IFRS 18

Preparing for IFRS 18: What you need to know

The new IFRS 18 Presentation and Disclosure in Financial Statements is coming soon.

This new standard replaces IAS 1 Presentation of Financial Statements and introduces a fresh approach to how financial statements are presented and disclosed. IFRS 18 aims to improve clarity, consistency and comparability across financial reports.

What’s changing under IFRS 18?

IFRS 18 brings five major updates to how financial statements are presented:

Clearer categories for income and expenses

All income and expenses must now be grouped into five categories: investing, financing, operating, income taxes and discontinued operations. These categories differ from those used in the cash flow statement and vary depending on your business activities.

New required subtotals

Two new subtotals must be shown:

  • Operating profit or loss
  • Profit or loss before financing and income taxes (which includes operating results plus investing items).

Improved labelling and grouping

Financial statements must follow stricter rules for how items are labelled, grouped and broken down, making reports easier to read and compare.

New disclosures for performance measures

If your organisation uses custom performance measures, called “management-defined performance measures”, you’ll need to explain them clearly in your financial statements.

Updates to other standards

IFRS 18 also changes other accounting standards, including IAS 7 Statement of Cash Flows and IAS 8 Basis of Preparation of Financial Statements, to align with the new presentation rules.

When does IFRS 18 take effect?

IFRS 18 is effective for annual reporting periods beginning on or after 1 January 2027. However, when first applying the standard,  entities must restate comparative information, which means implementation will require significant preparation time for most organisations. 

IFRS 18 will apply to both annual and half-year reporting periods, as shown in the table below.

 

Annual periods

Half-year periods (if reporting under IAS 34 Interim Financial Reporting)

Reporting start date

Annual reporting ends:

Restate profit or loss for:

Restate opening balance sheet

Half-year reporting ends:

Restate half-year profit or loss:

1 January

31 December 2027

31 December 2026

1 January 2026

30 June 2027

30 June 2026

1 April

31 March 2028

31 March 2027

1 April 2026

30 September 2027

30 September 2026

1 July

30 June 2028

30 June 2027

1 July 2026

31 December 2027

31 December 2026

1 October

30 September 2028

30 September 2027

1 October 2026

31 March 2028

31 March 2027

What’s involved in implementing IFRS 18 and why you should start now?

Implementing IFRS 18 is more than just updating your financial statements. It may require changes across systems, processes, contracts and communications. Here’s what to expect:

System updates

You’ll need to tag income and expenses into new categories: investing, financing, operating, income taxes and discontinued operations. This can be complex for groups using multiple financial reporting systems, especially if some entities have different main business activities.

Reviewing how financial data is grouped and labelled

IFRS 18 introduces stricter rules for how items are aggregated, disaggregated and labelled,  affecting both the profit or loss statement and the balance sheet.

New disclosures for performance measures

If your organisation uses custom profit metrics, known as management-defined performance measures, you’ll need new systems and controls to support the required disclosures.

Contract and KPI impacts

Contracts that rely on profit measures—like bank covenants and employee KPIs—may need to be reviewed and renegotiated. The new mandatory subtotals (operating profit or loss, and profit before financing and income tax) could affect how targets are set.

Investor communications

Investor relations teams should be aware that any new performance measures used in public communications must also be disclosed and reconciled in the financial statements.

How BDO can help

Our IFRS & Corporate Reporting team offers tailored guidance to help you navigate these new requirements with confidence. We offer IFRS 18-focussed training modules and webinars, designed for finance teams.

IFRS 18 resources

Articles

Corporate Reporting Insights

BDO's monthly newsletter, Corporate Reporting Insights, keeps you up to date with the latest Australian and global developments in corporate financial and sustainability reporting.

BDO Global IFRS Resources

BDO Global IFRS Resources

The following publications have been produced by the BDO Global IFRS group:

► IFRS at a Glance

A high level overview of International Financial Reporting Standards (IFRSs), including International Accounting Standards and Interpretations.

  • IFRS 18 Presentation and Disclosure in Financial Statements (refer Appendix 1 – effective for annual periods beginning on or after 1 January 2027).

► IFRS in Practice

Practical information about the application of key aspects of IFRS, including industry specific guidance.

► IFR Bulletins

Focus on the latest developments in international financial reporting.

Webinars

Webinars

BDO Australia conducts monthly complimentary webinars as an easy way to stay up to date with changes to accounting standards and other financial reporting developments. Recent webinars on this topic include: