Major financial statement reform is on its way with IFRS 18
The Journal of Accountancy recently published a forward‑looking analysis of this year’s new International Accounting Standards Board (IASB) standard IFRS 18, Presentation and Disclosure in Financial Statements. The article provides an analysis of why IFRS 18, which will be effective for annual reporting periods from 1 January 2027, marks a fundamental redesign in financial statements.
In recent years, companies have increasingly relied on alternative or adjusted performance measures (APMs), often reported outside audited statements. That practice has muddied comparability and transparency for investors. IFRS 18 aims to tackle these shortcomings by replacing broad flexibility under the old standard with a structured, consistent presentation style.
Under IFRS 18, income and expenses must be clearly classified into three core categories: operating, investing, and financing. Mandatory subtotals such as “operating profit or loss” and “profit or loss before financing and income tax” help create a standardised “earnings language.” Perhaps most strikingly, management‑defined performance measures (MPMs) no longer remain buried in footnotes or press releases; they must be disclosed in the financial statements and reconciled to IFRS‑defined numbers. This should bring far greater auditability, comparability, and investor confidence.
The article suggests that IFRS 18 is more than compliance: it’s an opportunity for companies to reposition themselves in an increasingly data‑driven financial world. For those preparing digital reports, the new structure offers a clean, machine‑friendly framework where line items, subtotals, and reconciliations are consistent and standardised across entities. That makes both automated analysis and cross‑company comparisons more reliable.
For companies, closing teams, auditors and regulators, the Journal of Accountancy’s commentary serves as a call to begin the bare bones of implementation; reorganising chart of accounts, updating systems and reporting templates now, to be ready for the 2027 deadline.
Read the full analysis of IFRS 18 and its implications at the Journal of Accountancy.
