IFRS 18: preparing a controlled transition before 2027

Why preparation can no longer wait

IFRS 18 replaces IAS 1 for presentation and disclosure in financial statements. It applies to annual reporting periods beginning on or after 1 January 2027, with earlier application permitted. For a group reporting on a calendar-year basis, 2026 is already the comparative period that requires careful preparation.

The timetable may appear comfortable if the project is treated as a formatting exercise. It becomes much tighter once the underlying work is considered: classifying income and expenses, reviewing grouping principles, identifying performance measures used in public communications, updating consolidation packages and documenting controls. Finance leads the transition, but management control, information systems, investor communication and governance all have a role.

Three structural changes

The standard aims to improve comparability and make performance easier to understand. Three changes need to be embedded in the organisation before the first publication.

• New defined subtotals in the statement of profit or loss, including operating profit and profit before financing and income taxes.
• Specific disclosures for management-defined performance measures used in public communications.
• Stronger aggregation and disaggregation principles so that over-grouped or poorly explained line items do not obscure material information.

The real programme sits behind the statements

Presentation quality starts with data quality. A new line in the statement of profit or loss may require detail that does not exist in the chart of accounts, interfaces or consolidation tools. If that information can only be produced through manual adjustments, the risks of error, delay and weak audit trails increase.

The assessment should therefore begin at source: local ledgers, group policies, mapping tables, analytical dimensions, consolidation entries and published measures. The next step is to make sure decisions are consistent across subsidiaries, documented and controllable. In a regional group, the approach must accommodate local constraints without weakening the coherence of consolidated reporting.

A six-step roadmap

A robust transition can be organised around six coordinated workstreams. Their sequence prevents system development from starting before accounting decisions and reporting needs are stable.

• Perform a gap assessment covering current statements, financial communication practices and IFRS 18 requirements.
• Set project governance, decision rights and clear ownership for each data point.
• Map accounts and flows to the new categories and subtotals.
• Inventory management-defined performance measures and control their calculation, reconciliation and approval.
• Update reporting packages, systems, controls and close documentation, then produce dry-run comparatives.
• Train teams and prepare a consistent narrative for governance bodies, investors, lenders and other users of the accounts.

A governance decision, not only an accounting project

Presentation choices influence how performance will be understood. Executive management and governance bodies should approve the principles, monitor areas of judgement and ensure that internal indicators tell the same story as the financial statements and external communication.

The most effective preparation includes at least one early dry close to identify gaps, correct data and test the teams' ability to explain changes. A well-managed transition reduces publication risk and creates an opportunity to simplify reporting and strengthen the connection between accounting, performance management and strategy.