1. Operating Profit Now Has One Definition
Under IAS 1, companies could define operating profit differently. That flexibility often made comparisons difficult.
IFRS 18 introduces five required categories:
• Operating
• Investing
• Financing
• Income taxes
• Discontinued operations
It also requires two subtotals:
• Operating profit or loss
• Profit or loss before financing and income tax
This removes customization. Financing and investing activities can no longer blur into operations unless they are the company’s core business, as in certain banks and insurers.
The message is clear: operating performance must be presented consistently.
2. Adjusted Metrics Move Into Audited Financials
Management-defined Performance Measures, or MPMs, are often used to highlight “adjusted” results.
Under IFRS 18, if you use an MPM publicly, you must:
• Disclose it in one audited note
• Reconcile it to the closest IFRS subtotal
This applies to most public written communications, excluding oral comments and social media posts.
As Larissa Clark of EY Africa notes:
“IFRS 18 is expected to enhance transparency and relevance of financial reporting, bridging the gap between IFRS information and investor communications.”
If you promote a number, you now have to defend it under audit.
3. The “Other” Bucket Gets Broken Apart
Broad, vague categories are no longer acceptable.
Items must be grouped by shared characteristics and separated when they are different. Companies must consider:
• Nature, such as depreciation or employee benefits
• Function, such as cost of sales or administrative
• Measurement basis
• Size and persistence
Labels must clearly explain what is inside.
As Cullum Allen of EY Africa explains:
“Preparers will need to carefully consider their current labelling of information in their financial statements, particularly for aggregated items—is the most informative label used?”
If the label does not explain the economics, it will not meet the new standard.
4. The 2027 Deadline Is Closer Than It Looks
IFRS 18 is effective January 1, 2027. But it must be applied retrospectively.
That means comparative figures for 2026 must be restated. Systems must be ready by January 1, 2026.
This impacts more than finance:
• IT must update data tagging and ERP structures
• HR may need to reassess KPI-linked compensation
• Treasury must review financing classifications
As Derek Youdelis of BDO Canada states:
“Like with any transition, it’s not just the finance department that is impacted. Learning and educating cross-functional departments is key because they’re going to have to understand how their activities influence financial statement presentation under the new standard.”
The clock is effectively one year earlier than many realize.
5. This Is a Systems and Governance Overhaul
IFRS 18 requires structural change across four areas:
Systems
Update the Chart of Accounts and ERP systems so transactions are correctly classified at entry.
Governance
Establish oversight and brief the board on how presentation changes may affect perceived performance.
Policy
Create formal rules around creating, labeling, and reconciling MPMs.
Data
Ensure historical data is detailed enough to support restatements and new disclosures.
This is not just an accounting update. It is an operational redesign.
The Bottom Line
IFRS 18 reduces flexibility but increases clarity.
Companies that prepare early, strengthen their systems, and tighten their narrative will not just comply. They will build credibility with investors who no longer need to reconstruct performance themselves.
When transparency becomes mandatory, the only real question is this:
Will your performance story still hold up?