Starting January 1, 2027, the IFRS 18 standard — published by the IASB in April 2024 with an option for early adoption — will definitively replace IAS 1 for the presentation of consolidated financial statements. This change redefines the structure of the income statement (Operating, Investing, and Financing categories) and standardizes subtotals as well as performance indicators communicated to the market.

For Chief Financial Officers (CFOs), the transition goes far beyond a simple accounting framework change: it requires restating 2025–2026 data, adapting reporting processes, and preparing for more transparent financial communication.

Decoding IFRS 18 for CFOs

Definition and objectives of IFRS 18

Published by the IASB in April 2024, IFRS 18 standardizes the presentation of the income statement into three mandatory categories: Operating, Investing, and Financing. Each line item must now be classified into one of these categories based on the nature of the activity. The standard also introduces three mandatory subtotals — operating profit, profit before financing and tax, and net profit — to enhance comparability across financial statements.

Regarding the “net cost of debt,” IFRS 18 does not prohibit it; this aggregate becomes an acceptable Management Performance Measure (MPM), provided it is reconciled to an IFRS subtotal and disclosed in the notes (including tax and non-controlling interests).

Finally, any performance indicator not defined by the standard but used in financial communication must be fully reconciled in the notes in accordance with the MPM requirements.

Impact on comparability and financial communication

For groups publishing consolidated IFRS financial statements, the challenge is twofold: improving comparability and clarity of performance (the IASB’s central objective) while reorganizing reporting processes. IFRS 18’s categories and mandatory subtotals end the practice of custom groupings, reclassifying them as MPMs subject to reconciliation. This advancement meets investors’ expectations for transparency.

In implementation terms, finance departments must anticipate as early as 2025 the redesign of their ERP systems, chart of accounts, and internal controls to retrospectively restate the 2026 fiscal year (and 2025 when two comparative periods are required). This effort includes team training, dashboard updates, and redefining the MPMs used.

Managing the impact on financial statements and processes

Reclassification of P&L / Cash Flow Statement and comparative restatements

The most visible change brought by IFRS 18 is the structure of the income statement: each income or expense item must now fall under one of the three mandatory categories (Operating, Investing, Financing). Entities may still present expenses by nature or by function — and a mixed presentation is now officially allowed — but those opting for a functional format must disclose certain expense types (depreciation, personnel costs, impairments) in the notes.

The cash flow statement is also evolving: for the indirect method, the starting point becomes operating profit, rather than net profit. In addition, IAS 7 options allowing flexible classification of interest and dividends are eliminated.

Modernizing ERP, internal control, and key competencies

To comply with IFRS 18, finance departments must act on three main fronts:

  1. Chart of accounts and systems: reorganize the chart of accounts to reflect the Operating / Investing / Financing categories and update ERP, IT systems, and consolidation tools to ensure the reliability of 2026 financial statements (and 2025 if two comparatives are needed).
  2. Internal control: review risk matrices, closing procedures, and reporting of subtotals; rigorously manage Management Performance Measures (MPMs) through exhaustive documentation and systematic reconciliation.
  3. Skills development: train consolidation, accounting, and controlling teams on the new IASB requirements, the impact on cross-functional analyses, and the rationale behind restatements.

Ensuring compliance and performance

IFRS 18 vs IAS 1 and SEC / US GAAP requirements

Compared to IAS 1, IFRS 18 (issued by the IASB) is more prescriptive: it mandates three subtotals — operating profit, profit before financing and tax, and net profit — and restricts presentation options, thereby strengthening comparability of financial statements. However, it remains flexible: other aggregations may still be presented as Management Performance Measures, provided they are thoroughly reconciled and documented.

This logic aligns with the SEC’s transparency requirements for U.S. issuers but differs from US GAAP: under IFRS 18, MPMs are permitted as long as they meet reconciliation criteria, whereas the SEC primarily regulates “non-GAAP measures.” Convergence is thus partial. International groups filing a Form 20-F can generally submit a single set of IFRS consolidated statements; US GAAP reconciliation is only required for certain subsidiaries or specific local obligations.

MPM framework: reconciliation, notes, and transparency

To ensure a smooth transition to IFRS 18, groups should focus on three levers:

  • Select MPMs that are truly used for management and justify their relevance; each MPM must be fully reconciled to the nearest IFRS subtotal, including tax and non-controlling interests.
  • Systematically document adjustments applied to these indicators and ensure their accounting consistency in line with IASB expectations.
  • Enhance the notes: explain groupings, detail the breakdown of expenses where the P&L is presented by function, and clearly describe presentation choices.

The clarity of information for analysts and investors — integrated reports, universal registration documents — remains critical: IFRS 18 requires full transparency on classification assumptions and published subtotals.

Managing the 2025–2027 transition

Complex cases: captive finance, derivatives, multi-activity groups

  • Determine the main activity: for hybrid structures (e.g. manufacturers with captive finance entities), the boundary between Operating and Financing can be complex; the standard allows multiple main activities, which must be documented in accounting policies.
  • Classify FX and hedging impacts: foreign-exchange and hedging gains or losses follow the category of the underlying item; if allocation is unclear, the impact is recognized under Operating.
  • Ensure retrospective transition: 2026 (and 2025 if two comparatives) financial statements must be restated under IFRS 18, with a detailed reconciliation against the IAS 1 presentation — this does not mean maintaining dual ledgers.

These challenges require close monitoring within ERP systems, management by standardized subtotals, and tight coordination among consolidation, internal-control, and tax teams to ensure the reliability of published financial statements submitted to the IASB and regulators.

Project roadmap: diagnostics, deployment, monitoring & cloud tools

  1. Diagnostics (2025) – Map affected line items, analyze gaps between IAS 1 and IFRS 18, identify quick wins on intermediate totals and financial statements.
  2. Deployment (2026) – Adapt ERP and consolidation tools, conduct test closings, and produce IFRS 18 restated statements in parallel with IAS 1 presentation to build 2026 comparatives.
  3. Monitoring (2027) – Stabilize production, leverage feedback, and train new hires to meet the IASB’s transparency requirements.

Clear governance is essential: an executive sponsor, CFO-led steering, and the involvement of IT, business units, and internal audit. Using cloud-based IFRS 18-ready solutions, standard templates, and data-visualization tools will accelerate the transition while ensuring high-quality published financial statements.

Published by the IASB in April 2024 and mandatory as of January 1, 2027 (with early-adoption option), IFRS 18 introduces a more prescriptive framework built on standardized subtotals that enhance global comparability of financial statements. For CFOs, it represents an opportunity to modernize communication and strengthen internal processes: by launching a comprehensive diagnostic now, training teams, and adapting tools, the constraint becomes a lever for lasting performance.

Schedule your IFRS 18 diagnostic call with our experts to secure your roadmap and gain a competitive edge.