IFRS 18 – Presentation and Disclosure in Financial Statements

IFRS 18 Presentation and Disclosure in Financial Statements is a new accounting standard issued by the International Accounting Standards Board (IASB) that impacts all companies reporting under IFRS, regardless of industry sector.

Scope and impact

IFRS 18 introduces a new framework for presenting and disclosing financial statements. It significantly impacts how companies report performance by mandating clearer income statement categories, standardized subtotals and transparent disclosure of management-defined performance measures (MPMs).

Aim of IFRS 18

These changes aim to enhance comparability and investor confidence, requiring companies to adapt systems, processes and reporting practices well ahead of the effective date.

Application

IFRS 18 replaces IAS 1 and becomes effective for annual reporting periods beginning on or after 1 January 2027, subject to endorsement by the EU, with earlier application permitted.

IFRS 18 must be applied retrospectively, hence several companies have already started their implementation of the standard ahead of the effective date.

Aim of IFRS 18 Application

Aim of IFRS 18

These changes aim to enhance comparability and investor confidence, requiring companies to adapt systems, processes and reporting practices well ahead of the effective date.

Application

IFRS 18 replaces IAS 1 and becomes effective for annual reporting periods beginning on or after 1 January 2027, subject to endorsement by the EU, with earlier application permitted.

IFRS 18 must be applied retrospectively, hence several companies have already started their implementation of the standard ahead of the effective date.

Current and future challenges for companies implementing IFRS 18

KPMG has observed the following recurring challenges in the implementation of IFRS 18:

Complex classification of transactions into operating, investing and financing categories.
Increased disclosure burden, including mandatory information on MPMs.
System and process redesigns (including chart of accounts redesign and data management).
Significant change management and cross-functional coordination involving multiple departments and stakeholders.

Actions companies will need to take

Decisions to be taken

These include:

How to classify all income and expenses into the specified categories
How to provide new specified totals and subtotals in the statement of profit or loss, and
How to enhance disclosures (including the notes to the financial statements) to comply with the standard’s requirements.

Implications of not taking action

The implications of not implementing IFRS 18 could be significant. They include, but are not limited to: regulatory non-compliance, reduced transparency and comparability, operational and systematic risks, audit and assurance challenges, and strategic and performance reporting gaps.

How can KPMG help?

KPMG can assist its clients with the following key IFRS 18 related services:

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Impact assessment

Analyzing the existing presentation of the financial statements, highlighting changes required by IFRS 18, suggesting alternative disclosures and performing industry benchmarking.

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Design*

Improving data gathering processes, analyzing the chart of accounts, enhancing transaction recording systems and developing updated control procedures.

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Workshops/trainings

providing training sessions explaining the IFRS 18 requirements, discussing the latest developments and sharing KPMG insights on various matters relating to IFRS 18.

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Implementation*

Categorizing financial items as per the IFRS 18 standard, providing the draft financial statements and linking existing control processes with enterprise resource planning (ERP).

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Post-implementation

Providing ongoing support relating to technical accounting queries and offering ongoing guidance on resolving accounting challenges relating to IFRS 18.

* Services which might not be applicable to audit clients of KPMG Luxembourg, and which are subject to independence requirements.

Why KPMG?

We focus on your individual situation

By taking a client-centric approach, we always put your specific needs and objectives at the forefront.
We have the knowledge

We can leverage our deep understanding in this field as well as our experience in assisting institutions with industry-proven implementation solutions.
We have the right team

Our team brings extensive expertise in such areas, having successfully supported numerous institutions in similar projects.