May 2026
IFRS 18 replaces IAS 1 and introduces new income statement classification, two mandatory subtotals, and disclosure requirements for management-defined performance measures. Effective from 2027 with 2026 comparatives required — implementation starts now.
Last updated: May 2026 — reflects the final IFRS 18 standard and updated 2026 implementation guidance from major accounting bodies.
IFRS 18 is the most significant change to financial statement presentation in two decades. It replaces IAS 1 — the standard governing how companies present their financial results since 2007 — with new rules that restructure the income statement, introduce mandatory subtotals, and impose transparency requirements on the performance measures that companies use to tell their financial story.
Technically mandatory for annual periods beginning on or after 1 January 2027, IFRS 18 requires comparative 2026 figures restated under the new rules. That means effective implementation begins now — not at the start of 2027. Finance teams that are not already working through the implications are already behind the curve.
This guide explains what IFRS 18 changes, how it differs from IAS 1, who is affected and when, and what finance teams need to do to be ready.
IFRS 18 — formally titled Presentation and Disclosure in Financial Statements — is a new accounting standard issued by the International Accounting Standards Board (IASB) to address a persistent investor complaint: income statements under IAS 1 were too flexible. Companies could structure subtotals, label line items, and define performance measures in ways that made cross-company comparisons difficult and, in some cases, obscured the underlying health of the business.
The IASB's solution was a standard that brings structure and comparability to how financial results are presented. IFRS 18 does not change how transactions are recognised or measured — that remains governed by standards like IFRS 15 (revenue), IFRS 16 (leases), and IFRS 9 (financial instruments). What it changes is how those recognised amounts are classified, grouped, and disclosed on the face of the income statement and in the notes.
For most companies adopting IFRS, IFRS 18 is the highest-impact accounting change on the horizon. For companies that issue external performance measures — adjusted EBITDA, underlying profit, recurring revenue margin — the disclosure requirements will require process changes, not just template updates.
The most visible difference between IFRS 18 and IAS 1 is the introduction of a classified structure for the income statement. Under IAS 1, companies had broad latitude in how they ordered and labelled income and expense line items. IFRS 18 requires all items to be assigned to one of three defined categories: operating, investing, or financing. Operating covers core business activity. Investing covers returns from assets that are not integral to the main business — interest income earned by a non-financial company, for example, or gains from associate investments. Financing covers costs related to debt and financial liabilities.
Two mandatory subtotals must now appear on the face of the statement of profit or loss: operating profit — the net result of operating activities under the new classification — and profit before financing and income taxes. These are not new concepts, but they are now required line items with defined content, which eliminates the informal variation companies previously used to highlight the measures most favourable to their narrative. Companies that currently report EBITDA or adjusted operating profit as their headline metric will need to show how those figures reconcile to the IFRS 18 subtotals.
The third major change is the treatment of management performance measures, or MPMs. An MPM is any income-statement-related performance measure that a company discloses publicly but that is not required by IFRS. If your annual report or investor presentations include "underlying profit", "cash EBITDA", or any similarly labelled figure, IFRS 18 requires you to define it explicitly as an MPM, explain why management considers it useful, reconcile it to the nearest IFRS 18 subtotal, and disclose the associated tax effect and non-controlling interests. This is the change most likely to affect communications teams and investor relations functions, not just finance.
IFRS 18 applies to all entities that prepare financial statements under IFRS Standards. This includes listed companies, entities that have adopted IFRS voluntarily, and subsidiaries of groups that report under IFRS at a consolidated level. In Singapore, this captures companies listed on SGX and entities required to use Singapore Financial Reporting Standards (International) — SFRS(I) — which is aligned with IFRS.
The mandatory effective date is annual periods beginning on or after 1 January 2027. Early adoption is permitted and available immediately under both IFRS and SFRS(I). Companies that choose to adopt early can use IFRS 18 for their 2025 or 2026 financial statements, which may be advantageous for those seeking to get ahead of investor questions or align with group-level timelines.
The practical deadline for most companies is earlier than it appears. IFRS 18 requires comparative information for the prior period to be restated under the new classification. A company reporting under a 31 December year-end must present its 2027 income statement alongside a 2026 comparative restated under IFRS 18 categories and subtotals. The 2026 data must therefore be captured, classified, and documented under IFRS 18 rules from the start of the 2026 financial year — meaning implementation readiness is required by January 2026 for most entities, not January 2027.
The comparative requirement is the element of IFRS 18 implementation that most consistently catches finance teams off guard. Because financial statements present two years side by side — the current year and the prior year for comparison — adopting IFRS 18 in 2027 means you need 2026 to already be presented in IFRS 18 format. You cannot reconstruct the classification at year-end 2027 from a general ledger that was not structured around the new categories during 2026.
In practice, this means your chart of accounts needs to map cleanly to the three IFRS 18 income categories before the 2026 financial year starts. Items that sit at the boundary — interest income earned by a company where financial returns are part of the core business model, for example — require a deliberate classification decision documented before the first transaction of the year. Audit committees and external auditors will scrutinise these classification decisions, and restating them mid-year or at year-end creates unnecessary risk.
Reporting templates, board pack formats, and any external financial communications that reference income statement line items or subtotals also need to be updated to reflect IFRS 18 structure for 2026. Companies that have been reporting EBITDA or operating profit on a definition that does not align with the IFRS 18 operating profit subtotal will need to either redefine their communications metric or clearly label the divergence as an MPM with the required disclosures. The earlier this decision is made, the cleaner the transition will be.
IFRS 18 preparation requires three things to happen in sequence: understanding what the standard requires for your specific business, mapping your existing data and systems to those requirements, and updating your reporting infrastructure before the 2026 financial year produces data that needs to be restated. Teams that compress these steps into a single late-2026 sprint will face audit delays, management review cycles, and the risk of errors in comparative figures that persist into published reports.
Start with a classification analysis of your income statement. For each material line item, determine whether it belongs in the operating, investing, or financing category under IFRS 18 definitions. The investing and financing categories are defined narrowly — most items will land in operating — but the boundary cases require judgment and documentation. Interest expense on borrowings goes to financing. Dividend income from equity investments held for capital appreciation, not operational purposes, goes to investing. Income from associates may need splitting depending on the nature of the relationship. Your external auditors should be involved in this analysis early.
Once the classification mapping is complete, review every externally disclosed performance measure your business uses. If any figure is income-statement-related and not required by IFRS, assess whether it qualifies as an MPM under IFRS 18. Engage your investor relations and communications functions — the MPM disclosure requirements will affect how results are presented in annual reports, earnings releases, and investor presentations. Build the reconciliation templates and disclosure language before the first reporting period, not after.
Jaz's chart of accounts and reporting architecture is built for IFRS-aligned financial reporting. As businesses work through IFRS 18 readiness, Jaz provides the classification flexibility and audit-ready record structure that the transition requires. Account types and classification fields in Jaz can be configured to map ledger items to the operating, investing, and financing categories introduced by IFRS 18, without requiring a full chart-of-accounts restructure.
Every transaction in Jaz carries a full audit trail — date-stamped, traceable, and tied to the originating document. When your auditors review your IFRS 18 classification decisions for the 2026 comparative period, the underlying records in Jaz provide a clean evidence base. There is no gap between what is reported and what is recorded, which reduces the time and cost of audit queries on transition-year figures.
If you want to understand how Jaz can support your specific IFRS 18 transition — including chart of accounts setup, reporting template configuration, and how the platform handles income classification at the transaction level — book a call with the Jaz team. The earlier your system setup is aligned with IFRS 18 categories, the cleaner your 2026 comparative data will be when it matters.
The case for early action on IFRS 18 is not about virtue — it is about avoiding a specific and foreseeable problem. Companies that begin implementation planning in the second half of 2026 will find themselves classifying and documenting 12 months of transactions retrospectively, under audit scrutiny, while simultaneously closing the year-end. That process is error-prone, expensive, and avoidable. Companies that align their systems and chart of accounts to IFRS 18 before January 2026 accumulate a clean comparative year organically, without reconstruction.
Early adoption also provides a competitive communications advantage. Investors and analysts who follow IFRS 18 developments will be alert to how companies handle the MPM disclosure requirements. Companies that proactively update their performance measure communications before they are required to — rather than reacting to mandatory disclosure — will likely manage investor questions more smoothly in their first IFRS 18 year. This is particularly relevant for SGX-listed companies, where analyst expectations around transparency have been rising alongside global adoption of IFRS 18.
The structural changes IFRS 18 introduces — three-category income classification, mandatory subtotals, and MPM transparency — represent a shift in how financial performance is communicated, not just how it is formatted. Finance teams that understand the standard deeply before their first mandatory period will be better positioned to shape the narrative around their results, rather than having the standard's requirements shape it for them.
IFRS 18 — Presentation and Disclosure in Financial Statements — is a new accounting standard issued by the IASB that replaces IAS 1. It introduces a classified income statement structure, two mandatory subtotals, and disclosure requirements for management-defined performance measures.
IFRS 18 is mandatory for annual reporting periods beginning on or after 1 January 2027. Early adoption is permitted. Because the standard requires prior-year comparatives, companies with a 31 December year-end must have 2026 data prepared under IFRS 18 classifications — meaning readiness is required from January 2026.
Yes. IFRS 18 supersedes IAS 1 in full. Some IAS 1 requirements carry forward intact — including the overall structure of primary financial statements and the going concern assessment — but the income statement presentation rules are substantially rewritten.
Operating (core business activity), Investing (returns from assets not integral to the main business), and Financing (costs related to debt and financial liabilities). All income and expense items must be assigned to one of these categories on the face of the income statement.
Operating profit and profit before financing and income taxes. Both must appear on the face of the statement of profit or loss under defined formats. Companies cannot omit or rename them.
An MPM is any income-statement-related performance measure that a company publicly discloses but that is not required by IFRS — such as adjusted EBITDA, underlying profit, or recurring revenue margin. IFRS 18 requires companies to define, explain, and reconcile all MPMs to the nearest IFRS 18 subtotal, and to disclose the associated tax effect and non-controlling interests.
No. IFRS 18 only changes how recognised amounts are classified, grouped, and disclosed on the income statement. Recognition and measurement remain governed by existing standards such as IFRS 15, IFRS 16, and IFRS 9.
All entities that prepare financial statements under SFRS(I) — Singapore's IFRS-aligned reporting framework — including SGX-listed companies and entities that have adopted SFRS(I) voluntarily. Entities reporting under SFRS for small entities are not in scope.
When a company publishes its first IFRS 18 financial statements (2027 for most), it must present 2026 comparatives restated under IFRS 18 categories and subtotals. This means IFRS 18 classification of all 2026 income and expense items must be in place from the start of the 2026 financial year.
Yes. Early adoption is permitted under both IFRS and SFRS(I) immediately. Companies choosing to adopt early for 2025 or 2026 financial statements must apply all requirements of IFRS 18 in full and disclose the early adoption.
IFRS 18 becomes mandatory in 2027, but the 2026 comparative requirement means the effective start date for implementation is now. Finance teams that begin classification mapping, system configuration, and MPM disclosure review in the first half of 2026 will produce a clean comparative year. Those that wait until late 2026 or 2027 will face retrospective reclassification under audit conditions — a significantly harder and riskier process.
The three priorities for 2026 are: map your chart of accounts to IFRS 18 income categories before the financial year begins; audit every externally disclosed performance measure for MPM status; and update board reporting templates and investor communications to reflect the new mandatory subtotals. Each of these steps requires cross-functional involvement — finance, IR, audit committee, and external auditors — and benefits from being done with lead time rather than under deadline pressure.
Book a call with the Jaz team to understand how Jaz supports IFRS 18 chart of accounts setup and reporting, or explore the platform at app.jaz.ai.
