The income statement gains defined categories
All income and expenses are classified into five categories — operating, investing, financing, income taxes and discontinued operations — under criteria that are uniform across companies.
IFRS 18 · Effective 2027
The way you present your results is about to change.From diagnosis to the first close
What changes
The essence of the standard in three changes
IFRS 18 replaces IAS 1 and does not change how much your company earns. It changes how that result is organised, presented and compared by the market — across three main fronts.
Two new mandatory figures
Operating profit and profit before financing and income taxes become mandatory, standardised subtotals: the figures banks, investors and buyers will look at first.
Disciplined disclosure of MPMs
Management-defined measures, such as adjusted EBITDA, must be disclosed in a dedicated note, with a clear definition and a reconciliation to the official figures.
The income statement
The same business, presented differently
Today each company defines its own subtotals, which makes comparison difficult. Under IFRS 18 the structure is the same for everyone — and the figures the market uses to price your business gain a single definition.
The path of a management-defined measure under IFRS 18
Management discloses its own indicator
Adjusted EBITDA, recurring profit, normalised result: metrics used in releases and investor presentations.
The indicator qualifies as an MPM
Because it is a subtotal of income and expenses communicated publicly to convey management’s view of performance.
Disclosure in a dedicated note
With the definition of the calculation, a reconciliation to the closest official subtotal and an explanation of any change in criteria.
Subject to auditIncome statement today (IAS 1)
- Revenue
- Costs and expenses in varying formats
- Subtotals at each company’s discretion
- Adjusted EBITDA with no disclosure rule
- Net profit
Income statement under IFRS 18
- Operating category — the performance of the business
- Operating profit New subtotal
- Investing category
- Profit before financing and income taxes New subtotal
- Financing category
- Income taxes · Discontinued operations
- Net profit
Operating
Investing
Financing
Mandatory subtotals
Countdown
The new era of financial
reporting begins on
1 January 2027.
In
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Apr 2024Standard published
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Jan 2027Effective date
Applies to annual periods beginning on or after 1 January 2027, with early adoption permitted and retrospective application: the first report will require 2026 comparatives in the new format.
Who and when
Who needs to prepare, and why 2026 is the decisive year
The change reaches every company reporting under IFRS, in all sectors: subsidiaries of international groups, audited companies, groups in consolidation, businesses with material management metrics, and organisations raising capital, preparing a sale or an IPO.
Diagnosis, design of the new income statement, chart-of-accounts and systems adjustments, and building the comparative figures the first report will require.
First financial year under IFRS 18, with closings and interim statements already in the new format.
First full annual cycle published and audited under the new standard, with the market comparing your company to its peers.
Cosmos Insight · IFRS 18 in transactions
IFRS 18 at the M&A negotiating table
In mergers and acquisitions, price and contractual clauses are built on income-statement figures. When the reference changes, the negotiation changes too — for the buyer, for the seller and for whoever finances the deal.
1Valuation and comparable multiples
Middle-market deals are priced, in practice, on earnings multiples such as EV/EBITDA. With standardised categories and a single definition of operating profit, comparison between targets and peers becomes more transparent, and adjustments once reviewed case by case are now reconciled in a note.
2Earn-outs and price clauses
Earn-outs and price adjustments are frequently tied to operating profit or EBITDA. Contracts signed before 2027 and measured afterwards may have their calculation base altered by the new categories. Defining contractually which standard prevails is essential to prevent future disputes.
3Covenants and acquisition debt
Acquisition financing carries covenants based on EBITDA, EBIT and net debt to EBITDA. With operating profit recomposed, these indicators may shift without any change in the economics of the business. Opening the conversation with lenders early avoids renegotiation under pressure or technical breaches.
4Due Diligence and equity story
A target with 2026 comparatives prepared, MPMs inventoried and its income statement designed to the new standard reduces friction in diligence and strengthens the equity story with investors — including when preparing for an IPO or a funding round, where discipline over metrics weighs on credibility.
How Cosmos supports you
Diagnosis and implementation, end to end
One multidisciplinary team leads both phases of the project, with senior professionals directly involved and objective deliverables at the end of each stage.
Phase 1 · Diagnosis
Specialist assessment across four fronts
Presentation and financial statements
- Current income-statement structure, lines and subtotals disclosed
- Classification of income and expenses
- Compliance with the new requirements and presentation gaps
Indicators and MPMs
- Inventory of the indicators used by management
- Identification of potential MPMs and traceability of adjustments
- Documentation and governance gaps
Disclosures and explanatory notes
- Level of disaggregation of information
- Review of existing notes and disclosed judgements
- Additional disclosure requirements
Processes, systems and controls
- Closing process and reporting systems
- Classification rules and related internal controls
- Readiness of the organisation for adoption
Phase 1 deliverables
A diagnosis report with an executive summary, an IFRS 18 compliance map, estimated effort and a proposed action plan, together with the chart-of-accounts mapping to the new format.
Phase 2 · Implementation
From adaptation to project closure
Execution of the action plan built during the diagnosis, organised into four integrated workstreams — financial statements, MPMs and governance, disclosures and notes, processes and controls — and delivered in six stages alongside your teams.
Explanatory notes
Revised draft and a guide to aggregating information.
Internal controls
Redesigned processes and a revised controls matrix.
Governance
Metrics policy and methodology manual.
Training
Training for the accounting, FP&A and reporting teams.
Go-live
First close in the new format, with testing and validation.
Closure
Knowledge transfer and formal completion.
Phase 2 deliverables
A new income-statement structure and an updated financial-statement template, reconciliations between official figures and MPMs with a governance policy, a draft of the explanatory notes, a closing checklist and a revised controls matrix. The result is an IFRS 18 environment in place: statements compliant with the standard, MPMs documented and a closing process ready for recurring application.
Free pre-assessment
Find out where your company stands
Answer five quick questions. Based on them, a senior professional from our accounting practice will come back with a pre-assessment of your exposure to IFRS 18 and the next steps, with no commitment.
- Answered by a senior professional
- Full confidentiality over the information shared
- Clear guidance on what to do in 2026
Informational material prepared by Cosmos Advisors based on IFRS 18 (IASB). It does not replace reading the standard or specific professional advice. IFRS 18 applies to annual periods beginning on or after 1 January 2027, with early adoption permitted and retrospective application.