IFRS 18 – What’s new?

Key Takeaways

The IASB has introduced IFRS 18, ‘Presentation and Disclosure in Financial Statements’, a new standard replacing IAS 1.  While IFRS 18 retains many of IAS 1’s principles with minor adjustments, it does not impact the recognition or measurement of financial statement items. However, it may change how entities report their operating profit or loss.

Key principles introduced in IFRS 18 include:

• A revised structure for the statement of profit or loss, including new classifications for income and expenses and mandatory subtotals

• Mandatory disclosures for management-defined performance measures.

• Enhanced guidance on aggregation and disaggregation, applicable to both the primary financial statements and the accompanying notes.

  
  

Effective Date and Transition

IFRS 18 becomes effective for annual reporting periods starting on or after January 1, 2027, requiring retrospective restatement of comparatives. Early adoption is permitted, with disclosure required in the notes. The impact of IFRS 18 should not be underestimated, as its presentation and disclosure changes may require system and process adjustments. Entities should start preparing now to ensure a smooth transition. 

Why develop IFRS 18?

This new standard was introduced to improve comparability and transparency in performance reporting. IFRS 18 establishes new requirements to enhance the comparability of financial performance across similar entities, particularly by clarifying the definition of ‘operating profit or loss.’ Additionally, the mandated disclosures for certain management-defined performance measures will further improve transparency.

Who is impacted?

All entities reporting under IFRS Accounting Standards will be affected, with the same requirements applying to both public and private entities.

Key Changes

Note that this section does not provide an exhaustive summary of all the effects of IFRS 18 and its consequential amendments.

Classifications in the statement of profit or loss	All income and expenses must be classified into 1 of 5 categories: Operating Investing Financing  Income taxes Discontinued operations
Totals and subtotals in the statement of profit or loss	IFRS 18 requires the inclusion of the following mandatory subtotals: Operating profit or loss Profit or loss before financing and income taxes Profit or loss
Disclosures related to the statement of profit or loss	Entities must disclose management-defined performance measures (MPMs), effectively incorporating non-GAAP measures into the financial statements.
Aggregation and disaggregation	IFRS 18 strengthens guidance on aggregation and disaggregation, ensuring items are grouped based on shared characteristics. These principles apply throughout the financial statements, influencing both line item presentation and disclosures in the notes.
Consequential changes to IAS 7 Statement of Cash Flows	The starting point for the statement of cash flows will now be ‘operating profit or loss’  IFRS 18 eliminates the classification options for interest and dividend cash flows.

What are the benefits?

IFRS 18 aims to enhance the quality of financial reporting by:

• Providing investors more useful insights into financial performance.

• Improving comparability across companies and reporting periods. 

• Increasing transparency in how management-defined performance measures align IFRS Accounting Standards.

  
  

While IFRS 18 may introduce initial challenges and costs, the IASB has included measures to reduce implementation burdens. In the long term, the enhanced consistency and decision-making benefits are expected to outweigh the costs.

For further information or assistance, please contact Quazar at quazaroffice@quazar.mt.

Get in Touch:

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Martina Vassallo

mvassallo@quazar.mt / +356 2388 4600

Anastasia Debono

adebono@quazar.mt / +356 2388 4600