Key changes

IFRS 18 Presentation and Disclosures in Financial Statements, issued by the IASB in April 2024, replaces IAS 1 Presentation of Financial Statements, carrying forward many of the requirements in IAS 1 unchanged and complementing them with new requirements, the most significant of which are related to:

• Enhanced structure of the statement of profit or loss:
• New classification rules for allocating income and expenses into specific categories (operating, investing, financing, income taxes, discontinued operations) with certain exceptions for entities that invest in assets and/or provide financing to customers;
• New mandatory subtotals (operating profit, profit before financing and income taxes); and
• New guidance on presenting operating expenses (by nature, by function, or both).
• Although it could change what an entity reports as its ‘operating profit or loss’, it will not impact the recognition or measurement of items within the financial statements.
• New disclosures on management-defined measures to enhance transparency and provide investors with a clearer understanding of how MPMs compare with IFRS-defined measures.
• Enhanced principles for aggregation and disaggregation, aiding in the determination of which line items are presented in primary financial statements and what information is disclosed in the notes.

More information about the changes the new standard will bring can be found in our article IASB issued new standard IFRS 18.

Full text of the IFRS 18 in English is available in the Official Journal of the European Union.

Effective date and transition

IFRS 18 becomes effective in annual periods beginning on or after 1 January 2027 and necessitates a full retrospective approach, meaning that comparative information must be prepared already for 2026.

Implementation challenges

IFRS 18 requires several judgments and accounting policy choices to be made, which should be considered carefully. These decisions are not made in isolation – they will have cascading effects on subsequent implementation considerations.

The need to devote attention to the implementation of IFRS 18 was also emphasized by ESMA (the European Union’s independent authority responsible for regulating and supervising financial markets) in a statement following the adoption of the standard. In the introduction to the ten-page statement, ESMA notes:

“Given that the new presentation and disclosure requirements may require changes to issuers’ IT systems, management reports, communication strategy and policies, ESMA urges issuers to proceed with their implementation efforts on a timely basis. This is particularly important as IFRS 18 must be applied retrospectively, necessitating the restatement of comparative figures.”

How can Deloitte support its clients?

We will be happy to assist you in the initial assessment and implementation of the IFRS 18 requirements with an end-to-end approach. For details, see our website.

If you require assistance in understanding any IFRS 18 topics, please contact Petra Dvořáková, Head of the Accounting Advisory function.

We will discuss the new IFRS 18 standard in more detail in future articles on our blog. We are also planning a webcast and a seminar to discuss the main changes that the new standard will bring.

Source: www.iasplus.com