New standard for presentation of financial statements and performance measurement
22 June 2026
Tags
Audit & assurance
What is changing under K-IFRS 1118?
K-IFRS 1118, 'Presentation and Disclosure in Financial Statements,' will replace K-IFRS 1001 and will be applied from annual reporting periods beginning on or after 1 January 2027 (early adoption permitted). This amendment is not merely a change in financial statement formats. Its primary objective is to improve the structure of the income statement so that investors and stakeholders can more easily compare and analyze corporate performance, and to strengthen disclosures regarding non-GAAP performance measures used by companies. While many companies perceive K-IFRS 1118 as simply a change in disclosure requirements, in practice, it may significantly impact financial reporting processes, key performance indicators (KPIs), and investor communications.
Key change 1: New classification structure of the income statement
K-IFRS 1118 requires income and expenses in the income statement to be classified into the following categories:
- Operating
- Investing
- Financing
- Income tax
- Discontinued operations
In particular, while the definition of operating profit previously varied across entities, K-IFRS 1118 introduces a more consistent concept of 'Operating Profit' by clearly defining the operating category. This enhances comparability among companies within the same industry but may require some companies to reassess their current income statement structure.
Key change 2: Introduction of operating profit and new subtotals
K-IFRS 1118 requires certain subtotals to be presented in the income statement. The following indicators are expected to become particularly important:
- Operating profit
- Profit before financing and income taxes
These indicators are likely to become key benchmarks used by investors and analysts in evaluating corporate performance. Companies need to assess whether their current management accounting and internal reporting systems are aligned with the new income statement structure.
Key change 3: Enhanced disclosure of management-defined performance measures (MPM)
One of the most notable changes in K-IFRS 1118 is the requirement to disclose MPM (Management-defined Performance Measures). Many companies use their own performance measures such as EBITDA, Adjusted EBITDA, Core Operating Profit, and Adjusted Earnings. However, differences in definitions across companies have made comparisons difficult for investors. K-IFRS 1118 requires companies to disclose the following information for performance measures used in external communications:
- Definition of the measure
- Purpose of use
- Reconciliation to K-IFRS figures
- Comparative information with prior periods
Accordingly, companies need to comprehensively review non-GAAP measures used in investor relations materials, annual reports, and press releases.
Key change 4: Aggregation and disaggregation of information
K-IFRS 1118 aims to address issues where excessive aggregation of financial information obscured important details under existing K-IFRS. Companies must apply principles of aggregation and disaggregation to ensure that material information is clearly presented, and linkages between the financial statements and notes will become more important. This may require additional review, particularly for companies with diverse business segments or complex transaction structures.
Additional disclosure requirements in Korea
The Financial Services Commission has recently adopted a modified approach to adoption to minimize confusion for companies and users of financial information. For three years from the effective date (2027–2029), companies are required to separately present operating profit under the current standard and disclose reconciliation adjustments with K-IFRS 1118 in the notes. As a result, additional disclosures will be required in Korea.
What should companies prepare now?
Although the initial application date of K-IFRS 1118 is still some time away, comparative financial statements must be presented upon first-time adoption in 2027, and preparation may take longer than expected. The following preliminary assessments are recommended:
- Impact analysis of current income statement structure
- Review of calculation methodologies for operating profit and new subtotals
- Assessment of MPM applicability and enhancement of disclosure systems
- Impact analysis on ERP and consolidated financial reporting systems
- Establishment of communication plans with investors and stakeholders
- Preparation for restatement of comparative information
In particular, the impact of K-IFRS 1118 may be greater than expected for companies that are part of global groups or that extensively use non-GAAP performance measures.
Conclusion
K-IFRS 1118 is not merely a revision of presentation requirements but represents a new financial reporting framework that changes how corporate performance is communicated. Rather than responding after the effective date approaches, it is important to analyze impacts early and prepare necessary systems and disclosure frameworks in advance.
Forvis Mazars in Korea can support companies in successfully adopting K-IFRS 1118 across various areas, including impact analysis, review of financial statement presentation, and establishment of MPM disclosure systems. If you have any questions regarding the application of K-IFRS 1118, please feel free to contact our professionals at Forvis Mazars.
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