By Shaveera John, Director | Malander Advisory
Published: March 27, 2026

EXECUTIVE SUMMARY: IFRS 18 introduces significant changes to how financial performance is presented, including a more structured statement of profit or loss, stricter definitions of operating profit, and increased scrutiny of management-defined performance measures.

While the standard does not change underlying financial results, it may materially affect how performance is perceived by investors, lenders and regulators.

Organisations should begin preparing early by assessing reporting structures, aligning internal and external performance metrics, and ensuring systems and data can support the new requirements ahead of the 2027 implementation deadline.

Key Takeaways

• IFRS 18 standardises the structure of the income statement
• Operating profit will become more defined and comparable
• Management-defined performance measures (MPMs) will face increased disclosure requirements
• Organisations may see shifts in reported performance metrics
• Early preparation is critical due to retrospective application

IFRS 18 is coming: Key changes and how to prepare for 2027

IFRS 18 will become effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted. While it replaces IAS 1, this is not simply a technical update to financial statement presentation. It represents a shift in how financial performance is communicated, scrutinised and compared across the market.

For many organisations, this will result in visible changes to reported operating profit, increased scrutiny over adjusted performance metrics, and a need to realign internal reporting with external disclosures. Finance leaders should view IFRS 18 not as a compliance exercise, but as a strategic reporting change with direct implications for investor confidence and decision-making.

This is not simply a formatting update. It is a reporting change that will affect how performance is communicated to boards, investors, lenders, auditors and regulators.

A more structured statement of profit or loss

At the centre of the new standard is a more structured statement of profit or loss. IFRS 18 introduces defined categories for income and expenses, including:

• Operating
• Investing
• Financing
• Income taxes
• Discontinued operations

It also requires defined subtotals such as operating profit and profit before financing and income taxes. The intention is to improve comparability by providing users of financial statements with a more consistent basis for analysing performance.

While many businesses already present an operating profit measure, this is often done inconsistently. IFRS 18 introduces greater discipline and consistency in how performance is presented

Rethinking what “operating” means

For many businesses, the most visible impact will be in how line items are classified within the statement of profit or loss. Under IFRS 18, the operating category becomes the default, capturing all income and expenses not specifically allocated to investing, financing, income taxes or discontinued operations.

This may result in meaningful shifts in reported operating profit. For example, income or expenses previously presented outside of operating results—such as certain fair value movements or interest-related items—may now be reclassified, altering key performance indicators used by management and investors.

Importantly, operating profit under IFRS 18 is not intended to reflect only recurring or “core” performance. It is designed to present a comprehensive view of operations, including items that may be volatile or non-recurring in nature.

This creates potential tension between statutory reporting and internal performance metrics such as EBITDA or adjusted operating profit, requiring organisations to reassess how performance is defined, monitored and communicated.

Increased scrutiny on performance measures

Another key development is the treatment of management-defined performance measures (MPMs), often referred to as alternative or non-GAAP measures. IFRS 18 introduces explicit disclosure requirements for measures used in public communications to explain financial performance.

Where a measure meets the definition of an MPM, entities will be required to clearly define the metric, explain its purpose, and reconcile it to the most directly comparable IFRS-defined subtotal.

This is likely to be one of the most commercially sensitive aspects of the standard. Many organisations rely heavily on adjusted profit metrics in investor presentations, board reporting and market communications. Under IFRS 18, these measures will be subject to increased transparency, audit scrutiny and regulatory focus.

As a result, inconsistencies between internal reporting, investor messaging and statutory financial statements will become more visible, requiring tighter governance and alignment across all reporting channels.

What this means in practice

While IFRS 18 does not change the underlying economics of a business, it may significantly change how performance is perceived. In practice, organisations may experience:

• Shifts in reported operating profit and key ratios
• Misalignment between internal KPIs and statutory reporting
• Increased scrutiny over adjusted or non-GAAP metrics
• The need to revisit investor communication and board reporting packs

For finance teams, this introduces both a technical and narrative challenge: ensuring compliance with the standard while maintaining a clear and consistent performance story.

Greater focus on aggregation and transparency

IFRS 18 places increased emphasis on aggregation and disaggregation. Preparers will need to apply clearer principles when determining:

• What is presented in the primary financial statements
• What is disclosed in the notes
• The level of detail required for information to remain useful

The standard also introduces enhanced transparency around operating expenses. Where expenses are presented by function, entities must disclose certain amounts by nature in the notes, including:

• Depreciation
• Amortisation
• Employee benefits
• Impairment losses
• Inventory write-downs

Implications for systems, data and reporting structures

The requirements of IFRS 18 will necessitate more granular data capture and enhanced reporting capabilities. This may expose weaknesses in existing finance environments, particularly in areas such as chart of accounts design, data mapping, and financial system configuration.

Organisations will need to assess whether their current systems can:

• Accurately classify transactions into the required categories
• Generate the required level of disaggregation for note disclosures
• Support consistent mapping between management and statutory reporting

In addition, retrospective application will require historical data to be recast, which may be challenging where systems and processes have evolved over time.

As a result, implementation is unlikely to sit solely within financial reporting teams and will require coordination across finance, systems, and internal control environments.

A structured approach to implementation

Given the breadth of impact, a structured implementation approach will be critical. This typically includes:

• Diagnostic assessment of current reporting structures
• Identification of gaps against IFRS 18 requirements
• Evaluation of management-defined performance measures
• Alignment of chart of accounts and reporting frameworks
• System and data readiness assessments
• Dry runs and parallel reporting ahead of adoption

Taking a phased approach allows organisations to manage risk, reduce disruption, and ensure readiness ahead of mandatory adoption.

Why early preparation matters

IFRS 18 is applied retrospectively, meaning comparative information will need to be restated. For organisations with complex reporting environments, this significantly increases the implementation effort.

Delaying preparation may result in compressed timelines, increased reliance on manual adjustments, and greater audit scrutiny.

Early preparation enables organisations to assess impacts, refine internal reporting, and align stakeholder communication well in advance of implementation, reducing both operational risk and execution pressure.

A broader shift in reporting discipline

From a business perspective, IFRS 18 should be viewed as more than a technical accounting update. It forms part of a broader shift towards clearer performance communication and stronger reporting discipline.

For boards and investors, better structured information supports better analysis. For management teams, it creates an opportunity to assess whether the story told through statutory reporting aligns with the narrative presented elsewhere.

For finance functions already under pressure, it reinforces that presentation and disclosure are not secondary considerations, they directly influence credibility.

How can Malander Advisory help?

Implementing IFRS 18 extends beyond financial statement presentation and into the broader finance function, including systems, controls, governance, and performance reporting.

Malander Advisory supports organisations through a structured and practical implementation approach, including:

• IFRS 18 impact assessments and gap analysis
• Review and alignment of management-defined performance measures
• Redesign of reporting structures and chart of accounts
• Support with retrospective restatement and parallel reporting
• Enhancement of disclosures and financial statement presentation
• Strengthening of controls and governance over financial reporting

Our focus is not only on achieving compliance, but on ensuring that financial performance is communicated clearly, consistently and with confidence under increased scrutiny.

Organisations that approach IFRS 18 proactively will be better positioned to manage stakeholder expectations and maintain credibility in the market.

Preparing for IFRS 18 requires more than technical compliance. Speak to Malander Advisory to assess your readiness and reduce implementation risk.

FAQ’s:

What is IFRS 18?
IFRS 18 is a new accounting standard that replaces IAS 1 and introduces a more structured approach to presenting financial performance.

When does IFRS 18 come into effect?
It is effective for reporting periods beginning on or after 1 January 2027, with earlier adoption permitted.

Will IFRS 18 change profits?
No, it does not change underlying financial results, but it may change how profits are presented and interpreted.

Why is IFRS 18 important?
It improves comparability, increases transparency, and introduces stricter requirements around performance reporting.

How will IFRS 18 affect operating profit?
IFRS 18 introduces a more defined structure for the statement of profit or loss, which may result in certain income and expenses being reclassified. This can lead to changes in reported operating profit and key performance indicators, even though underlying financial performance remains unchanged.

What should companies do to prepare for IFRS 18?
Companies should begin with an impact assessment, review their chart of accounts and reporting structures, evaluate performance metrics, and ensure systems can support the new classification and disclosure requirements ahead of implementation.

Will IFRS 18 require changes to financial systems?
Yes, many organisations will need to update their financial systems and data structures to support new classification, disaggregation and disclosure requirements, particularly where existing systems lack sufficient detail or flexibility.

About the Author

Shaveera John

A founder and leader at Malander Advisory, specialising in delivering end-to-end finance function outsourcing solutions across all industries including telecommunications, construction, and financial services. Her expertise lies in streamlining operations, driving business efficiencies, and crafting bespoke financial strategies tailored to each client’s needs.