IFRS 18 – Presentation and Disclosure in Financial Statements

IFRS 18, Presentation and Disclosure in Financial Statements, is an International Financial Reporting Standard issued by the International Accounting Standards Board (IASB) on 9 April 2024. It establishes the requirements for the presentation and disclosure of information in general purpose financial statements and replaces IAS 1 – Presentation of Financial Statements. It is effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted.

Objective

The objective of IFRS 18 is:

To set out requirements for the presentation and disclosure of information in general purpose financial statements to help ensure that they provide relevant information that faithfully represents an entity’s assets, liabilities, equity, income and expenses. (IFRS 18, paragraph 1)

The standard seeks to improve:

• Transparency of financial reporting.
• Comparability between entities.
• Consistency in financial statement presentation.
• The usefulness of financial information for investors and other users.

Purpose

The primary purpose of IFRS 18 is to improve how financial performance is communicated. Unlike IAS 1, which allowed significant flexibility in presenting the statement of profit or loss, IFRS 18 introduces a more structured approach.

Its key purposes include:

• Standardizing the presentation of the statement of profit or loss.
• Introducing defined categories for income and expenses:
  • Operating
  • Investing
  • Financing
• Requiring mandatory subtotals, including:
  • Operating profit or loss
  • Profit or loss before financing and income taxes
• Improving aggregation and disaggregation of financial information.
• Increasing transparency around management-defined performance measures (MPMs), such as non-GAAP performance metrics used in public communications.
• Enhancing comparability across companies, industries, and reporting periods.

Field of Application (Scope)

IFRS 18 applies to:

• All entities preparing general purpose financial statements in accordance with IFRS Accounting Standards.
• Both public and private entities that report under full IFRS.

It applies to the presentation and disclosure of all primary financial statements, including:

• Statement of Profit or Loss
• Statement Presenting Comprehensive Income
• Statement of Financial Position
• Statement of Changes in Equity
• Statement of Cash Flows
• Notes to the Financial Statements

However, IFRS 18 does not prescribe the recognition or measurement of assets, liabilities, income, or expenses. Those requirements remain within other IFRS Accounting Standards (e.g., IFRS 9, IFRS 15, IFRS 16, IAS 12). IFRS 18 governs how recognized amounts are presented and disclosed, rather than whether or how they are recognized or measured.

Summary