IFRS 18 — Complete Guide

What IFRS 18 changes

IFRS 18 Presentation and Disclosure in Financial Statements replaces IAS 1 for annual periods beginning on or after 1 January 2027, with early application permitted. It does not change recognition or measurement — profit or loss for the period is unaffected — but it fundamentally restructures how that profit or loss is presented, introducing mandatory income statement categories, two new required subtotals, and a new class of disclosed metric called Management Performance Measures (MPMs).

The new income statement structure

Every entity must now classify each line of income and expense into one of five categories: operating, investing, financing, income taxes, and discontinued operations. The operating category is the default — any income or expense not required or permitted to fall into the other four categories lands there (IFRS 18.52). Two new subtotals sit inside this structure and must appear on the face of the statement for (almost) every entity.

• Classification of income and expenses → How to sort each line into operating, investing, financing, tax or discontinued operations — including the specific rules for entities whose main business is investing or financing (IFRS 18.53–55, 65, 67).
• New subtotals and categories → The two mandatory subtotals — operating profit and profit before financing and income tax — and which entities can omit them.
• Operating profit subtotal → How the operating profit subtotal is built line by line, and the presentation rules that govern it.

Management performance measures and disclosure

IFRS 18 also formalises "non-GAAP" style metrics that many companies already publish. A management-defined performance measure is a subtotal of income and expenses used in public communications to convey management's view of performance (IFRS 18.117) — think adjusted EBITDA or underlying profit. For the first time, these measures must be disclosed in the notes with a mandatory reconciliation to the nearest IFRS-defined subtotal, explaining the nature of each adjustment and its tax and non-controlling-interest effect.

• Management Performance Measures → Definition, the reconciliation requirement, and the most common disclosure traps.
• Presentation and disclosure requirements → The full disclosure package: statement of comprehensive income totals (IFRS 18.86), aggregation/disaggregation principles, and what moves from the primary statements into the notes.

IFRS 18 vs IAS 1

Not every change is about the income statement. IFRS 18 also carries forward — largely unchanged — the IAS 1 requirements for classifying assets and liabilities as current or non-current (IFRS 18.96), including the rule that deferred tax is always non-current (IFRS 18.98), and the minimum line-item list for the statement of financial position (IFRS 18.103).

• IFRS 18 vs IAS 1 — What changes? → A side-by-side comparison of what IFRS 18 keeps from IAS 1, what it replaces, and what is genuinely new.

Effective date and transition

IFRS 18 applies retrospectively for annual periods beginning on or after 1 January 2027. Entities must restate comparative amounts unless doing so is impracticable, in which case they must explain why and describe the adjustments that would otherwise have been made (IFRS 18.32–34). Errors or accounting policy changes identified during transition follow the standard retrospective-adjustment mechanics for opening retained earnings (IFRS 18.108).

Key paragraphs at a glance

• IFRS 18.10 — Complete set of financial statements required.
• IFRS 18.12–13 — Single-statement vs two-statement presentation of profit or loss.
• IFRS 18.52 — Operating category as the residual/default classification.
• IFRS 18.53–55 — Classification of investing-related income and expenses.
• IFRS 18.59–61 — Classification of financing-related income and expenses.
• IFRS 18.67 — Income taxes category.
• IFRS 18.82 — Cost of sales as a separate line when expenses are presented by function.
• IFRS 18.86 — Required totals in the statement of comprehensive income.
• IFRS 18.96, 98 — Current/non-current classification; deferred tax always non-current.
• IFRS 18.117 — Definition of a management-defined performance measure (MPM).