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Key points On paper, IFRS 18 is a presentation standard. It doesn’t change recognition, measurement, net profit, or basic and diluted earnings per share. But it’s the biggest change to…
On paper, IFRS 18 is a presentation standard. It doesn’t change recognition, measurement, net profit, or basic and diluted earnings per share.
But it’s the biggest change to the layout of the income statement in 20 years, and consolidation carries most of it.
It also arrives sooner than the effective date suggests. Adoption is retrospective, so the comparative period has to be restated. For a calendar-year group, that’s the current financial year. The data needed to present 2026 under IFRS 18 is being collected, mapped and consolidated now, and the consolidation team may not know it yet.
Income and expenses fall into five categories: operating, investing, financing, income taxes and discontinued operations. Two new subtotals are mandatory: operating profit, and profit before financing and income taxes. IAS 1 let groups choose which subtotals to show and where items sit. That choice is gone.
The account doesn’t decide the category. The nature of the item does, plus whether the reporting entity has a specified main business activity: investing in particular types of assets, or providing financing to customers. Two groups with identical charts of accounts can classify the same item differently, and both can be right.
An MPM is a subtotal of income and expenses that a group uses in public communications outside the financial statements to show management’s view of performance. Adjusted EBITDA, adjusted operating profit and similar measures move into a single note in the financial statements. For each measure, the note must show:
These measures are now audited. Plain EBITDA (operating profit before depreciation and amortisation) is exempt. Adjusted versions aren’t.
Items are grouped and split by shared characteristics, and vague “other” lines are restricted. Groups that present operating expenses by function must also disclose specified expenses by nature (depreciation, amortisation, employee benefits, impairment losses and inventory write-downs) in one note.
The indirect method now starts from operating profit. Most of the classification options for interest and dividends are gone. For most groups, that means reworking the consolidated cash flow statement.
Each requirement above becomes an output of the group consolidation process. Six matter most.
1. Category becomes a dimension of the group data model.
The category depends on the item and the group, so the account alone can’t carry it. The group chart of accounts has to hold the classification, apply it the same way across every entity, and keep it through scope changes. Entities can’t decide locally, because for the consolidated statements the assessment is made for the group as the reporting entity.
2. Consolidation adjustments need categories too.
Every consolidation journal goes into one of the five categories. Eliminating unrealised margin on inventory is operating. Eliminating interest on an intragroup loan removes expense from financing on the borrower side and income from investing on the lender side, so one journal touches two categories. Fair value adjustments from a business combination follow the items they relate to. If a consolidation engine posts adjustments without a category, it can’t produce an IFRS 18 income statement, even when every number is right.
3. Equity-accounted results always go in investing.
The share of profit or loss of associates and joint ventures accounted for using the equity method always goes in the investing category, whatever the group’s main business activity. That line only exists at group level, so consolidation has to place it.
4. FX differences follow the item that caused them.
Transaction exchange differences go in the same category as the income and expenses from the item that caused them. FX on a trade receivable is operating. FX on a borrowing is financing. A group that books all FX to one financial line now needs entity submissions that carry FX by source.
One case belongs only to consolidation. FX on an intragroup loan survives elimination (IAS 21.45). In April 2026, the IFRS Interpretations Committee accepted two approaches:
Either way, it’s a group policy decision, and the group has to apply it consistently.
5. MPM reconciliations need consolidation data.
This requirement is the one that most often has no owner. You can’t get the tax effect and NCI effect of each reconciling item from a group total. You need the ownership structure, the entity-level make-up of the adjustment and the tax position behind it. The consolidation system holds that data. A reporting spreadsheet doesn’t. An adjusted EBITDA reconciliation built in Excel and tied back by hand to an audited consolidation is a control risk, and your auditor will test it.
6. Comparatives are needed on both bases.
The prior year is restated on the new basis. In the first IFRS 18 statements, each line of the comparative income statement is reconciled from its IAS 1 amount to its restated amount. Interim reports use the new structure from the first 2027 interim period. Through the transition, the group needs both presentations from the same data, and has to be able to explain the bridge between them.
Multiple frameworks make all of this harder.
IFRS 18 changes group IFRS presentation. It doesn’t change US GAAP subsidiary reporting or local statutory accounts under national GAAP. A group that produces all of these from one process now keeps several presentation structures over one set of numbers.
Groups have usually handled presentation changes in the reporting layer with a new format, remapped lines or a revised export. That won’t work for IFRS 18, for three reasons:
A reporting layer that can’t see into the consolidation won’t produce an IFRS 18 note that holds up to audit.
In Board’s financial consolidation, the presentation structure is part of the consolidation model.
Classification in the model. Category is an attribute of the group chart of accounts, applied at mapping, so every entity submission arrives classified the same way. Entity-specific rules are set up once, centrally.
Adjustments categorized at posting. Eliminations, harmonization entries and other consolidation journals carry their category. Operating profit and profit before financing and income taxes come straight from consolidated data. Nobody assembles them afterwards.
Equity-method results placed by the scope. The consolidation scope holds each associate and joint venture with its ownership and method, so its share of profit goes to investing.
FX by source. Entity submissions carry FX differences by category. FX on intragroup loans that survives elimination is classified under the policy the group chooses.
MPM reconciliation from the consolidation. Reconciling items are defined on consolidated data, so tax and NCI effects are calculated from the group ownership structure. Each line keeps an audit trail back to the entities and journals behind it.
Cash flow statement changed by configuration. The statement is built from consolidated movements, so starting from operating profit and reclassifying interest and dividends means changing the statement definition.
Both presentations from one data set. You can present the prior period on both the IAS 1 and IFRS 18 basis from the same consolidated figures. The transition reconciliation needs exactly that, and it’s the same mechanism behind multi-GAAP reporting.
Planning on the same numbers. Board runs planning and consolidation on one engine, so the measures you steer on and the measures you disclose come from the same numbers.
IFRS 18 requirement | What it demands | How Board handles it |
Five categories, two new subtotals | A category on every item, entity and adjustment | Category held on the group chart and on consolidation journals |
Group-level classification | One assessment applied across entities | Set up centrally, applied at mapping |
Equity-method results in investing | Placement at group level | Driven by the consolidation scope |
FX by underlying item, including intragroup loans | FX traced to source; a group policy for intragroup FX | FX carried by category in submissions; policy set centrally |
MPM reconciliation with tax and NCI effects | A consolidation-level calculation per reconciling item | Derived from the group ownership structure, with audit trail |
Expenses by nature when presenting by function | Nature and function on the same data | Both held as dimensions of the group chart |
Restated comparatives and transition reconciliation | Two presentations of one prior year | Parallel statement structures over the same consolidated data |
Cash flow from operating profit | A reworked statement derivation | Statement definition set up on consolidated movements |
Calendar-year groups. Your comparative period is this year. The classification decisions you make now set how much restatement work you’ll have later.
Groups that publish adjusted measures. If a measure shows up in a results presentation or press release, treat it as an MPM and expect its reconciliation to be audited.
Groups with intragroup financing across currencies. FX classification is the requirement most likely to be found late. It looks like a small note until you start tracing it.
Groups with treasury centres, in-house banks or investment holdings. Deciding whether you have a specified main business activity is a judgement call, and it moves items between categories.
Groups reporting under more than one framework. The gap between group IFRS and local statutory presentation gets wider from here.
IFRS 18 gets called a presentation standard, which is why groups underestimate it. Nothing changes in the ledger. What changes is how the group’s results are structured, categorized, reconciled and disclosed, and all of that happens in consolidation.
2026 is the transition year whether a group plans for it or not. The groups that treat it that way will have an easier 2027. That means keeping classification in the consolidation model, and producing MPM reconciliations from the same audited data as the statements they reconcile to.
Register for Board’s webinar on November 5th to learn how IFRS 18 will affect consolidation reporting and planning: IFRS 18 New Requirements and Impacts on Consolidation Reporting and Planning
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