IFRS 18: What companies need to know now

International Financial Reporting Standards (IFRS) 18 becomes effective Jan. 1, 2027, and companies are entering a critical planning period. The standard introduces significant changes to how companies present and disclose financial information, including new requirements for the statement of profit or loss, management performance measures (MPMs), and the aggregation and disaggregation of information. While the standard is often described as a presentation and disclosure update, its impact may extend into data, systems, processes and controls.

As companies move from understanding the standard to planning implementation, many discover that the effort involved extends well beyond changing the formatting of the financial statements. For additional background on IFRS 18 and the changes it introduces to financial statement presentation, see our article, New IFRS standard will reshape the statement of profit or loss.

In this Q&A, Katherine Knowlton, managing director of accounting standards at RSM Canada, and Craig Cross, partner at RSM Canada, share their perspectives on where finance teams should focus their attention now, the areas most likely to create implementation challenges and the steps organizations should take to prepare.

This conversation has been edited for length and clarity.

What will actually change for a typical midsized company implementing IFRS 18? What might catch them off guard?

Katherine Knowlton: IFRS 18 is designed to change how financial statements are presented and disclosed, with the biggest impact on the income statement. Companies will see new categories, subtotals and requirements around how information is aggregated and disaggregated. There are also new disclosure requirements for MPMs, and some changes to cash flow presentation.

That sounds straightforward, but what often catches companies off guard is that it is not just a mapping exercise. Many assume they can simply remap their existing trial balance to the new presentation requirements. In reality, their current systems may not generate all of the information needed to meet the new presentation and disclosure requirements.

Craig Cross: The income statement will look different, and there may be new line items that effectively function as key performance indicators for management, investors and other users of the financial statements. The bigger issue is the level of detail required. Companies need to rethink how information flows through the reporting process—from the trial balance to financial reporting and disclosures—and whether the governance and controls that support that process are appropriate.

How is IFRS 18 likely to affect middle market businesses specifically?

KK: The level of impact depends less on company size and more on the complexity of the business. An entity with a single line of business may have a simpler transition. But companies with multiple business lines or those that provide financing to customers or undertake investing activities can face significantly more complexity.

CC: Many middle market companies initially view IFRS 18 as a formatting change. That perception creates risk. In practice, the effort required is highly entity-specific and can be substantial—especially for companies with global operations or multiple reporting entities or reporting processes that rely on manual adjustments outside the core finance system.

If you were advising a finance team today, where should they start?

KK: Start by understanding the standard. Then perform a high-level diagnostic of your current financial statements. Ask yourself: what will need to change, where are the gaps between your current information and what IFRS 18 requires and which areas may require additional accounting analysis?

From there, identify where system, process and control changes will be needed. That includes working with IT to ensure systems can capture the required information and updating processes and controls to support the new requirements. Given the changes regarding performance measures and financial statement presentation, companies should also consider what communication or education may be needed for investors and other external stakeholders.  Once those elements are clear, you can build a project plan.

Where do companies tend to underestimate the effort involved?

KK: Companies often underestimate the effort involved because they assume the work will be relatively quick. But organizations may find they do not currently have all of the information needed to meet the new requirements.

Once system changes are required and IT, project managers and other stakeholders become involved, the scope of the project can expand significantly. Companies also need to ensure appropriate controls are in place to support the new information and processes.

CC: Timing is another risk. Many organizations are behind because financial reporting may not be a top priority for the finance team or they underestimate the impact. As 2027 deadlines approach, the workload increases, especially if companies try to address implementation issues during their normal audit cycle rather than resolving classification, data and disclosure issues earlier.

What types of system or process changes should companies expect?

 KK: One example is the information IFRS 18 requires regarding expenses. IFRS 18 allows companies a choice on how to report expenses on the face of the income statement—by nature, by function or a mix of both. However, if expenses are reported using a by-function or mixed presentation, additional disclosures are required by nature of expense.

For example, if an organization presents expenses by business function, such as sales and marketing or product development, it would also need to disclose information about the nature of certain expenses, including employee benefit expenses and amortization and depreciation. Depending on how expenses are currently being categorized in reporting systems, companies may need information they do not currently have to prepare required disclosures.

What are the biggest challenges related to MPMs?

KK: The key challenge is determining what qualifies as an MPM. While the definition itself is relatively clear, applying it can require judgment. For example, determining what constitutes the entity’s “public communications” may not be straightforward for some entities.

Companies need to evaluate what information they share with stakeholders, where that information appears and whether it falls within the scope of the new disclosure requirements. In some cases, the answer may be straightforward. In others, companies will need to apply judgment to determine whether a measure is captured by the MPM definition and therefore requires disclosure.

How will audits change under IFRS 18?

CC: Auditors are likely to spend more time evaluating judgment areas, particularly how items are categorized within the income statement and allocated across the new reporting categories.

There will also be increased focus on determining whether MPMs meet the definition set out in the standard and whether related disclosures are complete. Companies that leave implementation too late may face additional time pressure during the audit process, making it more difficult to meet reporting deadlines.

KK: Companies should also expect increased scrutiny of the processes and controls, including controls around the implementation program itself, as well as the information, processes and documentation used to prepare financial statements under IFRS 18 on an ongoing basis. This is particularly important for listed entities that must certify or report on the entity’s internal controls under securities regulations.

Starting discussions with auditors early can help identify judgment areas, implementation challenges and control considerations before reporting deadlines become more pressing.

What risks do companies face if they treat IFRS 18 as only a presentation change?

KK: Starting early is critical. This is not something companies should wait to address at year-end. If finance teams have a slower period outside the reporting cycle, they should use that time to begin diagnostics and planning. Leaving it too late can create significant pressure to meet reporting deadlines, especially where system and process changes are required.

CC: The timeline can be shorter than companies realize, particularly for public companies and reporting issuers that will need to address IFRS 18 in interim reporting periods.

Companies should think about how to bring this work outside the normal audit process and begin discussing the more complex areas like aggregation/disaggregation, presentation judgments and MPM disclosures earlier. That is especially important for organizations with multiple business lines, global operations or consolidated reporting environments, where reporting packs, subsidiaries and affiliates may need to capture information differently.

Once a company gets into the details—such as disaggregation, unique transactions or balances, foreign currency considerations or financial instruments—they may find the impact is more significant than expected.

Key steps for finance leaders

• Understand the standard and identify the requirements relevant to your business
• Perform a diagnostic assessment to identify reporting, data and accounting gaps
• Evaluate systems, processes and controls to determine whether they can support the new requirements
• Engage key stakeholders early, including IT, auditors, business leaders and financial statement users
• Develop an implementation plan that leaves time to address judgment areas and avoid unnecessary reporting pressure

IFRS 18 may be a presentation and disclosure standard, but for many organizations the impact extends into systems, processes and controls. Companies that start early will be better positioned to manage implementation, resolve judgment areas and avoid last-minute financial reporting and/or audit surprises.