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IFRS 18: ‘significant’ changes to financial statements

18 April 2024
ifrs 18 the most significant change to financial statement presentation

The new standard aims to boost the transparency and comparability of financial statements by standardising presentation and adding a range of metrics.

The first update of its kind for seven years, IFRS 18 is expected to have the greatest effect on the structure of financial statements since the standards began.

According to the IFRS, the new standard will give investors “more transparent and comparable information” about a company’s financial performance.

Comparability has been an ongoing issue in financial reporting. The new standard clarifies the required approach to, for instance, operating profit or loss calculations.


The standard will be effective for annual reporting periods beginning on or after 1 January 2027, though the IFRS said entities may begin applying it sooner.

IFRS18 will replace IAS 1 Presentation of Financial Statements but carries forward many of its requirements unchanged.

In an unpublished article shared with Accounting Times, Aletta Boshoff, BDO partner and national leader in IFRS and corporate reporting, wrote the “main change will be in your statement of profit and loss, with mandatory subtotals required for ‘operating profit’ and ‘profit or loss before financing and income tax.’”

“Entities must also disclose information in the notes about management-defined financial performance measures used outside the financial statements,” she said.

According to Boshoff, these measures include earnings before interest, taxes, depreciation, and amortisation (EBITDA), adjusted profit, operating profit excluding recurring items, and more.

The IFRS said “Many companies provide company-specific measures, often referred to as alternative performance measures. Investors find this information useful.”

“However, most companies don’t currently provide enough information to enable investors to understand how these measures are calculated and how they relate to the required measures in the income statement,” it added.

Unlike IAS1, the new standard will require income and expenses to be classified into five categories: investing, financing, income taxes, discontinued operations, and operating.

According to Boshoff, there is no clear alignment between the investing, financing, and operating categories and their equivalents in the statement of cash flows under IAS 7.

In practice, Boshoff said the accounting system adjustments will be “complex for groups with diverse operations and multiple reporting systems.”

Martin said the standard will require entities to “scrutinise carefully” their performance measures when engaging with external stakeholders.

“Non-IFRS measures have long been an area of focus and concern for ASIC,” he said.

IASB Chair Andreas Barckow said, “IFRS18 represents the most significant change to companies’ presentation of financial performance since IFRS accounting standards were introduced more than 20 years ago.”

“It will give investors better information about companies’ financial performance and consistent anchor points for their analysis.”

Ralph Martin, national technical director of RSM Australia, said the standard “should not be overlooked just because it doesn’t change recognition and measurement requirements of IFRS.”

Net profits will be unchanged; however, entities will be required to change the way they display financial information and disclose certain new information.


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