Background
The new Standard, IFRS 18: Presentation and Disclosure in Financial Statements, will give investors more transparent and comparable information about companies’ financial performance, thereby enabling better investment decisions. IFRS 18 replaces IAS 1 Presentation of Financial Statements.
IFRS 18 introduces three sets of new requirements
| Improved comparability in the statement of profit or loss (income statement) | IFRS 18 introduces three defined categories for income and expenses – operating, investing and financing – to improve the structure of the income statement, and requires all companies to provide new defined subtotals, including operating profit. |
| Enhanced transparency of management – defined performance measures | IFRS 18 requires companies to disclose explanations of those company-specific measures that are related to the income statement, referred to as management-defined performance measures. |
| More useful grouping of information in the financial statements | IFRS 18 requires companies to provide more transparency about operating expenses, helping investors to find and understand the information they need. |
Effectiveness:
IFRS 18 is effective for annual reporting periods beginning on or after 1 January 2027, but companies can apply it earlier. Changes in companies’ reporting resulting from IFRS 18 will depend on their current reporting practices and IT systems.
| SW Remarks– IFRS 18 represents the most significant change to companies’ presentation of financial performance. It will give investors better information about companies’ financial performance and consistent anchor points for their analysis. It will give investors a consistent starting point for analyzing companies’ performance and make it easier to compare companies and will improve the discipline and transparency of management-defined performance measures. |
Piyush Verma, Audit Associate, SW
