How is operating profit defined?
By what it is not. IFRS 18 defines the investing, financing, income taxes and discontinued operations categories, and everything else is operating. This means the operating category captures the company's main business activities without the standard having to define them, and it means nothing can be left out for being unusual.
What is included?
- Revenue and the costs of earning it, including depreciation and amortisation.
- Impairment losses on property, plant and equipment, intangible assets and goodwill.
- Restructuring costs, litigation settlements and other infrequent items.
- Gains and losses on disposing of operating assets.
- Exchange differences on trade receivables and payables.
- The service cost of pension plans.
What is excluded?
- Share of profit or loss of associates and joint ventures accounted for using the equity method.
- Interest income on cash and cash equivalents, dividends, and rent or fair value changes on investment property.
- Interest expense on borrowings, lease liabilities, pension liabilities and provisions.
- Income tax and discontinued operations.
How much can the figure move?
| Northline Telecom, CU million | Amount |
|---|---|
| Operating profit as reported under IAS 1 | 230 |
| Less rental income from investment property, now investing | (8) |
| Less dividend income, now investing | (3) |
| Add back exchange loss on a US dollar loan, now financing | 3 |
| Operating profit under IFRS 18 | 222 |
A company that previously included its share of associates' profit in operating profit would see a larger fall. One that previously deducted interest on lease liabilities above operating profit would see a rise.
Can you still report an adjusted operating profit?
Yes, but not as a replacement. If you publish a measure such as adjusted operating profit that excludes restructuring or impairment, it is a management-defined performance measure and must be reconciled to operating profit in a note. See management-defined performance measures.
What else depends on operating profit?
Loan covenants, bonus targets and segment measures often refer to operating profit or EBIT. If the definition in those agreements follows the financial statements, the figure will change in 2027. Review them early; the implementation checklist covers this. To see your own new figure, use the IFRS 18 income statement mapper (Excel).
Getting ready for IFRS 18?
We help finance teams map their income statement to the new categories, restate comparatives and prepare the new disclosures.
Questions people ask
Does operating profit include one-off items under IFRS 18?
Yes. Unusual or infrequent items stay in the operating category unless they belong to another category by definition.
Is the share of profit of associates part of operating profit?
No. It goes in the investing category.
Is operating profit the same as EBIT?
Not necessarily. EBIT is not defined by IFRS 18, and operating profit excludes investing income that many EBIT definitions include.
Can a company define operating profit its own way under IFRS 18?
No. Operating profit is a required subtotal with a set meaning. A different measure can be disclosed as a management-defined performance measure.
Sources
Every fee, date and rule on this page was taken from these official and primary sources.
- IFRS Foundation: IFRS 18 Presentation and Disclosure in Financial Statements
- Australian Accounting Standards Board: AASB 18, the Australian equivalent of IFRS 18 (full text)
- 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.
Related guides
More in IFRS 18
This guide is general information. It is not tax or legal advice for your situation.