Insights into PFRS 18 - Presentation and Disclosure in Financial Statements
IFRS 18 'Presentation and Disclosure in Financial Statements' was issued by the International Accounting Standards Board (IASB) in April 2024. Once adopted locally, this will be known as PFRS 18. PFRS 18 replaces PAS 1 ‘Presentation of Financial Statements’ for annual reporting periods beginning on or after 1 January 2027.
The ‘Insights into PFRS 18’ series explains the new requirements of PFRS 18, highlighting some areas of the standard that we believe will be challenging to apply in practice. It also aim to help users of PFRS financial statements to understand how financial statements will change when applying the new Standard.
What’s Changing: Key Highlights
1. Statement of Profit or Loss
PFRS 18 fundamentally reshapes the statement of profit or loss by introducing five defined categories: operating, investing, financing, income taxes, and discontinued operations which reorganize how income and expenses are classified and presented. In addition, the Standard requires two new subtotals to be displayed above “profit or loss,” creating a more structured and comparable presentation of financial performance across entities.
2. New Requirements for Operating Expenses
Under PFRS 18, entities may present operating expenses by nature, by function, or through a mixed approach; however, this flexibility is allowed only when it results in relevant and faithfully represented information. The Standard also tightens expectations around labeling, restricting the use of broad or uninformative terms like “other,” and requiring clearer descriptions, especially when aggregating amounts that could obscure material information.
3. Management‑Defined Performance Measures (MPMs)
One of the most notable developments is the introduction of new disclosure requirements for Management‑Defined Performance Measures (MPMs), a narrow category of performance metrics used in public communications. For each MPM, entities must disclose the measure’s purpose, how it is calculated, a reconciliation to the closest PFRS subtotal, as well as the related income tax effects and impacts on non‑controlling interests. All MPM disclosures must be included within a single dedicated note, which will form part of the audited financial statements and thus be subject to enhanced scrutiny.
4. Transition Requirements
Transitioning to PFRS 18 requires retrospective application, including mandatory reconciliations to show how previously reported PAS 1 figures would be restated under the new Standard. This includes both annual and interim comparative periods. Entities may encounter challenges if their systems have not historically captured the detailed information needed to restate prior‑period classifications, making early preparation critical to ensure compliance.
5. Consequential Amendments to Other Standards
Adoption of PFRS 18 triggers consequential amendments to several related standards, including PAS 7, PAS 33, and PAS 34. Among these changes, PAS 7 now requires entities to start the indirect cash flow reconciliation with the new “operating profit” subtotal instead of “profit before tax,” and removes previous presentation options for interest and dividends received or paid. PAS 33 has been updated to allow entities to disclose additional earnings per share metrics using permitted subtotals or MPMs, but only within the notes. These amendments ensure consistency across the presentation and disclosure framework reshaped by PFRS 18.
As entities move closer to the 2027 effective date, understanding the practical implications of PFRS 18 becomes increasingly important. The Insights series offers a deeper look into the Standard’s application, highlighting judgment areas, potential system impacts, and considerations that may not be immediately evident from the high‑level requirements. Leveraging these insights early will help reporting entities anticipate changes, refine their financial reporting processes, and ensure a smoother, more informed transition to the new presentation and disclosure framework.
Please refer to the PDF file below to access and download the full Insights into PFRS 18 for complete guidance. For entities who want the high‑level overview and readiness roadmap, you may refer to our previous alert Get Ready for PFRS 18 (Updated Publication Released).
