IFRS 18 Readiness Assessment:
The Finance-Team Checklist for 2027

IFRS 18, Presentation and Disclosure in Financial Statements, replaces IAS 1 and is effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted. The standard introduces defined profit or loss subtotals, a more structured classification of income and expenses, disclosures for certain management-defined performance measures (MPMs) and strengthened requirements for aggregation and disaggregation.

This guide helps CFOs, controllers and financial reporting teams determine what to assess now. It does not replace analysis of the complete standard or local endorsement requirements.

Start with this readiness scorecard

Mark each item Ready, Partly ready or Not started:

If several items are "Not started", establish a project owner and conduct a structured gap assessment before the next reporting cycle.

1. What IFRS 18 changes and what it does not

IFRS 18 aims to improve how financial performance is communicated and compared. It introduces defined subtotals including operating profit or loss and profit or loss before financing and income taxes, together with a more structured set of categories in the statement of profit or loss.

The new structure does not mean every company's old "operating profit" will remain unchanged. Classification depends on the standard's requirements and, in specified cases, the entity's main business activities. Finance should prepare a documented bridge between the existing statement and the new presentation, with explanations for each material reclassification.

The standard also does not eliminate alternative performance measures used by management. Instead, it requires transparency for MPMs that meet the definition, including how they are calculated and how they reconcile to IFRS-defined figures.

2. MPMs: inventory external claims about performance

An MPM is not simply any KPI. The definition focuses on subtotals of income and expenses used in public communications outside the financial statements to communicate management's view of an aspect of financial performance, and that are not specified by IFRS Accounting Standards.

Start by collecting the measures used in:

• earnings releases and investor presentations;
• annual reports and management commentary;
• public results presentations;
• press releases and other public communications.

For each measure, document its label, formula, purpose, source data, public location, owner and the most directly comparable IFRS-defined subtotal or total. Then determine whether it meets the technical definition of an MPM.

For an MPM within the requirements, IFRS 18 requires disclosures in a single note, including:

• a statement that the measure reflects management's view and may not be comparable with similarly labelled measures used by other entities;
• an explanation of the performance aspect it communicates and why management considers it useful;
• the calculation method;
• reconciliation to the most directly comparable IFRS subtotal or total;
• the income tax effect and effect on non-controlling interests for each reconciling item, with an explanation of how the tax effect is determined.

Changes to a measure, its calculation or the set of measures communicated can create further disclosure considerations. Establish a formal approval process so investor-relations, finance and executive teams do not introduce new "adjusted" subtotals without accounting review.

3. A practical example: adjusted operating profit

Suppose a company communicates "adjusted operating profit" of ₹250 crore in its results presentation. The amount excludes ₹20 crore of restructuring costs and ₹8 crore of acquisition-related expenses.

The company should not assume that simply labelling the measure "adjusted" makes it an MPM or that the exclusions are automatically acceptable. The team must first assess whether the measure meets IFRS 18's definition, identify the relevant IFRS subtotal, document why management uses the measure and determine the required reconciliation and tax effects.

A controlled workpaper should retain the source calculation, rationale for each adjustment, supporting ledger accounts, reviewer approval and consistency checks against the public presentation. If the measure is used differently in different documents, the inconsistency should be resolved before publication.

4. Aggregation and disaggregation: where disclosures may need work

IFRS 18 strengthens the principles governing how information is grouped in the primary financial statements and notes. The challenge is to provide material information without burying it in broad captions or overwhelming users with immaterial detail.

Review:

• whether "other income" or "other expenses" includes material items with different characteristics;
• whether expense captions obscure important cost drivers;
• whether the statement's line items and note disclosures tell a consistent story;
• whether material unusual items require clearer explanation;
• whether aggregation choices are consistent across periods and entities.

The goal is not to disclose every general-ledger account separately. It is to make material information understandable and avoid aggregation that hides economically different items.

5. The systems and controls impact

The technical policy must be supported by the reporting architecture. Identify whether the chart of accounts, consolidation mapping, entity reporting packs and disclosure tools can capture the categories and data needed.

A workable control design includes:

• a centrally governed account-to-statement mapping;
• documented classification rules for local finance teams;
• approval and audit trails for manual reclassifications;
• controlled MPM formulas and source data;
• reconciliation of public performance measures to accounting records;
• review of tax and non-controlling-interest effects;
• version control over disclosure drafts and assumptions.

Where subsidiaries use different ERP systems, establish a common group mapping and document local differences. Avoid ad hoc spreadsheet adjustments that cannot be reproduced next year.

6. IFRS 18 versus Indian Ind AS: do not assume equivalence

Indian statutory financial statements are governed by the accounting standards applicable under Indian law, not automatically by IFRS as issued by the IASB. A foreign parent may require IFRS 18 group reporting while the Indian subsidiary prepares statutory accounts under the applicable Ind AS framework.

For a group with dual reporting, maintain a documented bridge between statutory accounts and group reporting rather than relying on unexplained top-side adjustments.

7. A 90-day implementation roadmap

Days 1 to 30: Diagnose

• Confirm the applicable framework and first reporting period.
• Compare current presentation with IFRS 18.
• Inventory public performance measures.
• Identify data, system and governance gaps.

Days 31 to 60: Design

• Prepare the proposed income-statement mapping.
• Determine which measures may be MPMs.
• Design reconciliations and tax-effect calculations.
• Assign owners for systems changes and disclosure controls.

Days 61 to 90: Test

• Prepare a dry-run statement and MPM note.
• Reconcile sample amounts to the ledger and group reporting.
• Test material line-item classifications.
• Review draft disclosures with finance leadership and auditors.
• Maintain a tracked issue log with owners and completion dates.

The timetable should be adapted to the size and complexity of the group. A multi-ERP multinational may need a longer programme; a smaller entity may be able to complete a focused assessment more quickly.

How we can help

A financial reporting diagnostic is useful where the entity uses non-IFRS performance measures, has multiple reporting systems, prepares both local and group accounts or needs to improve its close and disclosure controls.

Explore our financial accounting and reporting services and Tax Advisory & Compliance services.

To discuss a readiness assessment, email info@anantaca.in with "IFRS 18 Readiness" in the subject line. Include the reporting framework, year-end, whether group reporting is required and the current finance-system setup.

Related resources

• Our services
• All technical articles and updates
• Business compliance and workflow tools

Primary sources

• IFRS Foundation: IFRS 18, Presentation and Disclosure in Financial Statements
• ICAI: Ind AS resources and publications

This is general reporting guidance. Confirm the current standard text, local adoption status and reporting framework before relying on a specific implementation conclusion.