IFRS 18: navigating the revolution in financial statement presentation for F&A leaders.

tl;dr: 

• IFRS 18 is coming (Jan 2027!): this isn't just an update; it's the biggest change to financial statement presentation in over two decades, replacing IAS 1.
• new look for profit & loss: expect five clear categories (Operating, Investing, Financing, Income Taxes, Discontinued Operations) and two vital new subtotals: "Operating profit or loss" and "Profit or loss before financing and income taxes."
• MPMs get transparent: your Management-Defined Performance Measures now require clear disclosure in a single note, with calculation methods and reconciliation to IFRS.
• beyond compliance – it's strategic: IFRS 18 demands changes to systems, processes, and even how you think about financial performance. It's an opportunity to boost financial communication.
• your roadmap to success: implement in phases: assess impact, apply retrospectively, collaborate cross-functionally, upskill your team, and meticulously document everything.

A new era is dawning in financial reporting. IFRS 18 is poised to fundamentally change the presentation of financial statements as we know them. This standard, which replaces IAS 1, marks the most significant change in more than two decades. 

The goal? To elevate the comparability and transparency of financial performance. IFRS 18 comes into effect on 1 January 2027, although early application is permitted. This means that you and your F&A team need to anticipate and prepare now. The urgency is clear: these changes to financial reporting require your immediate attention.

If you want to better understand how it impacts your career and your daily responsibilities, read along as we are ready to clarify the implications of IFRS 18 and effectively support you in your preparation.

understanding IFRS 18: core requirements.

IFRS 18 introduces fundamental changes to the statement of profit or loss, mandating five distinct categories for income and expenses: Operating, Investing, Financing, Income Taxes, and Discontinued Operations. 

The "operating" category is now a residual category, differing significantly from cash flow statement classifications. For example, depreciation will typically fall under operating activities, gains on investment property in investing, and interest on debt in financing.

The standard also introduces two new mandatory subtotals: "Operating profit or loss" and "Profit or loss before financing and income taxes". These new subtotals will fundamentally alter how financial performance is viewed and analysed.

A critical aspect of IFRS 18 is the new treatment of Management-Defined Performance Measures (MPMs). These are non-IFRS measures often used in public communications. Under IFRS 18, MPMs must now be disclosed in a single note to the financial statements, including their calculation method and a clear reconciliation to IFRS-defined subtotals. This new requirement enhances financial transparency and consistency.

Furthermore, IFRS 18 provides enhanced aggregation and disaggregation principles, offering new guidance on how to group or break down financial information for clarity. This ensures that material information is not obscured, allowing for more insightful financial statement presentation. These IFRS 18 reporting requirements are set to reshape how companies present their financial performance.

For F&A professionals, IFRS 18 represents a transformative shift that will require fundamental changes to systems, processes, and strategic thinking, as the new five-category framework and mandatory subtotals will fundamentally alter how financial performance is viewed and analysed. 

Most critically, successful implementation requires specialised F&A talent with a deep understanding of these new standards and cross-functional collaboration, positioning this not merely as a compliance exercise but as a strategic opportunity to enhance financial communication and decision-making capabilities. Let’s take a closer look at the strategic implications of the new standard for F&A professionals.

strategic implications for F&A professionals.

The introduction of IFRS 18 goes far beyond a simple adjustment in presentation of financial information; it has profound strategic implications for you and your organisation. You are at the helm to navigate these changes by building resilience for your team and ensuring a smooth transition.

First and foremost, the impact on financial analysis and KPIs is direct. The new, mandatory subtotals such as "Operating profit or loss" and "Profit or loss before financing and taxes" will fundamentally change the way you calculate and interpret financial ratios. Traditional metrics such as EBIT or EBITDA may turn out differently, as components may shift to other categories. You must therefore critically reassess your current internal performance metrics. Are they still meaningful? Align your internal dashboards and management reports with this new reality. The financial analysis implications of IFRS 18 force you to take a fresh look at performance assessment.

In terms of investor relations and communication, IFRS 18 offers a unique opportunity. The standard aims to significantly improve the comparability of financial statements. This allows investors to analyse companies, including internationally and across different sectors, more easily and objectively. Your role as an F&A leader is to communicate proactively about these changes. Use your storytelling and presentation skills to inform your stakeholders – investors, analysts, banks – in a timely and clear manner about the impact on your figures. This manages expectations and underscores your commitment to financial transparency. These CFO reporting insights are invaluable for your investor relations finance strategy.

Next, consider internal reporting and budgeting. The new presentation structure of the income statement will inevitably require adjustments to your internal reporting packages. Budgeting processes and forecasting models must be updated to align with the new definitions and categories. This may mean that you need to review the current method of data collection and allocation within your organisation.

Finally, consider technology and systems adaptation. Your current ERP systems, consolidation tools and financial reporting software may not yet be ready for the new classifications, subtotals and the required detailed disclosures on MPMs. A thorough review is essential. Plan updates or even upgrades to accommodate the new data structures, tagging requirements and reporting formats. A robust system setup is crucial for watertight IFRS compliance. Anticipate this, as these are projects that require time and resources.

a practical roadmap for implementation.

Ready to master IFRS 18 implementation? Here's your comprehensive roadmap to not just comply, but excel in this transformative journey.

🔍 phase 1 - become the detective - early assessment & impact analysis: As an F&A professional, you'll spearhead a forensic examination of your organisation's financial landscape. You'll conduct a comprehensive review to identify exactly how IFRS 18 will reshape your financial statements and systems. This isn't just about ticking boxes—you're the strategic analyst uncovering opportunities for enhanced transparency and stakeholder communication.

⏰ phase 2 - master the time machine - retrospective application excellence: Here's where your expertise truly shines. You'll orchestrate the retrospective application requirement, skillfully restating comparative periods (such as FY 2026 for 2027 adoption). This complex undertaking positions you as the architect of historical accuracy, requiring your finest analytical skills and meticulous attention to detail.

🤝 phase 3 - champion cross-functional collaboration: You'll become the conductor of a symphony, bringing together finance, IT, investor relations, and legal departments. Your leadership will ensure seamless coordination across teams, transforming potential challenges into collaborative victories.

📚 phase 4 - become the knowledge catalyst: You'll drive training and upskilling initiatives, empowering your entire F&A team with new requirements and judgment calls. This investment in knowledge positions you as the champion of professional development within your organisation.

📋 phase 5 -  create the audit trail master: You'll establish meticulous documentation processes, especially for subjective classifications like determining 'main business activities'. Your robust documentation will provide clear audit trails and support critical classification decisions, showcasing your strategic foresight and attention to detail.

conclusion: randstad as your navigator in the new reporting landscape.

IFRS 18 is more than a compliance exercise. It’s an opportunity to strengthen your financial communication and decision-making. This new standard requires specialised F&A talent, professionals with an in-depth understanding of these changes in accounting standards.

Randstad is ready to stand as your strategic partner. We help organisations to successfully navigate this transition. We identify and place the F&A professionals who are not only IFRS 18-compliant but also possess the strategic foresight to optimally leverage its benefits. With the right finance leadership skills and accounting standards expertise, you'll effortlessly navigate the new reporting landscape.