IFRS 18 Preparation Starts With the Numbers Management Already Uses

With IFRS 18 approaching its 2027 effective date, businesses need to examine how public performance measures connect to their financial reporting.

A reporting change exposes an operating habit

A business can use the same word in a management presentation and a financial statement while meaning different things. When those differences are not explained, readers can compare measures that do not share the same definition. The issue becomes more consequential as companies prepare for a new presentation standard and revisit the language used to describe performance.

The IFRS Foundation says IFRS 18 is effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted. The standard replaces IAS 1 and introduces defined subtotals and disclosures concerning certain management-defined performance measures. This is an implementation analysis, not a claim that every business everywhere must apply the standard on the same calendar date. Applicable reporting requirements depend on the entity and jurisdiction.

Inventory the language before changing the slides

A sensible first step is to collect the performance measures already used in public communications. Look across presentations, announcements and other material rather than relying on the finance team's preferred list. The question is whether the organisation consistently knows what each measure includes, what it excludes and how it relates to the underlying records.

An internal inventory is useful even before determining the precise accounting treatment. It reveals where the same label has acquired several definitions or where an adjustment is repeated without a clear owner. The relevant accounting specialists can then assess which measures fall within the standard's scope. The inventory should support that assessment, not replace it with a broad assumption that every management metric is treated identically.

A reconciliation needs a repeatable process

Explaining a difference once is not the same as being able to reproduce it every reporting period. A reliable reconciliation connects the reported measure to controlled information, identifies adjustments and allows another qualified person to follow the calculation. A figure reconstructed from several private spreadsheets creates a different level of operational risk from one supported by a documented process.

For illustration, suppose a management presentation excludes a category of restructuring expenditure. The team needs to know who classifies the expenditure, which records support it and how changes are reviewed. This example does not prescribe whether the exclusion is appropriate. It demonstrates why a persuasive label cannot substitute for a traceable calculation and an assessment under the applicable requirements.

Comparative information creates a preparation burden

A presentation change can require work on information from earlier periods as well as the current one. Teams should examine that requirement with their reporting advisers early enough to identify missing classifications or records. Waiting until the first affected report is almost complete can leave little time to resolve differences properly.

The operational lesson is about preserving the evidence needed to explain a number. If a business changes systems or responsibilities during preparation, it should consider whether the relevant history remains accessible. A technically successful migration can still make a reporting comparison harder if definitions, mappings or explanations are lost. Financial communication depends on the continuity of meaning as well as the continuity of stored values.

Separate performance explanation from image management

Management has legitimate reasons to explain aspects of performance that a standard subtotal does not fully describe. The problem begins when an alternative measure is easier to promote than to examine. A recurring exclusion may deserve more attention precisely because it repeatedly affects the account of ordinary performance.

A useful governance question is whether the explanation would remain convincing to a reader who does not share management's preferred interpretation. Can the reader understand the calculation, compare it with other information and see why the adjustment matters? That standard does not prohibit supplementary explanations. It asks that the commercial narrative remain answerable to the numbers rather than organising the numbers around the desired impression.

Assign decisions across functions

Finance cannot necessarily solve the communication problem alone. Investor relations, executives and other teams may control material in which performance measures appear. Preparation therefore needs an agreed route for reviewing definitions and approving changes across the organisation.

The process should distinguish an editorial improvement from a substantive alteration in a measure. Changing a label for clarity is different from changing what the calculation excludes. Both should be documented so that the next period's team does not have to infer the intention. A practical review meeting can work through a real communication and ask whether the definitions, calculations and supporting records still align after every participant has made their changes.

Use the deadline to improve discipline

A reporting deadline can be approached as a compliance exercise or as a reason to correct an existing weakness in management information. The second approach requires more curiosity about how figures are produced and used. It asks whether decision-makers understand the limitations of the measures on which they rely.

My conclusion is that preparation should start with the current operating reality, not with a redesigned template. Identify the measures, examine their definitions and create a repeatable route from records to public explanation. Specialist accounting judgment remains essential for applying IFRS 18 correctly. But the strategic benefit is broader: a company that can explain its performance consistently gives stakeholders a stronger basis for assessing the business behind the presentation.

Gabriel Nicolaev — CyGuru

Sources & further reading

IFRS Foundation — IFRS 18 overview and effective date ↗

Editorial photograph for illustration.

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