On 1 January 2027, companies reporting under IFRS will no longer be able to present their income statement the way they did under IAS 1. The IFRS 18 standard published by the IASB in April 2024 (official IFRS Foundation source) mandates a fundamental restructuring of financial statements — with mandatory presentation categories, two new required subtotals, and new transparency requirements for the non-GAAP indicators that finance teams use internally.
This topic is not yet on every CIO’s agenda. It should be. The reason: IFRS 18 is not merely about reformatting a table. It requires revisiting the chart of accounts, reconfiguring ERP reporting modules, capturing 2026 data in the new structure for retrospective restatement, and building a full audit trail around MPMs (Management Performance Measures). These projects take time. Time is running short.
What IFRS 18 Changes Compared to IAS 1
IAS 1 gave companies considerable freedom in presenting the income statement. Companies could classify expenses by nature or by function, define their own subtotals, and highlight non-IFRS indicators without any formal reconciliation requirement.
IFRS 18 normalises that freedom. The standard introduces:
Five mandatory categories for all income statement items (Wolters Kluwer, May 2025):
- Operating: the default category for everything related to the company’s core business activities
- Investing: income and expenses from assets that generate returns independently (unconsolidated investments, joint ventures)
- Financing: financing costs, unwinding of discounts on liabilities
- Income taxes
- Discontinued operations
Two mandatory subtotals in the income statement (IASPLUS, 2024):
- Operating profit
- Profit before financing and income taxes
These subtotals are defined by the standard. Companies can neither omit them nor rename them.
Mandatory disclosure of MPMs with full reconciliation to IFRS subtotals.
Application is retrospective: 2027 financial statements must present 2026 data in IFRS 18 format. This means companies must capture and store their 2026 data according to the new classification — starting now.
The MPM Challenge: Adjusted EBITDA Under Scrutiny
MPMs (Management Performance Measures) are the performance indicators that finance leadership uses externally — in investor communications, press releases, analyst presentations. Indicators such as adjusted EBITDA, recurring operating profit, or recalculated free cash flow.
Under IAS 1, these measures circulated freely. Companies could communicate an adjusted EBITDA of €350m without explaining the adjustments behind it.
IFRS 18 changes that rule. Every MPM used in external communication must now be disclosed in the notes to the financial statements with (BDO, 2024):
- A clear definition and description of the calculation method
- A line-by-line reconciliation to the nearest IFRS subtotal
- The tax effect on each reconciliation item
- An explanation if the method changes from one period to the next
For CFOs, this means documenting the adjustments that were previously made informally or via untraceable Excel spreadsheets. The challenge is not conceptual — management knows how it calculates its adjusted EBITDA. The challenge is systemic: the audit trail must now exist in the system, not in people’s heads or in an offline file.
Impact on the Financial Information System
This is where the CIO enters the conversation.
The Chart of Accounts Must Be Revised
The five-category classification of IFRS 18 requires that every account in the chart of accounts be assigned to one of them. This assignment does not exist in most current charts of accounts, which were built under IAS 1.
Accounts that mix multiple natures — an account that captures both operating income and investment returns, for example — will need to be split. Reporting hierarchies will need to be rebuilt.
For multi-entity groups with heterogeneous charts of accounts by country or by system, the exercise is even more complex. Each entity must be mapped to the IFRS 18 categories, and that mapping must produce consolidable data.
Affected ERP Modules
The impact is not uniform across platforms (SAP Community, 2025):
SAP S/4HANA: the Universal Journal (ACDOCA) module is at the heart of the issue. IFRS 18 classification fields will need to be added to capture the category on each journal entry. SAP Group Reporting must be reconfigured with the new line-item hierarchies. Treasury & Risk Management is also impacted for financial flows. SAP has announced standard product updates to support IFRS 18, but companies will need to adapt their specific configurations.
Oracle Cloud ERP + EPM: Oracle recommends a two-stage approach — keep the existing ERP configuration, extract balances to the EPM platform, configure IFRS 18 mapping in EPM, and run parallel reporting (IAS 1 format and IFRS 18 format) with reconciliation validation (Oracle, 2025). Oracle’s Secondary Ledger feature allows simultaneous posting to multiple accounting frameworks from a single transaction.
Mid-market ERP (Sage, Microsoft Dynamics 365, Odoo, Unit4): mid-market vendors have not all published their IFRS 18 roadmap yet. For these platforms, the answer will often be an external EPM or consolidation layer (Tagetik, Jedox, Workiva) that handles the mapping and statement generation. If your ERP cannot natively produce data according to IFRS 18 categories, a transformation layer becomes necessary.
The EPM Constraint
Realigning the chart of accounts solves the data capture problem. It does not solve the statement production problem. Most companies calculate their consolidated results in an EPM or consolidation tool, separate from the transactional ERP.
These tools will need to be reconfigured to produce the two new mandatory subtotals, manage MPMs with their reconciliation, and generate IFRS 18-compliant statements. Reconfiguration timelines vary by platform and the complexity of the consolidation perimeter.
The Retrospective Restatement Constraint: 2026 Is Already in Scope
This is the point teams underestimate most.
IFRS 18 is retrospectively applied. The first 2027 financial statements under IFRS 18 must present, in the comparative column, 2026 figures in IFRS 18 format — not in IAS 1 format.
This means companies must:
- Already be capturing 2026 data in the IFRS 18 structure (or maintain a mapping that allows recalculation)
- Validate that restatement with external auditors before the 2027 close
- Document classification choices for ambiguous accounts, in a way that can be justified during audit
If systems are not configured to capture IFRS 18 classification on 2026 entries, teams will need to reconstruct that data from the general ledger — a manual exercise that is slow and error-prone. For groups with dozens of entities or heterogeneous systems, manual restatement is not operationally feasible.
The practical conclusion: the ERP configuration to capture IFRS 18 categories must be live before the start of the 2026 financial year. For those who have not yet started — we are in June 2026 — the second half of 2026 is critical.
Action Plan: What CFOs and CIOs Must Do Now
Phase 1: Diagnostic (Now — Q3 2026)
For the CFO:
- Map all MPMs used in external communications (adjusted EBITDA, recurring profit, free cash flow…)
- For each MPM, document the current adjustments and identify the reference IFRS 18 subtotal
- Identify accounts in the chart of accounts that require reclassification or splitting
- Assess the impact on bank covenants and analyst presentations (some ratios will change in presentation)
For the CIO:
- Audit your ERP and consolidation tool’s capabilities to produce IFRS 18 categories — is there a vendor roadmap?
- Identify whether an additional EPM layer is required
- Estimate the volume of work to reconfigure the chart of accounts and reporting modules
- Assess the complexity of the retrospective restatement: how many entities, how many systems, what granularity of historical data?
Phase 2: Design and Configuration (Q3–Q4 2026)
- Validate the IFRS 18 chart of accounts classification with external auditors
- Configure IFRS 18 fields in the ERP (or EPM layer) to capture the category on each journal entry
- Test parallel reporting — IAS 1 and IFRS 18 — on existing data
- Set up MPM disclosure templates with reconciliation formats
Phase 3: Parallel Execution and Audit (H1 2027)
- Produce the first IFRS 18 statements with restated 2026 data
- Submit the classification mapping and MPM notes to external audit
- Fix anomalies identified during audit
- Train finance teams across entities on the new reporting requirements
Phase 4: Publication (2027 Close)
- Publish the first compliant IFRS 18 statements with 2026 comparatives
- Document presentation changes in accounting policies
What Auditors Will Be Looking At
External auditors will concentrate their attention on three areas:
Completeness of MPMs: every non-GAAP measure disseminated externally must appear in the notes. If a press release mentions a “restated adjusted EBITDA,” it must appear in the notes with its full reconciliation.
Consistency of classification: an investment return classified as Operating in one entity cannot be classified as Investing in another without documented justification.
Quality of 2026 data: the audit trail for the retrospective restatement must be traceable. If data was manually reconstructed, auditors will request supporting evidence transaction by transaction for material items.
An Often-Overlooked Lever: Convergence with Other Projects
IFRS 18 can seem like just another compliance constraint. It can also be an opportunity to consolidate projects already in progress.
If your company is migrating to SAP S/4HANA, the IFRS 18 project must be integrated into the migration scope — not handled afterwards. The S/4HANA chart of accounts design must include IFRS 18 categories from the outset. Retrofitting afterwards costs two to three times more than getting it right at the start.
Similarly, if an EPM or consolidation project is underway (replacing SAP BPC, adopting Tagetik or OneStream), IFRS 18 is a priority use case to integrate into the project scope.
Finally, if your group is subject to the CSRD, extra-financial reporting structures are increasingly converging with IFRS accounting structures. The data collection, reconciliation, and audit trail capabilities you build for IFRS 18 also serve CSRD. Do not build two separate silos.
To explore the broader regulatory landscape and its impact on your financial information system, read our guide on European e-invoicing and ERP compliance and our analysis of CSRD and ERP sustainability reporting.
