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IFRS 18: Key Changes and Implications for Singapore Companies Ahead of 2027 Adoption

IFRS 18: Key Changes and Implications for Singapore Companies Ahead of 2027 Adoption

The International Accounting Standards Board (IASB) has issued IFRS 18 – Presentation and Disclosure in Financial Statements, which introduces a fundamental overhaul to how financial performance is presented. Singapore is expected to adopt IFRS 18 into SFRS(I), with an effective date for annual periods beginning on or after 1 January 2027.

Given the extent of the changes—and the requirement to restate comparative information—entities should begin preparing well ahead of the effective date.

Summary of Key Changes Under IFRS 18

Mandatory New Profit or Loss Categories

IFRS 18 replaces the traditional P&L format with three standardised, prescriptive categories:

  • Operating

  • Investing

  • Financing

All income and expenses must be reclassified into these categories based on detailed application guidance. This creates greater consistency across entities and industries, but requires extensive remapping of existing accounts.

Introduction of Management-Defined Performance Measures (MPMs)

IFRS 18 formally defines and regulates Management-Defined Performance Measures, which are subtotals of income and expenses that:

  • Are used in public communications outside the financial statements; and

  • Reflect management’s view of an aspect of financial performance of the entity as a whole.

Examples include Adjusted EBITDA, underlying profit, or other non-GAAP measures.

Entities must now:

  • Clearly define each MPM

  • Reconcile each MPM to the nearest IFRS-defined subtotal

  • Disclose explanations, rationale and consistency of application

This framework aims to enhance transparency around customised performance metrics.

Enhanced Disaggregation Requirements

IFRS 18 significantly raises the threshold for disaggregation. Entities must:

  • Break down material income and expense items into more granular components

  • Avoid overly broad or “catch-all” line items

  • Provide entity-specific breakdowns, not boilerplate disclosures

This will require detailed mapping and improved data capture within accounting systems.

Disclosure of “Unusual” Income and Expenses

Entities must separately disclose items that:

  • Are not expected to recur in the near term, and

  • Significantly affect the understanding of financial performance.

The standard prescribes how these items must be described and reconciled, improving comparability across entities.

Key Implications for Singapore Companies

1. Mandatory Restatement of Comparatives

For 2027 reporting, entities must restate all comparative periods using the new IFRS 18 structure. This includes:

  • Reclassifying prior-year income and expenses

  • Reconstructing MPMs for earlier periods

  • Providing comparative disclosures for “unusual” items

Practically, companies must be IFRS 18-ready for 2026 financials.

2. Revisions to the Chart of Accounts and Accounting Policies

To align with the new categories, entities will need to:

  • Re-map GL accounts to operating, investing, and financing classifications

  • Update internal accounting policies

  • Establish rules for consistent classification across reporting periods

3. ERP, System and Reporting Impacts

IFRS 18 will require:

  • More granular data collection

  • New P&L mapping structures

  • Additional reporting templates and automated reconciliations

Early system assessment is critical to avoid bottlenecks close to adoption.

4. Potential Impact on KPIs, Covenants and Investor Communication

New required subtotals and category definitions may affect:

  • KPI calculations (e.g., operating profit, EBITDA variants)

  • Bank covenants tied to performance metrics

  • Investor presentations and management commentary

Entities should evaluate these impacts proactively.

5. Expanded Narrative and Note Disclosures

IFRS 18 introduces new disclosure obligations relating to:

  • MPM definitions and reconciliations

  • Category-specific accounting policies

  • Disaggregation analyses

  • Unusual income and expense items

Disclosure preparation will require coordination across finance, operations, and management.

Preparing for 1 January 2027: Actions to Take Now

1. Conduct an IFRS 18 Gap Assessment

Evaluate:

  • Required P&L restructures

  • Classification impacts

  • Disaggregation and data gaps

  • Effects on KPIs, covenants, and management reporting

2. Begin Comparative Restatement Planning

Start re-mapping trial balances for 2024–2026 to ensure:

  • Sufficient granularity for retrospective presentation

  • Availability of historical data for MPM reconciliations

3. Redesign Chart of Accounts and Update Policies

Define the entity’s approach to:

  • Category classification

  • Identification of unusual items

  • MPM definitions, governance and reconciliation processes

4. Upgrade ERP and Reporting Tools

Ensure systems can:

  • Capture the granularity required

  • Track category-level information

  • Produce IFRS 18-compliant statements and disclosures

5. Train Finance Teams and Engage Stakeholders

Training should focus on:

  • New P&L structure

  • Disaggregation requirements

  • MPM rules and disclosure obligations

Stakeholders such as audit committees, banks, and investors should be briefed early.

6. Perform Dry Runs Before 2026

Trial restatements help identify:

  • Classification inconsistencies

  • Missing data

  • System limitations

  • Impacts on covenants and KPIs

Conclusion — Early Preparation Is Critical

Although IFRS 18 applies from 1 January 2027, the need to restate comparative periods means companies must begin preparing well in advance. Early assessment, system readiness, and robust policy development are essential to ensure a smooth transition.

If you require assistance with IFRS 18 impact assessments, comparative restatement planning, policy updates, or full implementation support, our team is ready to help.