The International Accounting Standards Board (IASB) is expected to publish a new IFRS® Accounting Standard—IFRS 18—in April 2024. IFRS 18 will significantly update the requirements for presentation and disclosures in the financial statements, with a particular focus on improving the reporting of financial performance.

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  • IFRS 18 will replace IAS 1 Presentation of Financial Statements.
  • IFRS 18 will introduce three key new requirements on presentation and disclosures in the financial statements, with a focus on the income statement and reporting of financial performance.
  • Existing requirements of IAS 1 are expected to be brought forward into IFRS 18 or other IFRS Accounting Standards with only limited changes.

IFRS 18 will affect companies across all industries that prepare financial statements under IFRS Accounting Standards.

It will not change how companies recognise and measure items in the financial statements. However, it will affect the way companies present and disclose information in those statements.

IFRS 18 will be effective for annual reporting periods beginning on or after 1 January 2027, with early application permitted.

Comparatives will require restatement.

IFRS 18 will require:

  • income and expenses in the income statement to be classified into three new defined categories—operating, investing and financing—and two new subtotals—“Operating profit or loss” and “Profit or loss before financing and income tax”.
  • disclosures about management-defined performance measures (MPMs) in the financial statements. MPMs are subtotals of income and expenses used in public communications to communicate management’s view of the company’s financial performance.
  • disclosure of information based on enhanced general requirements on aggregation and disaggregation. In addition, specific requirements to disaggregate certain expenses, in the notes, will be required for companies that present operating expenses by function in the income statement.

Investors want comparable subtotals and more disaggregation of information to better understand a company’s performance and enable greater comparability between companies. While some companies present an “Operating profit or loss” subtotal today, it is calculated differently—this diversity makes it challenging for investors to compare across companies.

Additionally, companies are increasingly using non-GAAP measures (or alterative performance measures) to explain their financial performance. The lack of information about these measures or lack of high-quality disclosures have raised concerns from investors. This has also been a topical issue for the UK Financial Reporting Council (FRC)—until its most recent 2022/23 corporate reporting review cycle, reporting on non-GAAP measures consistently featured in the top ten issues it raised with companies.

IFRS 18 will enable companies to communicate the information which investors value more effectively and consistently.

What IFRS 18 may mean for you

IFRS 18 may impact many aspects of how information is reported in the income statement. Companies may also need to change the extent of information disclosed in the notes to the financial statements. Financial reporting systems, processes and controls may need updating for these changes. As current reporting practices and maturity of reporting systems differ among companies, the level of impact will likely vary.

Companies that already present an “Operating profit or loss” subtotal may need to change how they calculate it. Companies may need significant time and effort to identify which categories their income and expenses should sit within the income statement. The nature of a company’s business activities could also determine the extent of the impact—for example, companies with multiple business activities may need to exercise greater judgement in determining if revenue from all their activities would be classified within the operating category.

The new requirements on MPMs may impact current communication practices to investors and other stakeholders. Companies will need to plan how the different presentation and disclosure changes that IFRS 18 will bring will be explained to their stakeholders.

Our future blog, once IFRS 18 is published, will explore the potential impacts of the new standard in more detail, how companies can start getting prepared and how KPMG can help. To ensure you receive our resources in real time via email, click here to sign-in or create an account in our Accounting Insights centre.

If you want to discuss this in more detail, please contact your usual KPMG account lead or one of our experts below.

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