In April 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements, replacing IAS 1 for periods beginning January 1, 2027. On the surface, IFRS 18 looks like a reshaping of the income statement: new categories, mandatory subtotals, and tighter rules for performance measures. But beneath the headlines lies the real challenge: the impact on finance systems, data models, and EPM platforms.
What’s Changing in the Income Statement
IFRS 18 introduces a new structure for the statement of profit or loss:
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Two mandatory subtotals: operating profit and profit before financing and income taxes.
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Five distinct categories for classifying income and expenses: operating, investing, financing, income taxes, discontinued operations.
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Expanded disclosure requirements, including management-defined performance measures (MPMs), which must be reconciled to IFRS-defined totals and disclosed in a single note.
While these changes seem straightforward, they ripple across the entire reporting ecosystem.
Why Finance Systems Will Feel the Pressure
General Ledger Restructuring
Transactions must be captured with greater granularity. Many current ledger and cost center structures will not map cleanly to the new categories. Without redesign, companies risk heavy reliance on manual reclassifications.
Data Integration and Consolidation
IFRS 18 demands seamless flows from ERP into consolidation and EPM systems. Existing mappings are often rigid, not built for structural change. This raises the stakes: can your consolidation platform still act as a single source of truth when the categorization logic shifts?
Chart of Accounts in EPM Platforms
EPM hierarchies, groupings, and roll-ups will need adjustment to align with IFRS 18. Legacy account structures—often bloated and inconsistent—are particularly vulnerable. This transition is an opportunity to rationalize and simplify the chart of accounts, making systems more resilient to future regulatory changes.
Reports, Rules, and Disclosures
Business rules that calculate key metrics—such as EBIT—must be redefined. Reports, dashboards, and disclosure templates require re-engineering. IFRS 18 also brings new audit requirements for MPMs, meaning disclosures will face greater scrutiny.
Beyond External Reporting
The ripple effects extend into the full performance management cycle:
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Forecasting and budgeting must mirror the new categories to keep actuals and plans aligned.
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KPIs and performance frameworks tied to EBIT or similar measures will need recalibration.
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Investor relations teams must prepare to explain and reconcile new subtotals.
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Internal reporting—which often mirrors statutory formats—will also need updating.
How to Approach IFRS 18 Implementation
Treat IFRS 18 as a transformation project, not just a compliance exercise. A structured approach helps minimize disruption:
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Discover and Explore
Map IFRS 18 requirements against your current ledger, consolidation, and reporting setup. Identify gaps and dependencies. -
Redesign and Simplify
Restructure your chart of accounts, mappings, business rules, and reports. Take the chance to eliminate unnecessary complexity. -
Test and Validate
Run parallel reporting for comparatives (2026 data) before IFRS 18 goes live in 2027. Ensure both accounting and technical teams are aligned.
10 Questions to Start Your IFRS 18 Assessment
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Can our general ledger capture the required granularity?
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Are ERP-to-consolidation mappings flexible enough?
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Do we need to restructure the chart of accounts in our EPM system?
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How will subtotals like “operating profit” be recalculated?
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Have we identified all affected reports and disclosures?
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Are our systems ready to disclose and reconcile MPMs?
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Can our consolidation platform still be our “single source of truth”?
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Are forecasting and budgeting aligned with IFRS 18?
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What’s the impact on KPIs and performance management?
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Have we planned for parallel reporting before 2027?
Conclusion: Make IFRS 18 an Opportunity
IFRS 18 is more than a compliance requirement—it’s a chance to future-proof your finance and reporting systems. By starting early, you can simplify structures, strengthen processes, and make reporting more transparent and adaptable.
If you want to understand how IFRS 18 will impact your finance, consolidation, and EPM systems, we can help you map the impact, identify opportunities, and create a practical roadmap for smooth implementation.
Contact us today to discuss how to turn IFRS 18 into a strategic advantage for your organization.
