IASB launches transformative IFRS 18 standard

Posted on April 21, 2024 by Editor

This week the International Accounting Standards Board (IASB) released its newest standard, IFRS 18 – Presentation and Disclosure in Financial Statements.

Said to be the most significant change to the way companies present financial performance since the IFRS standards were introduced, IFRS 18 replaces IFRS 1 and introduces new requirements across three key areas, all aimed at enhancing transparency, comparability, and the usefulness of financial information – and all designed from a digital-first perspective.

Firstly, the standard improves comparability by introducing structured categories and subtotals in the Statement of Profit or Loss, addressing investor concerns about the difficulty of comparing financial performance. By providing consistency in reporting these subtotals, companies can now offer investors a clearer picture of their financial health.

Secondly, IFRS 18 enhances transparency by requiring detailed reconciliation of Management Defined Performance Measures (MPMs) back to IFRS disclosures in a note contained within the financial statements, which means that these figures will be subject to audit. MPM’s are a sub-set of key “Non GAAP measures” or “Alternative Performance Measures” but this is a very welcome change for investors and lenders.

The standard also requires categorisation of disclosures in the profit and loss statement which will need to be classified into one of five categories: operating, investing, financing, income taxes and discontinued operations.

XBRL International commends the IFRS Foundation for its digital reporting focus throughout the development of IFRS 18. The introduction of mandatory subtotals will greatly facilitate digital comparability, while MPM reconciliation requirements will provide significantly more detail about these key metrics, and in a number of jurisdictions these disclosures will need to be tagged for the first time. From the outset IFRS 18 should provide investors with valuable insights.  It’s great to see the IASB and IFRS Foundation’s commitment to embracing digital reporting – and this work will result in more useful, insightful data.

Congratulations to everyone involved on reaching this milestone! We look forward to seeing the positive impact it will have on financial reporting and investor decision-making once it comes into play – mandatory from January, 2027, but interested companies can start applying it voluntarily before then. Relevant taxonomy updates are expected in Q1 2025.

Find everything you need to know about the new standard here.

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