IFRS 18 will introduce significant changes to presentation and disclosure within IFRS financial statements, including mandatory subtotals and enhanced disclosure requirements for management performance measures (“MPMs”). For many groups, implementation may also require reassessment of reporting structures, ERP mappings and comparative reporting processes. IFRS 18 is effective for annual reporting periods beginning on or after 1 January 2027 and generally requires retrospective application, meaning groups may need to restate comparative prior-period presentation, subtotals, MPMs and reporting mappings to align historical reporting with the new requirements.
IFRS 18 implementation may affect chart of accounts structures, consolidation mappings, KPI reporting, ERP reporting dimensions, reporting packages, lender reporting, investor reporting, and comparative reporting procedures.
Key
Changes
1. New Structure of the Statement of Profit or Loss
One of the key changes introduced by IFRS 18 is classification of income and expenses into operating, investing and financing categories within the statement of profit or loss. IFRS 18 also introduces mandatory subtotals such as operating profit and profit before financing and income taxes.
Illustrative Presentation – Before vs. After IFRS 18
Profit & Loss by Nature
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Profit & Loss by Function
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Under IFRS 18, the operating category generally becomes the residual category for items not classified within investing or financing activities. For many groups, implementation may require reassessment of existing chart of accounts mappings, consolidation reporting structures and financial statement presentation policies.
2. Aggregation and Disaggregation Principles
IFRS 18 introduces enhanced guidance around aggregation and disaggregation of information within the financial statements and notes. The objective is to avoid obscuring material information through excessive aggregation while maintaining understandable financial statement presentation. In practice, implementation may require groups to reassess whether existing ERP mappings, chart of accounts structures, reporting package formats and disclosure templates provide sufficient granularity and consistency for IFRS 18 presentation and disclosure requirements, particularly regarding:
line-item structures,
note presentation formats,
grouping of similar transactions,
reporting package detail levels, and
presentation consistency across entities.
3. Enhanced Notes Disclosures
For many groups, implementation may require reassessment of note structures, disclosure granularity, supporting reconciliations and consistency between management reporting and statutory financial statement disclosures. In practice, this may include:
restructuring note disclosures to align with new IFRS 18 presentation categories,
preparing reconciliations for management-defined performance measures (“MPMs”) to IFRS subtotals,
increasing disaggregation of expenses, fair value movements or restructuring items previously presented within broader captions,
aligning KPI definitions used in investor reporting, lender reporting and statutory financial statements, and
updating reporting package templates and disclosure questionnaires submitted by subsidiaries to support enhanced group-level disclosures.
4. Management Performance Measures (“MPMs”)
IFRS 18 introduces enhanced disclosure requirements for management performance measures (“MPMs”), which are subtotals used in public communications outside the financial statements that complement IFRS-defined subtotals. Many groups currently use measures such as adjusted EBITDA, adjusted operating profit, normalized earnings, or lender-specific KPI metrics.
Under IFRS 18, entities need to provide clearer reconciliations, explanations of adjustments, consistency of definitions across reporting periods, and additional disclosures supporting MPM calculations. Areas which are likely to require assessment include:
governance over non-recurring adjustments,
consistency of KPI definitions across entities,
linkage between management reporting and statutory reporting,
approval procedures for adjusted metrics, and
documentation supporting reconciliation adjustments.
5. Consequential Impacts on Cash Flow Reporting
IFRS 18 implementation may also affect reporting consistency across cash flow reporting, management reporting, reporting packages, and reconciliation procedures. Consequential amendments to IAS 7 (Statement of cash flow) may also require reassessment of certain existing reporting policies and classification approaches. Implementation areas may include:
interest and dividend classifications,
reporting package consistency,
reconciliation controls between reporting components, and
interaction between P&L classifications and cash flow presentation.
6. Effects on Contracts, Agreements and Compensation
IFRS 18 implementation may also affect lender reporting, management compensation metrics and performance-based agreements where KPIs are linked to operating profit, EBITDA or management-defined performance measures. Groups may therefore need to assess whether existing contractual definitions, reporting covenants and internal performance metrics remain aligned with revised reporting presentation and disclosure structures.
ERP
Systems
For many groups, implementation may require assessment of whether existing ERP and consolidation systems support the required IFRS 18 reporting structure. Potential implementation areas include:
chart of accounts redesign,
reporting dimension structures,
consolidation mappings,
reporting package templates,
management reporting cubes,
comparative reporting structures, and
manual reporting adjustments currently performed outside ERP systems.
Groups operating multiple ERP environments or acquired reporting structures may require additional mapping and reconciliation procedures during implementation.
Checklist
Reporting & Governance
Identify all management performance measures currently used externally.
Define governance procedures for MPM approvals and adjustments.
Update accounting manuals and reporting instructions.
ERP & Consolidation
Reassess and re-map chart of accounts, consolidation mappings and P&L reporting structures.
Assess whether consolidation tools support IFRS 18 categories.
Evaluate manual reclassification procedures currently used during close.
Review reporting package consistency across subsidiaries.
Comparative Information
Assess whether historical information can be restated consistently.
Review availability of prior-period audit trails and reporting mappings.
Identify legacy reporting structures requiring manual reconstruction.
Communication & Stakeholders
Assess impacts on lender reporting and KPI reporting.
Align management reporting and statutory reporting terminology.
Communicate expected presentation changes to internal stakeholders.
Implementation
Although IFRS 18 implementation projects are still in early stages for private companies, several practical implementation themes are already becoming visible in preparation assessments and readiness discussions. For many groups, implementation challenges from fragmented and decentralized reporting environments, inconsistent KPI definitions, legacy ERP mappings and limited standardization across acquired entities.
Groups that historically evolved through acquisitions or decentralized growth structures may therefore require broader implementation assessments across Finance, Controlling and reporting system functions. In practice, many groups are already performing dry-runs, reassessing mappings and ERP capabilities, evaluating KPI governance structures and preparing comparative reporting information ahead of IFRS 18 implementation.
Conclusion
IFRS 18 will introduce a more standardized structure for presentation of financial performance and enhanced disclosure requirements for management-defined performance measures. For many international and middle-market groups, implementation efforts may extend beyond technical accounting analysis and require assessment of reporting structures, ERP environments, management reporting practices and comparative reporting capabilities.
Although market practice is still evolving ahead of implementation, early assessment of reporting structures, governance procedures and reporting systems may help finance teams prepare for a smoother transition once IFRS 18 becomes effective.
About Group Accounting Partner
Group Accounting Partner is a modern, AI-enabled accounting advisory boutique specializing in group accounting, consolidation, and financial reporting for PE/VC-backed companies and international mid-market groups.