Although IFRS 18 will apply from 1 January 2027, preparations should begin now. The retrospective application of the standard, the need to restate comparative information and its impact on interim reporting mean that the analysis of the changes should not be left until the last minute. Find out which measures should already be planned today.

IFRS 18, Presentation and Disclosure in Financial Statements, will apply to annual reporting periods beginning on or after 1 January 2027. It may therefore appear that organisations still have plenty of time to prepare for the new requirements.

In practice, however, beginning implementation work only in 2027 may prove too late. This is primarily due to the retrospective application of the standard and the need to assess its impact on financial reporting sufficiently early.

In our previous article, we discussed the most important changes introduced by IFRS 18 and the expectations of the European Securities and Markets Authority (ESMA). We now address another question that many organisations are asking: why is it worth starting preparations today?

When does IFRS 18 become effective?

IFRS 18 will replace IAS 1, Presentation of Financial Statements, and will apply to annual reporting periods beginning on or after 1 January 2027. Earlier application is also permitted.

At the same time, the standard will be applied retrospectively in accordance with the requirements of IAS 8. This means that, upon initial application, an entity will be required to restate the comparative information presented in its financial statements as appropriate.

It is precisely this requirement for retrospective application that makes it inadvisable to leave preparations until the last minute.

Why should organisations not wait until 2027?

Although IFRS 18 will become effective in 2027, 2026 will be a key preparation period for many organisations.

Before implementing the new standard, organisations should assess its impact on the presentation of financial information, evaluate the availability of the data required to prepare comparative information and identify areas that may require changes.

Depending on the nature of the entity’s activities, this may also involve reviewing its reporting processes, the tools used to support the preparation of financial statements and the management-defined performance measures (MPMs) currently in use.

Starting this work sufficiently early makes it possible to spread the implementation process over time and reduce the risk of carrying out the project under pressure from approaching deadlines.

Impact of IFRS 18 on interim reporting

IFRS 18 will be particularly important for issuers preparing interim financial reports. In practice, the first financial statements prepared under the new requirements may be the interim financial statements for the first reporting period of 2027, for example the report for the first quarter of 2027, where the entity is required to prepare such a report in accordance with IFRS Accounting Standards.

This means that the structure and presentation of information in such interim financial statements should comply with IFRS 18 and should subsequently be applied in the annual financial statements for 2027. Continuing to use the 2026 reporting format would not meet one of the standard’s main objectives: ensuring comparability between financial statements for different reporting periods, including interim periods.

Because IFRS 18 is to be applied retrospectively, comparative information for the corresponding periods of 2026 presented in the 2027 interim financial statements will also need to be restated using the new presentation format.

For issuers, this means that comparative information will need to be prepared in advance, statement of profit or loss items will need to be mapped to the new categories, and the impact of the changes on the measures used and on market communications will need to be assessed.

For this reason, work on the target format of the financial statements and the process for preparing comparative information should begin before the start of 2027. This will reduce the risk that the first interim reporting period after IFRS 18 becomes effective will have to be completed under significant time pressure.

ESMA also highlights the need for early preparation

ESMA also emphasises the importance of beginning preparations sufficiently early. The regulator notes that issuers should assess in advance the impact of IFRS 18 on the financial statement preparation process, the preparation of comparative information and the organisation of the reporting process.

In practice, this means that an assessment of the new standard’s impact should be completed before its mandatory application.

What should be done now?

The first step should be to assess the impact of IFRS 18 on the entity’s financial reporting.

In particular, organisations should:

• assess the impact of the new requirements on the presentation of financial information;
• identify areas requiring changes to disclosures;
• review the performance measures currently used, including MPMs;
• verify the availability of the data required for retrospective application of the standard;
• prepare the target format of the financial statements in accordance with IFRS 18, including for the purposes of the first interim reporting period in 2027;
• prepare a timetable for the next stages of implementation.

Beginning this work sufficiently early will enable the organisation to prepare efficiently for the mandatory application of IFRS 18 from 2027 and reduce the risk of introducing changes at the last minute.