IFRS 18 income statement categories: operating, investing and financing

The categories are the core of IFRS 18. Once each account is in the right category, the required subtotals follow automatically. This guide explains what belongs where for a company with no specialised main business activity.

By Mirza Fahad Baig, Chartered Accountant. Reviewed by Hamza Fida, Chartered Accountant. Checked against official sources on . 2 minute read.

Short answer

IFRS 18 sorts every item of income and expense into one of five categories: operating, investing, financing, income taxes and discontinued operations. Investing covers returns on assets held separately from the main business, financing covers the cost of raising finance, and operating takes everything else. Two subtotals are then required: operating profit, and profit before financing and income taxes.

At a glance

Categories
5
Operating
Everything not placed elsewhere
Investing
Associates, cash returns, stand-alone assets
Financing
Cost of borrowings; interest on other liabilities
Subtotal 1
Operating profit
Subtotal 2
Profit before financing and income taxes
IFRS 18 income statement categories: operating, investing and financingCategories: 5; Operating: Everything not placed elsewhere; Investing: Associates, cash returns, stand-alone assets; Financing: Cost of borrowings; interest on other liabilities; Subtotal 1: Operating profit; Subtotal 2: Profit before financing and income taxes.KEY FACTS AT A GLANCEIFRS 18 income statement categories: operating,investing and financingCategories5OperatingEverything not placedelsewhereInvestingAssociates, cash returns,stand-alone assetsFinancingCost of borrowings;interest on otherliabilitiesSubtotal 1Operating profitSubtotal 2Profit before financingand income taxesChecked against official sourcesTax BakersIFRS 18 income statement categories: operating, investing and financingCategories: 5; Operating: Everything not placed elsewhere; Investing: Associates, cash returns, stand-alone assets; Financing: Cost of borrowings; interest on other liabilities; Subtotal 1: Operating profit; Subtotal 2: Profit before financing and income taxes.KEY FACTS AT A GLANCEIFRS 18 income statementcategories: operating, investingand financingCategories5OperatingEverything not placed elsewhereInvestingAssociates, cash returns, stand-alone assetsFinancingCost of borrowings; interest on otherliabilitiesSubtotal 1Operating profitSubtotal 2Profit before financing and income taxesChecked against official sourcesTax Bakers
Key facts at a glance, as set out in this guide.

What are the five categories?

CategoryWhat goes in itTypical items
OperatingAll income and expenses not classified in another categoryRevenue, cost of sales, staff costs, depreciation, impairment of operating assets, gains on selling equipment
InvestingResults of associates and joint ventures; income from cash and cash equivalents; income and expenses from assets that earn a return largely on their ownShare of profit of associates, interest on deposits, dividends, rent from investment property
FinancingAll income and expenses on liabilities that only raise finance; interest and the effect of interest rate changes on other liabilitiesInterest on loans and bonds, interest on lease liabilities, unwinding of discounts on provisions
Income taxesTax expense under IAS 12Current and deferred tax
Discontinued operationsThe single amount required by IFRS 5Result of a disposed business

The categories are set out from paragraph 47 of IFRS 18. They share names with the cash flow statement but are not defined the same way, so do not assume an item sits in the same place in both.

How does the financing category work?

It separates two kinds of liability. For liabilities that arise only from raising finance, such as bank loans and bonds, all income and expenses go to financing, including exchange differences and gains on early repayment. For other liabilities, such as lease liabilities, pension obligations and provisions, only the interest element and the effect of changes in interest rates go to financing. The rest, such as a pension service cost, stays in operating.

Which subtotals are required?

Paragraph 69 requires operating profit or loss, profit or loss before financing and income taxes, and profit or loss. The second subtotal is operating profit plus the investing category. Companies may add further subtotals, such as gross profit, where they fit the structure.

What does a classified income statement look like?

Northline Telecom, CU millionAmount
Revenue1,000
Operating expenses, net of other operating income(778)
Operating profit222
Share of profit of associate9
Rental, dividend and interest income23
Profit before financing and income taxes254
Interest on borrowings and exchange loss on loan(55)
Interest on lease liabilities and provisions(18)
Profit before income taxes181
Income tax expense(50)
Profit for the year131

Each line is broken down in the telecom worked example. To classify your own accounts, use the IFRS 18 income statement mapper (Excel).

Do the same rules apply to banks and property companies?

No. Companies whose main business is investing in assets or lending to customers put some of this income in operating instead. See main business activities.

Getting ready for IFRS 18?

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Questions people ask

What are the IFRS 18 categories?

Operating, investing, financing, income taxes and discontinued operations.

Where does interest income go under IFRS 18?

Interest on cash and cash equivalents goes in the investing category for a company with no specialised main business activity.

Where does interest on lease liabilities go?

In the financing category.

Where does income tax go under IFRS 18?

In the income taxes category, presented after profit before income taxes.

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 18Operating profit under IFRS 18: what is in and what is outIFRS 18IFRS 18 main business activities: banks, insurers and property companiesIFRS 18IFRS 18 worked example: a telecom income statement before and after

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