IFRS 18 from 2027: what applies to listed companies

The accounting standard IFRS 18 was endorsed by the EU in February 2026 and replaces IAS 1 from 1 January 2027. For most companies listed on Nasdaq Stockholm, the first quarter of 2027 will therefore be the first reporting period under the new standard. This also applies to companies on First North that report under IFRS.

The effects can be significant. When Carlsberg restated 2025 under IFRS 18, its operating profit fell by 23 percent, without any change in the underlying business. Here we go through what is changing, what companies need to pay particular attention to, and how they can prepare both their reporting and the market.

IFRS 18 deals with the presentation of financial statements, with a particular focus on the income statement. Much of IAS 1 remains, but IFRS 18 introduces a new structure for the income statement and a number of new presentation and disclosure requirements, with the aim of giving investors a better basis for analysing and comparing companies.

AVA has covered the changes in detail in an earlier article, but we summarise them below:

New structure and new subtotals. Income and expenses are classified into five categories: operating, investing, financing, income taxes and discontinued operations. Operating profit or loss and profit or loss before financing and income taxes become mandatory subtotals with fixed definitions. In a study of 100 companies, the IASB found that the just over 60 companies that reported an operating profit used at least nine different ways of calculating it.

New note on management-defined performance measures. Subtotals of income and expenses that are used in external communication and reflect management’s view of performance become management-defined performance measures (MPMs). They must be gathered in a single note with a definition, calculation method and reconciliation to the most directly comparable IFRS subtotal. The note forms part of the financial statements and is therefore subject to audit.

Stricter requirements on aggregation and disaggregation. The requirements cover several items and reflect the new structure of the income statement. They also cover where each item should be presented, that is, in the primary financial statements or in the notes. Companies that present expenses by function must also disclose in a note, among other things, depreciation, employee benefits and impairments broken down by function line.

Assessment of main business activities. All companies must assess whether their main business activities include investing in assets or providing financing to customers. For property companies, this means that rental income and changes in the fair value of investment properties are presented within operating profit. The same applies to dividends and changes in the value of holdings for investment companies, and banks and finance companies are affected in a similar way.

Consequential amendments to IAS 7. The option to classify interest and dividends is removed for most companies. Interest paid is presented in financing activities, and interest and dividends received in investing activities.

Consequential amendments to IAS 33. The numerator in an adjusted earnings per share figure must be an IFRS subtotal or an MPM, and, as before, the measure may only be presented in the notes.

Plan the process in good time

Reporting throughout the 2027 financial year will be more extensive, which makes it important to plan the work and set up a clear process. Every interim report needs a line-by-line reconciliation of the income statement for both the comparative quarter and the comparative year-to-date period, and the annual report a reconciliation for the comparative year, so that the reporting remains comparable. Under IAS 34, each interim report must also include the MPM note.

For listed companies, it will be important to inform the market in good time and to make the judgements together with the auditor during November and December, so that the comparative figures for every quarter of 2026 can be restated. This concerns, for example, how foreign exchange effects and bank fees should be classified and what the performance measures should be called. In the year-end report, the company can then give a preview of the new income statement and set out which key figures will become MPMs.

The 2026 annual report must include a disclosure of the expected impact of IFRS 18 in accordance with IAS 8.30. Make the disclosure as concrete as possible, and preferably show a reconciliation between the old and the new presentation if the effects can be estimated.

In the interim report for the first quarter of 2027, the standard is applied in full. The report must include a reconciliation for the comparative period, the first quarter of 2026, an MPM note and a restated cash flow statement. The interim reports for the second and third quarters must include reconciliations for both the quarter and the year-to-date period. The same applies to the year-end report, published in early 2028, which must show a reconciliation for both the fourth quarter and the full year 2026. The transition concludes with the 2027 annual report, which includes a reconciliation for the full year 2026 and a complete MPM note.

The changes can affect profit and cash flow

One reason why it is important to inform the market in good time is that the reclassifications can have a major effect on operating profit and cash flow, even though profit for the period is unchanged. Two companies that have applied IFRS 18 early show how large the effects can be.

The Danish brewing group Carlsberg began applying IFRS 18 as early as 1 January 2026. The decrease in operating profit is largely due to items affecting comparability, previously presented on a separate line below operating profit, now being allocated to the expense lines above it, and to the share of profit of associates moving below operating profit. Foreign exchange effects and bank fees were also moved from net financial items to operating activities. Cash flow from operating activities rose mainly because interest paid was moved to financing activities, while the group’s total cash flow was unaffected. Carlsberg introduced its own MPMs, with adjusted operating profit for 2025 coming in at DKK 13,686 million, close to the previous level. The restated figures were published in a separate document, together with a Q&A session for the market, about a week before the half-year report.

The effect can also go in the opposite direction. The Franco-Dutch airline group Air France-KLM applied IFRS 18 early in its 2026 half-year report. Operating result for the first half of 2025 increased by EUR 547 million, of which EUR 521 million is explained by foreign exchange effects and derivatives previously included in net financial items. This makes operating result more sensitive to currency fluctuations, which was already visible in the 2026 half-year report, where operating result fell from EUR 944 million to EUR 343 million, mainly due to currency effects. The media described it as a sharp drop in earnings, even though adjusted operating result rose from EUR 431 million to EUR 478 million. Cash flow from operating activities increased because realised exchange differences were moved to investing activities.

Far from all companies will see major changes as a result of the transition, but one effect that is likely to be fairly common is higher cash flow from operating activities, since the consequential amendments to IAS 7 mean that interest paid is presented in financing activities. This only applies, however, to companies that currently present interest in operating activities. Air France-KLM already classified it as financing and was not affected by this particular change. Nor does the change represent any real improvement in cash flow, which makes clear communication with the market important regardless of the starting point.

Pay particular attention to net financial items and key figures

For most companies, breaking down net financial items is what requires the most thought and what can have the biggest effect on operating profit. This applies in particular to companies with low margins, where foreign exchange effects and the cost of sold trade receivables can together have a material effect on operating profit without any change in the business. Under IAS 1, finance income and expenses have often been presented together, but under IFRS 18 each item must be classified as operating, investing or financing depending on what it arises from. Some items are particularly important to review:

• Bank fees. Fees for raising or repaying loans belong to financing, while other bank fees normally belong to operating activities. Fees for unused credit facilities are a matter of judgement.

• Share of profit of associates and joint ventures. Always presented in the investing category, below operating profit. Companies that currently include it in operating profit will see a lower or higher operating profit depending on the results of their associates.

• Foreign exchange differences. Classified according to their origin. Exchange differences on trade receivables and trade payables belong to operating activities, on loans to financing, and on cash and cash equivalents to investing.

• Intra-group loans. Foreign exchange effects on loans within the group require a judgement that should be agreed with the auditor in good time.

• Factoring and sale of trade receivables. If the receivables are sold so that they are derecognised from the balance sheet, the cost normally belongs to operating activities. If they remain on the balance sheet and the arrangement is in practice a borrowing, the cost belongs to financing.

Another change with a major impact for many companies is the subtotals operating profit or loss and profit or loss before financing and income taxes, both of which are clearly defined in IFRS 18. Companies that currently call EBITA, EBIT or another adjusted performance measure “operating profit” or “operating earnings” will need to rename it if the measure differs from the IFRS 18 definition of operating profit. This may in turn affect financial targets communicated to the market, as well as covenants in loan agreements defined on the basis of operating profit or EBITDA.

Adjusted performance measures, such as adjusted operating profit, that are used in external communication and reflect management’s view of performance become MPMs. They must be reconciled to the most directly comparable IFRS subtotal, with the tax effect and the effect on non-controlling interests for each adjustment. Key figures that are not subtotals of income and expenses, such as return measures, cash flow measures and net debt, are not covered and continue to follow the ESMA Guidelines on Alternative Performance Measures. However, if such a key figure is based on an adjusted performance measure, that measure is in itself an MPM.

EBITDA may be exempt, but only if the measure corresponds exactly to operating profit before depreciation, amortisation and impairments within the scope of IAS 36. Companies that currently present items affecting comparability on a separate line need to review this, as such a line is difficult to reconcile with the IFRS 18 requirement to present operating expenses by function or by nature. The adjusted measure can instead be communicated as an MPM, as Carlsberg has done.

Key figures based on operating profit, net financial items or cash flow from operating activities therefore also need to be reviewed. Examples include interest coverage ratio, operating margin, return on capital employed and cash conversion. At group level, profit after financial items is replaced by profit before tax, which as a rule does not change in amount, while the term remains in the parent company, which under RFR 2 normally retains the format prescribed by the Swedish Annual Accounts Act.

Companies sometimes also define measures differently in the annual report and in the interim reports, or use terms such as “operating earnings” for several different measures. The MPM note makes such differences visible, and companies need to review all their key figures, settle on a definition as soon as possible and explain the effect to the market. The year-end report for 2026 is a good opportunity to do so.

AVA Corporate Communications offers listed companies support in planning the transition, preparing reconciliations and MPM notes, and communicating the changes to the market. If you have any questions about IFRS 18, your reporting or your market communication, do not hesitate to contact us.

Frequently asked questions about IFRS 18

When does IFRS 18 take effect?

The standard applies to financial years beginning on or after 1 January 2027. Comparative figures for 2026 must be restated, and early application is permitted.

Does IFRS 18 apply to companies on First North?

Yes, to those companies on First North that report under IFRS. The standard applies to everyone reporting under IFRS, regardless of marketplace.

What applies to companies with a non-calendar financial year?

The standard is applied from the first financial year beginning on or after 1 January 2027. A company whose financial year begins on 1 April therefore applies it from the 2027/28 financial year, and its first report under IFRS 18 will be the interim report for April to June 2027.

Is the parent company affected?

Parent companies applying RFR 2 generally retain the income statement format prescribed by the Swedish Annual Accounts Act. The IFRS 18 categories and subtotals therefore do not carry through there.

Is profit for the period affected?

No. IFRS 18 changes how income and expenses are presented, not how they are measured. Profit for the period, earnings per share and equity are unchanged.