Pantelis Pavlou – Partner, Financial Accounting Advisory Services (FAAS) and member of Europe Central Corporate Reporting

Christina Argyrou – Manager, Financial Accounting Advisory Services (FAAS) and member of Europe Central Corporate Reporting

Chara Skordi – Manager, Financial Accounting Advisory Services (FAAS)

IFRS¹ 18 Presentation and Disclosure in Financial Statements is not just an incremental update, it marks one of the most significant shifts in financial statement presentation in years. With the EU endorsement now in place, IFRS 18 is no longer an academic discussion in the Union or future concern. Although it becomes effective on 1st January 2027, its impact is already here, as it applies retrospectively. In practice, this means that the processes being used today, and the information currently being produced, are already, one way or another, affected by the new requirements. One thing is for sure; IFRS 18 will reshape how entities present performance and may require redesigning how financial information is structured internally, alongside updates to systems, processes and disclosures. This, in turn, could have a much more pronounced impact on an organisation, from changes to systems and processes, to governance considerations, and even extending into broader strategic themes.

What is Changing? 

Replacing IAS 1², an older standard that had been maintained through a series of patchwork updates ,IFRS 18 introduces a comprehensive redesign across three dimensions: (1) the structure of the primary financial statements, (2) the principles governing performance measures used by management, and (3) the discipline applied when it comes to aggregation and disaggregation of information. At its core, it reshapes how performance is structured, explained, and communicated. These changes, analysed below, aim to enhance comparability, transparency and decision‑usefulness across industries representing a structural transformation rather than a fine-tuning exercise.

• New Categories and Mandatory Subtotals in the Statement of Profit or Loss

IFRS 18 requires all income and expenses to be classified into five defined categories: operating, investing, financing, discontinued operations, and income taxes. Three of these, operating, investing and financing, are completely new categories introduced with a clear purpose: to standardise how performance is portrayed across entities. It also introduces two new mandatory subtotals, operating profit and profit before financing and income taxes, removing historical discretion and creating a more standardised and comparable statement of profit or loss across entities and industries. The replacement of IAS 1 is the mechanism; the real objective is to deliver the comparability investors have long been seeking. 

• New Disclosures about Management-Defined Performance Measures (MPMs)

The Standard introduces new requirements for management-defined performance measures (MPMs). These are subtotals of income and expenses, used by management in public communications outside the financial statements and reflect management’s view of performance. Under IFRS 18, MPMs must be clearly defined, explained, and reconciled to IFRS subtotals within the financial statements, enhancing transparency and improving the credibility of performance metrics widely relied upon by investors.

• Enhanced Guidance for Aggregation, Disaggregation and Materiality 

IFRS 18 strengthens the guidance on the aggregation and disaggregation of information across all primary financial statements and the notes. Materiality becomes central to determining the appropriate level of detail. Entities need to strike an appropriate balance: appropriate aggregation to present a clear, summarised view in the financial statements without concealing important information, but enough disaggregation to ensure users still receive meaningful information, without obscuring the overall message. This principles-based approach will influence the way entities organise financial information internally, as well as system design and the structuring of disclosures.

Together, these changes will influence how companies organise their accounts and financial information, adapt their internal controls and systems, and communicate results. IFRS 18 transforms not only the structure of reporting, but also the clarity and comparability of the performance narrative itself.

What Companies Need to Focus on Now 

Implementing IFRS 18 requires coordinated action across the organisation, with teams from strategy, systems, processes and people working together, to deliver the required changes. Although the change is rooted in accounting rules, its impact goes well beyond technical accounting. Because the requirements apply retrospectively, preparers must begin alignment immediately. Here are the key impact areas:

1. Strategic & Performance Impact

The first and most fundamental impact is strategic. Companies must reconsider how they articulate their performance narrative to investors and how they position themselves relating to competition and peers. From this strategic foundation flow the more technical elements:  the redesign of the statement of profit or loss to reflect the new categories and subtotals, the assessment of the entity’s main business activities, and the selection and definition of MPMs, including disclosure of associated calculations and reconciliations.

2. Data Impact

From a data perspective, IFRS 18 is a genuinely data-hungry standard. Entities must reorganise their financial data structures to align with the new categories and ensure that systems capture classification logic accurately and consistently. This includes updating data structures and ensuring alignment between externally communicated performance measures and those required by IFRS 18.

3. Process & Systems Impact

In terms of processes and systems, companies will need to redesign reporting templates, closing routines, mapping logic and the related controls, roles and responsibilities. Consolidation systems, internal reporting tools and IT infrastructure will require updates to support new classifications, subtotals and reconciliations. This transition presents an opportunity to streamline processes and enhance automation.

4. People Impact

Finally, the people dimension requires focused training and communication, so finance teams – and the wider business that generates and uses this information - understand the new classification rules, MPM requirements and disclosure expectations. Clear guidance and consistent application across the organisation will be essential to ensure high‑quality reporting. 

The Challenge

IFRS 18 introduces new, judgment‑heavy requirements, particularly around categorising transactions and determining the role of specific activities. These judgments must be well-documented, consistently applied and supported by robust internal governance. ESMA³ has emphasised transparency in implementation. Investors need to understand not only the numbers, but the rationale behind the numbers.

Ultimately, IFRS 18 represents an important opportunity for companies to elevate the clarity, consistency and communicative value of their financial statements. Early preparation will not only support compliance, it will also strengthen the quality of performance reporting delivered to stakeholders.

Our experience with major IFRS Accounting Standards transitions is clear: the biggest challenges emerge when organisations wait too long to mobilise. Compressed timelines lead to rushed judgements, limited testing, and pressure on systems and governance. With IFRS 18, a data‑hungry, judgement‑heavy and operationally pervasive standard, late adoption magnifies risk. Early mobilisation, by contrast, allows companies to design their performance story deliberately, strengthen investor confidence, and embed the new structure sustainably across processes, data and systems.

Why This Is Urgent 

IFRS 18 becomes effective for reporting periods beginning on or after 1 January 2027, with early application permitted, and requires full retrospective application. Practically, this means that 2026 will serve at a minimum as the comparative period and must reflect the new categories, subtotals and disclosure requirements. 

As we are already three months into the comparative period, and the work required behind the scenes is substantial. The time to act is now.

Want to Go Deeper?

EY’s publications, Applying IFRS: A closer look at IFRS 18 (updated July 2025)⁴, and the Appendix – Additional considerations for banks⁵, include more practical examples. As always, we are available to support you throughout the transition. Our tool, EY Atlas Client Edition (here) is available for free to everyone and offers access to EY interpretations and thought leadership content.

The views expressed in this article represent the personal opinions of the authors and not necessarily the official position of EY. 

1. International Financial Reporting Standards

2. International Accounting Standard

3. ESMA’s public statement: Reshaping performance: Implementation of IFRS 18 Presentation and Disclosure in Financial Statements. 

4. The publication “Applying IFRS: A closer look at IFRS 18 (Updated July 2025)”, in English, is accessible at Applying IFRS: Applying IFRS: A closer look at IFRS 18 (Updated July 2025) | EY - Global.

5. The publication “A closer look at IFRS 18 Appendix – Additional considerations for banks”, in English, is accessible at A closer look at IFRS 18 Appendix – Additional considerations for banks | EY - Global