IFRS 18 Presentation and Disclosure in Financial Statements is an accounting standard issued by the IASB in April 2024. It replaces IAS 1 Presentation of Financial Statements and becomes effective for annual periods beginning on or after January 1st 2027. Early adoption is permitted and encouraged. Companies will need to apply it retrospectively to their comparative figures in their 2027 report. However, this retrospective application is presentation-based only, meaning entities will need to reclassify and regroup income and expenses according to the new structure introduced by IFRS 18.
The main goal of IFRS 18 is to make financial statements more comparable, transparent, and useful for investors and other stakeholders.
To achieve that the standard classifies all income and expense items into five categories:
- Operating – core business revenues and expenses
- Investing – income and losses from investments
- Financing – income and expenses related to funding activities
- Tax – income tax expense
- Discontinued operations – results from components of the business that have been or will be disposed of
The standard also introduces two mandatory subtotals:
- Operating Profit – the total of operating items
- Profit before Tax – the total of all categories except tax
This ensures a consistent presentation across companies and aims to clean up the operating part and separate it from non operating parts.
Remember that IAS7 and IFRS 18 are not aligned even though IFRS18 brings the Income statement closer to the Cash Flow statement logic under IAS 7.
IFRS18 acknowledges the usefulness of non-GAAP performance measures companies use to communicate to stakeholders. The standard defines a management performance measure (MPM) as:
- Management view of financial performance
- Subtotal of income and expenses (that is not one of the required subtotals)
- Used in public communications outside financial statements
Under IFRS18 information about these MPM’s will be required to be disclosed in a note to the financial statements. The MPM’s will be subject to audit.
How we support our clients with IFRS18 using CCH Tagetik
The first impact of IFRS 18 might be on the chart of accounts used for reporting in CCH Tagetik. As explained earlier, the Income Statement will adopt new breakdowns, which might require a more granular setup for certain accounts.
Example: An impairment of a PP&E (Property, Plant, and Equipment) asset, previously classified as a non-operating item, will now be considered operational, since it relates to an asset used in operations. Companies that do not yet maintain separate impairment accounts will need to introduce them in order to support the more detailed classification.
IFRS 18 also introduces new aggregations, including mandatory subtotals like Operating Profit or Loss and Management Performance Measures (MPMs).
CCH Tagetik’s Financial Statement Templates (FSTs) allow users to define breakdowns and aggregations of accounts stored in Tagetik’s database. For IFRS 18, a user would create a new FST (e.g., “Income Statement I18”) and set up the structure to meet the standard’s requirements. This involves:
- Mapping accounts from the new chart of accounts to the correct categories (e.g., operating expenses)
- Building aggregations and formulas for subtotals and MPMs
- Applying the template to any scenario using the Excel add-in
Most of the MPMs can also be managed through this interface, where formulas may be defined and applied in the new disclosure templates. Definitions are centralized and can be made available to auditors. Where relevant, the same setup can also be applied retrospectively by using a previous scenario dimension in the form (e.g., “2026”).
The final step for IFRS 18 compliance is managed through CCH Tagetik’s Intelligent Disclosures module, which takes the newly structured statements and disclosures and outputs them into a Word file. For clients that already have built and use templates, the newly structured Income Statement will automatically refresh in the annual report. This also allows the client to make side by side comparisons of Income statement with previous and new structures to see how the changes impact the statement.
Users can then comment on MPM disclosures and other notes, while the template remains refreshable and numbers stay linked to the underlying database. This ensures full auditability, version control, and collaborative workflows within the document — clean, simple, and compliant.
With this setup, IFRS 18 becomes less of a challenge: to streamline your reporting process, enhance transparency, and stay ahead of regulatory demands. If you are already using CCH Tagetik an need any support with IFRS 18 implementation, let’s schedule a call.
We’ll walk you through the steps, tailor the setup to your needs, and help you ensure a smooth, audit-ready transition before 2027.