IFRS 18: What Changes, the Deadline, and Who Should Own It

IFRS 18 is the most significant change to how companies present financial performance since IFRS Accounting Standards were introduced more than twenty years ago — that's the IASB's own framing, not marketing. It replaces IAS 1, and while it carries forward most of IAS 1's underlying principles, it restructures how income and expenses are categorised, adds new required subtotals to the face of the income statement, and brings the "non-GAAP" measures companies quote in earnings calls and investor decks inside the audited financial statements for the first time. None of this is optional, and none of it is only an accounting-department problem.

A practical note before the detail: this is a high-level orientation meant to help you plan and ask the right internal questions — not formal accounting advice. Classification judgments, MPM identification, and transition mechanics for your specific facts should be confirmed with your auditors and technical accounting team.

What actually changes on the income statement

IFRS 18 requires every set of income and expenses to sit in one of five defined categories, instead of the loose, entity-specific structures IAS 1 allowed:

Operating — the default category: everything that isn't specifically required to sit elsewhere lands here.
Investing — income and expenses from investments in associates, joint ventures, and other assets that generate a return individually and largely independently of the entity's other resources.
Financing — income and expenses from liabilities that raise finance, including interest on lease liabilities.
Income taxes — per IAS 12, as before.
Discontinued operations — per IFRS 5, as before.

Alongside the categories, two new subtotals become mandatory on the face of the statement: operating profit or loss, and profit before financing and income taxes — on top of the profit-or-loss total that was already there. Entities with a "specified main business activity" — banks, insurers, investment entities — apply a modified version of this classification, since investing or financing income can itself be their core operating activity.

The IASB's own reasoning for all of this: over 60% of companies surveyed already report an "operating profit" figure — calculated in at least nine different ways. IFRS 18 doesn't ban management judgment, but it puts a floor under what "operating profit" has to mean.

Management-defined performance measures: the disclosure most companies aren't ready for

This is the part of IFRS 18 that reaches furthest outside the finance function. A management-defined performance measure (MPM) is any subtotal of income and expenses that management uses in public communications — press releases, investor presentations, earnings calls — to describe the entity's financial performance as a whole, and that isn't already a subtotal IFRS specifies. If that description fits something your business quotes regularly, it now needs, in a single note to the financial statements:

A statement that the measure reflects management's own view of performance and isn't necessarily comparable to similarly named measures at other companies.
An explanation of why the measure is considered useful, and how it's calculated.
A reconciliation to the most directly comparable IFRS-specified subtotal, with every reconciling item identified individually.
The income tax effect and non-controlling interest effect of each reconciling item, and how the tax effect was determined.
If the calculation changes between periods, an explanation and a restatement of the comparative.

And critically: MPM disclosures are inside the financial statements, which means they're subject to audit. A measure that's lived comfortably in an investor deck with a footnote disclaimer now needs the same rigour as any other audited figure.

Aggregation, disaggregation, and the end of the vague "other" line

IFRS 18 also sets an explicit principle for grouping items: things with shared characteristics — nature, function, measurement basis, how often they recur — can be aggregated; things that are genuinely dissimilar have to be shown separately, even if that means more lines in the notes. The practical bite is in the "other" line so many income statements lean on: a residual label like "other operating expenses" is only allowed when there truly is no more informative label available and the amounts involved are immaterial. Materially different items can no longer be swept into one generic bucket.

A smaller but real change to the cash flow statement

IFRS 18 also amends IAS 7. The indirect-method reconciliation now has to start from operating profit or loss rather than whichever starting point an entity previously chose, and the long-standing free choice in classifying interest and dividends received and paid is gone: for most entities, interest paid and dividends paid sit in financing, interest received and dividends received sit in investing. Entities with a specified main business activity classify these consistently with how the related income or expense sits in their income statement instead.

The deadline, and what it actually means for your timeline

IFRS 18 is mandatory for annual reporting periods beginning on or after 1 January 2027, applied fully retrospectively, with early application permitted. The European Commission formally endorsed the standard in February 2026, so for EU-listed groups the effective date is confirmed and unchanged — there is no carve-out and, as of this writing, no sign of a deferral.

The date that actually matters for planning isn't 1 January 2027 — it's the comparative year before it. Full retrospective application means 2026 needs to be capturable under the new structure too, so the systems, chart-of-accounts, and classification decisions need to be operating well before the first reporting period technically starts. Treat "2027" as the deadline for being finished, not the deadline for starting.

What needs to change, practically

A gap assessment first. Map the current income statement, cash flow statement, and every externally quoted performance measure against the new structure before committing to a plan — it's what everything else gets prioritised against.
Chart of accounts and systems. Classification under IFRS 18 depends on the nature of the underlying asset or liability, not just the nature of the expense, which usually means more granular general-ledger detail than most charts of accounts currently capture.
An MPM identification exercise. Systematically review press releases, investor materials, and management commentary to work out which existing non-GAAP measures meet the formal MPM definition — before the deadline, not during year-end close.
A covenant and remuneration review. Debt covenants, banking agreements, and incentive plans that reference "operating profit" or similar metrics may need amending once the definition underneath them changes.
Comparative restatement capability. Systems and processes need to produce a restated prior-year comparative alongside the transition year itself, not after it.
Governance and controls. New documentation and audit trails for the judgment calls involved — category classification, MPM policy, specified-main-business-activity determinations — since all of it is now subject to audit.

Who's responsible

No single source hands this to one role — it genuinely sits across several, and the transition tends to stall wherever one of them isn't actually engaged.

01CFO / finance leadership

Overall sponsorship, timeline, and budget for the transition — and the tone for how seriously the rest of the business treats it.

What this role owns

Making the transition a funded, resourced programme rather than something the reporting team absorbs on top of business-as-usual.

Where an interim can help

Bring pattern recognition from having led a structural reporting change before, and free up senior capacity to own the programme properly.
02Group reporting & technical accounting

The classification judgments themselves — operating, investing, or financing — and drafting the new primary statements.

What this role owns

Getting the category and subtotal logic right, consistently, across every entity in the group.

Where an interim can help

Add capacity precisely where technical judgment calls are being made under time pressure, without diluting who's accountable for them.
03Financial controller / consolidation team

Chart-of-accounts redesign, systems and ERP changes, and the mechanics of producing a restated comparative.

What this role owns

Making sure the general ledger can actually capture information at the granularity the new categories require.

Where an interim can help

Run the systems and data workstream directly, so permanent staff can keep today's close running in parallel.
04Investor relations & communications

Identifying which measures already used in public communications will meet the formal MPM definition.

What this role owns

Aligning external messaging with what will now need to be defined, reconciled, and disclosed.

Where an interim can help

Bridge the finance and communications sides of this conversation, since the two teams don't always speak the same language about the same numbers.
05Audit committee & board

Oversight and formal sign-off on MPM policy, classification judgments, and the transition programme as a whole.

What this role owns

Holding management to account for the judgment calls IFRS 18 puts in their hands, and asking the questions that surface gaps early.

Where an interim can help

Prepare board-ready materials that make the judgment calls, and the reasoning behind them, genuinely easy to scrutinise.
06External auditors

Testing the classification judgments and the MPM reconciliations, both of which are now formally part of the audited financial statements.

What this role owns

Independent assurance over decisions that, before IFRS 18, mostly sat outside their scope.

Where an interim can help

Make sure what auditors are being asked to test is already clean and well-documented, so review conversations move faster rather than surfacing gaps late.

Why this is exactly where interim finance leadership earns its keep

I've been through three major ERP/S/4HANA rollouts and, most recently, the Close & Consolidations workstream of a global S/4HANA transformation across 29 EMEA entities — work that, like IFRS 18, comes down to redefining how numbers get classified and reported across an entire group, on a fixed timeline, with people outside finance who need to understand why it matters. An interim is rarely, if ever, the one with the authority to make classification calls or sign off MPM policy on the business's behalf, and that's as it should be — but authority and influence aren't the same thing. What experience like this offers is the standing to ask the right question at the right moment, and the pattern recognition to help the business get through a structural reporting change once, properly, rather than working out the pitfalls live under audit pressure.

This is a brief, high-level pass over what IFRS 18 changes, not the full picture. Every area named here — category classification, MPM identification, systems redesign, transition governance — has real depth and real judgment calls underneath it that this piece doesn't attempt to resolve.

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Gabriella Sebők, MBA, FCCA, runs ProFor Interim Management and has spent 25 years in finance leadership roles across the Netherlands and internationally, including the Close & Consolidations workstream of a major global SAP S/4HANA transformation across 29 EMEA entities. This article reflects personal experience, not a vendor, audit, or technical-accounting perspective, and isn't a substitute for advice from your auditors on your specific facts.