IFRS 18: Time to move from awareness to action

From our client work and market observations, we note that some best practices are starting to take shape while other implementation issues are only now being uncovered. They key message remains the same however - start earlier than you think. 

Although next year’s financials may still seem distant, comparative restatement means 2026 numbers must already be IFRS 18-ready! 

What is IFRS 18 and when does it apply? 

IFRS 18 replaces IAS 1 and introduces a fundamentally redesigned approach to the presentation of financial performance. EU endorsement has now been completed, confirming the effective dates for all EU preparers.  

The standard is effective for annual reporting periods beginning on or after 1 January 2027, with retrospective application and restatement of comparatives (2026) required.

At a glance, what changes? 

IFRS 18 does not change recognition or measurement, but it significantly changes presentation and disclosure, particularly in the statement of profit or loss: 

1. Introduction of defined categories (Operating, Investing, Financing), effectively creating new mandatory subtotals such as operating profit 
2. New disclosure requirements for Management-defined Performance Measures (MPMs)  
3. Enhanced guidance on aggregation and disaggregation

The objective is clear: improve comparability, transparency, and consistency across entities.

Key developments and emerging interpretations 

Although IFRS 18 is relatively new, the past year has already provided important clarification through practice, publications and early implementation work. 

1) Defining an 'operating' category is more judgmental than expected

The mandatory subsections depend heavily on classification decisions, especially around: 

• Income/expenses linked to financing activities
• Entities with financing as a main business activity
• Hybrid business models (e.g., industrial groups with captive finance arms)

In practice, we see significant diversity emerging, particularly in sectors where financing is intertwined with operations. Making your business model assessment is critical; this is not a purely technical exercise! 

2) Management Performance Measures (MPMs): bringing non-GAAP measures into the (audited) financial statements! 

One of the most underestimated innovations is the new requirements on MPMs: 

• Identification of performance measures used in external communication  
• Reconciliation to IFRS-defined numbers  
• Mandatory disclosure in a single dedicated note  

This effectively brings certain non-GAAP measures into the audited financial statements.

What we observe in practice:

• Many companies underestimate the amounts of possible or existing APMs/MPMs  
• Inconsistencies between investor presentations and financial statements are common, but will become more important to track (upfront)
• Governance over KPIs is often not yet formalized  

MPMs should be treated as a cross-functional project (financial teams, audit committee, investor relations, …) or risk being incomplete. 

3) Aggregation and disaggregation: a new level of both guidance and scrutiny 

IFRS 18 introduces enhanced principles on how information should be grouped or split, based on its “role” in financial statements.  

In practice, this leads to: 

• More granular disclosures
• Increased pressure on chart of accounts and reporting systems
• Greater audit focus on materiality and presentation logic  

Expect data model and system implications, not just disclosure changes. The supporting systems need to be in place in order to provide comparable 2026 figures! 

Interaction with other standards: still evolving 

Recent discussions and early interpretations highlight areas where IFRS 18 interacts with existing standards, such as classifications of foreign exchange differences, derivatives, etc. These interactions are not always straightforward and may require policy decisions.

IFRS 18 is often described as a “presentation and disclosure” update, but that understates its impact: 

• It redefines how performance is communicated  
• Brings non-GAAP measures into the spotlight (and audited financials)
• Forces alignment between internal and external reporting  

If you are starting your IFRS 18 journey or want us to support you in your IFRS 18 implementation journey, feel free to reach out. We are always happy to help guide and explore within this new standard!