Understanding IFRS 18: Implications for your organisation

IFRS 18 Presentation and Disclosure in Financial Statements (“IFRS 18”) marks a significant shift in how companies present, disclose and communicate financial performance.

Now is the time for companies to review their systems, make critical judgments and prepare for a more connected and insightful future in financial statement presentation and disclosure.

Developed in response to growing investor demand for more relevant and comparable data, IFRS 18 aims to provide consistency in presentation of the income statement alongside more disaggregated information.

Further, key non-GAAP measures that meet the definition of management performance measures (“MPMs”), will now be integrated into audited financial statements, fostering greater transparency and consistency.

Groups with multiple activities might find it quite judgmental in terms of what's their main business activity or not. And that has big implications in terms of what goes into the operating piece of their income statement and what goes elsewhere.

David Drought

Director

KPMG in Ireland

Key changes

A structured, transparent approach - IFRS 18 means transitioning from a variety of income statement formats to a uniform, easily comparable structure. Key changes include:

In addition to the existing categories of income tax and discontinued operations, IFRS 18 requires income and expenses to be classified into three new categories being operating, investing and financing – depending on the company’s main business activities.

Additionally, IFRS 18 introduces new subtotals to provide investors with clearer insight into the company’s operating performance.

IFRS 18 mandates that companies classify and present operating expenses by nature and/ or function directly on the face of the income statement, with additional disclosures (by nature) for those items presented by function on the face of the income statement.

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Under IFRS 18, certain non-GAAP measures—now formally called MPMs—must be incorporated into the audited financial statements.

To qualify as an MPM, the measure must be presented as a subtotal of income and expenses, have been used in public communications outside the financial statements and reflect management’s view of financial performance of the entity as a whole.

A single-note should be disclosed for all measures that meet the definition of an MPM detailing why it provides useful information, how it is calculated and reconciliation to an IFRS-defined subtotal.

IFRS 18 provides enhanced guidance on aggregation and disaggregation of information based on shared and non-shared characteristics. This includes guidance on whether information is presented in the primary statements or further disaggregated in the notes.

IFRS 18 further requires clear and understandable MPM labels, discourages labelling items as “other” and requires companies to provide additional disclosures where such labels continue to be used.

The classification of income and expenses have these knock-on implications on other areas like foreign exchange, which could see these types of movements being presented across multiple categories.

Naazneen Moosa

Associate Director

KPMG in Ireland

Next steps

As IFRS 18 is effective for annual periods beginning on or after 1 January 2027 with retrospective application, now is the time to kick-start your IFRS 18 journey.

Involve and communicate with all impacted stakeholders including investors, finance, IT and tax teams;
Conduct an initial impact assessment with consideration of the implications on judgements, systems, processes and controls;
Monitor the changes in the local reporting landscape; and
Appropriately track information for the FY2026 comparatives.

How can we help you?

To support your transition to IFRS 18, we have a suite of resources including our First Impressions publication which provides our detailed insights and comprehensive analysis on applying IFRS 18. We also have a high-level guide and video designed to help you navigate the changes with clarity and confidence.

KPMG Ireland’s Accounting Advisory Services team stands ready to support you with the transition to IFRS 18. If you would like to discuss how these changes may impact your business or need tailored support, please reach out to our team—we’re here to help.