IFRS 18: A Step Forward in Transparency and Performance Reporting

In a rapidly evolving financial reporting landscape, transparency and comparability remain fundamental to investor confidence and effective market functioning. The International Financial Reporting Standards (IFRS), adopted by more than 160 jurisdictions, offer a globally harmonised framework designed to elevate the quality, relevance and consistency of financial information. 

IFRS 18, Presentation and Disclosure in Financial Statements, represents a transformative update within this framework—one that aims to strengthen clarity in financial communication and align reporting with user expectations. Effective from 1 January 2027, it redefines how companies present performance, particularly through a revamped structure of the profit or loss statement and increased scrutiny of management‑defined metrics. 

To understand more about IFRS and its implications for listed companies, we spoke to Khaled Elkazaz – Director, Audit at KPMG in Kuwait. Khaled Elkazaz is a Director in KPMG Kuwait’s Audit function. His role is focused on providing audit services for key audit clients in oil & gas, real estate and construction sectors.

IFRS are a comprehensive set of standards issued by the International Accounting Standards Board (IASB) to ensure high‑quality, globally comparable financial statements. They guide recognition, measurement, presentation and disclosure of financial information, with a core objective of providing useful insights to investors, lenders and stakeholders. IFRS 18 evolves this purpose by standardizing income statement structure, strengthening disclosure principles and introducing clearer categorizations across financial reporting.

Listed companies operate under heightened regulatory and investor scrutiny. IFRS ensures that these companies provide transparent, decision‑useful information that supports confidence in capital markets. Consistent reporting reduces risk for investors and enhances cross‑border comparability. IFRS 18 builds on these strengths by introducing required subtotals—such as operating profit and profit before financing and tax—which reduce diversity in performance reporting. The inclusion of management‑defined performance measures (MPMs), with mandatory reconciliations, further increases accountability and clarity in financial communications.

Organizational readiness varies significantly across markets. However, we see that leading companies and institutions with robust reporting processes have already begun evaluating the implications of IFRS 18. Key areas of preparation include mapping existing reporting lines to the new categories, revising accounting policies, modifying ERP and consolidation systems, and strengthening internal control frameworks around disclosures. 

While IFRS 18 is principle-based, its deeper disclosure requirements and emphasis on management‑defined metrics will require expanded data capture and governance mechanisms. Early preparation is essential, given that historical comparatives may also need restatement.

Although all listed companies must adopt IFRS 18, not all may find the transition equally straightforward. Large, well‑resourced organisations are generally better equipped due to established financial reporting teams and system flexibility. 

In contrast, smaller issuers may face challenges around system upgrades, resource allocation, and the level of technical judgment required to classify transactions into the new profit or loss categories. IFRS 18 also introduces the requirement to disclose and reconcile MPMs, increasing reporting complexity. Having said this, we believe that with proper trainings, advisory support and phased implementation planning, all companies can achieve compliance.

IFRS 18 will reshape the structure and interpretation of financial statements. Its most notable impact is on the statement of profit or loss, which must classify all income and expenses into five defined categories: operating, investing, financing, income taxes, and discontinued operations. 

This improves comparability by reducing subjective classification choices. Required subtotals, such as operating profit and profit before financing and tax, offer standardized benchmarks across entities. 

The treatment of management‑defined performance measures—frequently used in investor presentations—requires transparent definition, clear labelling and reconciliation to IFRS‑specified subtotals, limiting the potential for selective reporting. These changes enhance users’ understanding of core business performance and the impacts of financing and investing activities.

IFRS 18 delivers multi‑layered benefits to companies, investors and regulators. Its structured format improves communication by distinguishing between operational performance and peripheral activities, enabling stakeholders to assess quality of earnings more effectively. Consistent subtotals and compulsory reconciliations for MPMs reduce ambiguity and increase trust. For companies, enhanced transparency can translate into better investor engagement, improved comparability with peers, and potentially lower cost of capital. Over time, IFRS 18 supports stronger governance, more disciplined internal processes and clearer narrative reporting aligned with modern stakeholder expectations.