IFRS 18: How Financial Reporting Is Changing

The UK has now formally endorsed IFRS 18 – Presentation and Disclosure in Financial Statements, which will apply to accounting periods beginning on or after 1 January 2027.

Replacing IAS 1, IFRS 18 represents the most significant change to financial statement presentation in more than 25 years. While mandatory from 2027, UK-listed entities and other IFRS reporters should start preparing well in advance.

What’s changing under IFRS 18?

New income statement subtotals

‍IFRS 18 introduces standardised categories and subtotals, including a mandatory Operating Profit line. This will improve comparability between companies and reduce flexibility in how performance is presented.

Greater detail and transparency

‍Entities will be required to provide clearer breakdowns of income and expenses, both within the primary financial statements and in the supporting notes.

Management Performance Measures (MPMs)

‍Any alternative performance measures used by management must be clearly explained and reconciled to IFRS figures. This aims to improve consistency and transparency around non-GAAP metrics.

Closer alignment with the cash flow statement

‍The classification of income and expenses will align more closely with cash flow reporting, helping users better understand how reported performance links to cash generation.

What this means for UK businesses

Although IFRS 18 is not mandatory until 2027, its impact will be felt much earlier. Groups with multiple business lines, bespoke performance measures or complex reporting structures may need to rethink how results are presented and communicated.

Now is the time to:

• Review internal reporting structures and management reports

• Reassess how performance measures are communicated externally

• Consider system and process changes needed to support the new format

• Prepare finance teams for the new presentation and disclosure requirements

IFRS 18 is designed to improve comparability and transparency, but early planning will be key to a smooth transition and avoiding last-minute changes.

Are you ready to tell your financial story under the new rules?  If you would like to discuss how IFRS 18 may affect your financial reporting and what steps to take next, our team at Ballards would be happy to help.

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