In April 2024, after a period of relative regulatory calm in the area of financial reporting, the IASB adopted a significant new standard, IFRS 18 ‘Presentation and Disclosure in Financial Statements’, which affects all companies reporting in accordance with IFRS. IFRS 18 aims to increase transparency and to improve comparability of information regarding the financial performance of companies.

IFRS 18 replaces the previous standard IAS 1 ‘Presentation of Financial Statements’ and is applicable for annual reporting periods beginning on or after January 1, 2027, with retrospective adjustment through restatement of the comparative period.

Key changes compared to IAS 1

Going forward, in the statement of profit or loss, two new subtotals must be reported: operating profit or loss, and profit or loss before financing and income taxes. Consequently, the corresponding revenue and expenses must be allocated to the following five categories, considering specified main business activities:

Operating

Investing

Financing

Income taxes

Discontinued operations

This structure applies regardless of whether an IFRS user presents expenses in the statement of profit or loss by nature or by function.

Furthermore, IFRS 18 contains specific regulations on when items must be aggregated based on shared characteristics or disaggregated based on characteristics that are not shared.

In the future, companies must provide additional explanations in the notes for performance measures that are determined for management purposes and publicly communicated but are not already required by other IFRS standards. These measures are referred to as Management-defined Performance Measures (MPM).

With the adoption of IFRS 18, further changes were made to numerous other IFRS standards, both editorially and substantively. This particularly affects presentation requirements in the cash flow statement according to IAS 7.

What companies should act upon now

The regulatory changes lead to a fundamentally altered presentation of the statement of profit or loss, affecting a core element of the overall financial reporting of companies. Due to the retrospective application of the standard by restating the comparative period (usually the financial year 2026), IFRS 18 already requires action and early engagement with regards to the implementation and impacts of the standard.

Our experts from the Accounting & Reporting Advisory Group will support you in the technical, procedural, and system-side implementation of the new standard, so that you can efficiently master the new regulatory challenges.