IFRS 18: what changes in the way you present your financial statements

IFRS 18 deals with presentation and disclosure, not with the measurement or recognition of transactions. Your net profit and the value of your assets and liabilities do not change: what changes is how information is structured, grouped and explained.

The standard replaces IAS 1. Some IAS 1 paragraphs were retained in IFRS 18, others moved to IAS 8 and IFRS 7. In Europe, IFRS 18 was adopted through Regulation (EU) 2026/338, published in the Official Journal on 16 February 2026, and is therefore endorsed in the European Union.

1. Three income statement categories

Each income and expense must be classified into one of the following categories:

• Operating
• Investing
• Financing

Plus income taxes and discontinued operations. Every line of your current income statement must be re-analysed against this classification.

2. Two mandatory subtotals

IFRS 18 requires two defined subtotals:

• operating profit;
• profit before financing and income taxes.

Your former in-house subtotals must be reviewed against this structure. Be careful not to confuse your historical "operating result" with the operating profit defined by IFRS 18.

3. Management-defined performance measures (MPM)

An MPM is a subtotal of income and expenses, not defined by IFRS, that you communicate publicly outside the financial statements to convey management's view of performance: adjusted EBITDA, recurring profit, adjusted operating profit, and so on. A measure that is not a subtotal of income and expenses, such as free cash flow, is not an MPM.

Each MPM must appear in a single note with: a reconciliation to the most directly comparable IFRS subtotal, a description of the measure and its calculation, an explanation of any changes, and a statement on possible non-comparability with similarly named measures used elsewhere.

4. Aggregation and disaggregation

IFRS 18 strengthens grouping principles: aggregate items sharing characteristics, disaggregate items that differ, and never obscure material information.

Date	Milestone
9 April 2024	IFRS 18 issued by the IASB
16 February 2026	Regulation (EU) 2026/338 published in the Official Journal
1 January 2027	Mandatory effective date
30 June 2027	First interim statements under IFRS 18 (if half-year reporting)
31 December 2027	First annual financial statements under IFRS 18

Application is retrospective: 2027 financial statements must include the 2027 presentation under IFRS 18, restated 2026 comparatives under IFRS 18, and an IAS 1 / IFRS 18 reconciliation for the comparative period. Interim periods (IAS 34) within an annual period beginning on or after 1 January 2027 are also covered.

Practical consequence: preparation must start in early 2026 at the latest. 2026 is the year to restate, test and secure the process, often through parallel reporting on a closing before go-live.

• Income statement: remapping of each line into the categories, and a rigorous definition of operating profit.
• Statement of cash flows (IAS 7): a new starting point (operating profit) and reclassification of certain flows, in particular interest and dividends paid.
• Notes: analysis of expenses by nature or by function, a transition reconciliation note, and a single MPM note including tax effect and non-controlling interests effect.
• Tools and systems: consolidation mappings and configurations must produce the new categories, subtotals and cash flow statement reliably and repeatably.
• MPM governance: a validation and documentation process, because MPMs come under auditor review.
• Listed issuers: a regulatory layer applies. The AMF flags IFRS 18 and the ESEF taxonomy; ESMA calls for transparent communication on expected impacts and, through its Q&A 2775, for mapping MPM and APM measures.

An IFRS 18 transition is structured in four stages:

• Diagnostic: map the current income statement, map target categories, inventory subtotals and MPMs, assess the cash flow statement and tools.
• Design: target income statement, MPM note format, target cash flow statement, updated mappings and reporting packages.
• Execution: tool configuration, pilot comparatives, parallel reporting on a 2026 closing.
• Training and go-live: upskilling teams, finalising comparatives, first closing under IFRS 18.

Three useful reflexes in the first weeks: scan your press releases and investor presentations to spot potential MPMs; check whether your mapping already separates IFRS 16 lease interest; validate your main classification choices with your auditor. And one pitfall to avoid: leaving the topic to the consolidation team alone, when MPMs are just as much a matter for investor communication and controlling.