IFRS 18 – New standard changes structure of the income statement

Published on October 1, 2024 | Reading time approx. 2 minutes

In April 2024, a new standard IFRS 18 has been published, which will supersede the currently applicable IAS 1 regarding fundamental questions on the presentation of financial statements from 2027 onwards. The EU endorsement is still pending. However, this should only be a formal step. At its core, IFRS 18 offers – beside new guidelines for the (dis)aggregation of information – especially two further substantial changes.

For one thing the structure of the income statement will change. It will be divided into the categories “operating”, “investing” and “financing” as already known from the cash flow statement. Furthermore, income taxes and discontinued operations must be presented separately.

For another thing new information regarding so-called management performance measures (MPMs) must be presented in the notes. MPMs are profit or loss measures that are not required by IFRS, but that are used in public communications by the entity and that shall show a certain aspect of the financial performance. Beside a description of the MPMs, a reconciliation to the most directly comparable IFRS figure, for example, must be presented.

The practical implications of IFRS 18 are diverse. Entities must give thought to the future design of performance measurement and its external communication early. The new structure of the income statement might further require adjustments to reporting processes and IT systems. Moreover, possible consequences of the restructuring of the income statement on (existing) covenants or management remuneration must be examined.

A deeper analysis of the new requirements of IFRS 18 and its practical implications will be provided in one of the following issues of our newsletter “Reporting Trends & Solutions”.

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IFRS 18 – New standard changes structure of the income statement

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