By Bianca Ornellas – External Audit and Accounting Advisory Manager
The IASB has published IFRS 18 – Presentation and Disclosure in Financial Statements, an update aimed at changing the way companies demonstrate their financial performance. Although it does not alter recognition or measurement rules, the standard changes the presentation structure of the Income Statement and provides for a greater level of clarity and consistency, aspects that have been increasingly demanded by financial statement users.
Mandatory application begins for financial years starting on January 1, 2027, with the requirement to present adjusted comparative information, which already makes it advisable for companies to begin aligning their internal models with the new logic during 2025 and 2026. The earlier the adaptation begins, the less rework will be required at year-end closing.
The main change is the reorganization of the Income Statement into three mandatory categories: operating, investing and financing activities. This standardized structure aims to reduce subjectivity and allow financial statement users to compare company performance using more consistent criteria. In addition, subtotals widely used by the market, such as EBITDA and adjusted margins, will require greater methodological discipline, reinforcing consistency and transparency.
Another relevant aspect is the treatment of unusual items, which must now be explained clearly, both qualitatively and quantitatively. The previously common practice of grouping isolated events under “other income/expenses” will be restricted: the standard requires justification and detailed disclosure, strengthening the quality of the information presented.
These changes, despite appearing to be simple reclassifications, have a direct impact on companies’ day-to-day operations. The implementation of IFRS 18 will require revisions to the chart of accounts, adjustments to cost centers, internal reclassifications of expenses and revenues, modifications to management reports and, in many cases, adaptations to systems that automatically allocate transactions. Areas such as Accounting, Controllership, Tax and FP&A will need to be aligned to avoid inconsistencies between the accounting and management views of the business.
To illustrate the practical impact, some examples are useful:
Gains on the sale of fixed assets will be classified as investing activities, interest paid will be clearly linked to financing activities, one-off items, such as indemnities, must be segregated as unusual, with robust disclosure, and corporate and administrative expenses remain within operating results, but with a requirement for greater consistency in their presentation.
From an audit perspective, the adoption of IFRS 18 also introduces new areas of focus. Judgments regarding the nature of revenues and expenses, allocation criteria and internal policies will be evaluated with greater depth. Early preparation reduces the risk of adjustments at year-end closing and contributes to more coherent financial statements from the first period of application.
MCS Markup is prepared to support companies throughout this transition in a comprehensive manner, from the diagnosis of impacts through to the review of financial statements, the development of new accounting policies, the definition of classification criteria and support in the preparation of explanatory notes. We also offer training for the teams involved and accompany companies throughout preliminary closings, ensuring that adoption is carried out in a safe, organized manner and in line with international best practices.
IFRS 18 represents an opportunity to enhance the quality of financial communication and strengthen corporate governance. Beginning the transition process now allows companies to adjust systems, processes and controls at a measured pace, avoiding improvisation and reinforcing the transparency of the information presented to the market.
