IFRS 18 – Presentation and Disclosures in the Financial Statements

Objective of IFRS 18

IFRS 18 governs the presentation and disclosure of information in IFRS financial statements. Its objective is to provide relevant information that presents an entity’s assets, liabilities, equity, and revenue and expenses in a manner that is consistent with actual conditions. The standard places particular emphasis on the structure of the income statement and on additional disclosures regarding entity-specific performance measures. [IFRS 18.1]

Scope

IFRS 18 applies to the presentation and disclosure of information in financial statements prepared in accordance with the IFRS Accounting Standards. The standard contains general and specific requirements for the presentation of information in the statement of comprehensive income, the balance sheet, and the statement of changes in equity, as well as for disclosures in the notes. The provisions of IAS 7 generally apply to the statement of cash flows; however, some of the general requirements of IFRS 18 also apply to the statement of cash flows. [IFRS 18.2–4]

IFRS 18 generally does not apply to condensed interim financial statements prepared in accordance with IAS 34. However, certain requirements—in particular those relating to aggregation and disaggregation, as well as management-defined performance measures—also apply to these financial statements. [IFRS 18.5]

Components of the Financial Statements

A complete set of financial statements includes:

• a balance sheet as of the end of the reporting period,
• an income statement for the reporting period,
• a statement of comprehensive income for the reporting period,
• a statement of changes in equity for the reporting period,
• a statement of cash flows for the reporting period,
• notes to the financial statements, including significant information on accounting policies,
• comparative information for the prior reporting period, and
• under certain conditions, a balance sheet as of the beginning of the prior reporting period.

The income statement and the statement of other comprehensive income may be presented either in a single statement of comprehensive income or in two separate statements. [IFRS 18.10–13]

Primary Components of Financial Statements and Notes

IFRS 18 distinguishes between the primary components of financial statements and the notes. The primary components of financial statements are intended to provide structured summaries of an entity’s assets, liabilities, equity, income, expenses, and cash flows. The notes to the financial statements supplement this information with additional material disclosures and more detailed breakdowns. [IFRS 18.15–17]

Information in the primary components of financial statements is therefore generally presented at a higher level of aggregation, while the notes provide more detailed information and breakdowns. [IFRS 18.18]

Categories in the Statement of Comprehensive Income

Revenues and expenses in the income statement must be classified into one of five categories:

• Operating Category,
• Investing Category,
• Financing Category,
• Income Taxes Category, and
• Discontinued Operations Category.

The allocation to these categories forms the basis for the structure of the income statement and the subtotals required by IFRS 18. [IFRS 18.47–48]

Operating Category

The Operating Category generally includes all income and expenses that are not allocated to the Investing Category, Financing Category, Income Taxes Category, or Discontinued Operations Category. It thus serves as a residual category. [IFRS 18.52]

The Operating Category includes, in particular, income and expenses arising from the entity’s ordinary business activities. However, it is not limited to recurring or operating activities in the strict sense. The decisive factor is whether an item of income or expense is classified in one of the other categories according to the classification requirements of IFRS 18. [IFRS 18.52, B42]

Investing Category

Income and expenses arising from the following assets are generally classified in the Investing Category:

• interests in associates, joint ventures, and unconsolidated subsidiaries,
• cash and cash equivalents, as well as
• other assets that generate a return individually and largely independently of the entity’s other resources.

This category includes, among other things, income from these assets, income and expenses arising from their initial and subsequent measurement, and gains or losses resulting from their derecognition. [IFRS 18.53–54]

Financing Category

The Financing Category includes certain income and expenses arising from liabilities resulting from transactions entered into solely for the purpose of raising funds. These include, in particular, interest expense and the effects of changes in interest rates on such liabilities. [IFRS 18.59–60]

Certain financing components of liabilities that do not arise exclusively from financing transactions are also classified in the Financing Category. The specific classification requirements depend on the nature of the underlying liability. [IFRS 18.59–64]

Income Taxes and Discontinued Operations

The Income Taxes Category includes tax expenses and tax income recognized in the statement of income in accordance with IAS 12, including certain related foreign currency translation differences. [IFRS 18.67]

In the Discontinued Operations Category, income and expenses from discontinued operations are reported in accordance with IFRS 5. [IFRS 18.68]

Required Subtotals

IFRS 18 specifically requires the following totals and subtotals in the income statement:

• Operating profit or loss,
• Profit or loss before financing and income taxes, and
• Profit or loss.

Operating profit or loss includes all revenue and expenses of the operating category. [IFRS 18.69–70]

Profit or loss before financing and income taxes comprises operating profit or loss plus all income and expenses of the investing category. Special provisions apply to certain entities whose primary business is financing. [IFRS 18.71–74]

Profit or loss is equal to the sum of all income recognized in the income statement less all expenses and thus includes all five categories. [IFRS 18.72]

Entities with Specific Principal Business Activities

Special classification rules apply to entities whose primary business activity consists of investing in specific assets or providing financing to customers. [IFRS 18.49]

Income and expenses that would be classified in the Investing or Financing Category for other entities may be included in the Operating Category for such entities. This is intended to ensure that the Operating Category reflects the entity’s actual primary business activity. [IFRS 18.55–58, 65–66]

Whether investing in assets or providing financing constitutes a principal business activity must be assessed based on the actual circumstances and supporting evidence. Examples of entities engaged in such activities include investment companies, real estate investment companies, insurers, banks, and other credit institutions. [IFRS 18.B30–B41]

Presentation of Operating Expenses

Expenses within the operating category shall be classified in a manner that provides the most useful structured summary of expenses. For this purpose, expenses may be classified by

• their nature,
• their function within the entity (function of expenses), or
• a combination of both characteristics

. [IFRS 18.78]

When classified by nature, for example, cost of materials, personnel expenses, and depreciation are presented separately. When classified by function, expenses are grouped according to the activity to which they are attributable, for example, as cost of sales. [IFRS 18.80–81]

If the income statement includes functional expenses, a separate line item for cost of sales must be presented, provided that a corresponding function is used. In addition, certain information regarding the nature of the expenses included in the functional expenses must be disclosed in the notes. [IFRS 18.82–83]

Aggregation and Disaggregation

IFRS 18 sets forth fundamental requirements for the aggregation and disaggregation of information. Assets, liabilities, equity, revenue, expenses, and cash flows shall be aggregated based on common characteristics and disaggregated based on different characteristics. [IFRS 18.41]

Aggregation and disaggregation must be performed in such a way that the primary components of the financial statements provide a useful, structured summary and the notes to the financial statements contain material additional information. Material information must not be obscured by the aggregation of different items. [IFRS 18.41]

Further breakdowns must be provided if the resulting information is material. If material information is not already presented in the primary components of the financial statements, it must generally be disclosed in the notes. [IFRS 18.42]

The titles and descriptions of line items, totals, and subtotals must appropriately reflect their characteristics. Where necessary, additional explanations must be provided so that users of the financial statements can understand the titles used and the aggregation or disaggregation performed. [IFRS 18.43]

Management-Defined Performance Measures

IFRS 18 introduces specific disclosure requirements for management-defined performance measures (MPMs).

• is used by the entity in public communications outside the financial statements,
• is intended to convey to users of the financial statements management’s perspective on an aspect of the entity’s overall financial performance, and
• is neither one of the subtotals expressly excluded in IFRS 18 nor required to be presented or disclosed under other IFRS accounting standards. [IFRS 18.117]

Not every performance measure used by management therefore constitutes an MPM. Certain subtotals, such as gross profit or loss, operating profit or loss before depreciation, amortization, and impairments, profit or loss before income taxes, or profit or loss from continuing operations, are expressly not MPMs. [IFRS 18.118]

Disclosures Regarding Management-Defined Performance Measures

All information regarding MPMs must generally be presented together in a single note to the financial statements. The entity must explain that the MPMs convey management’s view of an aspect of the entity’s financial performance as a whole and are not necessarily comparable with measures used by other entities. [IFRS 18.121–122]

For each MPM, the following information, in particular, must be disclosed:

• a description of the aspect of financial performance that management believes the measure conveys,
• a description of how the measure is calculated,
• a reconciliation to the most directly comparable amount or subtotal required by IFRS or identified in IFRS 18,
• the income tax effect of each reconciling item,
• the effects of each reconciling item on non-controlling interests; and
• a description of how the tax effects were determined. [IFRS 18.123]

If an entity changes the calculation of a key performance measure, introduces a new key performance measure, or ceases to use a previously reported key performance measure, the change and the reasons for it must be explained. Comparative information must generally be adjusted accordingly. [IFRS 18.124–125]

Balance Sheet

IFRS 18 also contains requirements regarding the presentation of the balance sheet. Assets and liabilities must generally be classified into current and non-current items. Presentation by liquidity is permitted if it provides reliable and more relevant information. [IFRS 18.96]

IFRS 18 also prescribes certain balance sheet items, including property, plant, and equipment; investment property; intangible assets; goodwill; inventory; receivables, cash and cash equivalents, liabilities, provisions, and current and deferred tax assets and liabilities. [IFRS 18.103]

Statement of Changes in Equity

The statement of changes in equity must include, among other things, total comprehensive income for the reporting period, presented separately for the owners of the parent and non-controlling interests, as well as a reconciliation of the individual components of equity between the beginning and end of the period. [IFRS 18.107]

In particular, changes arising from net income for the period, other comprehensive income, and transactions with owners in their capacity as owners must be presented separately. [IFRS 18.107]

Effective Date and Transition

IFRS 18 is effective for fiscal years beginning on or after January 1, 2027. Earlier application is permitted. IFRS 18 replaces IAS 1 “Presentation of Financial Statements.” [IFRS 18.C1, C8]

Upon initial application, IFRS 18 shall generally be applied retrospectively in accordance with IAS 8. For the immediately preceding comparative period, a reconciliation of the individual items in the income statement from the amounts previously presented in accordance with IAS 1 to the amounts presented in accordance with IFRS 18 shall be disclosed. [IFRS 18.C2–C3]

Additional transition provisions apply to interim financial statements in the first year of adoption. In particular, the headings and required subtotals required by IFRS 18 must already be presented in the condensed interim financial statements. [IFRS 18.C4–C5]

Diese Übersicht dient der sachlichen Orientierung und ersetzt keine Rechts- oder Bilanzierungsberatung im Einzelfall. Rechtsstand: September 2026