Introduction to the upcoming IFRS 18 accounting standard
The IASB recently released an informative webcast introducing the forthcoming IFRS Accounting Standard, IFRS 18 Presentation and Disclosure in the Financial Statements. This new standard aims to enhance the reporting of financial performance, addressing investors’ demands for better information.
Scheduled to be issued in April 2024, IFRS 18 will impact all companies and investors, aiming to improve how financial information is communicated in statements and aiding investors in analysing and comparing company performance.
IFRS 18 replaces IFRS 1 and introduces new requirements across three key areas:
- Statement of Profit or Loss Categories and Subtotals: Designed to address investor concerns regarding the difficulty of comparing financial performance, this set of requirements aims to bring consistency and comparability to financial statements.
- Disclosures on Management Defined Performance Measures (MPMs): In response to concerns about the lack of transparency in how these measures are calculated, IFRS 18 mandates the definition and auditing of MPMs, ensuring transparency and consistency in disclosure.
- Enhanced Guidance on Grouping of Information: With the aim of providing more detailed information, IFRS 18 introduces enhanced requirements for the grouping of information, offering guidance on when information should be included in statements or notes.
These changes are geared towards facilitating better decision-making by increasing comparability, transparency, and the usefulness of financial information. The standard is set to launch in April 2024 and will come into effect on 1 January 2027.
The IFRS Foundation’s work in this area is really important. At XBRL International we’ve been delighted to see, encourage and from time to time provide input into the digital reporting focus that the “PFS” (now IFRS 18) project team have had from the outset. New mandatory subtotals will greatly assist digital comparability. MPM (aka Non-GAAP measures) that are reconciled in the financial statements and tagged from the outset will provide investors with vastly more insight into the approaches to, and purpose of, some of these custom performance metrics. Providing additional “categorical” metadata about facts disclosed within the face financials will enhance comparability in important ways. This project really shows the way that the IASB and IFRS Foundation is “thinking digital”. Congratulations to them all as they get really close to this milestone.
Watch the webcast here.
