IFRS 18: key points from the new standard on presentation of financial statements

IFRS 18 - Presentation and Disclosure in Financial Statements is mandatory for annual periods beginning on or after 1 January, 2027. It is set to replace IAS 1 Presentation of Financial Statements and amend other standards, primarily IAS 7 Cash Flow Statements.

The new provisions introduced by IFRS 18 are designed to provide clearer, more transparent and detailed information on a company's financial performance.

Changes in three main areas

IFRS 18 incorporates many of the original of IAS 1 provisions and improves the presentation of financial performance by introducing changes in three main areas:

• structuring of the income statement, by defining three categories (Operating, Investing and Financing) and requiring companies to present the same sub-totals, including operating income;
• introduction of rules and guidance on how to aggregate and disaggregate financial information, both in the primary financial statements and in the notes to the financial statements; and
• improved information provided by companies on certain performance indicators (management-defined performance measures - MPMs).

IFRS 18 is to be applied retrospectively, and will be effective for annual periods beginning on or after 1 January, 2027 (subject to adoption by the European Union). The IASB also authorises early application.

The new features and clarifications introduced by IFRS 18 concern all types of businesses. It is thus important to identify their potential impact as early as possible, both to prepare for the transition and to anticipate any possible effects on companies' overall financial reporting.

The effects of applying IFRS 18 will vary from one company to another, depending on the way in which financial information is currently communicated, and on companies' ability to upgrade their information systems.