IFRS 18: Are Your Management Performance Measures Ready?

19 AUG 2026

Assurance

Reporting Standards

IFRS 18: Are Your Management Performance Measures Ready?

A Brief Guide for Entities to present and disclose their financial performance

Introduction

IFRS 18 – Presentation and Disclosure in Financial Statements, introduces specific disclosure requirements for Management-Defined Performance Measures (MPMs).

Many entities already communicate measures such as Adjusted Operating Profit, Adjusted EBITDA, Underlying Profit or Core Earnings outside their financial statements.

The major change is that, when such a measure meets the IFRS 18 definition of an MPM, information about it must now be disclosed within the financial statements, together with reconciliation and supporting explanations.

For accountants, this means moving from simply calculating a management performance measure to formally identifying, defining, reconciling, documenting and supporting it.

1. What Is an MPM?

Under IFRS 18, an MPM is a subtotal of income and expenses that:

is used in public communications outside the financial statements;
communicates management’s view of an aspect of the financial performance of the entity as a whole; and
is not a subtotal specifically required by IFRS Accounting Standards or otherwise excluded by IFRS 18.

Examples that may be MPMs

Adjusted Operating Profit
Adjusted EBITDA
Underlying Profit
Core Earnings

The name of the measure alone does not determine whether it is an MPM. The accountant must assess whether the measure meets the IFRS 18 definition.

Not every *KPI is an MPM

Measure	MPM?
Adjusted Operating Profit**	Potentially Yes
Adjusted EBITDA**	Potentially Yes
Underlying Profit**	Potentially Yes
Revenue growth %	No
Free Cash Flow	No
Return on Equity	No
Number of customers	No
Operating Profit	No – IFRS-defined subtotal
Gross Profit	No

* KPI: Key Performance Indicator.
** Provided the measure meets the IFRS 18 definition of an MPM.

2. IAS 1 vs IFRS 18: What Changes?

IAS 1 – Before	IFRS 18 – Now
Adjusted Operating Profit: $23m	Adjusted Operating Profit: $23m
Could be communicated outside the financial statements.	If it qualifies as an MPM, related information is disclosed in the financial statements.
Calculation might be explained only in management reporting.	Formal definition and explanation are required.
No specific IAS 1 MPM reconciliation framework.	Reconciliation to the most directly comparable IFRS subtotal is required.
Limited formal requirements concerning adjustments.	Each reconciling item must be disclosed and explained.
Tax and NCI effects were not subject to an MPM-specific IAS 1 framework.	Tax and NCI effects of reconciling items are required.
Calculation methodology might be maintained internally.	Method and significant changes must be transparent and supported.

The key change

Before: Calculate and communicate the measure.
Now: Identify → Define → Explain → Reconcile → Support → Disclose.

3. Visual Example: Adjusted Operating Profit

Assume management publicly uses Adjusted Operating Profit to communicate its view of underlying operating performance.

IAS 1

IFRS 18

Calculation	USD
Operating Profit	21,000,000
Less: impairment for goodwill	(2,000,000)
Add: Gains on disposal of PPE	1,000,000
Profit	20,000,000

The measure might have appeared in an investor presentation or management report with limited explanation of the adjustments.

MPM Reconciliation	USD	Income tax expense*	Profit attributable to NCI**
Operating Profit	20,000,000
Impairment for goodwill	2,000,000
Gains on disposal of PPE	(1,000,000)
Adjusted Operating Profit	21,000,000

The financial statement note must also provide the required information explaining the MPM, including the aspect of performance it communicates and how it is calculated, together with the required information about reconciling items and their tax and NCI “Non Controlling Interest” (also called minority interest) effects where applicable.

* Management should calculate the income tax expense effect accordingly to the applicable rates in the country (i.e. Lebanon income tax is 17%)
** Management should allocate the share of profit to the NCI where applicable.

4. Visual Example: Adjusted EBITDA

IAS 1 – Typical Communication

	USD
Adjusted EBITDA	40,000,000

The measure could have been publicly communicated without an IFRS-specific MPM note explaining the complete bridge.

IFRS 18 – If the Measure Qualifies as an MPM

Reconciliation	USD
Profit before tax	30,000,000
Add:
Interest	1,000,000
Depreciation	5,000,000
Amortisation	2,000,000
EBITDA	38,000,000
Add: Restructuring expense	2,000,000
Adjusted EBITDA	40,000,000

The accountant must be able to support:

the definition of Adjusted EBITDA;
how the measure is calculated;
why management uses it;
each reconciling adjustment;
the required tax effects;
the required NCI effects, where applicable; and
comparative information.

5. Public Communication Matters

A performance measure does not become an MPM simply because management calculates it internally.

IFRS 18 focuses on measures used in public communications outside the financial statements.

Examples of public communications include management commentary; press releases; and investor presentations.

Therefore, accountants need more visibility than the year-end financial statements.

Accountant’s new question:
What performance measures is the entity communicating publicly?

The finance team should therefore coordinate with investor relations, management and communications teams to identify potential MPMs before preparing the financial statements.

6. How Should the Accountant Prepare?

The process should follow this sequence:

Public Communications → Identify Performance Measures → Determine Which Meet the MPM Definition → Define Each MPM → Identify Most Directly Comparable IFRS Subtotal → Prepare Reconciliation → Calculate Tax and NCI Effects → Prepare Comparative Information → Prepare IFRS 18 MPM Disclosure

7. Maintain an MPM Register

A practical MPM register could contain:

MPM	Public Source	IFRS Reference Point	Adjustments	Tax Effect	NCI Effect	Owner
Adjusted Operating Profit	Investor presentation	Operating Profit	Impairment for goodwill / Gains on sale of PPE	✔	✔ if applicable	Finance
Adjusted EBITDA	Earnings release	Most directly comparable IFRS subtotal	D&A / restructuring	✔	✔ if applicable	Finance

The register should help ensure that the measures disclosed in the financial statements are consistent with the measures management communicates publicly.

8. Accountant Readiness Checklist

Before IFRS 18 becomes effective, accountants should:

identify performance measures used in public communications;
determine which measures meet the IFRS 18 definition of an MPM;
maintain an MPM register;
formally define each MPM;
document why management uses the measure;
document the calculation methodology;
identify the most directly comparable IFRS subtotal;
prepare the required reconciliation;
support each reconciling adjustment;
calculate the required tax effects;
calculate NCI effects where applicable;
prepare comparative information;
document changes in MPMs or calculation methodology; and
maintain a clear audit trail supporting the disclosure.

Under IAS 1, management performance measures could largely sit outside the IFRS financial statement framework.

Under IFRS 18, when a performance measure qualifies as an MPM, the accountant must bring transparency around that measure into the financial statements.

The accountant’s responsibility is therefore no longer simply:

“How did we calculate this number?”

It becomes:

“Why do we use it, where did it come from, how does it reconcile to IFRS, and can every adjustment be supported?”

IFRS 18 turns qualifying management performance measures from externally communicated numbers into formally disclosed and supportable financial information.