IFRS 18: Key Changes and impacts on the Financial Statements of IFRS Adopters
On 9 April 2024, the IASB published IFRS 18 Presentation and Disclosure in Financial Statements, aiming to enhance the quality of financial reporting across entities. The new standard replaces IAS 1 Presentation of Financial Statements and amends several other standards, including IAS 7 Statement of Cash Flows and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
Why a New Standard?
Existing IFRS standards are not prescriptive enough in terms of how income and expenses are classified in the statement of profit or loss, or how subtotals are used. This results in inconsistencies across companies, limiting comparability and hindering performance analysis.
To address these issues, IFRS 18 introduces a series of requirements designed to provide clearer, more comparable, and transparent financial information, particularly regarding financial performance.
While many of the provisions from IAS 1 are carried forward unchanged, IFRS 18 introduces three key pillars of change:
- Enhanced comparability of the income statement through a revised structure and defined categories;
- Improved transparency of Management-Defined Performance Measures (MPMs) presented in the income statement;
- Strengthened aggregation and disaggregation rules to avoid omission or concealment of material information across financial statements and the accompanying notes.
When will IFRS 18 be effective?
IFRS 18 is mandatory for annual reporting periods beginning on or after 1 January 2027, subject to endorsement in the EU. Early adoption is permitted. The standard must be applied retrospectively.
These changes will affect all entities that prepare financial statements in accordance with IFRS. It is crucial to evaluate the impacts early and plan a well-structured transition to ensure readiness and avoid surprises in financial reporting, processes, and systems.
Key changes introduced by IFRS 18
- New income statement structure: Learn more about the three defined categories of income and expenses.
- Disclosure of MPMs: Improved guidance on alternative performance measures linked to the income statement.
- Stricter aggregation/disaggregation requirements: Clearer presentation of line items and enhanced transparency in financial statements and notes.
How we can support you
Given the scale and scope of the upcoming changes, a timely assessment of internal processes is essential. Adopting a proactive approach will ease the transition and enhance the clarity and reliability of your financial communications.
Special focus should be placed on training internal teams and upgrading digital reporting tools to optimise data collection, analysis, and presentation. In this context, specialised advisory support can be a significant value driver in managing this regulatory shift effectively.
At Forvis Mazars, we assist companies in designing and implementing a robust transition plan to IFRS 18, covering changes to financial statement presentation—particularly the income statement—and the required disclosures in the notes, as well as broader financial communication strategies.
Our services include:
- Targeted training and workshops tailored to your teams, with a focus on the new reporting structure;
- Gap analysis between your current reporting format and IFRS 18 requirements, supported by a proprietary tool developed by Forvis Mazars and customisable to your needs;
- Assessment of process and IT system impacts, including necessary adjustments and integrations;
- Evaluation of potential impacts on financial covenants and compliance indicators.