In April 2024 the International Accounting Standards Board (IASB) issued IFRS 18 Presentation and Disclosure in Financial Statements. It replaces IAS 1 as the overarching presentation standard, with effect for annual reporting periods beginning on or after 1 January 2027 (earlier application permitted). The Board focused on the statement of profit or loss; many IAS 1 requirements continue, while some paragraphs move to IAS 8 (Basis of Preparation) and IFRS 7.
What IFRS 18 is designed to improve
According to the IFRS Foundation, IFRS 18 aims to improve financial reporting by:
- requiring two new defined subtotals in profit or loss — operating profit and profit before financing and income taxes;
- requiring disclosure of management-defined performance measures (MPMs) — subtotals of income and expenses not specified by IFRS that management uses in public communications; and
- adding clearer principles for aggregation and disaggregation of information across the primary statements and notes.
All income and expenses in profit or loss are classified into five categories: operating, investing, financing, income taxes and discontinued operations.
Why the Board intervened
Investor outreach during the Primary Financial Statements project showed that “operating profit” was widely used but inconsistently defined. Illustrative findings cited around the April 2024 issuance included:
- about 61 of 100 sample companies presented an operating profit subtotal;
- roughly nine different definitions were used for that subtotal;
- around 79% provided limited or no tax effect for adjustments to their measures; and
- about 59% of adjusted performance measures sat outside the financial statements.
IFRS 18 responds by defining the subtotal, locating management measures in one audited note, and requiring reconciliations that “price” adjustments — including tax and non-controlling interest effects where relevant.
MPMs in plain language
An MPM is a subtotal of income and expenses that:
- is used in public communications outside the financial statements;
- communicates management’s view of an aspect of financial performance; and
- is not itself a total or subtotal specifically required by IFRS Accounting Standards.
Each MPM must be labelled clearly, reconciled to the most directly comparable IFRS-specified subtotal, and accompanied by explanations of how it is calculated and why it is useful.
Systems and governance impact
Although measurement does not change, implementation typically touches chart-of-accounts design, consolidation mapping, covenant definitions, remuneration metrics, and the financial close calendar. Groups with Indian subsidiaries should also track Ind AS 118 notification so local statutory reporting and group IFRS packs stay aligned.
Summary of IFRS 18 based on IFRS Foundation materials and professional commentary. Always refer to the full Standard and jurisdictional endorsement status.