IFRS 18 – A new standard on presentation and disclosures. What is changing in financial reporting?

The way financial information is presented is of key importance to investors, analysts and other stakeholders. In response to long-standing expectations for greater comparability and transparency of financial statements, the International Accounting Standards Board (IASB) introduced the new IFRS 18 – Presentation and Disclosure in Financial Statements, published on 9 April 2024.
 

The standard replaces IAS 1 and applies to reporting periods beginning on 1 January 2027, together with the requirement to retrospectively restate comparative information.
 

The main objective of IFRS 18 is to enhance the transparency, comparability and consistency of presented financial information, while maintaining the existing principles of measurement and recognition.
 

Key changes introduced by IFRS 18
 

1. New categories of income and expenses

IFRS 18 introduces a uniform classification of all items of financial performance into five categories:

• Operating activities – a residual category including items not classified in the other categories, typically related to an entity’s main business activities.
• Investing – items related to assets that generate returns largely independently of other resources.
• Financing – income and expenses arising from obtaining capital and servicing financial liabilities.
• Income tax.
• Discontinued operations.
   

2. Two mandatory subtotals in the statement of profit or loss

One of the most important changes is the introduction of two mandatory subtotals presented in the statement of profit or loss:

• Operating profit or loss,
• Profit or loss before financing and income taxes.

This change is intended to organise and standardise the presentation of key financial performance measures across entities.
 

3. Mandatory disclosures on MPMs (Management-defined Performance Measures)

A new requirement is the obligation to present and provide detailed reconciliations of so-called management-defined performance measures (MPMs).
MPMs are indicators that are:

• used by management to assess the entity’s performance,
• publicly communicated,
• not defined by IFRS but relevant for evaluating the business.

Entities will be required to:

• describe the calculation methodology,
• explain the purpose of using the measure,
• provide a reconciliation to amounts derived directly from the financial statements.
   

4. Presentation of expenses – by nature or by function

The standard clarifies the principles for presenting operating expenses. Entities must consistently apply one of the following methods:

• by nature (e.g., depreciation, employee benefits),
• by function (e.g., cost of sales, administrative expenses),
• choosing the approach that best reflects how the business is managed.
   

5. Expanded disclosure requirements

IFRS 18 strengthens the principles of aggregation and disaggregation of information, requiring:

• greater detail,
• consistent grouping of line items,
• clear labelling of information in the statements and notes.

This change directly addresses demands from investors and other users of financial statements.
 

The impact of IFRS 18 on companies

Implementing IFRS 18 will be a significant organisational and technological challenge, including:

• redesigning the structure of the statement of profit or loss in line with the new categories and subtotals,
• adapting financial accounting and reporting systems,
• updating management KPIs and reports (including MPMs),
• ensuring consistent comparative information (2026),
• training finance, controlling teams and management boards,
• reviewing internal and external reporting processes.
   

Who does IFRS 18 apply to?

The standard will apply to all entities preparing financial statements under IFRS, regardless of industry.
The change does not affect recognition or measurement, but it significantly changes presentation and the scope of disclosures.
 

Why PKF Polska?

Implementing IFRS 18 requires experience, expertise and a well-planned process. PKF Polska can support your organisation comprehensively through:
 

1. Expert knowledge and experience

Our team has been researching and supporting IFRS reporting entities for years, which means we understand both the technical and practical implementation challenges.
 

2. An individual approach – “tailor-made solutions”

Each organisation has its own specifics, and IFRS 18 often requires a detailed analysis of the business model and processes. We provide an approach based on the entity’s real needs.
 

3. Experience in audit and regulatory change implementation

Changes in reporting standards are part of our everyday work. We monitor regulations, interpretations and market practices to support our clients in line with the latest requirements.
 

4. Support throughout the entire transformation process

From impact assessment, through adjustments to processes and financial systems, to testing, training and documentation – we guide the organisation through the full IFRS 18 implementation journey.