IFRS 18 is coming. Here’s what South African finance teams need to know.
In April 2024, the International Accounting Standards Board issued IFRS 18, Presentation and Disclosure in Financial Statements. It replaces IAS 1 and takes effect for annual reporting periods beginning on or after 1 January 2027. For JSE-listed companies and large private groups applying IFRS, this is one of the most significant changes to financial statement presentation in a generation.
The good news is that IFRS 18 doesn’t change how transactions are recognised or measured. The challenge is that it fundamentally changes how they must be presented – and for companies using enterprise performance management systems to produce their financial statements, that distinction matters enormously.
What changes under IFRS 18?
The most significant change is the introduction of a mandatory, structured income statement. Under IAS 1, companies had considerable flexibility in how they organised their profit and loss account. IFRS 18 removes that flexibility and requires all income and expenses to be classified into one of three categories:
Operating: income and expenses from a company’s main business activities.
Investing: returns from assets not used in the main operations (for example, dividends from associates, returns on idle cash).
Financing: costs of liabilities and assets arising from financing activities.
Two new subtotals become mandatory: Operating profit and Profit before financing and income tax. These must appear in every income statement, and they must be derived directly from the categorisation above, companies cannot define them differently for their own purposes.
The management performance measure requirement
IFRS 18 also introduces new disclosure requirements for what it calls Management Performance Measures, or MPMs. If a company discloses any non-GAAP or alternative performance measure in its public communications, think adjusted EBITDA, headline earnings, normalised operating profit, it must now:
Provide a formal reconciliation from the MPM back to the nearest IFRS line item.
Explain why the measure provides useful information to investors.
Disclose the income tax and non-controlling interest effects!
For JSE-listed companies, which frequently use alternative performance measures in results presentations, SENS announcements, and integrated reports, this represents a meaningful new disclosure burden.
Why this matters for your EPM system
Many finance teams will look at IFRS 18 and assume it’s a finance project. In practice, for any company using an enterprise performance management platform – Oracle FCCS, SAP BPC, OneStream, or similar – it is just as much a systems project.
Your chart of accounts needs to support the three-category structure. Your consolidation hierarchies need to derive the mandatory subtotals. Your non-GAAP reporting workflows need to produce formal, auditable reconciliations. None of this happens automatically when the standard changes.
The companies that will navigate this most smoothly are those that start their readiness assessments in 2025 and 2026, leaving time for a structured, phased implementation rather than a last-minute scramble.
What to do now
If your organisation reports under IFRS, we recommend three immediate steps:
Confirm your first IFRS 18 reporting period and work backwards to establish your implementation deadline.
Assess whether your current EPM system can support the new income statement structure without significant re-architecture.
Identify any management performance measures in your external communications that will require formal MPM reconciliations.
At Futuresense, we’ve been helping Oracle EPM clients work through exactly this process. If you’d like to understand what IFRS 18 means specifically for your Oracle environment, we’re happy to have that conversation.
Contact Futuresense at info@futuresense.co.za
