The International Accounting Standards Board (IASB) has introduced a new standard, IFRS 18, Presentation and Disclosure in Financial Statements, which is set to redefine financial performance reporting by improving the usefulness of information presented and disclosed in financial statements to enable better investment decisions. IFRS 18 introduces new requirements to improve companies’ reporting of financial performance and provide investors a better basis for analyzing and comparing companies’ statements through improved comparability in the income statement, enhanced transparency of management-defined performance measures, and more useful grouping of information in the financial statements.
IFRS 18 is expected to bring about significant changes in the way companies present their results on the face of the income statement and disclose information in financial statement footnotes. The standard introduces three defined categories for income and expenses – operating, investing, and financing – as an improved structure of the income statement. This formalized layout and resulting categorical subtotals will give investors a consistent starting point for analyzing a company’s performance, making it easier to compare across entities. Further, the standard will require companies to disclose explanations of non-GAAP and company-specific measures (i.e. outside of IFRS standards), which will improve discipline and transparency of management-defined performance measures and make them easier to audit. IFRS 18 will be effective for all periods beginning on or after January 1st, 2027.
When compared to U.S. GAAP, the more widely used accounting standards in the U.S., IFRS 18 will introduce some significant differences. While both sets of standards aim to provide transparent and comparable financial performance information, their methodologies and practical applications differ. The introduction of IFRS 18, with its focus on improving the structure of the income statement and enhancing the transparency of management-defined performance measures, marks a significant step towards more connected reporting while continuing to advocate a more principles-based approach to standard setting. On the other hand, the U.S. Financial Accounting Standards Board (FASB) aims to achieve this through the disaggregation of relevant expenses which will allow for the improvement of the usefulness of expense information on public business entities’ income statements. FASB is deliberating and continuing discussions on a proposed ASU that will disaggregate the income statement. Understanding the differences between IFRS and U.S. GAAP reporting, especially when it comes to income statements, is crucial for companies with multinational and segmented operations, and for investors and stakeholders in making informed financial decisions.
At Chess Consulting, we have extensive experience working with clients to provide financial statement preparation, audit readiness, and evaluation and mitigation of potential business processes and control risks. We have assisted companies that follow both U.S. GAAP and IFRS, as well as companies with extensive multinational reporting requirements. Our technical accounting experts stay informed of all the latest standards updates and can analyze the effects of new standards and effectively implement them for your company. Please see additional details on related services we provide at:
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