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IFRS 18 is changing how financial statements are presented. Here’s what public companies need to know.

IFRS 18 is changing how financial statements are presented. Here’s what public companies need to know.

Synopsis
5 Minute Read

IFRS 18 will reshape how public companies present and explain their financial performance.

Effective January 1, 2027, the new standard introduces a more consistent income statement structure, enhanced disclosure requirements, and greater scrutiny of company-defined performance measures, aiming to result in increased transparency for investors and new expectations for investor communications.

Keep reading to learn more.

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Bijan Toufighi, CPA, CA
Partner
Insight
Confidence Insight Public Companies

Public companies have until January 1, 2027, before the International Finance Reporting Standard 18 Presentation and Disclosure in Financial Statements (IFRS 18) becomes mandatory.

Issued by the International Accounting Standards Board (IASB) in April 2024, IFRS 18 will replace the International Accounting Standards 1 Presentation of Financial Statements. It will introduce new presentation and disclosure requirements that will change how your company’s financial performance is presented in financial statements.

While IFRS 18 does not change how your company measures income, expenses, assets, and/or liabilities, it does change how your financial performance is presented, structured, and explained. In other words, your net profit won’t change, but the story told by your financial statements will.

The new standard introduces a more consistent income statement structure, including new mandatory subtotals (e.g., operating profit). It also includes new disclosure requirements for certain management-defined performance measures (MPMs), bringing some commonly used measures outside of the Generally Accepting Accounting Principles (GAAP) into audited financial statements for the first time.

These changes aim to improve transparency and clarity for analysis across all issuers. The changes also have practical implications for public companies, from financial reporting systems and internal processes to investor communications and governance.

Why IFRS 18 is more than compliance

IFRS 18 was developed in response to long-standing concerns from investors and analysts about the comparability of income statements. Historically, public companies have had flexibility in how they present financial performance information, particularly when it comes to how operating profit is measured.

As a result, companies have used different definitions, labels, and presentation formats, making it more difficult for investors to compare financial performance across issuers.

Many companies also report company-specific or non-GAAP financial metrics to explain their performance. And while these measures can provide useful insights, concerns have been raised about the lack of clarity and consistency in how they are calculated and presented.

IFRS 18 addresses these challenges by introducing a more consistent income statement structure and defined subtotals that provide clearer anchor points for analysis across issuers. It also introduces new disclosure requirements for a subset of non-GAAP MPMs, in an attempt to bring greater discipline and transparency to the metrics investors often rely on.

For your company, this means IFRS should not be viewed as simply another compliance exercise. Although these requirements don’t impact total profit or loss, they may influence how analysts consider performance, compare you to similar organizations, and assess the quality and sustainability of earnings. It also raises the bar in terms of how you communicate your financial performance to the market.

Boards and executives should also consider IFRS as a market communication change, as it will influence how investors interpret performance, trends, and comparability across similar companies.

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Four ways IFRS 18 will change financial reporting

For your public company, IFRS is primarily a presentation and disclosure change. It does not change metrics. Net profit will not change, but how results are structured, labelled, and explained will.

For investors, this change is significant. The market will gain more consistent building blocks for comparing companies, while also placing more scrutiny on company-defined performance measures and how the reconcile to IFRS results. 

Here are three key areas of change to better understand:

1. Improve comparability with structured income statements and MPMs

One of the most significant changes introduced by IFRS 18 is a more consistent structure for the statement of profit or loss.

Income and expenses must be classified into defined categories — operating, investing, financing, income taxes, and discontinued operations. The standard also includes new mandatory subtotals, including operating profit or loss and profit or loss before financing and income taxes. This helps investors to compare performance using consistent starting points across companies.

It’s important to note that IFRS 18 applies to all IFRS reporters, but classification outcomes can vary depending on your entity’s main business activities. If your company’s main business activities include investing in assets and/or providing financing to customers, you may classify certain income and expenses under the operating category, whereas other companies may classify it under the investing or financing category.

As a result, operating profit may look different across different business models. This will be a key consideration for analysts and investors that are comparing issuers across different sectors.

Through an investor’s lens: Even without changing the total profit, changes to classification and subtotals can impact how analysts interpret operating momentum, core earnings trends, and peer performance — especially when it comes to operating profit as a metric in valuation conversations.

2. Greater scrutiny of performance measures as MPMs moving into audited financials

If your company uses MPMs, you will need to disclose these and clearly reconcile them against IFRS subtotals.

These disclosures are designed to increase transparency and discipline around the metrics your management uses in public communications. Under these new requirements, they become part of your audited financial statements.

Through an investor’s lens: This disclosure can increase confidence in adjusted metrics by making them easier to understand and compare. However, it can also raise the bar in terms of consistency. Metrics used in earnings releases, management discussion and analysis, and annual reports may need proper governance and alignment with the audited reporting.

3. Clearer explanations through more disciplined aggregation and disaggregation

IFRS 18 introduces clarity around how information is grouped or broken out, with the aim of avoiding excessive summarizing and detail across the primary statements and notes. The goal is to improve how information is organized. This will help users understand what’s driving performance.

Through an investor’s lens: Better disaggregation can help analysts isolate recurring drivers from non-recurring drivers. This change also aims to reduce reliance on management adjustments to understand performance, which will support clearer and faster analysis of earning cycles.

Early planning is important for a smooth transition

Although the effective date is January 1, 2027, there are still preparations that need to happen. The IFRS 18 may mean changes to your internal reporting, chart of accounts, financial reporting systems, and external investor communications. Your company will also need to ensure comparative information is aligned and to identify which publicly communicated performance measures qualify as MPMs and ensure they can support the mandatory disclosures.

For calendar year public companies, this means your 2026 figures will need to be restated for presentation under the new rules when IFRS 18 is first applied. For issuers that report quarterly, the first IFRS 18-formatted interim reporting for calendar year companies generally begins in Q1 2026.

By waiting, you may face compressed timelines during adoption or run into challenges presenting their results while sticking to the new standard.

Get started today

Reach out to your MNP advisor to start talking about how IFRS 18 could impact your financial statement presentation, performance measures, and investor communications. Our professionals can help you develop a practical transition plan for 2026 comparatives and 2027 reporting.

To learn more, contact Bijan Toufighi, Assurance & Accounting Partner, at [email protected], or reach out to our Public Companies team today.

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