These categories standardize the income statement format and require consistent presentation of certain line items.
Aspect | IAS 1 | IFRS 18 |
Profit or Loss Structure | Flexible structure; no mandatory subtotals | Mandatory structure with three categories: Operating, Investing, Financing |
Operating Profit | Not required or defined | Clearly defined and required |
Presentation Consistency | High variability across entities | Standardized categories improve comparability |
MPMs (Non-GAAP Measures) | No specific guidance | Required disclosures with reconciliation and explanation |
Disaggregation Requirements | General requirement to present material items separately | More specific and strict requirements for disaggregation |
Associates & Joint Ventures | Presentation flexibility | Standardized presentation outside operating profit |
Link to Segment Reporting | Limited linkage | Stronger alignment with IFRS 8 disclosures |
Terminology and Guidance | Principles-based, fewer defined terms | More prescriptive with defined categories and formats |
One of the most immediate challenges is the mandatory restructuring of the income statement. IFRS 18 requires businesses to present income and expenses in three clearly defined categories: operating, investing, and financing, along with a required subtotal for operating profit.
For entities with complex or non-standard business models, applying these categories consistently can be operationally difficult.
IFRS 18 introduces mandatory disclosure and reconciliation of Management-Defined Performance Measures (MPMs)—non-GAAP performance metrics such as “adjusted EBITDA” or “core profit.”
This area may also trigger increased scrutiny from regulators and stakeholders, especially where MPMs have historically lacked transparency.
IFRS 18 requires companies to disaggregate material items in the profit or loss statement and related notes, even when using the “by-function” presentation (e.g., cost of sales, admin expenses).
The disaggregation must provide users with meaningful information about:
Adopting IFRS 18 is not just a technical accounting change—it affects how management, investors, analysts, and regulators perceive a company’s performance.
If you’d like, I can also provide a transition roadmap, sample project plan, or Word-formatted report summarizing these challenges for internal use.
IFRS 18 brings a major shift in how entities present financial performance. By introducing standard subtotals, formalizing the use of management-defined performance measures, and enhancing disaggregation, it increases the clarity, comparability, and decision-usefulness of financial statements. Entities transitioning from IAS 1 to IFRS 18 will need to restructure their income statement, revise reporting systems, and possibly update investor communications and internal KPIs.
The implementation of IFRS 18 – Presentation and Disclosure in Financial Statements marks a significant shift in financial reporting standards. As companies move away from IAS 1, they face both technical and operational challenges that require careful planning, system upgrades, and strong change management. Online Accountant with its deep technical knowledge and practical industry experience, is uniquely positioned to guide businesses through this transformation, ensuring compliance while optimizing financial transparency and performance communication.
Online Accountant begins by conducting a comprehensive impact assessment tailored to your industry, operations, and current financial reporting practices. This diagnostic phase identifies how IFRS 18 will affect your financial statement structure, chart of accounts, key performance metrics, and internal reporting processes. Our experienced advisors analyze existing disclosures, subtotals, segment reporting, and management performance measures to assess the gaps between your current framework and the new IFRS 18 requirements.
Once the impact areas are identified, we develop a customized implementation roadmap. This includes redesigning the statement of profit or loss to reflect IFRS 18’s new categories—operating, investing, and financing—and ensuring a clear and accurate presentation of required subtotals such as operating profit. Online Accountant also assists in classifying and mapping income and expenses under the revised structure, which is often one of the most complex and judgment-based aspects of adoption. For groups with multiple subsidiaries or cross-border operations, we provide standardization guidance and inter-company alignment strategies.
A major component of IFRS 18 is the disclosure of Management-Defined Performance Measures (MPMs). Online Accountant helps your finance and leadership teams identify which metrics qualify as MPMs, prepare reconciliations to IFRS-defined subtotals, and develop robust documentation to meet audit and regulatory scrutiny. We also provide training and communication tools to ensure consistency in how MPMs are used internally and externally, and help you update investor relations materials and MD&A disclosures accordingly.
In parallel, Online Accountant works closely with your IT and finance departments to upgrade systems and reporting tools. We help ensure your ERP or accounting software can support the new categorization, enhanced disaggregation, and segment-level reporting linkages required under IFRS 18. Where necessary, we provide custom templates, reporting packs, and disclosure checklists to ease the transition process.
To support effective change management, Online Accountant offers training workshops and stakeholder communication strategies, ensuring that your internal finance team, board of directors, and auditors understand the rationale and implications of the new reporting framework. Our approach also emphasizes good governance by integrating IFRS 18 into your internal controls, financial policies, and audit processes, thereby reducing future compliance risks.
Ultimately, Online Accountant’s IFRS 18 implementation support goes beyond compliance—we position your business to enhance its financial storytelling, strengthen investor confidence, and improve comparability with peers. By aligning reporting practices with global standards, your business will benefit from improved transparency, strategic clarity, and long-term stakeholder trust.
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