IFRS 18: PRESENTATION AND DISCLOSUREIN FINANCIAL STATEMENTS

By Osman A. Ali

Audit Associate at 3A CPA LLP

The issuance of IFRS 18:

Presentation and Disclosure in Financial Statements, April 2024 marks a very critical shift in how companies present financial performance. This new standard will replace IAS 1 (Presentation of Financial Statements), which has been in place for over twenty years.

With an effective date of 1 January 2027, entities are now in a crucial window to understand the transition requirements and key differences between IAS 1 and IFRS 18.

  1. Overview: Why IFRS 18?

The IASB developed IFRS 18 in response to feedback from primary users such as investors and stakeholders who found that:

  • Limited standardisation in the income statement which hinders the element of comparability.
  • The use of Non – GAAP measures that lacked transparency e.g adjusted profits.
  • Disaggregation of financial statement line items that were often insufficient to facilitate meaningful analysis.

The aim of IFRS 18 is to address these concerns through more structured presentation and clearer disclosure.

2. Transition Requirements from IAS 1 to IFRS 18

IFRS 18 requires entities to apply the standard retrospectively in accordance with IAS 8; Accounting Policies, Changes in Accounting Estimates and Errors. This means:

  • Comparative information (e.g. for 2024 if applying in 2025) must be restated.
  • Companies must classify income and their respective expenses in accordance with the new categories.
  • A notice of transition disclosure note is required in the first year of adoption, explaining the effects of the change.

3. Presentation Example: Before vs. After

Revenue

xx

Cost of sales

(xx)

Gross profit

xx

Other income

xx

Operating expenses 

(xx)

Administration expenses  

(xx)

Finance Cost   

(xx)

Profit/Loss before tax   

/xx(xx)

Tax Charge  

(xx)

Net Profit / Loss  

(xx)

Revenue

xx

Operating category

 – Cost of sales              

xx

 – Operating income/expenses

xx/(xx)

Operating profit (mandatory)

– Income/expense from investing activities

(xx)

Financing category

(xx)

– Finance income/costs

(xx)

Profit before financing and income tax (mandatory)

(xx)

Income tax 

(xx)

Profit for the year      

(xx)

Conclusion

The transition from IAS 1 to IFRS 18 is not a minor update, it is a foundational change in how financial performance is communicated. While it increases the burden on preparers in the short term, it offers significant long-term benefits in transparency, investor confidence and decision usefulness.

Companies that begin preparations early will have a smoother transition and will be better positioned to meet stakeholder expectations in the evolving global reporting landscape.

By Osman A. Ali

Recent Posts