SUÁ & Associates explores the major reform introduced by IFRS 18, replacing IAS 1 and reshaping how financial performance is presented and disclosed.
The papers explain new profit-and-loss categories, mandatory subtotals, management performance measure disclosures, and the implications for preparers and auditors ahead of the 2027 effective date.

Technical Summary: IFRS 18 — Presentation and Disclosure in Financial Statements

Overview

The International Accounting Standards Board (IASB) issued IFRS 18 in April 2024, marking one of the most significant updates to financial statement presentation in over two decades.
It replaces key sections of IAS 1 Presentation of Financial Statements and introduces a more structured, comparable, and transparent way to communicate financial performance.

IFRS 18 becomes effective for annual reporting periods beginning on or after 1 January 2027, with early adoption permitted.

1. Objective of IFRS 18

The purpose of IFRS 18 is to:

• Improve consistency and comparability in income statement presentation.
• Strengthen communication of financial performance through standardized subtotals.
• Increase transparency around management’s own performance measures.
• Reduce “clutter” and over-aggregation in financial statements.

2. Key Changes from IAS 1

 New Structure for the Statement of Profit or Loss

Entities must now classify all income and expenses into five defined categories:

 Mandatory Subtotals

Two new subtotals must appear in every statement of profit or loss:

• Operating profit or loss
• Profit or loss before financing and income taxes

These subtotals provide a clearer, consistent “performance line” across entities — reducing reliance on non-GAAP figures.

 Management-Defined Performance Measures (MPMs)

If management uses alternative performance measures (e.g., “adjusted profit”), IFRS 18 requires:

• A reconciliation from the MPM to the most directly comparable IFRS subtotal.
• An explanation of why management believes the measure is useful.
• Disclosure of tax and non-controlling interest effects.

This ensures transparency and consistency between IFRS reporting and management communications.

 Enhanced Disclosure Requirements

IFRS 18 introduces:

• New principles for aggregation and disaggregation to prevent obscuring material information.
• Required disclosure of specified expenses by nature, including:
• Depreciation
• Amortisation
• Employee benefits
• Impairment losses
• Write-downs of inventories

These must be shown even if the entity presents expenses “by function” (e.g., cost of sales, admin).

 Taxonomy and Digital Reporting Alignment

IFRS 18 comes with a new IFRS Accounting Taxonomy Update, guiding how data is tagged in digital (XBRL) financial reports — enabling improved electronic comparability between companies.

3. Effective Date and Transition

• Effective: Periods beginning on or after 1 January 2027
• Transition: Comparative information must be restated.
• Early Adoption: Permitted if all IFRS 18 requirements are fully met.

4. Implications for Preparers and Auditors

• Chart of accounts and ERP systems may need restructuring.
• Reporting templates and internal reporting lines should be reviewed.
• Audit programs must include verification of MPM reconciliations and classification judgments.
• Training for finance teams and governance committees will be essential before 2027.

5. SUÁ & Associates Commentary

“IFRS 18 represents a pivotal shift toward greater comparability and transparency in financial reporting. Entities should start planning now — assessing data systems, reporting structures, and management metrics to ensure smooth transition.” Kele ai Galuega!
— SUÁ & Associates Technical Team