By: Noé Camargo, Socio de Servicios de Asesoría Contable, y Alan Ibáñez, Director de Servicios de Asesoría Contable de KPMG México
For years, companies have explained their performance using metrics that do not always align with subtotals defined by accounting standards. Markets know them, investors use them to interpret results, and management relies on them to run the business. International Financial Reporting Standards (IFRS) 18 does not challenge this practice. What it introduces is a clear shift: for the first time, certain metrics used to explain performance may now appear in audited financial statements. That shift brings visibility, discipline and accountability to measures that previously sat outside formal financial reporting.
This is the logic behind Management Performance Measures (MPMs). IFRS 18 does not create new metrics. Instead, it draws a line around measures that genuinely reflect how senior management assesses performance and requires them to be explained with the rigor expected of financial information.
In practice, MPMs take different forms across industries. Common examples that sit close to the MPM boundary under IFRS 18 include:
- Airlines – Earnings Before Interest, Taxes, Depreciation, Amortization, and Rent (EBITDAR): neutralizes lease structures and improves comparability of operating performance
- Real estate – Earning Before Interest, Taxes, Depreciation, and Amortization (EBITDA) before revaluation effects: excludes fair value remeasurements of investment properties to reflect recurring operating performance
- Banking – Profit before non-recurring or notable items: adjusts earnings for exceptional impacts such as regulatory fines, restructurings or significant litigation
- Mining – EBITDA before closure provisions and impairments: removes changes in mine-closure provisions and asset impairments to isolate recurring operational results
- Telecommunications – Adjusted EBITDA: adjusts EBITDA for integration costs, restructuring expenses and other non-recurring items
These examples show that many metrics already used by management naturally fall within the performance narrative addressed by IFRS 18. The standard does not invent these measures, but clarifies which ones move closer to the core of financial reporting.
The same framework also makes clear what does not qualify as an MPM. MPMs must be subtotals of income and expenses. Ratios such as ROIC (return on invested capital) do not qualify, nor do cash-flow measures such as FCFF (free cash flow to the firm) or FCFE (free cash flow to equity), which focus on cash generation rather than accounting performance.
Once a metric qualifies as an MPM under IFRS 18, the implications are immediate. The conversation with the auditor fundamentally changes. Reconciliation and disclosure in the notes to the financial statements raise expectations around evidence, traceability and control. Metrics that once lived in investor presentations are pulled into the financial close and governance process, forcing organizations to formalize definitions and judgements that were previously implicit.
Importantly, the reach of MPM disclosures is not universal. These requirements become relevant only when an entity chooses to communicate performance metrics beyond its financial statements. For organizations without listed equity, international debt issuances (including Rule 144A offerings), or investor-facing performance disclosures, the impact may be limited. IFRS 18 is not about adding complexity for its own sake. It is about imposing discipline where performance is publicly explained.
Beyond MPMs, IFRS 18 introduces broader structural changes. Effective for periods beginning on or after 1 January 2027, the standard replaces International Accounting Standards (IAS) 1 and requires a more consistent layout of the statement of profit or loss, incorporating new mandated categories (operating, investing, financing, income taxes, and discontinued operations) and subtotals such as operating profit. This structural clarity aims to improve comparability across companies and industries, and to provide investors with a clearer understanding of core operating performance.
The real implication of IFRS 18 is therefore not technical, it is organizational. Once a performance metric becomes part of audited financial information, who owns it, and who is prepared to stand behind it?; it can no longer be “just a story” - it becomes an assertion backed by process, evidence, and accountability.
