IFRS 18 Presentation and Disclosure in Financial Statements: What Finance Teams Need to Know

IFRS 18 is the most significant change to the income statement in a generation. Issued by the IASB in April 2024 and effective for periods beginning on or after 1 January 2027, it replaces IAS 1 and will require virtually every listed company to restructure how they present financial performance. Early preparation is not optional — it is essential.

Why the IASB Issued IFRS 18

Under IAS 1, companies had significant discretion over income statement structure and could present non-GAAP measures alongside IFRS numbers with minimal constraint. This led to inconsistency that made comparison between companies difficult. Investors pushed for change. IFRS 18 is the IASB's response: more structure, mandatory subtotals, and audited non-GAAP measures.

The New Income Statement Structure

IFRS 18 requires income and expenses to be classified into five categories: Operating (core business results); Investing (returns from associates, JVs, and investment assets not integral to operations); Financing (costs related to liabilities and equity); Income taxes; and Discontinued operations. Two new required subtotals are: Operating profit and Profit before financing and income taxes. These labels are mandatory — entities cannot rename them.

Management-Defined Performance Measures (MPMs)

If an entity discloses a performance measure not defined by IFRS — adjusted EBITDA, underlying profit, cash earnings per share — IFRS 18 now requires that measure to appear in the notes with: a description and explanation of why it is useful; a reconciliation to the most directly comparable IFRS subtotal; and an explanation of any definition changes year-on-year. For the first time, non-GAAP measures will be in the scope of the audited financial statements.

Aggregation and Disaggregation

IFRS 18 provides updated guidance on when to group or split line items. Material information must be presented separately — but the standard also discourages excessive disaggregation that obscures rather than clarifies. The focus is on information that is material in the context of the financial statements.

What Finance Teams Should Do Now

Map your current income statement to the five IFRS 18 categories and identify where line items will need to move. List every non-GAAP measure your company currently discloses and assess what reconciliation and disclosure will be required. Engage your auditors and audit committee early — this will be a significant audit focus in the first year of adoption. Plan system changes and staff training, and remember that comparative periods must be restated.

Further Reading

• IAS 1 Presentation of Financial Statements
• IFRS 10 Consolidated Financial Statements
• Accounting Standards CPD

Study with Learnsignal: Financial reporting CPD for qualified accountants. Browse CPD.