IFRS 18 changes explained: What UK businesses need to know before 2027

Overview of IFRS 18 presentation and disclosure changes

IFRS 18 Presentation and Disclosure in Financial Statements will replace IAS 1 and introduce significant changes to how financial information is presented and explained. Subject to UK endorsement, IFRS 18 applies to reporting periods beginning on or after 1 January 2027, with early adoption permitted if disclosed. 

The new standard aims to improve comparability, transparency and consistency in financial statements, responding directly to investor concerns about inconsistent profit subtotals, unclear non-GAAP measures, and poor aggregation of information. 

Why IFRS 18 is being introduced 

Users of financial statements have raised three key issues under IAS 1: 

• Inconsistent calculation of operating profit between companies 
• Limited transparency around alternative performance measures (APMs) 
• Over-aggregation that hides important financial detail 

IFRS 18 addresses these issues through targeted changes, while retaining many existing IAS 1 principles. 

Key IFRS 18 requirements you should understand 

Standardised income statement structure 

IFRS 18 introduces a defined structure for the statement of profit or loss, including: 

• Mandatory classification of income and expenses into operating, investing and financing categories 

• Two new required subtotals: 
•        Operating profit or loss
•        Profit loss before financing and income taxes 

These changes significantly improve comparability between companies. 

Management-defined performance measures (MPMs) 

IFRS 18 brings greater transparency to non-GAAP measures by introducing Management-defined performance measures (MPMs).

MPMs are subtotals used in public communications (e.g. investor presentations or press releases) that reflect management’s view of performance but are not defined by IFRS. 

Entities must now: 

• Disclose all MPMs in a single note 
• Reconcile each MPM to the closest IFRS subtotal 
• Explain why the MPM is useful to users 

Importantly, MPMs will fall within the scope of audit. 

Enhanced aggregation and disaggregation rules 

IFRS 18 strengthens guidance on how information should be grouped or separated. Key impacts include: 

• Clearer rules on breaking down “other” balances 
• More detailed disclosure of operating expenses 
• Improved consistency between primary statements and notes 

The aim is to ensure material information is not obscured. 

Changes to other IFRS standards 

IAS 7 statement of cash flows 

Key updates include: 

• Operating profit (as defined by IFRS 18) must be used as the starting point for the indirect method 
• Removal of accounting policy choices for classifying interest and dividends, improving comparability 

IAS 8 basis of preparation 

IAS 8 has been renamed and expanded to include requirements previously in IAS 1, clarifying how entities explain their accounting policies and basis of preparation. 

IAS 33 earnings per share 

Companies may disclose additional EPS measures based on IFRS 18 subtotals or MPMs, provided they are presented in the notes and calculated consistently. 

When does IFRS 18 apply and how to prepare

IFRS 18 is effective from 1 January 2027 and must be applied retrospectively, including reconciliations between IAS 1 and IFRS 18 figures for comparatives. 

Most organisations will need to: 

• Review financial statement layouts 
• Assess existing APMs and KPIs 
• Update systems, data capture and internal controls 

Early planning is strongly recommended. 

Get help with IFRS 18

With IFRS 18 fast approaching, early preparation can save time, cost and reporting risk. Contact our experts today to understand what the changes mean for your business and how to get ahead.