aspect of performance communicated, why management considers the measure useful, how it is calculated, and a reconciliation to the most directly comparable IFRS subtotal or total. The reconciliation also includes the income-tax effect and the effect on non-controlling interests for each reconciling item where relevant.
| Illustrative reconciliation | CU million |
|---|---|
| Adjusted operating profit - MPM | 195 |
| Less: restructuring adjustment | (12) |
| Less: impairment adjustment | (8) |
| IFRS 18 operating profit | 175 |
The actual IFRS 18 note would need the additional disclosures required by the Standard. The simplified table illustrates the central control principle: management's alternative view of performance must be connected transparently to IFRS-defined performance.
16. MPM change control
The ACCA material also highlights a point that should become part of governance design: if management changes how an MPM is calculated or stops using an MPM, IFRS 18 requires disclosures explaining the change and the reason. A change in calculation can also create comparative-restatement consequences, subject to the Standard's requirements.
17. EBITDA deserves special attention
IFRS 18 does not simply define every measure commonly labelled EBITDA. The Standard identifies specified subtotals that are not MPMs, including a measure based on operating profit before depreciation, amortisation and specified impairments. A company using an EBITDA measure calculated differently may therefore need to assess whether its measure is an MPM.
18. Public communications need an inventory
IFRS 18's MPM requirements mean the implementation team should review more than the annual report. Relevant public communications can include investor presentations, results announcements and press releases, applying the Standard's definition and application guidance.
| Public communication | Measure used | Subtotal of income/expenses? | Potential MPM? | Owner |
|---|---|---|---|---|
| Annual results presentation | Adjusted operating profit | Yes | Review as MPM | Investor Relations |
| Press release | Underlying earnings | Potentially | Review as MPM | Communications |
| Debt presentation | Net debt | No | Not an MPM on that basis | Treasury |
| Investor deck | Free cash flow | No | Not an MPM on that basis | Investor Relations |
19. Aggregation and disaggregation: the discipline behind useful statements
IFRS 18 strengthens the principles governing how information is grouped and separated. Items should be aggregated where they share characteristics and disaggregated where differing characteristics are important to users. The primary financial statements should provide a useful structured summary, while the notes provide additional material information.
The ACCA explanation gives a practical example. Human resources, IT, legal and accounting costs may share enough characteristics to be aggregated into an "administrative expenses" line. A significant goodwill impairment, however, has different characteristics. Simply burying it within administrative expenses may not provide the useful structured summary IFRS 18 is seeking.
20. The word "other" deserves more scrutiny
Many financial statements contain lines such as other income, other expenses, other finance income and other operating costs. IFRS 18's aggregation and labelling principles make these captions harder to use as convenient holding areas.
The ACCA technical guidance explains that entities should use terminology that communicates the shared characteristics of the items, or identifies the material items included. If "other" cannot reasonably be avoided, the description should still be made as informative as possible - for example, "other investing income" rather than simply "other income".
21. Operating expenses: nature, function, or a mixture
IFRS 18 requires an entity to determine the expense presentation that provides the most useful structured summary of operating expenses.
Expenses may be classified by nature, such as employee benefits, depreciation or raw materials; by function, such as cost of sales, distribution and administration; or using a mixture where that provides the most useful structured summary.
The ACCA material notes that where an entity uses a mixture, line items should be labelled clearly enough for users to understand what has and has not been included.
22. Function presentation creates a data-lineage requirement
Where an entity presents operating expenses by function, IFRS 18 requires specified disclosures of expenses by nature. The relevant disclosures include specified information relating to depreciation, amortisation, employee benefits, impairment losses and reversals of non-financial assets, and inventory write-downs and reversals.
In 2026, the IFRS Interpretations Committee considered the scope of this requirement and observed that IFRS 18 paragraph 83 contains no exception merely because a functional expense line arises from another IFRS requirement. The implementation consequence is important: entities need to be able to trace the required nature information into the relevant functional presentation.
Payroll may come from HR. Depreciation may come from the fixed-asset register. Inventory write-downs may come from ERP valuation. Impairment information may exist in manual working papers. Yet the disclosure process may need those nature amounts to be connected to financial-statement functions.
23. Cash flow statements: more than changing the first line
IFRS 18 makes consequential amendments to IAS 7. For entities using the indirect method, operating profit or loss becomes the required starting point for reporting cash flows from operating activities.
The ACCA extract adds a valuable practical point: once the reconciliation starts with operating profit, finance teams should adjust for non-cash items only where those items are actually included in the operating-profit starting amount.
Under IFRS 18, the better question becomes:
If a share of profit from an associate sits in investing rather than operating, it is not part of operating profit. The cash-flow reconciliation should not mechanically adjust for it as though it were contained in the starting point.
24. Interest and dividend cash flows
The amendments to IAS 7 also reduce previous classification choices. For a typical entity without specified main business activities, the broad result is:
| Cash-flow item | General classification after IFRS 18 amendments |
|---|---|
| Interest received | Investing |
| Interest paid | Financing |
| Dividends received | Investing |
| Dividends paid | Financing |
Entities with specified main business activities can have different outcomes for certain items.
25. IAS 1 did not simply disappear
Because IFRS 18 replaces IAS 1, it can be easy to assume that every IAS 1 principle has been rewritten. That is incorrect.
The ACCA extract notes that several principles previously located in IAS 1 were moved into IAS 8 Basis of Preparation of Financial Statements, including going concern, accrual accounting, fair presentation, accounting-policy disclosures and sources of estimation uncertainty.
This matters for accounting manuals and checklists. A reference to IAS 1 may need to be updated because the requirement moved, not because the underlying principle disappeared.
26. Transition is retrospective - which makes 2026 operationally important
IFRS 18 is effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted. The Standard is applied retrospectively under its transition requirements.
2027 = first mandatory IFRS 18 reporting period for a calendar-year entity
This means a finance team waiting until late 2027 may need to reconstruct information relating to transactions that occurred much earlier. In the first annual financial statements applying IFRS 18, the transition requirements include reconciliation information showing how comparative profit-or-loss line items presented under IFRS 18 relate to the amounts previously presented under IAS 1.
27. Interim reporters may face the first live test earlier
Entities applying IAS 34 need to consider the effect of IFRS 18 on interim financial reporting during the first year of application. For listed entities, the first meaningful operational deadline may therefore arrive before the 2027 annual close.
An implementation timetable should work backwards from the first 2027 interim reporting date, audit or review timetable, board and audit-committee meetings, results announcements, investor communications and comparative-data sign-off.
28. A practical IFRS 18 implementation roadmap
| Phase | Core activity | Practical output |
|---|---|---|
| 1. Mobilisation | Establish governance, scope and accountable owners | Steering group, project charter and timetable |
| 2. Technical assessment | Determine classifications, specified main business activities, MPMs, expense presentation and cash-flow implications | Technical position papers |
| 3. Data assessment | Test whether GL, subledgers and reporting systems capture required information | Data-gap register |
| 4. Reporting design | Design the IFRS 18 statement of profit or loss, notes and cash-flow changes | Reporting prototype |
| 5. Comparative conversion | Recast 2026 information | Controlled IFRS 18 comparative |
| 6. Systems configuration | Update mappings, consolidation logic and reporting packs | Repeatable reporting process |
| 7. Controls redesign | Update preparation, review, MPM and disclosure controls | IFRS 18 control matrix |
| 8. Dry run | Produce mock IFRS 18 statements | Full trial close |
| 9. Assurance | Engage auditors on significant judgements and comparative conversion | Issue tracker and resolved accounting positions |
| 10. Communication | Explain changes to board, lenders, investors and other stakeholders | Communication plan |
| 11. Go-live | Operate the new process for 2027 reporting | IFRS 18-compliant reporting cycle |
29. Why a 2026 parallel reporting view can be valuable
One of the strongest implementation techniques is to produce 2026 reporting in two views: the existing IAS 1 presentation and a shadow IFRS 18 presentation.
The accounting records do not need to be duplicated. Controlled mappings can allow the same ledger to feed both reporting structures during implementation.
- incorrect category mappings;
- missing data;
- unstable manual adjustments;
- unexpected movements in operating profit;
- cash-flow template problems;
- MPM reconciliation issues;
- subsidiary inconsistency;
- audit questions before go-live.
30. Do not redesign the ERP before understanding the accounting
IFRS 18 does not mean every category needs a new general-ledger account. Some organisations may need chart-of-account changes. Others may already capture sufficient dimensions - account, cost centre, profit centre, function, product, counterparty, transaction type or treasury instrument - to perform classification in the consolidation or reporting layer.
A small entity may use a controlled reporting map. A multinational may need group reporting-package changes. A bank or insurer may require more sophisticated logic because specified main business activities are integral to the model.
This is consistent with the broader FGL principle discussed in Automation for Finance Teams: What Accountants Need to Understand About Systems, Controls and AI: automation is strongest when the accounting logic, data ownership and control design are clear before technology is configured.
31. Group reporting instructions need to be centralised
For groups, inconsistent subsidiary interpretation is a major risk. Group finance should therefore issue reporting instructions covering classification principles, specified-main-business-activity conclusions, account and reporting-package mappings, expense nature/function requirements, cash-flow mappings, MPM data requirements, comparative-restatement data, and documentation and sign-off expectations.
32. Internal controls should be redesigned, not merely renamed
| Risk | Example control | Evidence |
|---|---|---|
| Income or expense is placed in the wrong IFRS 18 category | Approved account-to-category mapping reviewed by technical accounting | Signed mapping matrix |
| Specified main business activity conclusion is unsupported | Formal annual assessment approved by controller/CFO | Technical memo |
| New MPM is omitted | Periodic review of relevant public communications | MPM inventory |
| MPM reconciliation is incorrect | Independent reconciliation and tax/NCI review | Disclosure working paper |
| Expense-by-nature data is incomplete | Reconciliation of source systems to GL and note disclosure | Data-lineage reconciliation |
| 2026 comparatives are incorrectly restated | Line-by-line IAS 1 to IFRS 18 bridge | Transition schedule |
| Cash-flow classification is wrong | Treasury and cash-flow mapping review | IAS 7 mapping |
| Subsidiaries apply inconsistent logic | Central group instructions plus consolidation review | Reporting-pack sign-off |
| Residual "other" lines obscure material information | Financial-statement aggregation and labelling review | Disclosure checklist |
| System configuration does not reproduce approved logic | User acceptance testing and parallel reporting | UAT evidence |
33. MPM governance may require board and audit-committee attention
Management-defined performance measures may influence executive remuneration, investor expectations, analyst presentations, budget targets, covenant discussions and board reporting. An entity should therefore decide who has authority to create, change or retire a publicly communicated performance measure.
34. KPIs and covenants may be affected even if total profit is unchanged
IFRS 18 can change presentation without changing total profit. But many KPIs depend on subtotals rather than total profit, including operating margin, operating-profit growth, interest cover, debt/EBITDA, return on operating assets and some remuneration measures.
Implementation teams should identify contracts and policies referring to "operating profit", "EBIT", "EBITDA", "finance costs" or other accounting lines. This does not mean IFRS 18 automatically changes a covenant; the contractual definition governs. But where an agreement points directly to a financial-statement line without a self-contained definition, legal and treasury review may be warranted.
35. Management accounts and budgets should be considered deliberately
An organisation can comply with IFRS 18 while leaving management reporting unchanged. But a 2027 budget prepared using historical categories while statutory reporting adopts IFRS 18 may create recurring bridges between budget, actual results, board reporting, statutory statements and investor communications.
For some organisations, aligning part of the 2027 management-reporting framework with IFRS 18 may reduce reconciliation burden and improve consistency. That is a management decision rather than an IFRS requirement, but it should be considered during implementation rather than discovered after go-live.
36. Audit involvement should begin before the 2027 year-end
Early discussion with external auditors can be useful for specified main business activities, material classification judgements, foreign-exchange treatment, derivative classification, expense presentation, MPM identification, tax and NCI effects, comparative-restatement methodology, system changes, new controls and interim reporting implications.
Management remains responsible for accounting judgements and implementation. The benefit of early audit involvement is that major differences can be identified before the new reporting architecture becomes difficult to change.
37. A practical readiness checklist
| Question | Evidence that should exist |
|---|---|
| Which entities in the group are affected? | Scope assessment |
| Do we have specified main business activities? | Approved judgement memo |
| Where will major income and expense streams be classified? | Classification matrix |
| What will our IFRS 18 income statement look like? | Prototype statement |
| Which public measures qualify as MPMs? | MPM inventory |
| Which communications were reviewed? | Communications register |
| Can we calculate tax and NCI effects for MPMs? | MPM reconciliation model |
| Are expenses presented by nature, function or both? | Presentation assessment |
| Can systems produce the required nature disclosures? | Data-gap analysis |
| How will cash-flow classifications change? | IAS 7 mapping |
| Can 2026 comparatives be restated? | Comparative conversion |
| Have transition reconciliations been prepared? | IAS 1-to-IFRS 18 bridge |
| Have subsidiaries received consistent instructions? | Group reporting manual |
| Have controls been redesigned and tested? | Control matrix and UAT |
| Have significant judgements been discussed with auditors? | Audit issue tracker |
| Are board and investor communications ready? | Stakeholder communication plan |
If several answers remain "not yet", the entity does not merely have an accounting-standard gap. It has an implementation-project gap.
38. Implementation questions are still evolving
The Standard is issued, but implementation activity continues as companies apply it to real fact patterns. During 2026, the IFRS Interpretations Committee considered IFRS 18 questions involving management-defined performance measures, public communications, cash and cash equivalents, entities providing financing to customers, specified main business activities, foreign-exchange differences, derivatives and expense-by-nature disclosures.
Some Committee discussions may be tentative during consultation and should not be treated as final authoritative conclusions until due process is complete. Implementation teams should therefore maintain a controlled process for monitoring IFRS Foundation updates during transition.
39. FGL analysis: IFRS 18 is also a data-governance standard
IFRS 18 is formally a presentation and disclosure standard. Operationally, however, it exposes the quality of an organisation's financial-data architecture.
To classify performance correctly, finance needs to understand what generated each income or expense. To identify MPMs, finance needs visibility over public communications. To disclose expenses by nature, finance needs traceability across functions and systems. To restate comparatives, the organisation needs historical information at sufficient granularity. To classify cash flows correctly, finance and treasury need consistent transaction-level logic. To apply the Standard across a group, technical accounting judgements must become reporting instructions, system mappings and controls.
40. Weak implementation versus strong implementation
Company A: year-end conversion
Company A assigns IFRS 18 to one senior accountant. Late in 2027, the accountant downloads the trial balance, manually reclassifies balances in Excel, asks investor relations which adjusted measures were published during the year and prepares the MPM note shortly before the audit.
The financial statements might eventually be technically correct, but the process has key-person dependency, limited audit trail, late judgement, manual classification risk, weak change control, comparative reconstruction risk and high audit pressure.
Company B: controlled transition
Company B performs the classification assessment during 2026, documents specified main business activities, maps accounts, inventories management measures, identifies system gaps, recasts 2026 comparatives, updates group instructions, tests controls and completes a mock IFRS 18 close before mandatory reporting.
Both entities may ultimately issue compliant statements. Only one has built a sustainable financial reporting process.
41. What finance teams should do now
As the 1 January 2027 effective date approaches, awareness training is no longer enough for calendar-year reporters.
- appoint accountable project ownership;
- document significant classification judgements;
- assess specified main business activities;
- build an account-to-category mapping;
- review public performance measures;
- decide the operating-expense presentation approach;
- test expense-by-nature data availability;
- update the indirect cash-flow model;
- recast 2026 comparative information;
- issue group reporting instructions;
- redesign controls and review evidence;
- perform a parallel run or dry close;
- engage external auditors on significant judgements;
- brief boards, audit committees and investor-relations teams.
For finance professionals building broader IFRS capability, FGL's Accounting & IFRS hub also brings together related financial-reporting material, including the IFRS 15 Revenue Recognition: A Practical Guide.
Conclusion
IFRS 18 is often described as a presentation standard. That description is technically correct but operationally incomplete.
The Standard changes how financial performance is structured, how management-defined performance measures connect to audited financial reporting, how operating expenses may need to be analysed, how certain cash-flow items are presented and how comparative information is converted.
For entities with annual periods beginning on 1 January 2027, implementation is no longer a distant project. The comparative period is already being generated.
The strongest implementation programmes will therefore not begin by redrawing the statement of profit or loss. They will begin by testing the full reporting chain:
If one part of that chain relies on an undocumented manual judgement or unavailable data, the project has identified precisely where implementation work is needed.
IFRS 18 therefore gives finance teams an opportunity to do more than comply with a new presentation standard. It provides a reason to improve the architecture through which financial performance is classified, governed, communicated and assured.
Sources and further reading
- IFRS Foundation - IFRS 18 Presentation and Disclosure in Financial Statements
- IFRS Foundation - IFRS 18 key terms
- IFRS Foundation - IFRS 18 supporting implementation materials
- IFRS Foundation - IFRIC Update, March 2026
- IFRS Foundation - IFRIC Update, June 2026
- IFRS Foundation - IAS 7 Statement of Cash Flows
- ACCA - IFRS 18 Presentation and Disclosure in Financial Statements
FGL note: This article is an educational implementation guide and does not replace the text of IFRS 18, related IFRS Accounting Standards, IFRS Interpretations Committee decisions, or entity-specific professional advice. Technical conclusions should be assessed against the facts and circumstances of the reporting entity and the authoritative requirements in force at the relevant reporting date.
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