IFRS 18 Reshapes the Income Statement: What Finance Teams Need to Know
IFRS 18 Presentation and Disclosure in Financial Statements is the new accounting standard issued by the IASB in April 2024, replacing IAS 1. It becomes mandatory for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted.
Because IFRS 18 is applied retrospectively, companies will need IFRS 18-compatible comparative information when they report under the new standard. In practice, this makes the 2026 reporting cycle a transition period, not just a preparation year. The European Securities and Markets Authority (ESMA) has also pushed issuers to communicate expected impacts transparently before adoption.
This article walks through recent IASB and IFRS Interpretations Committee developments, the standard's core changes, and concrete examples of how Nordic listed companies are already describing the expected effects on their own numbers.
Recent decisions and meeting outcomes
The standard itself has been issued, but practical interpretation continues to develop.
In April 2026, the IASB ratified four IFRS 18-related agenda decisions. These cover topics such as foreign exchange differences on intragroup monetary items, specified main business activities in a parent's separate financial statements, the scope of the expense-by-nature disclosure requirement, and gains or losses on derivatives used to manage foreign currency exposure.
In June 2026, the IFRS Interpretations Committee also published several tentative IFRS 18 agenda decisions, open for comment until 9 September 2026. These cover management-defined performance measures, public communications, income and expenses from cash and cash equivalents, specified liabilities for entities providing financing to customers, subtotal labelling and the presentation of operating expenses.
On 17 February 2026, ESMA published a public statement, “Reshaping performance: Implementation of IFRS 18,” calling on issuers, boards, audit committees and auditors to ensure a high-quality, consistent transition. ESMA expects issuers to disclose anticipated IFRS 18 effects as soon as the information becomes available. If an issuer completes its assessment in the first half of 2026, the relevant information should already be included in the interim financial statements for the period ending 30 June 2026.
The direction is clear: IFRS 18 implementation is not only about changing the layout of the income statement. It requires documented judgements about classification, labelling, subtotals, public performance measures and links between the primary statements and the notes.
What IFRS 18 actually changes
The standard introduces three groups of changes that affect every IFRS preparer, regardless of industry:
A new income statement structure: income and expenses are classified into five categories, including three main performance categories: operating, investing and financing, alongside income taxes and discontinued operations. Two new mandatory subtotals are introduced: operating profit or loss, and profit or loss before financing and income taxes.
Management-defined performance measures (MPMs): some non-IFRS subtotals used in public communications outside the financial statements may meet IFRS 18's definition of a management-defined performance measure. These MPMs must be disclosed in a single note, including how the measure is calculated, why it provides useful information, and a reconciliation to the most directly comparable IFRS-defined total or subtotal, including tax and non-controlling interest effects for reconciling items.
Aggregation, disaggregation and labelling: expenses and other items must be grouped and labelled in ways that improve comparability and avoid obscuring material information. Companies presenting operating expenses by function will need to provide additional by-nature expense information in a single note, including depreciation, amortisation, employee benefits, impairment losses and inventory write-downs, together with qualitative descriptions of the nature of expenses included in function line items.
IFRS 18 does not generally change recognition or measurement of profit. It changes how financial performance is structured, presented and disclosed. It also introduces consequential presentation changes to areas such as the statement of cash flows.
For most companies, the impact will be primarily presentation and disclosure. But for companies with equity-accounted associates and joint ventures, material cash-related returns, financing structures, foreign exchange differences or management-defined performance measures, key subtotals such as operating profit and profit or loss before financing and income taxes may change even though profit for the period remains unchanged.
Why this matters for users: because IFRS 18 does not require every subtotal label to list all included or excluded items, users may still need to connect subtotals with the related note disclosures, reconciliations and accounting policies to understand a measure fully.
Impact on company numbers: real data examples
Several Nordic listed companies, both Swedish and Finnish, have already described in their financial statements and interim reports how IFRS 18 will change their reporting. The table below summarizes disclosures across industries and markets:
| Company | Market | What the company says about the expected IFRS 18 impact |
|---|---|---|
| Wärtsilä | Finland | Its share of profit from joint ventures and associates (€17 million in 2025) moves from the operating category to the investing category. This directly affects reported operating profit. Wärtsilä has also disclosed that certain foreign exchange differences and income or expenses related to cash and cash equivalents will move from financing to investing, but the quantified split has not yet been published. |
| Fingerprint Cards | Sweden | Income and expenses will be split across five income statement categories, including the three main performance categories of operating, investing and financing, alongside income taxes and discontinued operations. A new mandatory operating profit subtotal is introduced. |
| Hacksaw | Sweden | Confirms the income statement will gain three new categories and two new defined subtotals, “Operating profit” and “Profit before financing and income taxes,” alongside expanded guidance on aggregation and labelling of line items. |
| Ferronordic | Sweden | Notes that IFRS 18 introduces new requirements for classifying income and expenses into defined categories and disclosing management-defined performance measures. The Group says it is currently evaluating the impact. |
| Enea | Sweden | Describes IFRS 18 as aimed at improving comparability of performance reporting between entities and providing more relevant, transparent information once adopted by the EU. |
| Tokmanni | Finland | Some of the company's existing alternative performance measures may fall within the scope of IFRS 18's management-defined performance measure requirements, requiring formal disclosures and reconciliations to the most directly comparable IFRS-defined total or subtotal going forward. |
| Nordea | Finland / Nordic | Currently assessing how to classify income statement items into the new IFRS 18 categories. Banks require separate analysis because IFRS 18 includes specific rules for entities that provide financing to customers and/or invest in financial assets as a main business activity. |
| Kamux | Finland | Preliminary assessment indicates IFRS 18 will primarily affect presentation and disclosures, with no material impact expected on the company's financial result or position. |
A concrete example: Wärtsilä
Wärtsilä is one of the few companies to have already quantified the direction of a specific reclassification. In its Q1 2026 interim report, the company states that its share of profit from joint ventures and associates will move from the operating category to the investing category. It also states that foreign exchange differences and income or expenses related to cash and cash equivalents will move from financing to investing.
To make the impact concrete, the first table below shows Wärtsilä's actual FY2025 consolidated income statement as published. The second table is Clarifo's illustrative partial IFRS 18 reclassification. It is built line by line from Wärtsilä's published FY2025 income statement and reflects only the quantified reclassification direction that can be illustrated from the disclosed line items: the associates and joint ventures line moving out of operating profit and into the investing category.
As published today, under IAS 1
| FY2025 | €m |
|---|---|
| Net sales | 6,914 |
| Other operating income | 118 |
| Materials and services | −3,689 |
| Employee benefit expenses | −1,620 |
| Result from net position hedges | −14 |
| Depreciation and impairment | −211 |
| Other operating expenses | −681 |
| Share of result of associates and joint ventures | 17 |
| Operating result 12.1% of net sales | 833 |
| Finance income | 67 |
| Finance costs | −72 |
| Profit before taxes | 828 |
| Income tax | −198 |
| Profit for the period | 630 |
| Attributable to owners of the parent | 626 |
| Attributable to non-controlling interests | 4 |
| EPS, basic and diluted (€) | 1.06 |
Illustrative partial IFRS 18 reclassification*
| FY2025 | €m |
|---|---|
| OPERATING CATEGORY | |
| Net sales | 6,914 |
| Other operating income | 118 |
| Materials and services | −3,689 |
| Employee benefit expenses | −1,620 |
| Result from net position hedges | −14 |
| Depreciation and impairment | −211 |
| Other operating expenses | −681 |
| Operating profit new IFRS 18 subtotal, about 11.8% of net sales | about 816–817 |
| INVESTING CATEGORY | |
| Share of result of associates and joint ventures | 17 |
| Profit before financing and income taxes new IFRS 18 subtotal | ~834 |
| FINANCING / NOT FURTHER ALLOCATED IN THIS ILLUSTRATION | |
| Finance income† | 67 |
| Finance costs† | −72 |
| Profit before taxes unchanged apart from rounding | 828 |
| Income tax unaffected by this reclassification | −198 |
| Profit for the period unchanged | 630 |
| Attributable to owners of the parent | 626 |
| Attributable to non-controlling interests | 4 |
| EPS, basic and diluted (€) | 1.06 |
*Illustrative partial IFRS 18 reclassification by Clarifo, built line by line from the consolidated income statement in Wärtsilä Oyj Abp's FY2025 annual report, combined with the reclassification direction disclosed in Wärtsilä's Q1 2026 interim report. Wärtsilä has not itself published a restated FY2025 income statement. The table illustrates only the quantified associates and joint ventures reclassification; it is not a full IFRS 18 restatement. Depending on whether the subtotal is derived from the published operating result less the associates/JV line or from the published rounded line items, illustrative operating profit is approximately €816–817 million.
†Wärtsilä has also disclosed that foreign exchange differences and income or expenses related to cash and cash equivalents will move from the financing category to the investing category. In addition, foreign exchange differences from external derivatives will be presented in the operating category, whereas the financing-related portion is currently included in financial items and the rest in operating result. Wärtsilä has not yet published how much of the €67 million finance income or €72 million finance costs those components represent, so the table does not estimate that split. IFRS 18 reclassification does not change profit before tax or profit for the period. Any small arithmetic differences in subtotal build-up are due to rounding in the published line items.
The same pattern shows up in the first quarter of 2026. Wärtsilä's reported €194 million operating result for the quarter included a €7 million share of associates' and joint ventures' results; under IFRS 18, that operating result would have been roughly €187 million before considering any other IFRS 18 classification effects.
What this means for analysts and investors
Once operating profit becomes a mandatory IFRS subtotal, historical operating profit figures may no longer be directly comparable with IFRS 18 figures unless companies provide clear reconciliations or restated comparatives.
This matters especially for companies with equity-accounted associates and joint ventures, material cash-related returns, financing structures, foreign exchange differences or management-defined performance measures.
It matters even more for banks, insurers, asset managers and entities that provide financing to customers, because IFRS 18 contains specific rules for entities with specified main business activities. Their category structure may therefore differ materially from non-financial companies.
For analysts and investors, the practical challenge is not only to read the new subtotals. It is to connect each subtotal with the related note disclosures, reconciliations and accounting policies to understand the measure fully.
What finance teams should do now
Map current income statement line items into IFRS 18 categories. Pay particular attention to equity-accounted associates and joint ventures, foreign exchange differences, cash-related returns, interest income and financing structures.
Assess whether the entity has specified main business activities. Banks, insurers, asset managers, lessors and entities providing financing to customers may need separate analysis because some investing or financing-type income and expenses may be classified as operating.
Review APMs and public communications for MPMs. Not all APMs are MPMs, but some non-IFRS income and expense subtotals used in public communications will require note disclosure, reconciliation and governance under IFRS 18.
Update systems, chart of accounts and consolidation processes. IFRS 18 can require changes to data capture, close processes, controls, reporting packages and consolidation mappings.
Prepare by-nature expense disclosures. Companies presenting operating expenses by function should confirm that they can produce the required nature-based information and explain clearly what each function line item contains.
Document judgements and prepare audit evidence. Classification, aggregation, labelling, public communications and MPM identification all require supportable judgements that auditors and regulators can review.
Plan the transition and comparative reconciliation. IFRS 18 is applied retrospectively, so companies should prepare early for comparative information and the reconciliation between the IAS 1 and IFRS 18 presentation of the statement of profit or loss.
Summary
IFRS 18 does not generally change recognition or measurement of profit. It changes how financial performance is structured, presented and disclosed.
For most companies, the impact will be mainly presentation and disclosure. But for companies with equity-accounted associates and joint ventures, cash-related returns, financing items, foreign exchange differences or management-defined performance measures, key subtotals such as operating profit and profit or loss before financing and income taxes may change even though profit for the period remains unchanged.
Wärtsilä's disclosure illustrates the point. Moving the share of associates and joint ventures out of operating profit would reduce the illustrated operating margin by around 0.3 percentage points, while profit before tax and profit for the period remain unchanged apart from rounding.
That makes IFRS 18 more than a standard change. It is also a search, classification and interpretation problem: users need to connect subtotals with related notes, accounting policies, reconciliations and management commentary back to the source.
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Sources
IFRS Foundation, IFRS 18 Presentation and Disclosure in Financial Statements and related IASB / IFRS Interpretations Committee updates.
ESMA, Reshaping performance: Implementation of IFRS 18 Presentation and Disclosure in Financial Statements, 17 February 2026.
EY, Applying IFRS: A closer look at IFRS 18, updated April 2026.
EY UK, IFRS 18 Presentation and Disclosure in Financial Statements, June 2026.
IFRS Interpretations Committee, tentative agenda decisions, June 2026.
Wärtsilä Oyj Abp, FY2025 financial statements release and Q1 2026 interim report (Clarifo database).
Fingerprint Cards AB, Hacksaw AB, Ferronordic AB and Enea AB, 2025 financial statements (Clarifo database).
Tokmanni Group Oyj, Nordea Bank Abp and Kamux Oyj, 2025 financial statements (Clarifo database).