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Presentation & disclosure · IFRS 18

IFRS 18 Presentation and Disclosure in Financial Statements

Summary, key points, exam traps and a worked example — written for ICAP, ACCA, ICAI, CIMA and ICAEW students.

On this page
  1. Status & recent changes
  2. Objective
  3. Scope
  4. Key definitions
  5. Recognition & measurement
  6. Key disclosures
  7. Common exam traps
  8. Worked example
  9. Related standards
  10. Practise MCQs

Status & recent changes

  • IFRS 18 Presentation and Disclosure in Financial Statements was issued in April 2024 and is effective for annual reporting periods beginning on or after 1 January 2027 (earlier application permitted). It replaces IAS 1, carrying many IAS 1 requirements forward while adding new ones on the structure of the income statement.
  • Before 1 January 2027 most entities still apply IAS 1. On transition, IFRS 18 is applied retrospectively, with comparatives restated.
  • IFRS 18 also brings consequential amendments to other standards, including IAS 7 (cash flows), IAS 8 (retitled 'Basis of Preparation of Financial Statements') and IAS 33.

Objective

Sets general requirements for presenting and disclosing information in financial statements, with more structured income statements and new disclosures on management-defined performance measures.

Scope

  • All general purpose financial statements prepared under IFRS Accounting Standards.
  • Many requirements on the statement of financial position, statement of changes in equity and general features are carried over from IAS 1 with limited changes.

Key definitions

Operating category
The default category in profit or loss: income and expenses not classified in the investing, financing, income tax or discontinued operations categories.
Investing category
Broadly, income and expenses from investments in associates, joint ventures and unconsolidated subsidiaries, and from other assets that generate returns largely independently of the entity's other resources (for entities without a specified main business activity of investing).
Financing category
Broadly, income and expenses from liabilities that arise from raising finance, and interest expense on certain other liabilities.
Management-defined performance measures (MPMs)
Subtotals of income and expenses that an entity uses in public communications outside the financial statements to communicate management's view of an aspect of overall financial performance, and that are not specified by IFRS.

Recognition & measurement

Structure of profit or loss

  • Classify income and expenses into five categories: operating, investing, financing, income taxes and discontinued operations.
  • Present two new required subtotals: operating profit, and profit before financing and income taxes (in addition to profit or loss).
  • Entities with specified main business activities (e.g. banks and some investment entities) classify certain items differently, so their operating profit reflects those activities.
  • Operating expenses are presented by nature, by function or a mix, based on what gives the most useful structured summary; entities presenting by function disclose specified expenses by nature (e.g. depreciation, amortisation, employee benefits) in the notes.

MPMs and aggregation

  • Disclose MPMs in a single note, explaining why each is useful, how it is calculated and reconciling it to the most similar IFRS-specified subtotal, with tax and NCI effects for each reconciling item.
  • Enhanced principles on aggregation and disaggregation, based on shared characteristics, and on the roles of primary statements versus notes.
  • Use of non-descriptive labels such as 'other' is restricted; more informative labels or disclosures are needed.

Key disclosures

  • MPM note with reconciliations.
  • Specified expenses by nature when presenting by function.
  • Disaggregated information in the notes where aggregation in the primary statements would obscure material information.

Common exam traps

  • IFRS 18 is not yet mandatory in 2026; exams based on IAS 1 remain valid until syllabuses switch.
  • IFRS 18 changes presentation, not recognition or measurement — profit for the year does not change.
  • Share of profit of equity-accounted associates and joint ventures is not in operating profit; it sits in the investing category.

Worked example: New subtotals (simplified, general corporate)

Scenario. Revenue $1,000; cost of sales $600; administrative expenses $150; share of profit of an associate $20; interest on bank borrowings $40; income tax $60.

  1. Operating category: 1,000 − 600 − 150 → operating profit $250.
  2. Investing category: share of associate's profit $20 → profit before financing and income taxes $270.
  3. Financing category: interest on borrowings $40 → profit before tax $230.
  4. Income taxes $60 → profit for the year $170.

Answer: Operating profit $250; profit before financing and income taxes $270; profit $170.

Practise MCQs on this standard

Test your understanding of IFRS 18 with free chapter-wise MCQs and explanations in these question banks.

CAF-1 Financial Accounting and ReportingICAP CAFACCA FA Financial AccountingACCAACCA FR Financial ReportingACCACAF-6 Corporate ReportingICAP CAFCIMA BA3 Fundamentals of Financial AccountingCIMA Certificate in Business AccountingICAEW AF Accounting FundamentalsICAEW ACA Certificate LevelCA Inter P1 Advanced AccountingICAI CA Intermediate

ICAI CA Intermediate examines Indian Accounting Standards, which are based on but can differ from IFRS. Check your syllabus.

Read the official IFRS 18 text on ifrs.org