In plain words
Every set of financial statements needs a structure: which statements to present, going concern, consistency and minimum notes. IAS 1 sets these rules today. IFRS 18 replaces IAS 1 for annual periods beginning on or after 1 January 2027, applied retrospectively with restated comparatives. It does not change measurement, but it classifies income and expenses into operating, investing and financing categories, with required subtotals such as operating profit.
Why it matters
Every entity preparing general purpose financial statements applies IAS 1 for their structure, the required primary statements, going concern, consistency of presentation and minimum note disclosures. IFRS 18 replaces IAS 1 for annual reporting periods beginning on or after 1 January 2027 and is applied retrospectively, so a calendar-year entity presents its 2027 statements under IFRS 18 with 2026 comparatives restated to the new structure.
Diagnostic questions
Do you prepare a full set of statements (financial position; profit or loss and OCI; changes in equity; cash flows; notes)? Has each profit or loss line been mapped to the IFRS 18 categories, and do you communicate any adjusted measures such as adjusted EBITDA outside the financial statements?
Recognition
A complete set comprises the statement of financial position, the statement of profit or loss and other comprehensive income, the statement of changes in equity, the statement of cash flows and the notes. Under IFRS 18, income and expenses are classified into operating, investing and financing categories, plus income taxes and discontinued operations.
Measurement
Neither IAS 1 nor IFRS 18 changes the measurement of individual items, which other standards govern. IFRS 18 changes classification and presentation: it requires the subtotals operating profit and profit before financing and income taxes.
Presentation & disclosure
Disclose the basis of preparation, material accounting policy information, judgements, sources of estimation uncertainty and the going concern assessment. From 2027, management-defined performance measures used in public communications are disclosed in a single note with a reconciliation to the nearest IFRS-defined subtotal, and specified expenses by nature are disclosed when expenses are presented by function.
Common mistakes
- Omitting a required primary statement
- misclassifying current vs non-current
- burying material information or over-disclosing immaterial detail
- treating IFRS 18 as a 2027-only change and not restating the 2026 comparatives
- overlooking adjusted measures in investor or board communications that become audited MPM disclosures.
Simple example
A Riyadh-based group with a calendar year end publishes "adjusted EBITDA" in its investor presentation. Its FY2027 statements are prepared under IFRS 18: profit or loss shows operating profit and profit before financing and income taxes, FY2026 comparatives are re-presented on the same basis, and adjusted EBITDA is disclosed in a note reconciled to operating profit, with the tax and non-controlling interest effect of each adjustment.
Professional judgment
Judgement is needed on materiality, on what to present separately, aggregate or disclose in the notes, and under IFRS 18 on the entity's main business activities, which decide whether items such as interest income are classified in operating or in investing and financing.
Source basis
IAS 1 / IFRS 18 · Presentation of Financial Statements / Presentation and Disclosure in Financial Statements
Paragraph references
Verified against the official standard texts used in the IFRS Expert skill.
Related issues
Educational and navigation content only. Not professional advice. Does not reproduce official IFRS/IAS text. Consult the authoritative standards and qualified professionals; professional judgment may still be required.