IFRS 18 Is Coming: What CFOs Need to Know Before January 1, 2027
By Kevon McIntosh, FCA, CPA (US)
Assurance & Advisory Partner, Signature Creed & Associates
Financial reporting is about to change in a way that has not happened since IAS 1 was introduced. IFRS 18, Presentation and Disclosure in Financial Statements, was issued by the IASB in April 2024 and becomes mandatory for annual reporting periods beginning on or after January 1, 2027, with early application permitted. It replaces IAS 1 and, while it does not change recognition or measurement, it fundamentally reshapes how the statement of profit or loss is structured and how performance is communicated to users of financial statements.
For CFOs, controllers, and audit committees, this is not a "wait and see" standard. The changes touch chart of accounts design, reporting systems, KPI governance, and audit scope. Restatement of comparatives is required, which means the effective transition work begins well before 2027.
Three things that actually change
IFRS 18 is built around three core innovations.
1. Mandatory categories in the statement of profit or loss
Entities must now classify every income and expense item into one of five categories: operating, investing, financing, income taxes, and discontinued operations. This is a departure from the relative flexibility under IAS 1, where entities had latitude in how the income statement was structured beyond a few mandated line items.
The operating category is effectively the residual category: anything that does not specifically qualify as investing or financing activity falls there. The investing category captures returns from assets that generate a return largely independent of other resources held by the entity (associates, joint ventures, investment property, and similar). The financing category captures transactions involving only the raising of finance, plus interest and other financing-related charges on liabilities.
For entities whose main business activity is investing in assets, or providing financing to customers, IFRS 18 has specific classification carve-outs. A leasing company or a captive finance subsidiary, for example, may classify certain financing-related income and expense within operating rather than financing, because that activity is core to what the entity does. This is a genuine judgment area and will need to be documented early, since it drives which subtotal ratios and margins users see.
2. Two new mandatory subtotals
IFRS 18 requires two new defined subtotals on the face of the statement of profit or loss:
a. Operating profit or loss: the result of the operating category
b. Profit or loss before financing and income taxes: operating profit plus the investing category result. These subtotals are not optional and must be labelled consistently with the standard's terminology. This is a meaningful change for entities that currently present their own version of "operating profit" or EBIT-type metrics with different scope. Once IFRS 18 applies, "operating profit" has one defined meaning under IFRS, and anything an entity currently calls operating profit that does not match that definition will need to be renamed or reconciled.
3. Management-defined performance measures (MPMs)
This is the change with the most audit and governance implications. Many entities disclose subtotals in press releases, investor presentations, or MD&A that are not defined by IFRS, commonly adjusted EBITDA, underlying profit, normalized earnings, and similar. Historically these lived outside the audited financial statements with no consistent disclosure requirement.
IFRS 18 brings MPMs inside the financial statements. A subtotal of income and expenses is an
MPM if:
it is used in public communications outside the financial statements,
it communicates management's view of an aspect of financial performance, and
it is not a subtotal specifically required or permitted by IFRS Accounting Standards.
Where an MPM exists, the entity must disclose, in a single note:
why the measure provides useful information,
how it is calculated,
a reconciliation to the most directly comparable IFRS-specified subtotal or total, and
the income tax and non-controlling interest effects of each reconciling item.
Because this disclosure sits within the financial statements, it falls within audit scope. Reconciliations that were previously unaudited investor relations material now need to tie out with the same rigor as the rest of the statements. Entities that have been loose with how adjusted metrics are calculated, or inconsistent period to period, will need to tighten that up considerably before 2027.
Secondary changes that still matter
Aggregation and disaggregation
IFRS 18 introduces a clearer principle-based framework for grouping and disaggregating items, replacing the reliance on the vague "material items" and "unusual items" language that existed under IAS 1 practice. The standard requires items with dissimilar characteristics to be disaggregated rather than buried in a catch-all "other" line, and prohibits aggregation that would obscure material information. In practice, this means "other operating expenses" as currently constructed in many financial statements will not survive scrutiny unchanged.
Statement of cash flows
Amendments here are narrower but not trivial. The starting point for the indirect method reconciliation of operating cash flows is now fixed as the operating profit subtotal, removing the choice entities previously had (some started from profit before tax, others from profit for the year). Classification choices for interest and dividends paid and received are also largely removed and replaced with classification driven by the category the related item sits in on the income statement. Entities that made a different classification election under IAS 7 will need to reassess.
Transition considerations
IFRS 18 is applied retrospectively, with comparative periods restated. There are limited practical expedients (for example, relief from applying the sources and uses of cash test retrospectively in specified circumstances), but the general expectation is full restatement of the comparative period's statement of profit or loss and related notes.
For entities with a January 2027 effective date, that means the 2026 comparative year needs to be captured and mapped under the new categorization from day one, since it will need restating either way. Waiting until 2027 to start is not a viable transition strategy.
Implications for the Jamaican and Caribbean context
For IFRS reporters in Jamaica and the wider Caribbean, three practical points stand out:
· Regulated entities. Financial institutions supervised by the Bank of Jamaica, insurers and pension funds under the FSC, and JSE-listed issuers will need to align regulatory reporting templates and covenant calculations with the new IFRS 18 categorization, particularly where regulatory capital or prudential ratios reference "operating profit" or similarly labelled figures that will now carry a defined meaning.
· Systems and chart of accounts. General ledger structures built around historical income statement presentation will likely need remapping to support the operating, investing, and financing categories at the transaction level, not just at the reporting overlay level. This is systems and process work, not just a disclosure exercise, and should be scoped now rather than in Q4 2026.
· Board and audit committee readiness. Because MPMs move into audited territory, boards and audit committees should expect a conversation with their auditors well before the 2027 year end about which non-IFRS metrics the entity currently publishes, whether they meet the MPM definition, and what reconciliation and controls infrastructure will be needed to support audit sign-off.
Where to start
A practical transition roadmap looks like this:
Gap assessment of the current statement of profit or loss against the mandatory categories and subtotals.
Classification analysis for any main business activity carve-outs (investing or financing entities).
Inventory of MPMs currently used in earnings releases, investor decks, and management reporting, tested against the IFRS 18 definition.
Chart of accounts and systems remapping to support category-level reporting.
Comparative period build, since 2026 figures will need to be presented under the new structure regardless of when the entity formally transitions.
Audit committee briefing on the expanded audit scope over MPM reconciliations.
IFRS 18 does not change how much profit an entity reports. It changes how that profit is presented, subtotaled, and explained, and it brings previously unaudited performance narratives inside the financial statements. That shift in scope and scrutiny is the real story for CFOs between now and January 2027.
Signature Creed and Associates advises on IFRS transition planning, including IFRS 18 readiness assessments, chart of accounts remapping, and MPM policy development. If your organization would benefit from a gap assessment ahead of the 2027 effective date, our Advisory team is available to discuss scope.
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