IFRS 18: A New Era for Financial Disclosure
What Greater Comparability and Disclosure Requirements Mean for Listed Companies and Investors
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2026年10月07日
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Introduction
Over many years, income statements have varied widely in structure meaning that they can be difficult to compare and sometimes hard to scrutinise. The International Financial Reporting Standards 18 (“IFRS 18”), Presentation and Disclosure in Financial Statements, issued by the International Accounting Standards Board (“IASB”) is designed to change this. It is one of the most significant reforms to financial statement presentation in decades and its implications extend well beyond the finance function. With a higher level of scrutiny from investors more likely and comparisons across companies far easier, listed companies need to prepare for the potential communications and reputational impacts of this transition.
What is IFRS 18 and What Does it Seek to Achieve?
IFRS 18 replaces IAS 1, Presentation of Financial Statements, and takes effect for annual reporting periods beginning on or after 1 January 2027. It introduces a mandatory structure for the income statement, where all income and expense items must now be classified into one of five defined categories: operating, investing, financing, income taxes and discontinued operations. All companies must present two new defined subtotals, operating profit and total profit/loss before financing and income taxes.1
Arguably, the most consequential change is the requirement for management-defined performance measures (“MPMs”). Where a company discloses a financial measure in its financial statements that is not defined by IFRS, for instance, adjusted EBIT, underlying profit, or similar, it must now provide a labelled subtotal, a reconciliation to the most directly comparable IFRS line item, and a clear explanation of why the measure provides useful information.
Together, these changes are intended to improve comparability between companies, provide investors and analysts with more consistent reference points and bring greater discipline and transparency to management-defined performance measures. In doing so, IFRS 18 reinforces the role of structured, comparable financial reporting as the foundation for assessing corporate performance.
How Should Listed Companies Respond?
Even for those companies who begin their next financial year well after the 1 January 2027 effective date, the sheer scope of change required means that early preparation is necessary. Companies that leave implementation to the last moment risk compliance failures as well as potential reputational damage if their transition is visibly disorganised or if their alternative performance measures (“APMs”) do not survive the scrutiny that the new reconciliation requirements will invite from stakeholders including the media, analysts and investors. Companies that have not begun a structured impact assessment should prioritise the accounting, systems, governance and communications decisions required for implementation.
For finance teams and investor relations officers (“IROs”) thinking about how to practically prepare, there are four key areas of focus:
Assessment: Companies need to map their current income statement structure against the five IFRS 18 categories and identify where reclassification or new subtotals are required. The new standard will almost certainly require changes to financial reporting infrastructure, the recording of transactions, internal controls over the accounting, the budgeting and forecasting process and the granularity of data to support disclosure transparency and auditability. This is not always straightforward, for example the boundary between operating and investment income will require careful judgement in some business models and early engagement with auditors is advisable.
Review of alternative performance measures: Companies should review every APM they currently disclose, assess whether it meets the MPM definition under IFRS 18 and consider whether each measure can be clearly justified and reconciled. This is an opportunity to rationalise a metrics framework that may have grown organically over time and now contains measures that are difficult to defend under scrutiny. The impact on how management performance is evaluated and rewarded is also an important consideration.
Communication: IROs in particular need to be closely involved in the transition planning process. Changes to income statement structure and APM presentation will affect earnings releases, investor presentations and analyst briefings. IROs might expect that analysts and institutional investors will use the new reconciliation disclosures to scrutinise APMs more rigorously. Measures that were previously presented without detailed explanation will now sit alongside clear bridges back to IFRS figures, making it easier to identify adjustments that appear aggressive or inconsistent year on year. This raises the stakes for how IROs justify and communicate those measures. Managing investor expectations ahead of the transition, explaining what is changing, why it is changing and what remains consistent, will be essential to maintaining confidence during the changeover period.
Perception: IFRS gives companies a reason to revisit measures and disclosures that may have evolved gradually over time. as a strategic opportunity, rather than compliance exercise. Some organisations may conclude that existing metrics remain appropriate. Others may decide that certain adjustments are difficult to explain consistently or add little value for investors. The implementation process provides an opportunity to review those decisions before they are tested through the new disclosure requirements.
Conclusion
IFRS 18 represents a fundamental shift in how financial performance is presented and communicated. Its requirements are technical, but its implications are strategic. For finance leaders, investor relations professionals, and boards, the opportunity is in how to use the new standard to strengthen the quality and credibility of financial communication, ensuring that accounting judgments, internal reporting and a Company’s equity story all align. The standard may introduce new disclosure requirements, but it also creates a reason to revisit reporting practices that have evolved over time and are often unquestioned as to effectiveness. Those who engage early and thoughtfully will be best placed to turn a compliance obligation into a competitive advantage with the investment community.
Footnotes:
1: Defined as:
Operating profit: the total of all income and expenses in the operating category
Total profit/loss before financing and income taxes: the total of operating profit and all income and expense classified in the investing category
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2026年10月07日
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