IFRS 18 - CPA Australia urges accountants to prepare for a significant change to profit or loss statement presentation

• CPA Australia has released a resource to prepare accountants for a major change to how the profit or loss is presented in financial statements
• These changes also accommodate long standing GAAP disclosure practices within IFRS 18 

IFRS 18 introduces a new era in financial reporting across industries by replacing IAS 1, setting robust guidelines for income and expense classification, and enhancing transparency and consistency in the profit or loss.

Tiffany Tan, External Reporting and Assurance Lead, CPA Australia says:“The introduction of IFRS 18 Presentation and Disclosure in Financial Statements is one of the most significant changes in accounting standards in over 20 years.

“These new requirements will fundamentally change how businesses report on their financial performance, including a new focus on the classification of income and expenses.

“With IFRS 18 effective from 1 January 2027, businesses are encouraged to start preparing now by assessing the impact on financial statements and updating their systems for compliance.

“IFRS 18 mandates two new subtotals - Operating Profit/Loss and Profit/Loss Before Financing and Income Tax - ensuring a more consistent presentation of financial performance across industries and regions.

“With IFRS 18, companies must give more careful thought when aggregating and disaggregating financial data, replacing generic labels like "Other" with informative, specific categories that enhance clarity,” Ms Tan adds.

“IFRS 18 introduces disclosure requirements for Management-Defined Performance Measures (MPMs), providing stakeholders with management’s view of financial performance, which complements standard IFRS measures.

“The classification of income and expenses in IFRS 18 depends on entities’ 'main business activities', which requires a significant degree of judgment and careful documentation by preparers and auditors.

“IFRS 18 reinforces the importance of revenue as a key benchmark for regulatory thresholds, impacting statutory reporting obligations and sustainability reporting in several jurisdictions.

“For instance, income previously reported as part of revenue may now be classified as investing or financing income under IFRS 18. Similarly, income once categorised as ‘other income’ may now be classified as operating revenue, depending on how the main business activities are defined.

“For Australian companies, if the reclassified income is substantial, this could impact which mandatory climate reporting group the entity falls under – Group 1 (consolidated revenue of $500 million or more), Group 2 (consolidated revenue of $200 million or more), or Group 3 (consolidated revenue of $50 million or more).”

Ms Tan added that Auditors will also need to prepare for the change.

“Auditors will face new challenges too, especially in assessing the completeness and accuracy of financial disclosures related to MPMs and income classifications,” she said.

CPA Australia has released a resource for businesses that explores the key changes, how entities can prepare and considers the implications of using revenue as a benchmark.

Media contact

Simon Downes
External Affairs Lead 
[email protected]
0401 461 503