{"id":17631,"date":"2026-03-17T16:35:18","date_gmt":"2026-03-17T16:35:18","guid":{"rendered":"https:\/\/nova-praxis.com\/ifrs-18-whats-changing-who-it-affects-and-how-to-prepare-for-the-new-reporting-requirements\/"},"modified":"2026-07-28T15:10:10","modified_gmt":"2026-07-28T15:10:10","slug":"ifrs-18-whats-changing-who-it-affects-and-how-to-prepare-for-the-new-reporting-requirements","status":"publish","type":"post","link":"https:\/\/nova-praxis.com\/en\/ifrs-18-whats-changing-who-it-affects-and-how-to-prepare-for-the-new-reporting-requirements\/","title":{"rendered":"IFRS 18: What&#8217;s Changing, Who It Affects, and How to Prepare for the New Reporting Requirements"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><strong>Table of Contents<\/strong><\/p>\n\n<ol class=\"wp-block-list\">\n<li><strong><a href=\"#1\" type=\"internal\" id=\"#1\">What are the changes, and why are they being made?<\/a><\/strong>\n<ul class=\"wp-block-list\">\n<li><strong><a href=\"#1-1\" type=\"internal\" id=\"#1-1\">1.1 A More Structured and Comparable P&amp;L<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#1-2\" type=\"internal\" id=\"#1-2\">1.2 New Required Subtotals<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#1-3\" type=\"internal\" id=\"#1-3\">1.3 Main business activities: The standard recognizes that not all companies operate in the same way<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#1-4\" type=\"internal\" id=\"#1-4\">1.4 Greater Disaggregation and Discipline in the Presentation<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#1-5\" type=\"internal\" id=\"#1-5\">1.5 MPMs: Management Metrics Within the Audited Scope<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#1-6\" type=\"internal\" id=\"#1-6\">1.6 Related Changes to IAS 7 (Cash Flow)<\/a><\/strong><\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong><a href=\"#2\" type=\"internal\" id=\"#2\">Who will be affected by IFRS 18?<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#3\" type=\"internal\" id=\"#3\">When Does IFRS 18 Take Effect, and How Does the Transition Work?<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#4\" type=\"internal\" id=\"#4\">How IFRS 18 Will Affect Financial Reporting<\/a><\/strong>\n<ul class=\"wp-block-list\">\n<li><strong><a href=\"#4-1\" type=\"internal\" id=\"#4-1\">4.1 Restructuring the Income Statement (P&amp;L)<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#4-2\" type=\"internal\" id=\"#4-2\">4.2 Operating Profit as a Key Performance Indicator (KPI)<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#4-3\" type=\"internal\" id=\"#4-3\">4.3 MPM Management: More Control, More Evidence, More Reconciliation<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#4-4\" type=\"internal\" id=\"#4-4\">4.4 Cash Flows (IAS 7): Changes in the Basis of Presentation and Classification<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#4-5\" type=\"internal\" id=\"#4-5\">4.5 Group Reporting: Consolidation Packages and Tools<\/a><\/strong><\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong><a href=\"#5\" type=\"internal\" id=\"#5\">How to Prepare for the Implementation of IFRS 18<\/a><\/strong>\n<ul class=\"wp-block-list\">\n<li><strong><a href=\"#5-1\" type=\"internal\" id=\"#5-1\">Step 1: Impact Assessment (2\u20136 weeks)<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#5-2\" type=\"internal\" id=\"#5-2\">Step 2: Design of the IFRS 18 model (policy + data model)<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#5-3\" type=\"internal\" id=\"#5-3\">Step 3: Changes to Systems and Reporting Packages<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#5-4\" type=\"internal\" id=\"#5-4\">Step 4: Transition and Comparisons (Dual View)<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#5-5\" type=\"internal\" id=\"#5-5\">Step 5: Governance of the MPMs<\/a><\/strong><\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong><a href=\"#6\" type=\"internal\" id=\"#6\">Financial and Analytical Consolidation<\/a><\/strong>\n<ul class=\"wp-block-list\">\n<li><strong><a href=\"#6-1\" type=\"internal\" id=\"#6-1\">6.1 Financial Consolidation: Avoiding Excessive Manual Processes<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#6-2\" type=\"internal\" id=\"#6-2\">6.2. Financial Consolidation: Avoiding Excessive Manual Processes<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#6-3\" type=\"internal\" id=\"#6-3\">6.3. Budgeting and Analytics: IFRS 18 as a Common Language<\/a><\/strong><\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong><a href=\"#7\" type=\"internal\" id=\"#7\">Conclusion: IFRS 18 as an Opportunity to Improve Financial Reporting<\/a><\/strong><\/li>\n\n\n\n<li><strong><a href=\"#8\" type=\"internal\" id=\"#8\">Frequently Asked Questions About IFRS 18<\/a><\/strong><\/li>\n<\/ol>\n\n<p class=\"wp-block-paragraph\"><strong>IFRS 18<\/strong> ( <em>International Financial Reporting Standards<\/em>, also known as <strong>NIIF<\/strong> in Spanish) is the most significant update to IFRS presentation in decades. It does not change the <strong>recognition or measurement of items<\/strong> (that remains in <strong>IFRS 9, IFRS 15, IAS 12<\/strong>, etc.), but it does significantly change <strong>how revenue is structured and disclosed in the financial statements<\/strong>. <\/p>\n\n<p class=\"wp-block-paragraph\">In practice:<\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>It will restructure the income statement.<\/strong><\/li>\n\n\n\n<li><strong>It will standardize key subtotals<\/strong>, including a <strong>mandatory \u201coperating profit or loss.\u201d<\/strong><\/li>\n\n\n\n<li>It will incorporate many <strong>\u201cnon-GAAP\u201d<\/strong> metrics into the <strong>audited financial statements<\/strong> \u2014metrics that currently tend to appear only in presentations or management reports.<\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">The standard was issued in <strong>April 2024<\/strong> and <strong>replaces IAS 1<\/strong>. Below you will find a <strong>practical guide<\/strong>, designed for financial professionals, to help you understand the changes and prepare your <strong>reporting<\/strong>, <strong>consolidation<\/strong>, <strong>budgeting<\/strong>, and <strong>internal analytics<\/strong>. <\/p>\n\n<h2 class=\"wp-block-heading\" id=\"1\"><strong>1. What are the changes, and why are they being made?<\/strong><\/h2>\n\n<h3 class=\"wp-block-heading\" id=\"1-1\"><strong>1.1 A More Structured and Comparable P&amp;L<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">One of the most noticeable changes is the new classification of revenue and expenses. <strong>IFRS 18<\/strong> requires that the <strong>income statement (P&amp;L)<\/strong> be organized into <strong>five categories<\/strong>:<\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>Operating<\/strong><\/li>\n\n\n\n<li><strong>Investing<\/strong><\/li>\n\n\n\n<li><strong>Financing<\/strong><\/li>\n\n\n\n<li><strong>Income Taxes<\/strong><\/li>\n\n\n\n<li><strong>Discontinued operations<\/strong><\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">The <strong>first three are <\/strong>the most relevant for analyzing business performance. The <strong>\u201coperating\u201d<\/strong> category covers the performance of the core business, while <strong>\u201cinvesting\u201d<\/strong> includes returns on non-operating investments, and <strong>\u201cfinancing\u201d<\/strong> reflects the costs or revenues arising from financing. In practice, this creates a more consistent structure across companies.  <\/p>\n\n<p class=\"wp-block-paragraph\">The goal is to address a problem highlighted by <strong>investors and analysts<\/strong>: under <strong>IAS 1<\/strong>, two companies with similar businesses could report <strong>very different income statements<\/strong>, making comparisons difficult.<\/p>\n\n<p class=\"wp-block-paragraph\"><strong>IFRS 18<\/strong> will make it easier to understand:<\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>What is &#8220;Operation&#8221; really?<\/strong><\/li>\n\n\n\n<li><strong>What are returns on non-operating investments?<\/strong><\/li>\n\n\n\n<li><strong>what relates to the cost or return on financing<\/strong><\/li>\n<\/ul>\n\n<h3 class=\"wp-block-heading\" id=\"1-2\"><strong>1.2 New Required Subtotals<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\"><strong>IFRS 18<\/strong> requires the presentation of at least <strong>two new subtotals<\/strong> in the income statement:<\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>Operating Profit or Loss<\/strong><\/li>\n\n\n\n<li><strong>Profit or loss before financing and income tax<\/strong><strong><br\/><\/strong><em>(operating + investing)<\/em><\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\"><strong>Operating profit<\/strong> becomes the <strong>primary benchmark<\/strong>.<\/p>\n\n<p class=\"wp-block-paragraph\">Many companies today report metrics such as <strong>\u201coperating result\u201d<\/strong> or <strong>\u201cadjusted EBIT.\u201d<\/strong> IFRS 18 does not prohibit alternative metrics, but it requires that <strong>they be clearly defined and reconciled<\/strong>. <\/p>\n\n<h3 class=\"wp-block-heading\" id=\"1-3\"><strong>1.3 Main business activities: The standard recognizes that not all companies operate in the same way<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\"><strong>IFRS 18<\/strong> recognizes that <strong>not all business models operate in the same way<\/strong>.<\/p>\n\n<p class=\"wp-block-paragraph\">It establishes specific rules for entities whose primary business includes:<\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>investing in assets as a core business activity<\/strong><\/li>\n\n\n\n<li><strong>provide financing to customers<\/strong><\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">In such cases, certain items that other companies would classify as <strong>\u201cinvesting\u201d or \u201cfinancing<\/strong> \u201d may be classified as <strong>\u201coperating<\/strong>.\u201d<\/p>\n\n<p class=\"wp-block-paragraph\">This prevents, for example, <strong>a bank or an insurance company<\/strong> from <strong>appearing to have operating losses<\/strong> solely due to accounting classification issues.<\/p>\n\n<h3 class=\"wp-block-heading\" id=\"1-4\"><strong>1.4 Greater Disaggregation and Discipline in the Presentation<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">The standard aims to avoid <strong>\u201ccatch-all categories\u201d<\/strong> in the <strong>P&amp;L<\/strong>.<\/p>\n\n<p class=\"wp-block-paragraph\">This means:<\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>provide a more detailed breakdown<\/strong> when the line items are materials<\/li>\n\n\n\n<li><strong>Greater consistency<\/strong> between the lines of the financial statements and the notes<\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">In operational terms, this means:<\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>more extensive account mapping work<\/strong><\/li>\n\n\n\n<li>greater need for <strong>tagging or attributes in ERP or EPM tools<\/strong><\/li>\n\n\n\n<li>greater control over <strong>what is presented as a line and what is presented as a note<\/strong><\/li>\n<\/ul>\n\n<h3 class=\"wp-block-heading\" id=\"1-5\"><strong>1.5 MPMs: Management Metrics Within the Audited Scope<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\"><strong>IFRS 18<\/strong> introduces the concept of <strong>management-defined performance measures (MPMs)<\/strong>.<\/p>\n\n<p class=\"wp-block-paragraph\">These are <strong>subtotals defined by management<\/strong> that reflect how the business is managed.<\/p>\n\n<p class=\"wp-block-paragraph\">When a company uses <strong>MPMs<\/strong>, it must disclose:<\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>definition<\/strong><\/li>\n\n\n\n<li><strong>which is why they are useful<\/strong><\/li>\n\n\n\n<li><strong>Reconciliation to the comparable IFRS subtotal<\/strong><\/li>\n\n\n\n<li><strong>tax and minority interest effects<\/strong> when applicable<\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">Typical examples:<\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>Adjusted EBITDA<\/strong><\/li>\n\n\n\n<li><strong>normalized profit<\/strong><\/li>\n\n\n\n<li><strong>recurring result<\/strong><\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">Many metrics that currently appear in <strong>presentations or management reports<\/strong> will be included <strong>in the audited financial statements<\/strong>.<\/p>\n\n<h3 class=\"wp-block-heading\" id=\"1-6\"><strong>1.6 Related Changes to IAS 7 (Cash Flow)<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">The <strong>IASB<\/strong> also made amendments to <strong>IAS 7<\/strong>:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>The <strong>indirect method<\/strong> is now based on <strong>operating profit or loss<\/strong><\/li>\n\n\n\n<li>The <strong>flexibility in the classification of interest and dividends<\/strong> is reduced<\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">This affects consistency between:<\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>P&amp;L<\/strong><\/li>\n\n\n\n<li><strong>cash conversion<\/strong><\/li>\n\n\n\n<li><strong>Group reporting<\/strong><\/li>\n<\/ul>\n\n<h2 class=\"wp-block-heading\" id=\"2\"><strong>2. Who will be affected by IFRS 18?<\/strong><\/h2>\n\n<p class=\"wp-block-paragraph\">In practice, this <strong>applies to almost all companies that report under IFRS<\/strong>.<br\/>However, the impact will vary.<\/p>\n\n<h3 class=\"wp-block-heading\"><strong>High impact (almost certain)<\/strong><\/h3>\n\n<ul class=\"wp-block-list\">\n<li>Groups with <strong>multiple lines of business<\/strong> or mixed business models <em>(manufacturing + services + financing)<\/em><\/li>\n\n\n\n<li>Groups with significant <strong>\u201cother income\/expenses<\/strong>, <strong>\u201d<\/strong> restructuring, impairment, litigation, etc.<\/li>\n\n\n\n<li>Companies that make extensive use of <strong>APMs and non-GAAP<\/strong> metrics in their communications with the market<\/li>\n\n\n\n<li>Groups with <strong>complex consolidation<\/strong>, many subsidiaries, and <strong>rigid reporting packages<\/strong><\/li>\n<\/ul>\n\n<h3 class=\"wp-block-heading\"><strong>Special impact due to \u201cmain business activities\u201d<\/strong><\/h3>\n\n<ul class=\"wp-block-list\">\n<li><strong>Banking<\/strong><\/li>\n\n\n\n<li><strong>insurance<\/strong><\/li>\n\n\n\n<li><strong>leasing<\/strong><\/li>\n\n\n\n<li><strong>consumer credit<\/strong><\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">Here, the classification <strong>into operating, investing, and financing<\/strong> categories can vary significantly depending on the model.<\/p>\n\n<h3 class=\"wp-block-heading\"><strong>Moderate impact<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">Companies with <strong>simple structures<\/strong>, with <strong>P&amp;L statements that are already very \u201cclean<\/strong>, <strong>\u201d<\/strong> few alternative metrics, and little consolidation complexity.<\/p>\n\n<p class=\"wp-block-paragraph\">Even so, almost all of them will have to review:<\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>P&amp;L presentation<\/strong><\/li>\n\n\n\n<li><strong>disclosures<\/strong><\/li>\n\n\n\n<li><strong>comparisons<\/strong><\/li>\n\n\n\n<li><strong>cash flow<\/strong> (if using the indirect method)<\/li>\n<\/ul>\n\n<h2 class=\"wp-block-heading\" id=\"3\"><strong>3. When Does IFRS 18 Take Effect and How Does the Transition Work?<\/strong><\/h2>\n\n<h3 class=\"wp-block-heading\"><strong>Effective Date<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\"><strong>IFRS 18 will be mandatory<\/strong> for annual periods beginning <strong>on or after January 1, 2027<\/strong>, although early adoption is permitted.<\/p>\n\n<h3 class=\"wp-block-heading\"><strong>Required Comparisons<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">The adoption of <strong>IFRS 18 is retroactive<\/strong>. This means that when a company reports <strong>its 2027 financial statements<\/strong> under IFRS 18, it must present <strong>comparative figures for 2026 restated<\/strong> in accordance with the new format. <\/p>\n\n<h3 class=\"wp-block-heading\"><strong>Interim Reporting<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">Companies that report <strong>interim financial information (IAS 34)<\/strong> must begin preparing comparative figures earlier.<\/p>\n\n<p class=\"wp-block-paragraph\">In practice, many organizations will begin implementing <strong>IFRS 18 in 2026<\/strong> to properly prepare for the transition.<\/p>\n\n<h2 class=\"wp-block-heading\" id=\"4\"><strong>4. How IFRS 18 Will Affect Financial Reporting<\/strong><\/h2>\n\n<h3 class=\"wp-block-heading\" id=\"4-1\"><strong>4.1 Restructuring the Income Statement (P&amp;L)<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">You will need:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Define classification rules: <strong>operating vs. investing vs. financing<\/strong><\/li>\n\n\n\n<li><strong>Remap general ledger accounts \/ subaccounts \/ nature vs. function<\/strong><\/li>\n\n\n\n<li>Align the <strong>text by lines with the notes<\/strong><\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">The <strong>\u201coperating\u201d<\/strong> category often functions as <strong>a \u201cresidual\u201d<\/strong> category, with detailed rules.<\/p>\n\n<p class=\"wp-block-paragraph\">Typical effect:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Certain results that were previously classified under <strong>\u201cOther\u201d<\/strong> may need to be reclassified under <strong>\u201cOperating\u201d<\/strong><\/li>\n\n\n\n<li>Certain returns on specific investments may be reported on <strong>Investing<\/strong><\/li>\n<\/ul>\n\n<h3 class=\"wp-block-heading\" id=\"4-2\"><strong>4.2 Operating Profit as a Key Performance Indicator (KPI)<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">Although <strong>IFRS 18<\/strong> does not change the business itself, it does modify the <strong>official framework for reporting performance<\/strong>.<\/p>\n\n<p class=\"wp-block-paragraph\">This may affect:<\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>financial reporting<\/strong><\/li>\n\n\n\n<li><strong>guidance<\/strong><\/li>\n\n\n\n<li>Metrics Used in <strong>Covenants<\/strong><\/li>\n\n\n\n<li><strong>incentive systems<\/strong> linked to financial KPIs<\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">The challenge isn&#8217;t just an accounting one; it also involves <strong>financial storytelling and internal governance<\/strong>.<\/p>\n\n<h3 class=\"wp-block-heading\" id=\"4-3\"><strong>4.3 MPM Management: More Control, More Evidence, More Reconciliation<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">Companies must:<\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>Identify alternative metrics<\/strong><\/li>\n\n\n\n<li>define which ones <strong>qualify as MPM<\/strong><\/li>\n\n\n\n<li>Create <strong>clean and reproducible reconciliations<\/strong><\/li>\n\n\n\n<li>justify its use to <strong>the auditor and the audit committee<\/strong><\/li>\n<\/ul>\n\n<h3 class=\"wp-block-heading\" id=\"4-4\"><strong>4.4 Cash Flows (IAS 7): Changes in the Presentation and Classification<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">Two main effects:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>In <strong>the indirect method<\/strong>, the starting point becomes <strong>operating profit or loss<\/strong><\/li>\n\n\n\n<li><strong>Interest and dividends<\/strong> will have fewer classification options<\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">This improves <strong>comparability<\/strong>, but it can also lead to <strong>changes in historical data series<\/strong>.<\/p>\n\n<h3 class=\"wp-block-heading\" id=\"4-5\"><strong>4.5 Group Reporting: Consolidation Packages and Tools<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">In consolidation, <strong>IFRS 18<\/strong> typically involves:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>new <strong>fields or attributes per account<\/strong><\/li>\n\n\n\n<li>Adjustment to the <strong>Group Chart of Accounts<\/strong><\/li>\n\n\n\n<li>Redesign of <strong>Corporate P&amp;L Reports<\/strong><\/li>\n\n\n\n<li>Updates to <strong>disclosure management (XBRL \/ iXBRL)<\/strong> where applicable<\/li>\n<\/ul>\n\n<h2 class=\"wp-block-heading\" id=\"5\"><strong>5. How to Prepare for the Implementation of IFRS 18<\/strong><\/h2>\n\n<p class=\"wp-block-paragraph\">This preparation should be approached as <strong>a project to transform reporting<\/strong>, not as a simple change to the format.<\/p>\n\n<h3 class=\"wp-block-heading\" id=\"5-1\"><strong>Step 1: Impact Assessment (2\u20136 weeks)<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">It is recommended that an <strong>initial assessment<\/strong> be conducted to identify the differences between the current situation and the requirements of IFRS 18.<\/p>\n\n<p class=\"wp-block-paragraph\"><strong>Inspection Checklist:<\/strong><\/p>\n\n<ul class=\"wp-block-list\">\n<li>What <strong>P&amp;L<\/strong> format is currently used (by nature or function, subtotals, \u201cother\u201d line items)?<\/li>\n\n\n\n<li>What <strong>APMs<\/strong> are currently being communicated (presentations, press releases, corporate website, quarterly results)?<\/li>\n\n\n\n<li>Are there any <strong>lines of business with high volatility<\/strong> (impairment, restructurings, exchange rate effects, litigation)?<\/li>\n\n\n\n<li>Does the <strong>ERP or the consolidation and reporting tool<\/strong> allow you to manage attributes by account (tagging) without complex custom development?<\/li>\n\n\n\n<li>Is <strong>interim financial information<\/strong> published?<br\/><\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\"><strong>Minimum deliverables for the assessment:<\/strong><\/p>\n\n<ul class=\"wp-block-list\">\n<li>List of <strong>gaps or differences in the P&amp;L<\/strong> compared to IFRS 18.<\/li>\n\n\n\n<li>Inventory of <strong>MPMs<\/strong> and preliminary assessment of their potential classification as such.<\/li>\n\n\n\n<li><strong>Impact map (\u201cheat map\u201d) by subsidiaries or business units.<\/strong><\/li>\n<\/ul>\n\n<h3 class=\"wp-block-heading\" id=\"5-2\"><strong>Step 2: Design of the IFRS 18 model (policy + data model)<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">In this phase, the following are defined:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>The <strong>rules for classifying items by category<\/strong> (operating, investing, financing, etc.), including examples.<\/li>\n\n\n\n<li>The group&#8217;s <strong>subtotals and header rows<\/strong>.<\/li>\n\n\n\n<li>The <strong>structure of the notes<\/strong>, including the note regarding <strong>MPMs<\/strong>.<\/li>\n\n\n\n<li>The handling of cases related to <strong>\u201cmain business activities<\/strong>, <strong>\u201d<\/strong> when applicable.<br\/><\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">It is recommended that <strong>all decisions be documented as internal IFRS policies<\/strong> in order to ensure consistency among subsidiaries and facilitate the audit process.<\/p>\n\n<h3 class=\"wp-block-heading\" id=\"5-3\"><strong>Step 3: Changes to Systems and Reporting Packages<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">This phase typically involves:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Update the <strong>chart of accounts<\/strong> or its <strong>mapping to the consolidation<\/strong>.<\/li>\n\n\n\n<li>Incorporate <strong>IFRS 18 attributes<\/strong> (operating, investing, financing, etc.).<\/li>\n\n\n\n<li>Modify the <strong>reporting templates used by the subsidiaries<\/strong>.<br\/><\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">In cases where it is not possible to modify the ERP system, it is recommended to ensure that the <strong>consolidation tool<\/strong> allows <strong>for<\/strong>:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Classify accounts using <strong>additional attributes or dimensions<\/strong>.<\/li>\n\n\n\n<li>Automatically generate the <strong>income statement in accordance with IFRS 18<\/strong>.<\/li>\n\n\n\n<li>Perform the <strong>necessary reconciliations during the transition period<\/strong>.<\/li>\n<\/ul>\n\n<h3 class=\"wp-block-heading\" id=\"5-4\"><strong>Step 4: Transition and Comparisons (Dual View)<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">Since IFRS 18 requires <strong>restated comparative figures<\/strong>, the 2026 fiscal year must be presented in two formats:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Presentation in accordance with <strong>IAS 1 (previous format)<\/strong>.<\/li>\n\n\n\n<li>Presentation in accordance with <strong>IFRS 18<\/strong>.<\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">This situation can be resolved by using <strong>two mappings or two chart-of-accounts hierarchies<\/strong>.<\/p>\n\n<p class=\"wp-block-paragraph\">During the transition year, it will be necessary to prepare <strong>reconciliations between the old and new formats<\/strong>, ensuring traceability between the two versions.<\/p>\n\n<h3 class=\"wp-block-heading\" id=\"5-5\"><strong>Step 5: Governance of the MPMs<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">It is recommended that a <strong>governance framework<\/strong> be established <strong>for Management-defined Performance Measures (MPMs)<\/strong> that includes:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Identify the <strong>person responsible for each metric<\/strong> (Finance, FP&amp;A, Investor Relations).<\/li>\n\n\n\n<li><strong>Formal definition<\/strong> of each indicator.<\/li>\n\n\n\n<li><strong>Standardized<\/strong> and documented <strong>calculation<\/strong>.<\/li>\n\n\n\n<li>Procedures for managing <strong>changes to the definition<\/strong>, including restating comparative figures when necessary.<\/li>\n\n\n\n<li><strong>Quality and consistency<\/strong> checks in their calculation and presentation.<\/li>\n<\/ul>\n\n<h2 class=\"wp-block-heading\" id=\"6\"><strong>6. Financial and Analytical Consolidation<\/strong><\/h2>\n\n<h3 class=\"wp-block-heading\" id=\"6-1\"><strong>6.1 Financial Consolidation: Avoiding Excessive Manual Processes<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">An effective approach is to structure the implementation project into different <strong>workstreams<\/strong>, each focused on a specific area.<\/p>\n\n<p class=\"wp-block-paragraph\"><strong>Workstream A: IFRS 18 Policy and Design<\/strong><\/p>\n\n<ul class=\"wp-block-list\">\n<li>Definition of the <strong>classification rules<\/strong>.<\/li>\n\n\n\n<li>Design of <strong>the target P&amp;L<\/strong> in accordance with the standard.<\/li>\n\n\n\n<li>Creating <strong>templates for the MPM report<\/strong>.<br\/><\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\"><strong>Workstream B: Data and Systems<\/strong><\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>Mapping of accounts<\/strong> to IFRS 18 categories.<\/li>\n\n\n\n<li>Adjustments to the <strong>financial consolidation<\/strong> processes.<\/li>\n\n\n\n<li><strong>Automation of reconciliations<\/strong>.<br\/><\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\"><strong>Workstream C: Closing Process<\/strong><\/p>\n\n<ul class=\"wp-block-list\">\n<li>Impact Assessment on <strong>Fast-Close<\/strong> Processes.<\/li>\n\n\n\n<li>Definition of <strong>controls, audit evidence, and audit procedures<\/strong>.<\/li>\n\n\n\n<li><strong>Training of financial teams<\/strong>, both at the corporate level and at subsidiaries.<br\/><\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\"><strong>Workstream D: External Communication<\/strong><\/p>\n\n<ul class=\"wp-block-list\">\n<li>Analysis of how <strong>KPIs and time series<\/strong> change.<\/li>\n\n\n\n<li>Alignment with <strong>financial guidance and communication with stakeholders<\/strong>.<br\/><\/li>\n<\/ul>\n\n<h3 class=\"wp-block-heading\" id=\"6-2\"><strong>6.2. Financial Consolidation: Avoiding Excessive Manual Processes<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">To prevent the implementation from resulting in complex manual processes, it is recommended to adopt certain operational practices.<\/p>\n\n<p class=\"wp-block-paragraph\"><strong>Key Recommendations:<\/strong><\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>Tagging at the source (whenever possible): It is <\/strong>recommended that each account or subaccount enter the consolidation process with <strong>defined IFRS 18 attributes<\/strong>, such as category, nature, or function.<\/li>\n\n\n\n<li><strong>Centralized classification rules: It is<\/strong>advisable to establish <strong>common criteria for the entire group<\/strong>, thereby preventing each subsidiary from applying different interpretations when classifying categories.<\/li>\n\n\n\n<li><strong>Automatic controls:<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>Category<\/strong> validations <strong>based on account type<\/strong>.<\/li>\n\n\n\n<li>Warnings about the <strong>excessive use of residual lines<\/strong>.<\/li>\n\n\n\n<li><strong>Reconciliation<\/strong> checks <strong>of MPMs<\/strong> with the corresponding IFRS subtotal.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Restated comparative figures: It is <\/strong>recommended to prepare, at least starting in 2026, a <strong>parallel presentation of the financial statements<\/strong> so that the transition to IFRS 18 in 2027 does not become an abrupt process.<\/li>\n<\/ul>\n\n<h3 class=\"wp-block-heading\" id=\"6-3\"><strong>6.3. Budgeting and Analytics: IFRS 18 as a Common Language<\/strong><\/h3>\n\n<p class=\"wp-block-paragraph\">The adoption of IFRS 18 also has implications for <strong>financial planning and analysis<\/strong> processes.<\/p>\n\n<p class=\"wp-block-paragraph\"><strong>Best Practices:<\/strong><\/p>\n\n<ul class=\"wp-block-list\">\n<li>Prepare the <strong>budget<\/strong> using the same <strong>data model that will be used for financial reporting<\/strong>, to ensure consistency between actual results and forecasts.<br\/><\/li>\n\n\n\n<li>Document the <strong>adjustments defined by management<\/strong>, including clear definitions and rules, especially when such metrics may be communicated externally and classified as <strong>MPMs<\/strong>.<\/li>\n<\/ul>\n\n<h2 class=\"wp-block-heading\" id=\"7\"><strong>Conclusion: IFRS 18 as an Opportunity to Improve Financial Reporting<\/strong><\/h2>\n\n<p class=\"wp-block-paragraph\">The implementation of <strong>Enterprise Performance Management (EPM) platforms<\/strong> can significantly facilitate compliance with <strong>IFRS 18<\/strong>, as it allows for <strong>the structuring and automation of processes<\/strong> that are otherwise typically managed manually.<\/p>\n\n<p class=\"wp-block-paragraph\">These tools allow you to:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Classify line items into <strong>operating, investing, and financing<\/strong> categories<\/li>\n\n\n\n<li>Generate <strong>required P&amp;L subtotals<\/strong><\/li>\n\n\n\n<li>Maintain <strong>traceability in comparative re-expressions<\/strong><\/li>\n\n\n\n<li>Automate <strong>MPM reconciliations<\/strong><\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">In organizations that already have an <strong>EPM platform<\/strong>, the adaptation is typically <strong>evolutionary<\/strong>, involving the expansion of the data model and adjustments <strong>to the chart of accounts mapping<\/strong>. Additional recommendation: Beyond simply adapting to the new regulations, these revisions to the P&amp;L line items can be an excellent opportunity to update the management P&amp;L metrics. <\/p>\n\n<p class=\"wp-block-paragraph\">For new implementations, there is the advantage of designing an <strong>\u201cIFRS 18-ready\u201d<\/strong> model <strong>from the outset<\/strong>, integrating reporting categories, closing processes, and a governed catalog of <strong>MPMs<\/strong>.<\/p>\n\n<p class=\"wp-block-paragraph\">At <strong>Nova<\/strong>, we have experience in the <strong>comprehensive implementation of EPM platforms<\/strong> and collaborate with the leading software providers in the market. Our team is available to analyze the <strong>impact of IFRS 18 on financial reporting and consolidation<\/strong>, assess the organization\u2019s level of readiness, and define an <strong>appropriate implementation plan<\/strong>. <\/p>\n\n<h2 class=\"wp-block-heading\" id=\"8\"><strong>Frequently Asked Questions About IFRS 18<\/strong><\/h2>\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1773763805984\"><strong class=\"schema-faq-question\"><strong>What is IFRS 18?<\/strong><\/strong> <p class=\"schema-faq-answer\">It is an international standard that redefines the presentation of the income statement and information related to companies&#8217; financial performance.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1773763821990\"><strong class=\"schema-faq-question\"><strong>What has changed compared to IAS 1?<\/strong><\/strong> <p class=\"schema-faq-answer\">IFRS 18 introduces a more clearly defined structure for the income statement, new mandatory subtotals, and rules for presenting management-defined performance metrics.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1773763838170\"><strong class=\"schema-faq-question\"><strong>When does IFRS 18 take effect?<\/strong><\/strong> <p class=\"schema-faq-answer\">The standard is mandatory for fiscal years beginning on or after <strong>January 1, 2027<\/strong>, with the option of early adoption.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1773763861939\"><strong class=\"schema-faq-question\"><strong>Which companies are affected by IFRS 18?<\/strong><\/strong> <p class=\"schema-faq-answer\">All companies that report under IFRS, although the impact will be greater for organizations with complex financial reporting.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1773763888697\"><strong class=\"schema-faq-question\"><strong>What Are Management Performance Measures?<\/strong><\/strong> <p class=\"schema-faq-answer\">These are performance metrics defined by management that explain how the business is managed and must now be included in the financial statements with clear reconciliations.<br\/><\/p> <\/div> <\/div>\n","protected":false},"excerpt":{"rendered":"<p>Table of Contents IFRS 18 ( International Financial Reporting Standards, also known as NIIF in Spanish) is the most significant update to IFRS presentation in decades. It does not change the recognition or measurement of items (that remains in IFRS &#8230; <a title=\"IFRS 18: What&#8217;s Changing, Who It Affects, and How to Prepare for the New Reporting Requirements\" class=\"read-more\" href=\"https:\/\/nova-praxis.com\/en\/ifrs-18-whats-changing-who-it-affects-and-how-to-prepare-for-the-new-reporting-requirements\/\" aria-label=\"Read more about IFRS 18: What&#8217;s Changing, Who It Affects, and How to Prepare for the New Reporting Requirements\">Read more<\/a><\/p>\n","protected":false},"author":6,"featured_media":15893,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[45],"tags":[],"class_list":["post-17631","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analytics-reporting-ai"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.1 - 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