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IFRS 18

Presentation and Disclosure in Financial Statements

IFRS 18 replaces IAS 1, introducing a structured statement of profit or loss with three mandatory subtotals and defined categories (operating, investing, financing), disclosure requirements for management-defined performance measures within the audited financial statements, and enhanced principles on aggregation and disaggregation, effective for annual periods beginning on or after 1 January 2027. [S1]

Effective 2027-01-01Related: IAS 1 · IAS 7 · IAS 8 · IFRS 8

Overview

Issued on 9 April 2024 in response to long-standing investor concerns about the comparability and transparency of performance reporting, IFRS 18 keeps the same broad set of primary statements as IAS 1 but fundamentally restructures the statement of profit or loss and introduces new disclosure concepts. [S1][S2] Income and expenses are classified into five categories — operating, investing, financing, income tax, and discontinued operations — with three new mandatory subtotals: operating profit or loss, profit or loss before financing and income tax, and profit or loss. [S4] It also requires disclosure of 'management-defined performance measures' (MPMs) — subtotals of income and expenses management uses in public communications outside the financial statements — within a single note, reconciled to the most directly comparable IFRS-specified subtotal. [S5][S6]

Why it matters

IFRS 18 brings company-specific, previously unaudited 'adjusted' or 'underlying' profit measures into the audited financial statements for the first time, requiring formal reconciliation and disclosure discipline around numbers that were often presented loosely in investor presentations and press releases. Combined with the mandatory operating/investing/financing structure for the income statement, this is one of the most significant changes to financial statement presentation since IFRS's inception, and it requires retrospective application, meaning comparative periods must also be restated — not just the year of transition.

Scope

Applies to the presentation and disclosure of general purpose financial statements, replacing IAS 1 in its entirety, and bringing consequential amendments to IAS 7 (Statement of Cash Flows) and IAS 8 (retitled Basis of Preparation of Financial Statements, with its accounting policy, estimate and error-correction guidance retained). [S5] It does not change recognition or measurement requirements in other Standards; its focus is the structure, categorisation and disclosure of information already required to be presented.

Key definitions

term
Operating category
definition
The default category for income and expenses not classified into investing, financing, income tax or discontinued operations; includes an entity's main revenue-generating activities.
term
Investing category
definition
Income and expenses from assets that generate returns individually and largely independently of other resources (e.g. investments in associates, joint ventures, and returns on investments not part of an entity's main business activities).
term
Financing category
definition
Income and expenses from liabilities that raise finance, and the effect of interest on all other liabilities (e.g. unwinding of discounts on provisions), and interest income/expense on all financial assets and liabilities unless the entity's main business is investing in or providing financing for assets.
term
Management-defined performance measure (MPM)
definition
A subtotal of income and expenses (other than specified IFRS-defined subtotals) that management uses in public communications outside the financial statements to communicate its view of an aspect of financial performance.
term
Operating profit or loss
definition
A new mandatory subtotal in the statement of profit or loss under IFRS 18, comprising all income and expenses classified in the operating category.
term
Aggregation and disaggregation principle
definition
Items are grouped based on shared characteristics and kept separate where they have dissimilar characteristics, with enhanced guidance to prevent burying material items within generically labelled line items (e.g. 'other').

Recognition

IFRS 18 does not change when or whether an item of income or expense is recognised; that remains governed by the relevant Standard for the transaction (revenue under IFRS 15, impairment under IAS 36, and so on). What changes is classification: every recognised income or expense item is now assigned to one of the five defined categories (operating, investing, financing, income tax, discontinued operations) based on the nature of the underlying item and the entity's main business activities, which for most entities means default classification of core trading income and expenses as operating, financing costs on borrowings as financing, and returns on standalone investments as investing.

Initial measurement

Not a measurement standard; IFRS 18 governs where a recognised and measured amount is presented and how it is aggregated or disaggregated, not its initial or subsequent measurement basis. Entities whose main business activities involve investing in assets, or providing financing to customers, classify related income and expenses in the operating category rather than investing/financing, reflecting that these activities are core to, not incidental to, their business.

Subsequent measurement

Not applicable in the measurement sense; the ongoing discipline is consistent period-to-period classification of income and expenses into the five categories, and consistent identification and disclosure of management-defined performance measures each period, including any changes to the MPMs used and the reasons for such changes.

Presentation

The statement of profit or loss presents, at minimum, the new required subtotals: operating profit or loss; profit or loss before financing and income tax (adding the investing category to operating profit or loss); and profit or loss (the final total, after financing and income tax). Entities providing financing or investing as a main business activity present modified structures reflecting that those activities are operating in nature for them. Any management-defined performance measure disclosed outside the primary financial statements (in the annual report or investor materials) that is a subtotal of income and expenses must be disclosed in a single note in the financial statements, reconciled item-by-item to the most directly comparable IFRS-specified subtotal, together with the tax and non-controlling interest effects of each reconciling item and a description of why the measure provides useful information.

Disclosure checklist

  • The three new mandatory subtotals (operating profit or loss; profit or loss before financing and income tax; profit or loss) presented in the statement of profit or loss.
  • Classification of each income and expense item into the operating, investing, financing, income tax or discontinued operations category, with the basis for classifying items differently from the default (e.g. for entities with investing or financing as a main business activity).
  • A single note disclosing each management-defined performance measure used, a reconciliation to the most directly comparable IFRS-specified subtotal, the income tax and non-controlling interest effect of each reconciling item, and why the measure communicates management's view of performance.
  • Enhanced aggregation/disaggregation disclosures preventing material dissimilar items from being combined into generic line items such as 'other expenses'.
  • For the transition period: the fact of early adoption (if applicable) and retrospective restatement of comparative information, together with the required IAS 8-style transition disclosures.

Practical treatment

Given the 1 January 2027 effective date and the retrospective application requirement, the practical discipline now (in the 2026 lead-up period) is running an impact assessment: mapping every income and expense line to its IFRS 18 category, identifying which 'adjusted' or 'underlying' measures currently used in investor communications, board packs or press releases will meet the MPM definition and therefore require in-financial-statement disclosure and reconciliation, and assessing system and chart-of-account changes needed to tag transactions by category from the start of the earliest comparative period that will need restating. Early engagement with the audit committee and external auditors on MPM identification is particularly important, since bringing previously unaudited measures into audited financial statements changes both the governance and the assurance expectations around them.

Common mistakes

  • Treating IFRS 18 as a distant 2027 problem rather than beginning the impact assessment and comparative-period data capture well before the effective date, given the retrospective restatement requirement.
  • Failing to identify all subtotals used in public communications (investor decks, press releases, management commentary) that meet the MPM definition and therefore require in-financial-statement disclosure.
  • Continuing to bury dissimilar material items within a generic 'other income' or 'other expenses' line, contrary to the enhanced aggregation/disaggregation principle.
  • Misclassifying interest income/expense into the wrong category for an entity whose main business activity is investing or financing, where the default classification does not apply.
  • Assuming the primary statements themselves (beyond the profit or loss structure) change substantially, when IFRS 18's scope was deliberately focused on the income statement and MPM disclosures rather than a full rewrite of IAS 1.

CFO checklist

  • Commission an IFRS 18 impact assessment now, mapping all current income and expense line items to the new five-category structure.
  • Inventory every subtotal currently used in investor communications, press releases and management commentary to identify which will meet the management-defined performance measure definition.
  • Engage the audit committee and external auditors early on governance and assurance expectations for MPM disclosure and reconciliation.
  • Plan chart-of-accounts and reporting-system changes needed to tag transactions by IFRS 18 category from the start of the earliest comparative period requiring restatement.
  • Provide staff training on the new statement of profit or loss structure and MPM disclosure requirements well ahead of the 1 January 2027 effective date.
  • Monitor FRCN and professional body guidance on Nigerian adoption timing and readiness expectations as the effective date approaches.

FAQs

q
When does IFRS 18 become mandatory, and can we adopt it early?
a
IFRS 18 is effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted; an entity that early adopts is required to disclose that fact in the notes. [S1][S4]
q
We report an 'adjusted EBITDA' figure in our investor presentations — does IFRS 18 affect that?
a
If adjusted EBITDA (or a similar measure) is a subtotal of income and expenses used in public communications outside the financial statements to communicate management's view of performance, it is likely to meet the management-defined performance measure definition, requiring disclosure and reconciliation within a single note in the audited financial statements, and bringing it within the scope of audit procedures for the first time.
q
Does IFRS 18 change how we recognise revenue or expenses?
a
No. IFRS 18 governs presentation and disclosure, not recognition or measurement; revenue continues to be recognised under IFRS 15, expenses under their respective Standards, and so on. What changes is how those already-recognised amounts are categorised, subtotalled and disclosed in the primary statements and notes.

Nigeria application notes

Regulatory overlay

IFRS 18 will apply in Nigeria under the FRCN Act 2011 mandate to promote compliance with IASB-adopted standards, consistent with Nigeria's existing full IFRS adoption; as a newly issued standard with a 1 January 2027 effective date, Nigerian entities should expect FRCN to confirm adoption and any local transition guidance in due course, and should not assume automatic, unmodified adoption without monitoring FRCN's own communications closer to the effective date. [S3]

Tax interaction (Nigeria)

IFRS 18 is a presentation and disclosure standard and does not itself change taxable profit computations; however, the restructured statement of profit or loss (with its new operating, investing and financing categories and mandatory subtotals) may change how income statement figures are extracted and mapped into Nigerian CIT computations and tax reconciliation schedules, and preparers should update their tax computation templates to reflect the new line-item structure once adopted, rather than assuming a like-for-like mapping from the IAS 1-based format. [S_TAX1][S_TAX2] Nigerian rates, thresholds, exemptions, incentives and filing rules referenced in this file (including CIT, VAT, withholding tax categories and rates, and the small-company threshold) should be independently verified against the Nigeria Tax Act 2025, the Nigeria Tax Administration Act 2025, CBN and FRCN guidance in force, and current NRS practice at the reporting or filing date, since thresholds, rates and reliefs are subject to periodic revision and to sector- or entity-specific qualifying conditions. This file does not constitute legal or tax advice. [S_TAX1][S_TAX2]

FX considerations

IFRS 18's financing category groups interest and other financing-related income and expenses, including foreign exchange gains and losses on borrowings where these are financing in nature; Nigerian entities with material naira-volatility-driven FX gains/losses on foreign-currency borrowings should assess which category (operating or financing) those specific gains/losses fall into under the new classification principles, since this can differ from how they were presented under IAS 1 and may change reported operating profit even though the underlying economics are unchanged.

SME practical note

Because IFRS 18 does not take effect until 1 January 2027, most Nigerian SME and non-listed clients need not restructure their financial statements immediately; however, Outliers recommends that clients using non-IFRS 'adjusted' profit figures in board reporting, investor materials, or lender covenant calculations begin identifying those measures now, since a measure used informally today for years may unexpectedly qualify as a management-defined performance measure requiring formal, audited reconciliation once IFRS 18 applies.

Common Nigerian pitfalls

  • Assuming IFRS 18 preparation can wait until close to the 1 January 2027 effective date, when retrospective application means comparative-period data must be captured earlier.
  • Overlooking existing informally used 'adjusted' profit measures in Nigerian investor or lender communications that will meet the MPM definition once IFRS 18 applies.
  • Assuming FRCN will automatically issue Nigeria-specific IFRS 18 transition guidance mirroring its sustainability-standards ARWG process, rather than actively monitoring FRCN's own communications.
  • Failing to update Nigerian CIT computation templates and tax reconciliation schedules for the new operating/investing/financing statement of profit or loss structure once adopted.

FRC pronouncements

No FRCN pronouncement specific to IFRS 18 adoption or readiness has been identified as at the preparation of this file. For context, FRCN has previously run a structured, staged adoption-readiness process for other new IFRS-suite pronouncements — notably its Adoption Readiness Working Group (ARWG) and phased roadmap for the IFRS Sustainability Disclosure Standards (S1 and S2), including board-resolution, gap-analysis and implementation-plan submission requirements ahead of each adoption phase. [S7][S8] This is cited here only as an indication of FRCN's general approach to phased IFRS-suite adoption in Nigeria, not as evidence of an IFRS 18-specific process; Outliers recommends monitoring FRCN's website and pronouncements directly for any IFRS 18-specific roadmap, readiness assessment or transition guidance as 2027 approaches, given the retrospective application requirement makes early preparation important.

Worked examples

Restructuring the statement of profit or loss into IFRS 18 categories

A Nigerian manufacturing company's IAS 1-format statement of profit or loss for the year shows: revenue ₦500,000,000; cost of sales ₦300,000,000; administrative expenses ₦60,000,000; a gain on disposal of a minority equity investment (not part of the company's main business) of ₦15,000,000; interest expense on bank borrowings of ₦25,000,000; and income tax expense of ₦36,000,000.

Facts

Workings

Operating profit or loss = Revenue - Cost of sales - Administrative expenses = 500,000,000 - 300,000,000 - 60,000,000 = 140,000,000

Profit or loss before financing and income tax = Operating profit or loss + Investing category = 140,000,000 + 15,000,000 = 155,000,000

Profit or loss (final) = Profit or loss before financing and income tax - Financing - Income tax = 155,000,000 - 25,000,000 - 36,000,000 = 94,000,000

Reconciling a management-defined performance measure

A Nigerian listed company presents 'adjusted operating profit' of ₦180,000,000 in its investor presentations, being operating profit or loss of ₦140,000,000 (per the IFRS 18 statement of profit or loss) adjusted to add back a one-off restructuring cost of ₦25,000,000 and a one-off legal settlement expense of ₦15,000,000, both already included within operating profit or loss.

Facts

Workings

Reconciliation: 140,000,000 (IFRS 18 operating profit or loss) + 25,000,000 (restructuring add-back) + 15,000,000 (legal settlement add-back) = 180,000,000 (adjusted operating profit, the management-defined performance measure).

Since 'adjusted operating profit' is a subtotal of income and expenses used in public investor communications to convey management's view of performance, it meets the management-defined performance measure definition and must be disclosed and reconciled within the financial statements, not only in investor materials.

Sources & citations

  1. [S1]IFRS 18 Presentation and Disclosure in Financial Statements — IFRS Foundationaccessed 2026-07-18
  2. [S2]IFRS - Primary Financial Statements (project page) — IFRS Foundationaccessed 2026-07-18
  3. [S3]IFRS - Use of IFRS Standards by jurisdiction: Nigeria — IFRS Foundationaccessed 2026-07-18
  4. [S4]Get ready for IFRS 18 — Grant Thornton Internationalaccessed 2026-07-18
  5. [S5]IFRS 18 Presentation and Disclosure in Financial Statements — BDOaccessed 2026-07-18
  6. [S6]IFRS 18 (KPMG International hub page) — KPMG Internationalaccessed 2026-07-18
  7. [S7]FRC Releases Roadmap Report for Adoption of IFRS Sustainability Disclosure Standards in Nigeria — Financial Reporting Council of Nigeriaaccessed 2026-07-18
  8. [S8]Roadmap Report for Adoption of IFRS Sustainability Disclosure Standards in Nigeria (Amended 2026) — Financial Reporting Council of Nigeriaaccessed 2026-07-18
  9. [S_TAX1]Nigeria Tax Act, 2025 has been signed – highlights — EY Globalaccessed 2026-07-18
  10. [S_TAX2]The Nigerian Tax Reform Acts — PwC Nigeriaaccessed 2026-07-18
Last reviewed 2026-07-18 · Reviewer: Rafiu Olawuyi, FCA (Author / Technical Reviewer)