IFRS 18 Presentation and Disclosure in Financial Statements is not yet mandatory but has been published and is effective for annual reporting periods beginning on or after January 1, 2027. It will replace IAS 1, requiring new, standardized subtotals for operating profit and profit before financing/taxes, alongside stricter disclosures for management-defined performance measures.
It responds to longstanding stakeholder concerns regarding the lack of detailed guidance in IFRS on the classification of income and expenses in the statement of profit or loss. The IFRS 18 standard is effective for annual reporting periods beginning on or after 1 January 2027, with retrospective application required.
Summary. IFRS 18 replaces IAS 1 Presentation of Financial Statements as the primary source of requirements in IFRS accounting standards for financial statement presentation which will provide better information to users.
IFRS 18 replaces IAS 1 and becomes effective for annual reporting periods beginning on or after 1 January 2027, subject to endorsement by the EU, with earlier application permitted.
IFRS 18 is effective for reporting periods beginning on or after 1 January 2027. It introduces several new requirements that are expected to impact the presentation and disclosure of most, if not all, entities.
IFRS 18 requires entities to classify income and expenses into five categories, three of which are new – i.e. operating, investing and financing – and the income tax and discontinued operation categories. The new standard sets out detailed requirements for classifying income and expenses into each category.
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.
Key changes introduced by IFRS 18
Items are aggregated based on shared characteristics and judgment is required. Totals, subtotals and line items should be described and labelled in a way that faithfully represents the characteristics.
The standard will take effect in the UK and other adopting jurisdictions from 1 January 2027. However, it must also be applied retrospectively, which means it is important for entities to prepare 2026 comparatives.
IFRS will require expenses to be classified into categories such as operating, investing, and financing while US GAAP will not impose such classifications. Both require disclosure of natural expenses in the footnotes (if not on the face of the financial statements).
The IASB has issued IFRS 18 Presentation and Disclosure in Financial Statements, which replaces IAS 1 Presentation of Financial Statements effective 1 January 2027.
Effective Date: 1 January 2027
The Standard for IFRS 18 Presentation and Disclosure in Financial Statements was approved for adoption by the UK Endorsement Board on 10 December 2025. A link to the Adoption Statement of the Amendments and the text of the Amendments can be found on the 2025 list of UK Adoptions.
IFRS 15 replaces both IAS 11 and IAS 18 as well as SIC 31, IFRIC 13, IFRIC 15 and IFRIC 18 and establishes a single, comprehensive framework for revenue recognition.
IFRS 18 is effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted.
Declaring (and rightfully so) that their main goal is to protect US investors' interests, the SEC notes that IFRS lacks consistent application, allows too much leeway with judgment, and is underdeveloped in many specific areas, for which the US GAAP has detailed and accepted guidance and established practice ( ...
IFRS 18 is expected to improve the quality of financial reporting by defining categories and subtotals in the statement of profit or loss, requiring the disclosure of MPMs, and introducing enhanced requirements for grouping of information in the primary financial statements and the notes.
One of the most immediate challenges is the mandatory restructuring of the income statement. IFRS 18 requires businesses to present income and expenses in three clearly defined categories: operating, investing, and financing, along with a required subtotal for operating profit.
IFRS 18 is more than a presentation change—it's an opportunity to enhance how your business communicates performance. Early adopters can strengthen investor confidence, streamline reporting processes, and turn greater transparency into trust and a competitive advantage.
The key difference between IFRS15 and IAS18 is that IFRS15 provides a standardized five-step model to recognize all types of revenue earned from customer contracts, while IAS18 considers different recognition criteria for different types of incomes received.
IFRS 18 also introduces two new defined subtotals: operating profit or loss and profit before financing and income taxes. They provide clearer insights into an entity's core business performance by distinctly separating them from investing and financing activities.
IFRS 9 replaced IAS 39 in January 2018 because it was too complex, inconsistent, and impractical in a modern financial world. Accountants, regulators, and financial institutions often call IAS 39 one of the most confusing standards ever written.
The four core financial statements are the Balance Sheet (snapshot of assets, liabilities, equity), the Income Statement (revenues, expenses, profit over time), the Cash Flow Statement (cash inflows/outflows over time), and the Statement of Shareholders' Equity (changes in owner investment over time), all crucial for understanding a company's financial health.
Income and expenses are to be categorised into the following five categories: operating, investing, financing, tax and discontinued operations. 4. IFRS 18 requires entities to present various specified totals and sub-totals following this categorisation.
IFRS 18 is effective for reporting periods beginning on or after 1 January 2027.