IFRS 18, Presentation and Disclosure in Financial Statements, is the new IFRS accounting standard effective from January 1, 2027. The new standard was developed in response to investor feedback to improve comparability of financial performance between entities and enhance transparency in financial reporting.
IFRS 18 will impact all organisations that prepare financial statements using the IFRS Accounting Standards. Some of the changes include the defined categories and subtotals in the profit or loss statement.
The impact of this change will vary for each entity.
For example, organisations would need to amend their reporting packs, chart of accounts, and ledgers in preparation for IFRS 18-aligned reporting. Organisations that have automated or digitised reporting processes would need to implement these changes across their systems and tools. Organisations also face numerous policy choices regarding the classification of items in profit or loss statements.
IFRS 18 introduces other changes, including enhanced principles for aggregation and disaggregation in the primary financial statements and related notes. It would impact how organisations label and classify items on the face of their primary financial statements.
Additional requirements under IFRS 18 include disclosures related to Management-defined Performance Measures (MPMs). MPMs are subtotals of income and expenses that communicate management’s view of the organisation’s financial performance to users of the financial statements and to users outside the financial statements.
Organisations need to commence identifying their MPMs and incorporating them into the financial statements.
For example, organisations with a December 31 year-end have very limited time before IFRS 18 becomes effective, including time to prepare their first interim financial statements in 2027 under IFRS 18.
Organisations should invest in building teams’ capacity, conduct a gap and impact assessment, engage stakeholders on the changes, seek internal alignment on policy choices, implement the agreed changes, including systems, reporting packs, and the chart of accounts, and update their accounting policy disclosures.
While IFRS 18 would not affect the recognition and measurement of items in the financial statements, the matters requiring attention and deliberate preparation are no less for this standard than for one with recognition and measurement changes.
Organisations should prioritise their IFRS 18 preparedness to avoid disruptions to their business and financial reporting processes.
