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New IFRS standard

IFRS 18 ‘Presentation and Disclosures in Financial Statements’ has been published in April 2024

The International Accounting Standards Board (IASB) has published its new standard IFRS 18 ‘Presentation and Disclosures in Financial Statements’ that will replace IAS 1 ‘Presentation of Financial Statements’.

The new standard is the result of the so-called primary financial statements project, aims at improving how entities communicate in their financial statements and will be effective for annual periods beginning on or after 1 January 2027.

While carrying forward many of the requirements in IAS 1, IFRS 18 will not impact the recognition or measurement of items in the financial statements, but it may impact what an entity reports as its ‘operating profit or loss’ for the results of its main business activities.

IFRS 18 introduces new concepts such as income statement structure, management-defined performance measures and primary financial statements, which will help to achieve comparability and transparency of entities’ performance reporting.
 

IFRS 18 key changes:

  • New defined categories in the statement of profit or loss
    • Operating
    • Investing
    • Financing
    • Income taxes
    • Discontinued operations
 
  • New required subtotals in statement of profit or loss
    • Operating profit or loss 
    • Profit or loss before financing and income taxes
    • Profit or loss
 
  • Disclosures about management-defined performance measures (MPMs)
    • Disclosed in a single note to the financial statements
    • Reconciliation between the MPM and the most directly comparable subtotal listed in IFRS
    • IFRS 18 specifies certain subtotals of income and expenses that are not MPMs, for example operating profit or loss before depreciation, amortisation and impairments (OPDAI)
 
  • Enhanced guidance on grouping of information (aggregation and disaggregation)
    • Distinct roles of the primary financial statements and the notes 
    • Grouping information based on their shared characteristics
    • Disaggregate information whenever the resulting information is material

 

In the first year of adopting IFRS 18, for the comparative period, the standard requires a reconciliation for each line item in the statement of profit or loss between the restated amounts presented applying IFRS 18 and the amounts previously presented applying IAS 1. Similar reconciliation requirements apply to interim financial statements in the first year of adoption.

Illustrative statement of profit or loss for a general entity*: 
(*Additional requirements for entities that conduct specified main business activities - investing in assets and/or providing financing to customers)

Deloitte Accounting & Reporting Assurance team will host an IFRS update event in the autumn to share more details and insights of implementing IFRS 18. Look forward to meeting you there! In the meantime, for more information about IFRS 18, please contact Jarno Miettunen, Oskari Lappalainen or Piao Yang.

 

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