INDUSTRY UPDATES
BEING IFRS18 READY BEFORE 2027
24th November 2025
Dear Partners
IFRS 18 is the new International Financial Reporting Standard that updates requirements for financial statement presentation and disclosure.
Replacing IAS 1, it introduces significant changes to enhance the comparability and transparency of financial performance reporting, particularly in the statement of profit or loss. Issued in April 2024, IFRS 18 is effective for annual reporting periods starting on or after 1 January 2027, with earlier application permitted.
Key Changes Introduced by IFRS 18
- Mandatory Categories: Income and expenses must be classified into one of five categories: operating, investing, financing, income taxes, and discontinued operations. The operating category is the default for items not specifically categorized elsewhere and typically relates to main business activities.
- New Subtotals: IFRS 18 mandates new subtotals in the statement of profit or loss to improve comparability:
- Operating profit or loss
- Profit or loss before financing and income taxes
- Profit or loss (formerly "profit for the year")
- Management-Defined Performance Measures (MPMs): Companies must disclose information about certain non-GAAP measures used by management in public communications to describe performance. These disclosures require a single note with a reconciliation to the most comparable IFRS subtotal.
- Aggregation and Disaggregation: The standard provides clearer guidance on grouping and separating information in financial statements and notes based on shared characteristics.
- Amendments to IAS 7 (Statement of Cash Flows): The reconciliation for operating cash flows (indirect method) will typically start with the new Operating profit or loss subtotal. Options for classifying interest and dividends paid are removed, generally requiring them to be classified as financing activities.
Entities reporting under IFRS should assess the impact of these changes and prepare for necessary system updates before the effective date. Further guidance can be found on the IFRS Foundation website.
Contact us for more professional guidance and expertise on how to navigate the transition from IAS1 to IFRS18
We hope you find this in order
Yours truly