IFRS 18 preparation: What companies need to know now

What is IFRS 18 and who is affected by it?

IFRS 18 aims to improve the comparability and transparency of financial reports. By clarifying the structure of the income statement and introducing new disclosure requirements, investors and other stakeholders should be better able to assess the financial performance of companies (source: Deloitte, 2024). 

IFRS 18 affects the entire financial organisation: while CFOs must make strategic decisions on management and capital market communication, accountants are responsible for the operational implementation of the new income statement categories and controllers are responsible for the disclosure and reconciliation of management performance measures (MPMs). Reporting teams, IT andHR managers are also challenged - for example, when filling specialised roles, training specialists and adapting processes and systems.

Difference between IFRS 18 and IAS 1: Overview of the most important changes

The table below compares the most important differences between IAS 1 and IFRS 18.

Range	IAS 1 (old)	IFRS 18 (new)
Structure of the income statement	Flexible, no fixed categories	Five clearly defined categories
Subtotals	Optional, not standardised	"Operating result" and "Earnings before interest and taxes" mandatory
MPMs (e.g. EBITDA)	Voluntary, unregulated	Disclosure obligation incl. definition and reconciliation

But let's take a closer look at the changes and what exactly they mean in terms of implementation:

1. New and standardised structure of the income statement

A standardised structure is prescribed for the income statement. Income and expenses must be divided into five categories (sources: KPMG, 2025; Deloitte, 2024; iiardjournals, 2024):

• Operational: This category includes all income and expenses from ordinary business activities, i.e. from the company's core business - e.g. sales revenue, cost of materials or personnel expenses.
• Investing:  Income and expenses from activities that are typically not part of the core business, such as gains or losses from the sale of non-current assets or investments, are recognised here.
• Financing:  This category includes interest income, interest expenses and other items related to the financing of the company - e.g. from the raising or repayment of capital.
• Income taxes: This item includes all tax expenses and income on the company's income, both current and deferred taxes.
• Discontinued operations: All results from divisions that are classified as held for sale or already sold in accordance with IFRS 5 are recognised here.

2. New, mandatory subtotals

Standardised key figures will be introduced as part of IFRS 18. In particular, two new subtotals will be mandatory (source: Deloitte, 2025): 

• Operating result: Shows the development of earnings from the core business without influences from financing, investments or taxes. This key figure makes it easier to compare the operating performance of different companies.
• Earnings before financing and income taxes: In addition to the operating result, this figure also includes investing activities such as capital gains, but excludes financing and taxes. This key figure provides a more comprehensive view of the company's operating and investing activities before external factors.

These subtotals are mandatory under IFRS 18.

3. Disclosure of management performance measures (MPMs)

In future, companies will have to disclose so-called MPMs. These are key performance indicators defined by the company management that are not defined by IFRS standards. These key figures must be explained in the notes and reconciled with the amounts recognised in the income statement. They are of central importance for CFOs and controllers in order to measure the company's performance and report it transparently. For HR managers, this can also have an impact on the allocation of personnel costs in the new P&L structure (source: Deloitte, 2024). 

Challenges during the implementation of IFRS 18

• Uncertainty regarding the correct categorisation of business transactions
  The clear allocation of expenses and income to the new categories "operating", "investing" or "financing" is complex in practice - particularly in the case of intra-group transactions or mixed forms such as investment income.
• Lack of standardised interpretations and industry specifics
  Although IFRS 18 provides the framework, there is still room for interpretation - particularly when it comes to the question of what is part of the operating business. This makes comparability within industries more difficult and harbours a risk of misinterpretation.
• High effort for the development and disclosure of MPMs
  Companies that previously used voluntary indicators such as EBITDA must now explain, reconcile and regularly update them in a structured manner - including historical comparative figures. This is usually associated with increased effort and coordination.
• Lack of data quality and depth of detail in existing systems
  Many ERP and consolidation systems are currently not designed to record business transactions with sufficient granularity to enable correct IFRS 18 compliant analyses.
• Training gaps in the accounting team
  Many accountants and controllers have primarily worked with IAS 1 in the past and now need to internalise the IFRS 18 vocabulary and system.
• Increased requirements for communication with investors and the Supervisory Board
  The new P&L structure and the obligation to disclose MPMs create a greater need for discussion with stakeholders. Especially when key figures change compared to the past.

How to prepare for IFRS 18

For CFOs and finance experts, the transition to IFRS 18 means not only adapting reporting, but also scrutinising internal processes more closely. IT and HR managers, on the other hand, must ensure that their systems and employees are prepared for the new requirements. With these steps, the gradual transition to IFRS 18 will be successful:

• Gap analysis: Assessment of current reporting compared to the requirements of IFRS 18.
• Form a project team: Put together an interdisciplinary team of finance, IT and communication experts.
• Carry out training courses: Prepare employees specifically for the new requirements.
• Customise systems: Identify and implement necessary changes in IT and reporting systems.
• Plan a pilot phase: Carry out test runs to check the new processes and systems.

Conclusion: Prepare now for IFRS 18

IFRS 18 marks a significant step towards greater transparency and comparability in financial reporting. The mandatory categories and subtotals create more clarity, but also require careful preparation in processes, systems and teams. If you start analysing and implementing at an early stage, you will reduce risks and create the basis for transparent, future-proof reporting. Especially in times of increasing regulation, it is crucial to take the right steps with experienced specialists at your side.