IFRS 18: A New Era in Financial Statement Presentation

Issued: April 2024

Effective Date: Annual periods beginning on or after 1 January 2027

Replaces: IAS 1 – Presentation of Financial Statements

What is IFRS 18?

IFRS 18 is a transformative standard issued by the International Accounting Standards Board (IASB) to enhance the presentation and disclosure of financial statements. It introduces a more structured and consistent approach to how financial performance is communicated, aiming to improve comparability, transparency, and clarity.

Key Objectives of IFRS 18

1. Introduce new mandatory & additional subtotals in the statement of profit or loss:

   - Operating profit
   - Profit before financing and income taxes
   - Profit before income tax
   - Profit from continuing operations
   - Net profit

2. Require disclosure of Management-Defined Performance Measures (MPMs).

3. Enhance aggregation and disaggregation principles.

4. Standardize the structure of the statement of profit or loss into five defined categories: Operating, Investing, Financing, Income Taxes, and Discontinued Operations.

Detailed Format: Statement of Profit or Loss (IFRS 18)

Statement Of Profit & Loss (IFRS 18 Format)
For the Year Ended 31 December 20XX
Category	Line Item	Amount (SAR)
Operating	Revenue	100,000.00
	Cost of Goods Sold	(60,000.00)
	Gross Profit	40,000.00
	Selling and Distribution Expenses	(8,000.00)
	Administrative Expenses	(7,000.00)
	Research and Development Expenses	(2,000.00)
	Other Operating Income	1,500.00
	Other Operating Expenses	(1,000.00)
	FX Gain/(Loss) on Revaluation	300.00
	FX Gain/(Loss) on Settlement	200.00
	Operating Profit	24,000.00
Investing	Share of Profit from Associates	1,200.00
	Dividend Income	300.00
	Interest Income (Investments)	500.00
	Gain on Disposal of Investments	400.00
	Loss on Disposal of Investments	(200.00)
	Total Investing Income/(Expense)	2,200.00
	Profit Before Financing and Income Tax	26,200.00
Financing	Interest Expense (on Loans)	(3,000.00)
	Interest Expense (on Lease Liabilities)	(500.00)
	Other Financing Costs	(200.00)
	Total Financing Expense	(3,700.00)
	Profit Before Income Tax	22,500.00
Income Taxes	Income Tax Expense	(5,000.00)
	Profit from Continuing Operations	17,500.00
Discontinued Ops	Profit from Discontinued Operations	–
	Net Profit for the Year	17,500.00
	Required Subtotals	Mandatory
	Additional Subtotals	Additional

 

Disclosure of Management-Defined Performance Measures (MPMs)

MPM: Adjusted EBITDA	Amount (SAR)
Operating Profit	24,000
+ Depreciation and Amortization	4,000
+ Non-Recurring Items	1,200
Adjusted EBITDA	29,200

Explanation: Adjusted EBITDA is used by management to evaluate core operating performance excluding non-cash and non-recurring items.

Timeline

Year	Action
2024	Standard issued
2025–26	Preparation and system updates
2027	Mandatory adoption begins

Final Thoughts

IFRS 18 marks a significant shift in financial reporting. By introducing mandatory subtotals, structured categories, and MPM disclosures, it enhances the usefulness and comparability of financial statements across industries and jurisdictions.