IFRS 18 starts in 2027. Your comparative year has already started.

IFRS 18 Presentation and Disclosure in Financial Statements replaces IAS 1 for annual periods beginning on or after 1 January 2027. Most finance teams have it on the radar as a 2027 problem. It isn’t. The standard applies retrospectively, so the first set of IFRS 18 accounts must show a restated prior year. For a 31 December year-end, that prior year is 2026. For a 30 June year-end, it began on 1 July 2026.

IFRS 18 doesn’t change how anything is recognised or measured. Revenue, assets and liabilities stay where they are. What changes is how the profit and loss is structured, which subtotals appear, how management’s own performance measures are disclosed, and how much detail sits in the notes. That sounds like a presentation exercise. In practice most of the work lands in the consolidation and reporting system, because that is where accounts are mapped, hierarchies are built and the statements are produced.

The same change, on slightly different clocks

IFRS 18 is being adopted across the region through local equivalents. The timing is close but not identical.

Two practical consequences. Groups with subsidiaries across these countries will be reporting under the new structure in some entities and the old structure in local statutory accounts elsewhere for a period, so the reporting system has to produce both. And Singapore-listed entities that publish interim statements apply the new presentation in their first interim report, ahead of the annual accounts.

What actually changes in the P&L

Every income and expense line is classified into one of five categories: operating, investing, financing, income taxes and discontinued operations. Two new subtotals are mandatory: operating profit, and profit before financing and income taxes.

The categories are where the detail gets awkward. Some examples that affect how a chart of accounts maps:

• Share of profit from associates and joint ventures goes to investing. Many groups show it within operating today.
• Foreign exchange differences are classified in the same category as the item that gave rise to them. FX on a trade receivable is operating. FX on a foreign currency loan is financing. One FX gain/loss account is no longer enough.
• Interest on lease liabilities, and the unwinding of discount on provisions and pension liabilities, go to financing.
• Entities whose main business is investing in assets or lending to customers (banks, insurers, some investment entities) classify some of these items differently, and need a documented assessment of their main business activity.

Management-defined performance measures

If you publish “underlying EBITDA”, “adjusted NPAT” or similar in investor presentations or the annual report, those numbers will probably meet the definition of a management-defined performance measure (MPM). IFRS 18 brings them into the audited financial statements. Each MPM needs a note that explains why it is useful, reconciles it to the nearest IFRS subtotal, and shows the income tax effect and the non-controlling interest effect of every reconciling item.

That last requirement is the one that catches people. Most underlying-profit calculations live in a spreadsheet maintained by the investor relations or FP&A team, with no tax effect per adjustment and no audit trail. Under IFRS 18 that spreadsheet becomes part of the audited accounts.

Aggregation, disaggregation and the “by nature” note

The standard tightens the rules on grouping. Large “other expenses” lines with no explanation will be challenged. If you present expenses by function (cost of sales, distribution, administration), you also have to disclose five amounts by nature in the notes: depreciation, amortisation, employee benefits, impairment losses and inventory write-downs, broken down by the functional line they sit in.

Many consolidation systems hold the P&L by function only. Employee costs inside cost of sales are not visible as a separate number. Getting them means bringing more detail through from the ERP or adding a nature attribute to the existing data.

Cash flow statement

IFRS 18 also amends IAS 7. The indirect method now starts from operating profit rather than profit before tax. For most entities, the existing choices on where to show interest and dividends go away: interest paid moves to financing, and interest and dividends received move to investing. Cash flow mappings and any rules that derive cash flow movements in the consolidation will need updating.

If you already have a consolidation system

Most of the commentary on IFRS 18 talks about new implementations. The larger group by far is organisations that already run their close and statutory reporting on a consolidation and reporting system, and now need that system to produce a different set of statements. The work is usually a targeted rework, not a replacement.

None of this is a compliance decision. Classification judgements, the main-business-activity assessment and which measures count as MPMs belong to management, your accounting advisers and your auditors. The system’s job is to apply those decisions consistently across every entity and period, and leave an audit trail when they change.

Where to start

If your accounting team has already done the IFRS 18 impact assessment, take their account-by-account classification and test it against the consolidation application now, while the comparative year is still open. The two areas that most often need more data than the system holds today are the FX/interest splits and the by-nature disclosures, so check those first.

If the impact assessment hasn’t started, that comes first. The system work follows from it, and the comparative year won’t wait.

Sources: IFRS Foundation, IFRS 18; AASB 18; XRB, NZ IFRS 18; Forvis Mazars Singapore; EY Malaysia; EY India.