Get ready for IFRS 18 – Presentation and Disclosure in Financial Statements
Understand the new requirements and how they will potentially affect your reporting, KPI’s, systems, processes and internal controls.
The IASB issued a new accounting standard, IFRS 18 – Presentation and Disclosure in Financial statements, in April 2024. The introduction of IFRS 18 is the most significant change to reporting standards in over 20 years. It replaces IAS 1 and must be adopted by January 1, 2027, with comparatives required from the prior period (FY 2026). The aim is to improve the quality of reporting, transparency, disclosure and comparability of financial statements, with end users’ needs in mind.
IFRS 18 marks a major shift in several areas – most notably how the income statement is presented, how management-defined performance measures are disclosed, and some additional requirements for grouping line items. The requirements for each of these key changes can be found in this IFRS summary.
The Impact on your organization
The introduction of IFRS 18 represents a fundamental change to the disclosure requirements within financial statements. Inevitably, the impact of that change will go beyond the confines of the finance team and may affect how the business manages its strategic communications, roles and responsibilities, core business processes, and data management. Considering the prompts below may prove useful when developing an impact assessment for complying with IFRS 18.
Strategic
How does IFRS 18 affect business communications with your investors and external stakeholders?
How does the introduction of the standard influence how the organisation measures and reports performance and its definition of key MPM’s?
Are the required changes to the income statement and MPM’s reporting likely to change the way the market views the business? Are there industry benchmarks for performance that may be used for comparison purposes?
People
Who within the organisation needs to be involved and engaged in activities to meet compliance requirements?
Which roles will be affected by the need to comply with IFRS 18?
Process
What will be the impact on policies, governance, controls and processes?
How will the leadership team direct the internal changes required?
What is the impact on the current performance management process?
Data
What changes are required to the Chart of Accounts to comply to IFRS 18?
Can the accounting structure deal with the required recategorisation?
Does the business currently report operating profit as defined by the standard?
What changes to the finance information model are required for compliance?
Does the standard require increased data granularity, to support disclosure transparency and auditability?
System
What changes to the underlying IT architecture would be required to support data management, reporting and audit requirements?
Can the introduction of IFRS 18 be used as a catalyst to further standardise information management, and automate data processes?
When to start?
IFRS 18 applies to annual reporting periods beginning on or after 1 January 2027, but early adoption is both allowed and encouraged – not least to ensure that previous-period comparative information is available and reliable.
How can we help
We will be happy to assist you in the initial assessment and implementation of the IFRS 18 requirements with an end-to-end approach, which includes:
IFRS 18 Diagnostic
Tailored workshop to identify the impact of the new IFRS 18 presentation requirements specific to your Company and to define an implementation roadmap.
Impact assessment & Operational implementation
Assist with assessing and implementing the changes in the income statement presentation according to the new IFRS 18 presentation requirements.
Assist with assessing and implementing the appropriate level and consistent approach of aggregation and disaggregation of information presented in the primary financial statements and notes to comply with the new IFRS 18 presentation requirements.
Assist with defining the management performance measures in line with industry expectations, assessing the impact on the performance management processes as well as on the performance measurements directly linked to operating profit and loss totals. Further, assessing the impact of changes to the notes and the related audit trail requirements.
Assist with assessing and implementing the required changes to the systems, chart of accounts, processes and controls.
Assist with the required technical accounting documentation, key judgements, trainings and audit readiness.
Go-live and operate:
Assist with the transition period, dry-runs, go-live and first financial statements prepared under IFRS 18.
