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What's Should I Know About IFRS18?

Georgina Roberts

When will IFRS18 Be Introduced?

IFRS 18,Presentation and Disclosure in Financial Statements is the first new standard introduced in seven years and holds significant importance in financial reporting. 
It takes the place of IAS 1, the fundamental IFRS standard, fundamentally transforming how financial performance is reported.

It's not yet been introduced into the ACCA syllabus, so from a studying perspective you won't need to worry just yet, but in time it surely will become a key addition especially for those papers such as FR or SBR that are primarily concerned with financial reporting.

IFRS 18 was issued in April 2024 and applies to an annual reporting period beginning on or after 1 January 2027.

Read on for a simple guide on how IFRS18 differs from its predecessor, IAS 1.

Key Differences Between IFRS18 and IAS1

These changes in IFRS 18 over IAS 1 aim to provide more detailed, transparent, and relevant financial information to improve the usefulness of financial statements for stakeholders.

  1. Comprehensive Presentation Framework
    IFRS 18: Introduces a more detailed and structured framework for presenting financial statements, providing more clarity and consistency across different entities.
    IAS 1: Provided the foundational guidelines for the presentation of financial statements but isn't as granular as the newly introduced IFRS 18

  2. Enhanced Disclosure Requirements
    IFRS 18: Mandates extensive disclosures, including qualitative and quantitative information about financial performance, risks, and uncertainties. It requires detailed notes on significant accounting policies and judgments.
    IAS 1: Required basic disclosures necessary for understanding financial statements but did not go into as much detail as IFRS 18.

  3. Updated Measurement Bases
    IFRS18: Introduces new measurement bases for assets and liabilities, incorporating fair value measurements and other updated valuation techniques to reflect current market conditions.
    IAS 1: Used traditional measurement bases such as historical cost, with limited provisions for fair value measurements.

  4. Performance Metrics and Indicators
    IFRS 18: Requires the presentation of key performance indicators (KPIs) that provide deeper insights into the entity’s operational efficiency and financial health.
    IAS 1: Focused on standard financial statements without specific requirements for KPIs

  5. Industry Specific Guidelines
    IFRS18: Includes tailored provisions for various industries, addressing unique presentation and disclosure needs specific to sectors like construction, telecommunications, and software.
    IAS 1: Offered a general framework applicable to all industries without specialised guidelines.

  6. Integration of Non-Financial Information
    IFRS 18: Emphasises the inclusion of non-financial information, such as sustainability metrics and environmental, social, and governance (ESG) factors, to provide a more holistic view of the entity’s performance.
    IAS 1: Primarily focused on financial information, with limited scope for non-financial disclosures.

  7. Improved Comparative Information
    IFRS 18: Enhances the requirements for comparative information, ensuring that financial statements provide meaningful comparisons over multiple periods.
    IAS 1: Required comparative information but without the enhanced detail and scope introduced in IFRS 18.

  8. Clarity in Financial Statement Components
    IFRS 18: Redefines and clarifies the components of financial statements, such as distinguishing between operating and non-operating items more clearly.
    IAS 1: Defined the basic components of financial statements but with less specificity regarding classification and presentation.

  9. Increased Focus on Transparency and Accountability
    IFRS 18: Aims to increase transparency and accountability in financial reporting by requiring more detailed disclosures and clearer presentation of financial information.
    IAS 1: Established the fundamental principles for financial statement presentation but did not highlight transparency to the same extent as IFRS 18.

This new accounting standard won't come into play until the annual reporting period beginning on or after 1 January 2027, so expect the ACCA syllabus to reflect this in due course. At present it's not examinable but it's a key change that will help investors as Andreas Barkow, Chair of the IASB states here:

'IFRS 18 represents the most significant change to companies’ presentation of financial performance since IFRS Accounting Standards were introduced more than 20 years ago. It will give investors better information about companies’ financial performance and consistent anchor points or their analysis.'

Companies can adopt IFRS18 earlier than January 2027 depending on their reporting practices and IT Systems. It may be something that your employer is already implementing. 
We hope this short guide has outlined some of its key additions and changes for you.