IFRS 18 replaces IAS 1 and applies from 1 January 2027 with retrospective application. It does not change net profit — it changes classification and presentation. Key changes: new mandatory subtotals in the income statement, classification of all income/costs into one of 5 categories, and mandatory disclosures on management performance measures (MPM). For the CFO of a Polish IFRS group subsidiary — 2026 is the last year to analyse the impact and adapt reporting systems.
Does this apply to your company
IFRS 18 applies if you: prepare financial statements under IFRS (including reporting packages to a foreign group parent), or are a CFO of a Polish subsidiary of a foreign owner requiring IFRS packages.
3 main changes in IFRS 18
Change 1 — New mandatory subtotals in the income statement
IFRS 18 requires two new mandatory lines in the income statement:
- Operating profit — required definition, not discretionary
- Profit before financing and income tax — new mandatory subtotal
For many companies these subtotals will differ from their current "EBIT" or "operating profit" — because IFRS 18 introduces precise category definitions rather than leaving them to companies.
Change 2 — Classification into 5 categories
Every item of income and expense must be assigned to one of 5 categories: operating, investing, financing, income tax, discontinued operations. For companies with financial income or costs from investments in associates — this may require material changes to presentation.
Change 3 — MPM (Management Performance Measures)
If you communicate metrics such as "adjusted EBITDA", "underlying profit" or other non-GAAP measures externally — IFRS 18 requires their formal disclosure in the notes with a detailed reconciliation to IFRS measures. The era of "adjusted profit with no explanation" is over.
Why the standard changed
IAS 1 gave companies significant freedom in presenting the income statement. Investors complained about lack of comparability — every company defined "operating profit" differently. The IASB responded with IFRS 18, which introduces a standardised structure while retaining flexibility in the level of detail of individual line items.
How the income statement changes — simplified overview
| Current (IAS 1) | Under IFRS 18 |
|---|---|
| Revenue | Revenue |
| Cost of sales | Operating costs (operating category) |
| Gross profit | — (optional) |
| Selling and administrative costs | Operating costs (operating category) |
| EBIT / operating profit (company-defined) | Operating profit (mandatory, defined) |
| — | Profit before financing and tax (mandatory) |
| Finance income/costs | Financing category (precise definition) |
| Profit before tax | Profit before tax |
- Identify all MPMs communicated externally (adjusted EBITDA, underlying profit, etc.)
- Analyse how your income and costs map to the 5 IFRS 18 categories
- Check whether your accounting system can tag transactions by IFRS 18 category
- Contact your auditor and group parent about the transition plan
- Plan which 2026 data will need restating as the comparative year
Frequently asked questions
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