IFRS 18 explained: what changes and when

IFRS 18 is the biggest change to the look of the income statement in two decades. Net profit stays the same, but operating profit, a figure almost every company reports, is defined by the standard for the first time. This guide sets out what changes, what does not, and when.

By Hamza Fida, Chartered Accountant. Reviewed by Awais Jameel, Chartered Accountant. Checked against official sources on . 2 minute read.

Short answer

IFRS 18 Presentation and Disclosure in Financial Statements replaces IAS 1 for annual periods beginning on or after 1 January 2027. It does not change how profit is measured. It changes how the income statement is laid out: income and expenses go into defined categories, two new subtotals become mandatory, and performance measures that management defines must be reconciled in a note.

At a glance

Replaces
IAS 1
Effective
Periods beginning 1 January 2027
Comparatives
Restated
Net profit
Unchanged
New subtotals
Operating profit; profit before financing and income taxes
New note
Management-defined performance measures
IFRS 18 explained: what changes and whenReplaces: IAS 1; Effective: Periods beginning 1 January 2027; Comparatives: Restated; Net profit: Unchanged; New subtotals: Operating profit; profit before financing and income taxes; New note: Management-defined performance measures.KEY FACTS AT A GLANCEIFRS 18 explained: what changes and whenReplacesIAS 1EffectivePeriods beginning 1January 2027ComparativesRestatedNet profitUnchangedNew subtotalsOperating profit; profitbefore financing andincome taxesNew noteManagement-definedperformance measuresChecked against official sourcesTax BakersIFRS 18 explained: what changes and whenReplaces: IAS 1; Effective: Periods beginning 1 January 2027; Comparatives: Restated; Net profit: Unchanged; New subtotals: Operating profit; profit before financing and income taxes; New note: Management-defined performance measures.KEY FACTS AT A GLANCEIFRS 18 explained: what changesand whenReplacesIAS 1EffectivePeriods beginning 1 January 2027ComparativesRestatedNet profitUnchangedNew subtotalsOperating profit; profit before financingand income taxesNew noteManagement-defined performance measuresChecked against official sourcesTax Bakers
Key facts at a glance, as set out in this guide.

What is IFRS 18?

IFRS 18 is the accounting standard on how financial statements are presented. The International Accounting Standards Board issued it in April 2024 to replace IAS 1. Most of IAS 1 carries over unchanged, and some of it moves to other standards. The new material is concentrated in the statement of profit or loss.

What are the main changes?

AreaUnder IAS 1Under IFRS 18
Structure of the income statementFew required lines; layout largely left to the companyFive categories: operating, investing, financing, income taxes and discontinued operations
Operating profitNot defined; companies chose what to includeA required subtotal with a set meaning
Second new subtotalNoneProfit before financing and income taxes
Management's own measures, such as adjusted profitReported outside the financial statementsExplained and reconciled in a single audited note
Grouping of itemsGeneral materiality guidanceMore detailed rules on combining and splitting items, and on the label "other"
Cash flow statementChoices on where interest and dividends goStarts from operating profit; the choices are removed for most companies

The categories are set out from paragraph 47 of the standard, the required subtotals from paragraph 69, and management-defined performance measures from paragraph 117.

What stays the same?

Recognition and measurement do not change. Revenue, expenses, assets and liabilities are measured exactly as before, so profit for the year, total equity and earnings per share are unaffected. What moves is where items appear and which subtotals are shown.

What does the change look like in numbers?

Northline Telecom, a fictional company used throughout these guides, reported operating profit of CU 230 million under its own IAS 1 definition. Under IFRS 18 its operating profit is CU 222 million, because rental and dividend income of CU 11 million move to the investing category and a CU 3 million exchange loss on a loan moves to the financing category. Profit for the year is CU 131 million in both cases. The full statement is in the telecom worked example.

When does it apply?

For annual periods beginning on or after 1 January 2027, with earlier application allowed. Comparatives are restated, so a company with a December year end restates its 2026 income statement. Its first interim report under IFRS 18 covers the first period of 2027. Check when your regulator adopts the standard, since some jurisdictions set their own dates. See transition and comparatives.

US GAAP has no equivalent of these requirements; see IFRS 18 vs US GAAP.

Where should you start?

Map your current income statement to the new categories and see what happens to operating profit. The IFRS 18 income statement mapper (Excel) does this from a list of your line items. Then work through the implementation checklist.

Getting ready for IFRS 18?

We help finance teams map their income statement to the new categories, restate comparatives and prepare the new disclosures.

Book a call Chat on WhatsApp

Questions people ask

When is IFRS 18 effective?

For annual reporting periods beginning on or after 1 January 2027, with earlier application permitted.

Does IFRS 18 change net profit?

No. It changes presentation and disclosure, not recognition or measurement, so profit for the year is unchanged.

Does IFRS 18 replace IAS 1?

Yes. Many IAS 1 requirements carry over unchanged, and some move to other standards.

Who does IFRS 18 apply to?

Every entity that prepares financial statements under IFRS Accounting Standards, from the first annual period beginning on or after 1 January 2027.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IFRS 18 Presentation and Disclosure in Financial Statements
  2. Australian Accounting Standards Board: AASB 18, the Australian equivalent of IFRS 18 (full text)
  3. IFRS Foundation: IFRS 18, the new requirements (presentation)

Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.

IFRS 18IFRS 18 vs IAS 1: the differences that matterIFRS 18IFRS 18 income statement categories: operating, investing and financingIFRS 18IFRS 18 implementation checklist: what to do and in what order

More in IFRS 18

TopicAll 12 guides in IFRS 18

This guide is general information. It is not tax or legal advice for your situation.