Key takeaways
- IFRS 18 replaces IAS 1 for annual periods beginning on or after 1 January 2027, with early application permitted.
- Income and expenses are classified into five categories, with two new defined subtotals: operating profit or loss, and profit or loss before financing and income taxes.
- Management-defined performance measures used in public communications require a single note with reconciliations to IFRS subtotals.
- Egyptian statutory accounts follow EAS; the IASB's 2027 date is not an automatic deadline for them, but IFRS group reporting packages must follow the international timetable.
- The impact arrives early: 2026 comparatives are restated and first-quarter 2027 interim statements already use the new structure.
IFRS 18 Presentation and Disclosure in Financial Statements changes how IFRS reporters explain their performance. It replaces IAS 1 for annual reporting periods beginning on or after 1 January 2027, with early application permitted. The largest change is to the statement of profit or loss, but the standard also affects the statement of financial position, the statement of cash flows and the notes. It does not, by itself, change recognition or measurement, or the entity's total profit.
Does the 2027 date apply in Egypt?
Egyptian statutory financial statements generally follow Egyptian Accounting Standards (EAS), which are close to IFRS but are issued separately. EAS 1 remains the local standard on the presentation of financial statements. At the date of publication, we have not identified an Egyptian adoption of IFRS 18, or an amendment to EAS 1 reflecting it, in the accounting standards decisions published by the Financial Regulatory Authority. The IASB's 2027 date should therefore not be treated as an automatic deadline for EAS statutory accounts.
An Egyptian entity preparing an IFRS reporting package for its group, or any other report that must comply with IFRS, should plan for the international timetable. For EAS accounts, teams should monitor for a formal Egyptian issuance, the timing of which has not been announced. Banks and other regulated entities should also check the framework that applies to their sector.
What changes across the statements
Statement of profit or loss
Income and expenses are classified into five categories: operating, investing, financing, income taxes and discontinued operations. IFRS 18 introduces two defined subtotals: operating profit or loss, and profit or loss before financing and income taxes. Classification can differ for entities whose main business activity is investing in particular assets or providing financing to customers.
Statement of financial position
IFRS 18 does not impose five categories on the balance sheet; the current and non-current presentation broadly continues. Goodwill, however, is now presented as a separate line item, apart from other intangible assets. The standard's principles on aggregation, disaggregation and labelling apply here too, and no asset or liability is remeasured solely because of IFRS 18.
Statement of cash flows and notes
Under the indirect method, the reconciliation of operating cash flows now starts from operating profit or loss. For a typical non-financial company, interest and dividends received are classified as investing cash flows, and interest and dividends paid as financing cash flows. Management-defined performance measures, such as adjusted profit, require a single note when they are used in public communications. The note must explain each measure and reconcile it to the most similar IFRS subtotal, showing the income tax effect and the effect on non-controlling interests for each reconciling item.
A practical example
Consider a non-financial manufacturer. Revenue and production costs feed operating profit. Its share of the profit of an equity-accounted associate is classified in the investing category; IFRS 18 requires this even where investing is a main business activity. Interest on its borrowings is classified in financing. A bank or an investment entity may classify other items, such as interest income and expense, differently. The assessment of the entity's main business activities must therefore come before any template is copied.
Why prepare before 2027
A calendar-year IFRS reporter must restate its 2026 comparative statement of profit or loss when it publishes its 2027 financial statements, and disclose a reconciliation, line by line, between the restated amounts and those previously presented under IAS 1.
In practice, the impact comes earlier. Condensed interim financial statements for the first quarter of 2027 must already present the new categories and required subtotals. This matters directly to Egyptian subsidiaries that report quarterly to foreign parent groups.
If accounting systems currently pool foreign exchange differences, finance charges or investment returns in broad accounts, transaction-level tagging may be needed now to support the new classifications and a clear audit trail.
Illustrative IFRS 18 statement of profit or loss
Generic non-financial entity — illustrative line items only.
| Category | Line item |
|---|---|
| Operating | Revenue |
| Cost of sales | |
| Gross profit | |
| Other operating income and expenses | |
| Operating profit or loss (required subtotal) | |
| Investing | Share of profit of associates and other investment income |
| Profit or loss before financing and income taxes (required subtotal) | |
| Financing | Finance costs and other financing items |
| Profit or loss before income taxes | |
| Income taxes | Income tax expense |
| Profit or loss from continuing operations | |
| Discontinued | Profit or loss from discontinued operations |
| Profit or loss (required total) |
What finance teams and auditors should do
Finance teams
Confirm the applicable reporting framework first. For IFRS reporting, map 2026 accounts to the new categories, document judgements on main business activities, list the performance measures used in public communications, build the required reconciliations and plan the comparative restatement.
Auditors
Challenge category judgements and the completeness of management-defined performance measures. Trace the new subtotals and comparative reclassifications to the ledger, and test controls over the new notes and cash flow changes. Finally, read the statements as a whole for clear labels and useful detail.
Sources
- IFRS Foundation — IFRS 18 Presentation and Disclosure in Financial Statements (issued April 2024)
- IASB — IFRS 18 Effects Analysis (April 2024)
- IFRS Foundation — Use of IFRS Accounting Standards by jurisdiction: Egypt
- Financial Regulatory Authority — Decisions and regulations on accounting standards
- Financial Regulatory Authority — Egyptian Accounting Standard No. 1, Presentation of Financial Statements
The Egyptian position is stated as at the date of publication.
This article is for general information only and does not constitute professional advice. Thresholds, rates and procedures change — please contact us or refer to the latest official sources before acting.