top of page

IFRS 18: Transforming Financial Reporting for Enhanced Clarity!


Follow us on LinkedIn (Wis Australia) for the latest industry updates and trending news.


The new accounting standard, IFRS 18 (which will replace IAS 1), has now been released. On 9 April 2024, the International Accounting Standards Board (IASB) issued IFRS 18 Presentation and Disclosure in Financial Statements and becomes effective for reporting beginning on or after 1 January 2027. IFRS 18 introduces new requirements to improve companies’ reporting of financial performance and give investors a better basis for analysing and comparing companies.

Andreas Barckow, IASB Chair, said: “IFRS 18 represents the most significant change to companies’ presentation of financial performance since IFRS Accounting Standards were introduced more than 20 years ago. It will give investors better information about companies’ financial performance and consistent anchor points for their analysis.” 

Presentation and structure of the statement of profit or loss

IFRS 18 introduces a defined structure for the statement of profit or loss. The new standard’s main objective is to improve comparability in analysing companies’ financial performance.  The structure is composed of categories and required subtotals:

Three new defined categories for income and expenses for a more consistent structure:

  • Operating – main business activities and residual category for items not classified in other categories (not defined in IFRS 18)

  • Investing – typically includes income and expenses from:

    • Associates and joint ventures

    • Cash and cash equivalents; and

  • Assets that generate a return individually and largely independently

  • Financing – comprising:

    • Income/expenses from liabilities related to raising finance only (borrowings)

    • Interest income/expense and effect of changes in interest rates from other liabilities

To properly classify income and expenses in the operating, investing, and financing categories, an entity needs to make an assessment on whether the entity has a specified main business activity—that is a main business activity of investing in particular types of assets or providing financing to customers. Certain income and expenses that would typically be classified under the investing or financing categories, according to general principles, might be presented under the operating category based on the assessment of the main business activity.

Two new required subtotals for a comparable analysis:

  • Operating profit or loss

  • Profit or loss before financing and income taxes

Disclosure requirements to the statement of profit or loss

IFRS 18 introduces specific disclosure requirements related to the statement of profit or loss:

Management-defined performance measures (MPMs)

An MPMs is a subtotal used in public communications outside the financial statements which are presumed to represent management’s view of financial performance will now be reported.

This enables the users of financial to understand the aspect of financial performance that in the management’s view is communicated by an MPMs and how the MPMs compares with measures defined by Accounting Standards.

Specified expenses by nature

IFRS 18 includes guidance for entities to assess and determine how to present operating expenses by nature, function or a mixed or both, whichever approach is most appropriate, based on the facts and circumstances.

Aggregation and disaggregation

IFRS 18 sets out enhanced guidance on how to organise information and whether to provide it in the primary financial statements or in the notes. Items must be aggregated and grouped based on shared characteristics and disaggregated based on characteristics that are not shared.


Retrospective application of the standard is mandatory for annual reporting periods starting from 1 January 2027 onwards, but companies can opt to apply it earlier which is heavily dependent on their current reporting practices.


All entities reporting under IFRS Accounting Standards will be impacted once the new standard is effective from 1 January 2027. Those entities' accounting systems might need to be adjusted to present the new categories appropriately. As IFRS brings in significant changes to the current reporting requirements, early planning is crucial to a smooth transition.


bottom of page