What is Changing: The Three Reasons Why CFOs Cannot Afford to Ignore IFRS 18 (effective 1 January 2027)
Author: Faatima Kholvadia
With the transition to IFRS 18, formally titled Presentation and Disclosure in Financial Statements and issued by the IASB, the impacts are significant.
- New categories and mandatory subtotals
Every entity must now present income and expenses in three defined categories: Operating, Investing, and Financing (plus Income Taxes and Discontinued Operations).
The “Operating Profit” subtotal becomes mandatory on the face of the income statement for the first time.
For organisations with specified main business activities (for example banks, insurers or investment-property companies), classification decisions become particularly nuanced. - Management-Defined Performance Measures (MPMs) under increased scrutiny
Measures such as “Adjusted EBITDA”, “Underlying Profit”, or “Like-for-Like Growth” now come with heightened disclosure and audit requirements.
IFRS 18 mandates that each MPM disclosed outside the standard subtotals must be clearly explained, reconciled to the nearest required subtotal, and captured in a single note.
This elevates the transparency threshold and increases risk for CFOs who lack robust internal governance around such measures. - Revised aggregation and disaggregation requirements
IFRS 18 tightens the rules on how line items are grouped or separated across the primary statements and the notes. The objective is clearer, more comparable information for users of the financial statements.
This may require system changes, process redesigns, and sharper judgement, particularly where reporting relies on legacy formats.
Strategic Implications for the CFO Agenda
As the financial controller candidate, imagine presenting this to your Board or Audit Committee.
Re-think your income statement format
This is not a matter of merely renaming line items. IFRS 18 forces you to interrogate your business model: “Is financing a main business activity?” “Do we invest in assets as a main activity?”
These classification decisions have direct implications for what falls into Operating Profit versus Investing and Financing categories.
For South African or broader African entities with diversified operations, determining the boundaries will require informed CFO-level judgement.
Strengthen governance over MPMs
If your organisation uses non-GAAP performance measures extensively, this is the time to ensure they are well-defined, documented, reconciled, and subject to internal challenge.
They will be auditable. The era of loosely-defined, CEO-driven performance metrics is coming to an end.
System and process readiness
Retrospective application and the restatement of comparatives mean planning must begin now.
Systems may need to capture new classification metadata, close processes may need extended timelines, and disclosure frameworks will require enhancements.
Investor and stakeholder communication
IFRS 18 increases comparability across peers. This presents both opportunity and risk.
Entities whose prior presentations obscured non-operating items may face more scrutiny from analysts and investors.
Special Considerations for the Group CFO in Consolidated Financial Statements
Classification based on subsidiary business models
For consolidated reporting, each subsidiary’s business model determines the classification of income and expenses.
This means similar types of income or expense may appear in different categories at Group level depending on subsidiary activities.
Aggregation at the Group level
A Group with a bank and a manufacturing subsidiary may present interest income in both Operating activities (for the bank) and Investing activities (for the manufacturer).
Disclosure requirements
Groups must apply consistent classifications across periods.
IFRS 18 requires clear labelling and sufficient disaggregation so users understand why the same type of item appears in different categories.
The rationale behind classification decisions must be explained.
Practical considerations
Implementation is driven from the bottom up.
Map each subsidiary’s business model to presentation categories.
Adjust consolidation packs for mixed classifications across entities.
Re-programme systems to automate the complexities and support transparent reporting.
Allocate adequate time to test before the effective date.
What CFOs Should Do Now: A Phased Approach (and How Malander Can Assist)
Phase 1 – Diagnostic (immediate)
Phase 2 – Impact assessment and roadmap (next three to six months)
Phase 3 – Implementation (2025 to 2026)
Why Malander is Positioned to Add Significant Value
- Deep experience across large South African corporates and financial services institutions gives Malander a strong understanding of the link between reporting, governance, and systems.
• We provide a structured advisory approach: diagnostic, roadmap, and implementation, helping your finance function convert IFRS 18 from a compliance burden into a strategic opportunity.
• Our team facilitates workshops that map main business activities, classify income and expense lines, define MPM governance, and engage with external auditors early to de-risk the transition.
Final Word
For the CFO who views finance as a value-creating function, IFRS 18 presents an important opportunity. It enables greater clarity, transparency, and comparability in telling your financial performance story, but only if preparation begins early.
If you are ready to explore how IFRS 18 will affect your organisation, assess your readiness, and build a practical roadmap, Malander Advisory would welcome the opportunity to assist. Let us arrange a time to discuss your income statement architecture, your performance metrics, and the readiness of your systems ahead of the 2027 transition.