IFRS 18 is coming. And the changes will be bigger than they seem at first glance
IFRS 18 is coming. And the changes will be bigger than they seem at first glance
A new standard for accounting systems, data, reporting, internal processes and company management
Why companies need to start preparing for IFRS 18 as early as 2026, even though the standard will only come into force from 2027
How IFRS 18 will change the structure of financial statements, performance reporting and the use of alternative performance measures
What impacts it will have
IFRS 18 fundamentally changes the way financial performance is presented, introduces new requirements for the structure of financial statements and the level of detail in disclosed information, and at the same time significantly tightens the rules for the use of alternative performance measures. The standard replaces the current IAS 1 and its main objective is to increase the transparency and comparability of financial statements across companies and markets.
As one of the few IFRS standards, IFRS 18 will have a retrospective impact. While the standard is effective for financial statements prepared for periods from January 2027 onwards, companies will have to provide comparative information for the preceding financial year in accordance with IFRS 18. And this is the main reason why companies cannot wait until 2027 to make the necessary changes and adjustments.
The changes will therefore have a significant impact not only on finance, but above all on accounting and other systems as well as internal processes. Companies will have to start collecting data in a different structure, potentially at a greater level of detail, and classify certain items differently during 2026 to ensure that information and accounting data are of sufficient quality and can be audited.
When auditing the financial statements for 2027, auditors will require comparative information prepared in accordance with the requirements of IFRS 18. If a company does not start preparing in time, it may quickly find itself in a situation where the accounting data is not available in the required structure or where extensive retrospective manual adjustments are necessary.
Experience from the first implementation projects also shows that IFRS 18 is not “just an accounting change”. In fact, it is a transformation project that affects finance, IT, governance, investor relations and the company's top management.
IFRS 18 starts with the statement of comprehensive income, but it does not end there
The most visible change will be the new structure of the statement of comprehensive income. IFRS 18 introduces a mandatory classification of income and expenses into operating, investing and financing categories, with this classification linked to the company's analysis of its business model. At the same time, the standard defines subtotals, such as operating profit, which companies will be required to present in a consistent manner.At first glance, the change may seem relatively simple. In practice, however, the new classification often reveals that existing systems, charts of accounts or reporting processes are not ready for such a structure.
Companies will therefore need to review in detail how their current statement of comprehensive income aligns with the new IFRS 18 logic and whether they have sufficiently high-quality data to classify individual items consistently. In many cases, it may be necessary to adjust the chart of accounts, change certain reporting links or introduce additional internal controls.
At the same time, the requirements for the level of detail of disclosed information will also expand significantly. IFRS 18 places much greater emphasis on a more detailed breakdown of individual income statement items. This means that companies will need data at a level of detail that they often do not currently track.
The end of “free-form” EBITDA measures
The area of alternative performance measures will also undergo a major change. IFRS 18 introduces a new concept of Management-defined Performance Measures (MPMs), i.e. specific performance measures defined by the company's management.Until now, these measures have often been presented outside the financial statements themselves and the rules governing their use have not been entirely consistent. IFRS 18 fundamentally changes this. MPMs will now become part of the audited financial statements and companies will have to explain in detail how the measures are determined, why they are relevant, how they are calculated and how they reconcile with IFRS measures.
For many companies, this will mean significantly higher requirements for governance and internal processes. Organisations will need to define exactly which non-IFRS measures they communicate externally, whether they actually meet the definition of an MPM under IFRS 18, and how they will ensure their consistent use across periods and communication channels.
This area is very likely to become one of the most frequently discussed topics with both auditors and regulators.
Systems and data will feel the greatest impact
One of the most challenging parts of IFRS 18 implementation will be technological and data-related changes. The new standard significantly increases the requirements for data structure and quality.Many companies still handle part of their IFRS reporting using manual adjustments in Excel or auxiliary reporting tools. Companies will need to assess whether their ERP systems can work with the new IFRS 18 categories and whether consolidation tools can automatically generate the new reporting structures and related disclosures.
The chart of accounts itself will also be a major topic. Organisations may find that the current version is not sufficiently detailed for the new requirements relating to transaction classification or the breakdown of expenses by nature. The availability of historical data and whether sufficiently detailed information exists for prior periods to prepare comparative information will also be crucial.
IFRS 18 will also be a matter of corporate governance and change implementation
The implementation of IFRS 18 will not be successful without the active involvement of company management. In larger organisations, it will be a complex transformation project requiring coordination between finance, IT, the legal department, investor relations and, where relevant, the audit committee.Companies will need to establish clear project governance, determine responsibilities for individual parts of the implementation, and prepare a communication plan and employee training. At the same time, budgets will need to take into account system modifications, external support and changes to reporting processes.
Change management is an area that is often underestimated in the initial stages — yet it frequently determines whether implementation takes place in a controlled and high-quality manner or under significant time pressure.
The biggest risk? Starting too late
The year 2027 may seem distant, but in reality, 2026 will be the period in which it will be decided how challenging the entire transition will be. Companies that start early will gain time to adjust systems, set up processes, prepare comparative data and communicate the changes to management, auditors and investors.“IFRS 18 represents one of the most significant changes in financial reporting in recent years. The sooner companies understand its practical implications, the more efficiently and at lower cost they will be able to manage the entire transition.”