Bye-Bye Old P&L. IFRS 18’s mandatory changes start 2027, introducing structured categories for operating, investing and financing activities along with new subtotals like operating profit. The format of the Statement of Profit or Loss and Other Comprehensive Income is undergoing significant changes with the introduction of IFRS 18 Presentation and Disclosure in Financial Statements, which replaces IAS 1.
These changes are effective for annual reporting periods beginning on or after January 1, 2027, with early adaption permitted.

Key Changes to the P&L Format under IFRS 18
IFRS 18 introduces a more structured and comparable approach to presenting financial performance by mandating specific categories and subtotals.

1.New Categories for Income and Expenses

Income and expenses must be classified into three main categories based on the entity’s main business activities:

  • Operating: The default category for all income and expenses not classified in the other four categories. This includes the primary business activities of the entity.
  • Investing: Income and expenses from assets that generate a return individually and largely independently of the entity’s other resources (e.g., interest and dividends from “simple” investments, rental income from investment properties).
  • Financing: Income and expenses related to liabilities arising from transactions that only involve the raising of finance (e.g., bank loans, issued debt).

Income taxes and results from discontinued operations are presented separately outside these three categories.

2. New Mandatory Subtotals

The standard requires all companies to present two new mandatory subtotals on the face of the statement of profit or loss:

  • Operating profit or loss: This provides a consistent and comparable measure of core business performance across different companies.
  • Profit or loss before financing and income taxes: This subtotal is also mandatory.
  • Profit or loss: The final net result for the period.

3. Enhanced Disclosure of Management-defined Performance Measures (MPMs) 

Companies often use “non-GAAP” or company-specific measures to communicate performance. Under IFRS 18, these Management-defined Performance Measures (MPMs) must be disclosed in a single note to the financial statements and will be subject to audit.
For each MPM, companies must explain:

  • Why the measure provides useful information.
  • How it is calculated.
  • A reconciliation to the most comparable IFRS-specified subtotal.

4. Improved Aggregation and Disaggregation Principles 

IFRS 18 provides more guidance on whether information should be presented in the primary statements or in the notes. It discourages the use of generic labels like “other expenses” and requires more precision in descriptions.

5. Implementation Timeline and Impact

IFRS 18 is effective from January 1, 2027, and requires retrospective application, meaning comparative information for prior periods must be restated to align with the new format. Companies are advised to begin planning their implementation now due to the potential need for system and process changes.

6. Closing Perspective

IFRS 18 introduces in a new era of transparent, comparable P&L reporting starting January 1, 2027. Companies must act now to restate comparatives and refine systems for mandatory subtotals and MPM disclosures. Embrace these changes to elevate stakeholder insights and core performance clarity.