The main goal of IFRS 18, effective from January 1, 2027, is to improve how companies communicate financial performance by enhancing the structure, transparency, and comparability of the statement of profit or loss. It addresses investor demand for better information by standardizing categories, defining new subtotals like operating profit, and requiring disclosures for management-defined performance measures (MPMs).
IFRS 18 aims to improve financial reporting by: • requiring additional defined subtotals in the statement of profit or loss; • requiring disclosures about management-defined performance measures; and • adding new principles for grouping (aggregation and disaggregation) of information.
IFRS 18 introduces defined and complementary roles for the primary financial statements and the notes to guide entities when making decisions about where to provide material information. Enhanced principles of aggregation vs disaggregation based on shared vs non-shared characteristics.
The International Financial Reporting Standards (IFRS) are accounting rules for public companies with the goal of making company financial statements consistent, transparent, and easily comparable around the world. This helps with auditing, tax purposes, and investing.
New features of primary financial statements
One of the key features of IFRS 18 is to require companies to classify all items of income and expenses into one of the five categories of operating, investing, financing, income taxes and discontinued operations.
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.
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.
The four pillars of IFRS S1 and S2 are governance, strategy, risk management and metrics and targets.
The objectives of accounting are to maintain systematic records, ascertain profit or loss, determine financial position, provide information to stakeholders, and assist management.
According to IFRS, there are 5, namely Income Statement which aims to determine the profit or loss of a company, Statement of change in Equity which aims to determine changes in the capital of a company within a certain period, Statement of Financial Position which aims to show the financial position of a company in a ...
Paragraph 16 establishes that the role of the primary financial statements is to provide structured summaries that are useful for the purposes specified in that paragraph (referred to hereafter as a useful structured summary).
Developed in response to growing investor demand for more relevant and comparable data, IFRS 18 aims to provide consistency in presentation of the income statement alongside more disaggregated information.
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 aims to improve financial reporting by: requiring an entity to present two new defined subtotals in the statement of profit or loss—operating profit and profit before financing and income taxes.
IFRS 18: improved comparability and transparency
IFRS 18 provides enhanced guidance on how entities should aggregate and disaggregate financial information based on shared characteristics. These principles apply to both the primary financial statements and the disclosure notes.
Overview of IFRS 18
In April 2024, the International Accounting Standards Board (IASB) issued IFRS 18 Presentation and Disclosure in Financial Statements (IFRS 18), replacing IAS 1 Presentation of Financial Statements.
The main objectives of IFRS include: Standardising financial reporting globally. Enhancing transparency and comparability of financial statements. Providing reliable and decision-useful information to investors and stakeholders.
We all now know it as the big four, but actually it was the big 5. Arthur Andersen was once a symbol of excellence in the accounting profession, standing tall among the prestigious "Big Five" firms alongside PwC, Deloitte, EY, and KPMG.
The Ps refer to People, Planet, and Profit, also often referred to as the triple bottom line. Sustainability has the role of protecting and maximising the benefit of the 3Ps.
A full set of financials include four basic financial statements: the balance sheet, income statement, cash flow statement, and statement of shareholders' equity. All four accounting financial statements accurately portray the company's overall financial situation.
Assessment phase: understanding your starting point
IFRS 18 is effective for reporting periods beginning on or after 1 January 2027.
IFRS 18 and the consequential amendments to other IFRS accounting standards, which must be adopted at the same time, are effective for periods beginning on or after 1 January 2027 and apply fully retrospectively.