New IFRS Accounting Standard to Enhance Investor Analysis of Companies’ Financial Performance


The International Accounting Standards Board (IASB) has concluded its efforts to enhance the usefulness of information presented and disclosed in financial statements. The new standard, IFRS 18 Presentation and Disclosure in Financial Statements, aims to provide investors with more clear and comparable information regarding companies’ performance financially, thus facilitating more informed investment decisions. This standard will impact all companies that use IFRS Accounting Standards.

IFRS 18 introduces three new sets of requirements to improve the reporting of financial performance and offer investors a better foundation for investigating and comparing companies:

Transparency of Management-Defined Performance Measures Enhanced 

Many companies offer company-specific measures, often called alternative performance measures, which investors find useful. However, most companies currently do not provide sufficient information for investors to understand how these measures are calculated and how they relate to the required measures in the income statement.

To address this, IFRS 18 mandates that companies disclose explanations of those company-specific measures related to the income statement, known as management-defined performance measures. These new requirements will enhance the discipline and transparency of management-defined performance measures, making them subject to audit.

Improved Comparability in the Statement of Profit or Loss (Income Statement)

Currently, there is no specified structure for the income statement, allowing companies to choose their own subtotals. Although many companies report an operating profit, the calculation methods vary, reducing comparability.

IFRS 18 addresses this issue by introducing three defined categories for income and expenses—operating, investing, and financing. This will improve the structure of the income statement and require all companies to provide new defined subtotals, including operating profit. This enhanced structure and new subtotals will provide investors with a consistent starting point for analysing companies’ performance, making it easier to compare different companies.

More Beneficial Grouping of Information in Financial Statements

Investor analysis of companies’ performance is hindered when information is either too brief or too detailed. IFRS 18 provides enhanced guidance on how to arrange information and determine whether it should be included in the primary financial statements or in the notes. These changes aim to deliver more clear and useful information. Additionally, IFRS 18 requires companies to offer greater transparency regarding operating expenses, assisting investors in finding and understanding the information they need.


IFRS 18 is effective for annual reporting periods starting on or after 1 January 2027, though companies have the option to apply it earlier. The impact of IFRS 18 on companies’ reporting will vary based on their current reporting processes and IT systems.

Replacing IAS 1 Presentation of Financial Statements, IFRS 18 retains many of the requirements from IAS 1. It is the culmination of the IASB’s Primary Financial Statements project.


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