Navigating IFRS 18: What the New Standard Means for Financial Statements

IFRS 18 Presentation and Disclosure in Financial Statements marks a major evolution in financial reporting. The new Standard reshapes how entities present their statement of financial position, statement of profit or loss and other comprehensive income, and related disclosures, bringing greater clarity and consistency across financial statements.

Designed to give investors sharper insight into financial performance, IFRS 18 will apply to annual reporting periods beginning on or after 1 January 2027, with the option for entities to adopt earlier. Below we highlight the most significant reforms organisations should be preparing for.

What are the key changes?

Under current requirements the absence of a standardised structure for income statements has made comparisons between companies difficult due to the variations in reporting practices. IFRS 18 addresses this by introducing a consistent framework that classifies income and expenses into three categories: operating, investing and financing. This uniform structure is intended to make financial performance easier to analyse and compare across entities.

Many entities use tailored, non-GAAP performance measures to tell their story, but often with limited explanation of how these metrics are derived or how they reconcile to IFRS numbers. IFRS 18 requires entities to clearly explain management defined performance measures that relate to the income statement, including how they are calculated and how they connect to mandated IFRS figures. These disclosures will sit within the audited financial statements, enhancing credibility and transparency.

IFRS 18 also strengthens guidance on how information should be grouped and presented throughout the financial statements. The aim is to strike the right balance between excessive detail and over summarisation helping users navigate disclosures more effectively. Additional requirements around the presentation of operating expenses are expected to further improve users understanding of an entity’s operations and cost structure.

When does IFRS 18 take effect?

The standard applies to annual reporting periods commencing on or after 1 January 2027, with early adoption permitted. The scale of change for each entity will depend on existing reporting formats, internal processes and supporting systems.

IFRS 18 replaces IAS 1 Presentation of Financial Statements, carrying forward key principles while refining and modernising presentation requirements. It also brings the IASB’s long-running Primary Financial Statements projects to a close.

If you would like support in interpreting or implementing the changes introduced by IFRS 18, please reach out to our team through the contact form, or by calling us at 02 8226 1655.

Important Information – General Advice Disclaimer:

The information provided in this communication is general in nature and does not take into account your personal objectives, financial situation, or needs. Before acting on any information, you should consider its appropriateness in relation to your own circumstances and seek independent financial advice where necessary. We recommend consulting a licensed financial adviser before making any investment or financial decisions. Past performance is not a reliable indicator of future performance.