IFRS 18
Upcoming
Presentation and Disclosure in Financial Statements
Replaces IAS 1, introducing five mandatory categories of income and expenses, two new subtotals, management-defined performance measure disclosures, and enhanced aggregation and disaggregation requirements.
1
Conceptual Framework Linkage
Structure and transparency, without changing measurement
IFRS 18 REPLACES IAS 1, but the IASB deliberately did NOT reconsider all of IAS 1 – it focused specifically on the STATEMENT OF PROFIT OR LOSS, responding to persistent investor concerns that income statements varied too much in content/structure between companies, that management's own "adjusted" performance measures lacked transparency, and that material information was often buried in catch-all line items.
HOW IFRS 18 MAPS TO THE FRAMEWORK
Comparability – mandatory categories and defined subtotals create a CONSISTENT starting structure across all IFRS preparers, addressing the primary investor complaint Transparency – bringing management-defined performance measures INTO the audited financial statements (rather than leaving them in unaudited investor presentations) is the standard's signature innovation
IFRS 18 does NOT change recognition or measurement of revenues/expenses – net profit is UNCHANGED. It restructures PRESENTATION only, alongside new disclosure requirements.
What stayed, what changed from IAS 1
AspectStatus under IFRS 18
Statement of financial position, statement of changes in equityLargely UNCHANGED from IAS 1
Statement of profit or loss structureMAJOR new requirements (categories, subtotals)
MPM disclosuresENTIRELY NEW requirement
2
Scope & Definitions
What IFRS 18 covers
IFRS 18 sets overall requirements for presentation and disclosure in general purpose financial statements, effective for annual periods beginning on/after 1 January 2027, with EARLY ADOPTION permitted.
Retained some IAS 1 paragraphs directly; moved certain other IAS 1 paragraphs into IAS 8 and IFRS 7.
Key definitions you must know
Management-defined performance measure (MPM)
A subtotal of income and expenses, NOT specified by IFRS Accounting Standards, used in PUBLIC COMMUNICATIONS outside the financial statements to convey management's view of financial performance.
Specified main business activity
Investing in particular types of assets, or providing financing to customers, as a CORE (not incidental) business activity – altering an entity's category classification.
3
The Five Categories of Income and Expenses
A defined structure for the statement of profit or loss
CategoryContent
OperatingThe DEFAULT category – includes all income/expenses NOT classified elsewhere
InvestingReturns from investments held largely independently of other resources
FinancingIncome/expenses on liabilities involving only the raising of finance, INCLUDING interest on ALL liabilities
Income taxesPer IAS 12
Discontinued operationsPer IFRS 5
4
The Two New Mandatory Subtotals
Standardising the income statement's structure
Operating profit = Sum of all items in the OPERATING category
Profit before financing and income taxes = Operating profit + INVESTING category
Example 1: Building the new subtotals
A company has operating income/expenses netting to $500 million, investing category income of $30 million, and financing category expense of $80 million, with income tax of $100 million.
Operating profit = $500 million
Profit before financing and income taxes = $500 million + $30 million = $530 million
Profit before tax = $530 million − $80 million = $450 million
Profit for the period = $450 million − $100 million = $350 million
These TWO NEW subtotals must appear on the FACE of the statement, with EQUAL prominence to any other primary line item.
Profit before financing and income taxes = $500 million + $30 million = $530 million
Profit before tax = $530 million − $80 million = $450 million
Profit for the period = $450 million − $100 million = $350 million
These TWO NEW subtotals must appear on the FACE of the statement, with EQUAL prominence to any other primary line item.
5
Specified Main Business Activities
A significant classification nuance
If investing in particular assets, or providing financing to customers, is a SPECIFIED main business activity (not merely incidental), the entity classifies RELATED income/expenses (which would otherwise fall in investing/financing) WITHIN the operating category instead – genuinely relevant for banks, non-bank financial institutions, and asset-heavy investment holding companies.
6
Management-Defined Performance Measures (MPMs)
The standard's signature innovation
MPMs (e.g. "adjusted EBITDA," "underlying profit") used in PUBLIC COMMUNICATIONS must now be DISCLOSED in a SINGLE NOTE within the audited financial statements, with a RECONCILIATION to the most comparable IFRS-specified subtotal, the tax/non-controlling interest effect of each reconciling item, and an explanation of why the measure provides useful information – bringing measures previously confined to unaudited investor presentations into AUDITED, reconciled disclosure.
7
Aggregation & Disaggregation Principles
Tackling the "catch-all line item" problem
IFRS 18 sharpens principles for grouping information (items sharing similar characteristics may be aggregated; items with DISSIMILAR characteristics must be presented/disclosed SEPARATELY), directly targeting the investor complaint that material information was often buried within generic "other expenses" line items.
8
Statement of Cash Flows Changes
Removing prior presentation choices
IFRS 18 ELIMINATES the presentation choices IAS 7 previously permitted for classifying dividends/interest received and paid, and defines "operating profit or loss" as the MANDATORY starting point when applying the indirect method – a consequential change to cash flow statement presentation.
9
Disclosure
Key disclosure requirements
The five-category statement of profit or loss structure with the two mandatory subtotals MPM disclosures in a single note, reconciled to the nearest IFRS-specified subtotal Enhanced aggregation/disaggregation-driven line item and note disclosures
10
Critical Judgments & Estimates
Where management judgement matters most
SIGNIFICANT JUDGEMENTS
Whether investing/financing constitutes a "specified main business activity" Which measures used in public communications meet the MPM definition Aggregation/disaggregation grouping decisions
SIGNIFICANT ESTIMATES
None new – IFRS 18 does not change measurement, only presentation
Companies should begin RUNNING PARALLEL IFRS 18-style presentations well before the 2027 effective date, given the RESTATEMENT of comparative-period figures required in the year of initial adoption.
11
IFRS 18 vs IAS 1 – Full Comparison
Comprehensive comparison table
FeatureIAS 1 (current)IFRS 18 (from 2027)
Statement of profit or loss structurePrinciples-based, minimum line items onlyFIVE mandatory categories, TWO new mandatory subtotals
Non-GAAP/adjusted measuresNOT addressed – left to unaudited investor presentationsMPMs brought INTO audited financial statements, with mandatory reconciliation
Cash flow statement presentation choicesChoice permitted for dividend/interest classificationChoices ELIMINATED; operating profit mandated as the indirect method starting point
IFRS 18 preserves IAS 1's core going-concern, materiality, and consistency principles unchanged – the transition is concentrated in the statement of profit or loss and its accompanying disclosures.
12
Statement Mapping
Where every IFRS 18 item lands
ItemLocationNotes
Operating profit, profit before financing and taxSOPLMandatory face-of-statement subtotals
MPM reconciliationNotesSingle dedicated note
13
Related Standards
Cross-reference map
StandardConnection
IAS 1The standard IFRS 18 replaces globally
IAS 7Cash flow statement presentation choices eliminated by IFRS 18
IFRS 19Made minor consequential amendments to IFRS 18 upon its own issuance
Quick-reference glossary
Operating profit
The sum of all items in the operating category – one of IFRS 18's two new mandatory subtotals.
Profit before financing and income taxes
Operating profit plus the investing category – IFRS 18's second new mandatory subtotal.
14
Glossary
Operating profit
The sum of all items in the operating category – one of IFRS 18's two new mandatory subtotals.
Profit before financing and income taxes
Operating profit plus the investing category – IFRS 18's second new mandatory subtotal.
Management-defined performance measure (MPM)
A subtotal of income and expenses not specified by IFRS, used in public communications to convey management's view of performance.
Specified main business activity
Investing in particular assets, or providing financing to customers, as a core business activity.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows
History & Development
Apr-2001
In April 2001 the International Accounting Standards Board (IASB) adopted IAS 1 Presentation of Financial Statements, which had originally been issued by the International Accounting Standards Committee in September 1997.
1975
IAS 1 replaced IAS 1 Disclosure of Accounting Policies (issued in 1975), IAS 5 Information to be Disclosed in Financial Statements (originally approved in 1977) and IAS 13 Presentation of Current Assets and Current Liabilities (approved in 1979).
Dec-2003
In December 2003 the IASB issued a revised IAS 1 as part of its initial agenda of technical projects.
Sep-2007
The IASB issued an amended IAS 1 in September 2007, which included an amendment to the presentation of owner changes in equity and comprehensive income and a change in terminology in the titles of financial statements.
Jun-2011
In June 2011 the IASB amended IAS 1 to improve how items of other comprehensive income should be presented.
Dec-2014
In December 2014 IAS 1 was amended by Disclosure Initiative (Amendments to IAS 1), which addressed concerns expressed about some of the existing presentation and disclosure requirements in IAS 1 and ensured that entities are able to use judgement when applying some of the existing requirements for presentation and disclosure and clarified the requirements in paragraph 82A of IAS 1 which are included in paragraphs 88-89 of IFRS 18.
Oct-2018
In October 2018 the IASB issued Definition of Material (Amendments to IAS 1 and IAS 8). This amendment clarified the definition of material and how it should be applied by (a) including in the definition guidance that until now has featured elsewhere in IFRS Accounting Standards; (b) improving the explanations accompanying the definition; and (c) ensuring that the definition of material is consistent across all IFRS Accounting Standards. This amendment is included in Appendix A and paragraphs B1-B5 of IFRS 18.
Jan-2020
In January 2020 the IASB issued Classification of Liabilities as Current or Non-current (Amendments to IAS 1). This clarified the criterion in IAS 1 for classifying a liability as non-current: the requirement for an entity to have the right to defer settlement of the liability for at least twelve months after the reporting period. These amendments are included in paragraphs 101, B99, B101, B102, B104, B105, B107 and B108 of IFRS 18.
Jul-2020
In July 2020 the IASB issued Classification of Liabilities as Current or Non-current-Deferral of Effective Date which deferred the mandatory effective date of amendments to IAS 1 Classification of Liabilities as Current or Non-current to annual reporting periods beginning on or after 1 January 2023.
Feb-2021
In February 2021 the IASB issued Disclosure of Accounting Policies which amended IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements. The amendment amended IAS 1 to replace the requirement for entities to disclose their significant accounting policies with the requirement to disclose their material accounting policy information. The amendments are included in paragraph B112 of IFRS 18 and paragraphs 27A-27G in IAS 8 Basis of Preparation of Financial Statements.
Oct-2022
In October 2022, the IASB issued Non-current Liabilities with Covenants. The amendments improved the information an entity provides when its right to defer settlement of a liability for at least twelve months is subject to compliance with covenants. The amendments also responded to stakeholders’ concerns about the classification of such a liability as current or non-current. These amendments are included in paragraphs B99, B100, B102 and B106 of IFRS 18.
Apr-2024
In April 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements. IFRS 18 sets out overall requirements for the presentation and disclosure in financial statements. The IASB did not reconsider all aspects of IAS 1 when developing IFRS 18, but instead focused on the statement of profit or loss. The IASB retained some paragraphs from IAS 1 in IFRS 18 and moved some paragraphs from IAS 1 to IAS 8 and IFRS 7 Financial Instruments: Disclosures.
May-2024
IFRS 19 Subsidiaries without Public Accountability: Disclosures
Minor consequential amendment to IFRS 18