Management-defined performance measures (MPMs) under IFRS 18

Most listed companies report an adjusted profit figure. Until now those figures sat in press releases and presentations, outside the audit. IFRS 18 brings the ones that qualify into the financial statements, with a reconciliation. This guide explains the test and the note.

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

Short answer

A management-defined performance measure, or MPM, is a subtotal of income and expenses that a company uses in public communications outside its financial statements to give management's view of performance, and that IFRS does not already specify. Adjusted operating profit is the typical example. Each MPM must be explained in a single note and reconciled to the nearest IFRS subtotal, showing the tax and non-controlling interest effect of every adjustment.

At a glance

What it is
A subtotal of income and expenses
Used where
Public communications outside the accounts
Not an MPM
Gross profit, operating profit, revenue, ratios
Where disclosed
One note
Reconciled to
The nearest IFRS subtotal
For each adjustment
Tax and non-controlling interest effect
Management-defined performance measures (MPMs) under IFRS 18What it is: A subtotal of income and expenses; Used where: Public communications outside the accounts; Not an MPM: Gross profit, operating profit, revenue, ratios; Where disclosed: One note; Reconciled to: The nearest IFRS subtotal; For each adjustment: Tax and non-controlling interest effect.KEY FACTS AT A GLANCEManagement-defined performance measures (MPMs)under IFRS 18What it isA subtotal of income andexpensesUsed wherePublic communicationsoutside the accountsNot an MPMGross profit, operatingprofit, revenue, ratiosWhere disclosedOne noteReconciled toThe nearest IFRS subtotalFor each adjustmentTax and non-controllinginterest effectChecked against official sourcesTax BakersManagement-defined performance measures (MPMs) under IFRS 18What it is: A subtotal of income and expenses; Used where: Public communications outside the accounts; Not an MPM: Gross profit, operating profit, revenue, ratios; Where disclosed: One note; Reconciled to: The nearest IFRS subtotal; For each adjustment: Tax and non-controlling interest effect.KEY FACTS AT A GLANCEManagement-defined performancemeasures (MPMs) under IFRS 18What it isA subtotal of income and expensesUsed wherePublic communications outside the accountsNot an MPMGross profit, operating profit, revenue,ratiosWhere disclosedOne noteReconciled toThe nearest IFRS subtotalFor each adjustmentTax and non-controlling interest effectChecked against official sourcesTax Bakers
Key facts at a glance, as set out in this guide.

What makes a measure an MPM?

From paragraph 117 of IFRS 18, three things together. It is a subtotal of income and expenses. The company uses it in public communications outside the financial statements, such as results announcements and investor presentations. And it communicates management's view of an aspect of the financial performance of the company as a whole. The standard presumes that a subtotal used in public communications does express management's view, unless the company can show otherwise.

What is not an MPM?

  • Subtotals the standard itself lists, such as gross profit, operating profit, operating profit before depreciation, amortisation and specified impairments, and profit before income taxes.
  • Measures that are not subtotals of income and expenses: revenue alone, free cash flow, net debt, return on equity and other ratios.
  • Non-financial measures, such as subscriber numbers.
  • Measures used only internally, or only in a segment note.

What goes in the note?

From paragraph 121, all MPMs are disclosed in a single note, with a statement that they give management's view and are not necessarily comparable with other companies' measures. For each one: why it is useful, how it is calculated, a reconciliation to the most directly comparable subtotal, and for each reconciling item the income tax effect and the effect on non-controlling interests. Changes to a measure must be explained and comparatives restated.

What does a reconciliation look like?

Northline Telecom, CU millionAmountIncome tax effectEffect on non-controlling interests
Operating profit222.0
Impairment of network equipment12.0(3.0)(1.8)
Restructuring costs6.0(1.5)0.0
Gain on disposal of towers(10.0)2.50.0
Adjusted operating profit (MPM)230.0

The tax effect uses a 25% rate. The impaired equipment belongs to a subsidiary that is 80% owned, so 20% of the CU 9 million after-tax adjustment, CU 1.8 million, relates to non-controlling interests. The MPM reconciliation template (Excel) builds this table from your own adjustments.

Is EBITDA an MPM?

It depends how it is calculated. A measure equal to operating profit before depreciation, amortisation and impairments within the scope of IAS 36 is a subtotal the standard already lists, so it is not an MPM, though the label used must describe it accurately. An EBITDA that starts from another figure, or an adjusted EBITDA that removes other items, is an MPM.

How should you prepare?

  1. List every profit measure used in announcements, presentations and the annual report's front half.
  2. Test each against the definition and record the conclusion.
  3. For each MPM, work out the tax and non-controlling interest effect of every adjustment, which many companies do not track today.
  4. Agree the wording with auditors early, since the note is audited.

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Questions people ask

What is an MPM under IFRS 18?

A subtotal of income and expenses, used in public communications outside the financial statements, that gives management's view of performance and is not already specified by IFRS.

Is adjusted EBITDA a management-defined performance measure?

Usually yes, because it removes items beyond those in the subtotal the standard lists.

Are MPMs audited?

Yes. They are disclosed in a note to the financial statements, so they fall within the audit.

Where are management-defined performance measures disclosed?

In a single note to the financial statements, with a reconciliation to the most directly comparable subtotal.

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.

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