IFRS 18 — Industry Insight Series

CONTENT PACK  ·  NOVEMBER 2026

IFRS 18 — Industry Insight Series

Six LinkedIn articles on the standard that redefines operating profit

Prepared November 2026  ·  For CFO, controller, investor relations and audit committee audiences

CONTENTS

01   From 2027, “operating profit” stops being your word to define

02   For banks, IFRS 18 pulls volatility inside operating profit

03   Insurers: IFRS 17 gave you a new P&L. IFRS 18 decides how it reads

04   Your ARR is safe. Your adjusted operating margin is not

05   Same asset, different line: why business model is now the accounting question

06   Two-speed IFRS 18: the comparability gap nobody is pricing

ARTICLE 01   ·   CROSS-INDUSTRY

From 2027, “operating profit” stops being your word to define

Thirty years of vocabulary, retired

For three decades, “operating profit” has been a phrase management could define. Some companies put restructuring below it. Some put share-based payments below it. Some put an entire commodity hedging programme below it. The result: two competitors with the same economics, operating margins four points apart, and no way for an investor to bridge the gap without a phone call. Analysts learned to rebuild the number themselves, company by company, which is precisely the inefficiency the standard exists to remove.

From 1 January 2027 that freedom ends. IFRS 18 requires every item of income and expense to be classified into one of five categories — operating, investing, financing, income taxes, discontinued operations — and requires two subtotals to be presented: operating profit, and profit before financing and income taxes. The definition stops being a matter of taste.

The judgement has moved, not disappeared

The interesting part is not the new structure. It is where the judgement now sits. Classification turns on an entity's main business activities rather than on the nature of the instrument. Interest income on a cash balance is investing for a manufacturer and operating for a bank. Rental income is operating for a property company and investing for a retailer with a spare warehouse. Identical cash flows, different lines.

That shift matters more than it sounds, because “main business activities” is a judgement about the entity, not about the transaction. It has to be made once, documented at group and segment level, and applied consistently — then defended to an auditor who may have formed a different view of what your business fundamentally is.

The comparatives problem nobody has budgeted for

IFRS 18 is applied retrospectively. So the transition does not begin in 2027; it begins at the 2026 close, because the 2027 accounts must present 2026 comparatives on the new basis. That means pushing a full year of actuals through a chart of accounts that was never designed for five categories, and rebuilding the mapping that sits between the general ledger and the face of the P&L.

Most finance teams have not yet done this. Until they do, nobody knows whether operating profit moves up, down or sideways — and that uncertainty is currently sitting inside board packs that look perfectly calm. The first dry run is usually where the surprises appear, which is exactly why it should happen while there is still time to make choices.

The part that lands on investor relations

Management-defined performance measures. If you publish a subtotal of income and expenses — adjusted EBITDA, underlying profit, non-GAAP operating income — it now goes into a single note, with its definition, its calculation, a reconciliation to the nearest IFRS subtotal, and an explanation of why it is useful. It also falls within the scope of the audit.

The trigger is public communication, not the financial statements, so the scope extends to earnings releases, investor decks and prepared remarks. A measure you have used for a decade to explain the business becomes a document you have to defend, in a common format, next to every competitor's.

Why this is a systems problem wearing an accounting costume

None of the above is solvable in the consolidation tool alone. The categories require tagging at transaction level, which means changes to the chart of accounts, the ERP configuration, the management reporting hierarchy, the budgeting cycle and the controls around all of them. Budgets and forecasts built on the old structure will not reconcile to the new P&L, and the variance analysis the board expects in February will be wrong in ways that are hard to explain.

Treat IFRS 18 as a reporting transformation with an accounting requirement attached, not the reverse. The teams that start in 2026 will spend that year on mapping and dry runs. The teams that start in 2027 will spend it explaining why the first set of comparatives does not tie.

If your 2027 operating profit differs from today's, do you know which line moved — and are you planning to explain it, or hoping nobody asks?

Audience: group CFO, technical accounting, IR  ·  Hashtags: #IFRS18 #FinancialReporting #CFO #InvestorRelations  ·  Visual: side-by-side P&L before and after

ARTICLE 02   ·   BANKING & CAPITAL MARKETS

For banks, IFRS 18 pulls volatility inside operating profit

Almost everything is operating

A bank's main business is providing financing. Under IFRS 18, net interest income, fee and commission income, and the results of trading and fair value activities all land in operating. The standard goes further for entities whose main business is financing customers, requiring interest expense on borrowings that relate to that activity to sit in operating too.

That is not a technicality. It reverses the logic a generation of bank investors has used, where “operating” meant the repeatable core and everything volatile sat below a line. Trading revenue is now inside the number that the market will treat as the headline. So is the fair value movement on your own debt, and so is the mark on a structured book in a bad week.

The subtotal that carries no information

IFRS 18 also mandates “profit before financing and income taxes”. For a bank, much of the funding side has moved into operating, so very little remains in financing. In many cases the new subtotal will simply equal operating profit, or come close to it.

That is a legitimate outcome rather than an error — but it needs a sentence of explanation in the notes. An unexplained subtotal that equals the subtotal above it looks to a reader like a mistake, and a reviewer who thinks your face statement contains a mistake will keep looking until they find something else. Expect this to be an early comment from auditors and regulators alike.

Your old operating profit is now an MPM

Most banks already publish a pre-provision, ex-volatility “operating profit”. From 2027, if that is a subtotal of income and expenses used in public communications, it is a management-defined performance measure. It gets a definition, a reconciliation to IFRS operating profit, an explanation of why it is useful, and audit scrutiny.

The bridge will be long, and every step in it will be visible. Strip out trading volatility, add back restructuring, adjust for the bank levy, exclude the fair value own-credit movement — each of those is now a line in a table, in a format investors can compare across peers. For a metric whose credibility rested partly on being taken on trust, that is a genuine change in the terms of the conversation.

The small decisions that add up

Interest expense on AT1 securities, lease liabilities and non-trading borrowings. Income from insurance subsidiaries and leasing arms. Dividend income on strategic stakes and fintech investments. Each is a narrow judgement with a visible consequence, because the sum of them is the number investors use to value the franchise.

These are also the items most likely to be classified differently by two banks that look similar from the outside. That is the awkward part: IFRS 18 narrows the range of acceptable presentation, but it does not eliminate it. Where judgement remains, it now leaves a paper trail — and the peer comparison will show who chose what.

What the sell side will do with it

Analysts have spent years maintaining their own normalisation of bank earnings, precisely because reported figures were not comparable. IFRS 18 hands them a standardised starting point and a reconciliation for every adjusted measure. The likely outcome is not fewer adjusted metrics but better documented ones, with less room for a bank to define its way to a smoother number.

The practical question for IR teams is sequencing: brief the sell side before the first IFRS 18 results, not after. A quiet conversation in the autumn costs far less than a surprised analyst on results day asking why operating profit fell by an amount nobody warned them about.

When market volatility moves inside operating profit, does your equity story get stronger or weaker? Most banks have not modelled the answer yet.

Audience: bank CFO, financial control, equity research  ·  Hashtags: #IFRS18 #Banking #CFO #InvestorRelations  ·  Visual: waterfall from net interest income to operating profit

ARTICLE 03   ·   INSURANCE

Insurers: IFRS 17 gave you a new P&L. IFRS 18 decides how it reads

Investment return is operating

An insurer's main business includes investing the float. Under IFRS 18, income from assets invested to generate returns as part of that main business is classified as operating, not investing. The consequence is structural: insurance service result and investment result sit inside the same defined subtotal, and the split IFRS 17 worked so hard to create becomes a disclosure rather than a presentation boundary.

Nothing about the underlying economics has changed. What changes is the box the reader finds it in — and therefore what the reader assumes belongs together. An insurer that has spent five years teaching the market to look at service result separately now has to explain why the standard puts it back alongside investment return.

Operating profit gets louder

Most investment portfolios are measured at fair value through profit or loss. Putting that inside operating profit means the new headline number inherits market volatility the industry has spent years explaining away. A bad quarter in credit spreads, a widening in the illiquidity premium, a lurch in equity markets — all of it now shows up in the subtotal IFRS defines, not in a line beneath it.

For life insurers with long-duration portfolios this is the single most visible consequence of the standard. Reported operating profit becomes a noisier number, in a year when the industry is already being asked to demonstrate that IFRS 17 results are understandable.

Which is exactly why MPMs matter

If you want a smoother number — adjusted operating profit, underlying earnings, a measure that isolates the service margin and the expected return — IFRS 18 does not stop you. It requires you to label it, define it, reconcile it to the IFRS subtotal, and explain why it is useful.

For insurers this is the most consequential requirement in the standard, because the industry's investor communication model rests heavily on measures IFRS does not define. The reconciliation will have to bridge market movements, assumption changes, one-off reserve strengthening and the CSM release, in one table, consistently, every reporting period. That table becomes the document investors read first.

Two traps worth naming

First, the contractual service margin is not a subtotal of income and expenses, so it is not itself an MPM — but a metric such as “operating profit including CSM release” is, and it will need a bridge. Teams that assume the CSM sits outside the disclosure net are right about the CSM and wrong about the metrics built on top of it.

Second, the requirement to disclose specified expenses by nature cuts across IFRS 17's acquisition cash flow presentation. The two disclosure sets have to be built to reconcile with each other, not assembled separately and reconciled by hand in the notes. That is a data-model decision, and it is much cheaper to make in 2026 than to unpick in 2028.

The disclosure build nobody has resourced

IFRS 17 programmes consumed most of the available capacity in insurance finance functions for five years. IFRS 18 arrives before that work has fully settled, and it lands on the same people. The temptation is to treat it as a presentation exercise that can be handled in the final consolidation tool during the 2026 close.

It cannot, for one structural reason: the classifications are determined at the level of the underlying item, and insurers hold large volumes of them. Getting the chart of accounts, the sub-ledgers and the actuarial interfaces to carry the right category — consistently, for comparatives, at entity level — is a data programme. Resource it as one.

Insurers have spent five years explaining IFRS 17. Is your team ready to explain the same business again, on a different structure?

Audience: insurer CFO, chief actuary, IR  ·  Hashtags: #IFRS18 #Insurance #IFRS17 #FinancialReporting  ·  Visual: insurance service result plus investment result inside operating profit

ARTICLE 04   ·   TECHNOLOGY & SAAS

Your ARR is safe. Your adjusted operating margin is not

A narrow definition with a sharp edge

An MPM is a subtotal of income and expenses, used in public communications, that IFRS does not specify. That definition is deliberately narrow — and for software companies it produces an odd asymmetry. ARR, net revenue retention, bookings, remaining performance obligations, free cash flow, net cash: all outside scope, because none of them is a subtotal of income and expenses.

Adjusted EBITDA, non-GAAP operating income, “underlying” gross margin, cash operating profit: all inside, each with a definition, a reconciliation and an audit trail. The pattern is clear. The operational metrics that describe the business model escape; the profitability metrics that describe the result do not. That is the opposite of how most SaaS investor decks are weighted.

The profitability story becomes auditable

For a decade the SaaS narrative has been: the statutory number loses money, but look at the adjusted one. IFRS 18 does not ban that argument. It makes the argument auditable. Every add-back — share-based compensation, restructuring, acquisition costs, commission amortisation, one-off litigation — appears in a bridge to an IFRS subtotal, in a common format, for every peer.

The comparison investors have been doing by hand becomes trivial. That is good for the market and uncomfortable for companies whose bridge has grown organically over eight years and now contains three adjustments nobody can quite explain. The reconciliation is also the moment to retire them, quietly, before someone else asks.

Share-based payments lose their cover

The disaggregation requirements force disclosure of specified expenses by nature — employee benefits, depreciation, amortisation, impairments and write-downs — in a single note. Combined with the MPM bridge, “add back SBC” stops being a footnote and becomes a line item with a number attached, sitting next to a headcount number.

Companies that pay in equity will look visibly different from those that pay in cash, at the same revenue scale. That is precisely the transparency the standard was designed to produce, and it will reopen a debate most software boards thought was settled years ago: what does compensation actually cost, and who bears it.

Then there is the plumbing

Interest income on the cash pile is investing for a software company, not operating — a reclassification that flatters operating profit for cash-rich balance sheets and penalises those running on debt. FX on dollar receivables follows the underlying item, so it cannot all be swept into other gains and losses; some of it lands in revenue-adjacent lines and moves gross margin.

And the cash flow statement must start from operating profit under the indirect method. That changes the reconciliation most SaaS companies present today, which is where the free cash flow number actually comes from. If the starting point moves, check that the FCF bridge still tells the same story — because that is the number many investors value the business on.

The customer-contract question

One judgement deserves board attention early: whether costs that a SaaS company incurs to fulfil customer contracts belong in cost of revenue or in operating expenses, and how that choice interacts with the new expense-by-nature disclosure. Two companies with identical gross margins can present them with completely different cost stacks underneath.

The standard does not resolve that for you. It does require the answer to be consistent, disclosed, and comparable with the peer set. For a sector where gross margin is a headline metric and a pricing signal, the consistency requirement is the part that bites.

If your adjusted operating margin has to be reconciled line by line, does it still look like a better business — or just a differently measured one?

Audience: tech CFO, FP&A, growth-stage founders  ·  Hashtags: #IFRS18 #SaaS #TechFinance #CFO  ·  Visual: MPM bridge with add-backs listed

ARTICLE 05   ·   INDUSTRIALS, ENERGY & REAL ASSETS

Same asset, different line: why business model is now the accounting question

Identical asset, different category

A property company lets flats and reports rental income and fair value gains. Operating. A manufacturer lets a spare warehouse and reports the same rental income. Investing. Same transaction, same economics, different line — because classification follows the entity's main business activities rather than the nature of the asset.

For focused companies this is intuitive. For conglomerates and mixed portfolios it is not: the group P&L now has to reconcile two classification logics at once, segment by segment, without letting the consolidation quietly average them into something neither describes. The segment note becomes the place where the judgement is either visible or hidden.

The “other” bucket closes

Most industrial P&Ls carry an “other gains and losses” line that quietly absorbs FX, commodity hedge results, disposal gains and one-off provisions. IFRS 18 requires foreign exchange differences and hedge results to be allocated to the category of the item they relate to. For an exporter with dollar revenue and a rolling hedge programme, that does not just move a line — it moves operating margin, and it moves it every year.

Hedges also raise a question companies rarely have to answer explicitly: which exposure is this derivative actually protecting? A programme documented at portfolio level, for risk management purposes, may not map cleanly to individual P&L line items. The mapping has to be built, and it has to survive an auditor testing whether the allocation reflects the economics.

Energy and infrastructure

Disposal gains on assets held for use in the business are operating; the same gain on a financial investment is investing. Interest capitalised during construction never reaches the P&L, but once expensed it is financing unless providing finance is your main business — a distinction that matters for project-heavy balance sheets with mixed funding structures.

For power companies, the interaction with the recent amendments on nature-dependent electricity contracts means classification and contract accounting have to be designed together. A power purchase agreement that qualifies for the own-use exemption does not appear on the balance sheet, but its economics still shape the P&L categories around it. Two teams solving those separately will produce a note that does not add up.

Real assets need a policy, not a case-by-case answer

The main-business test is a judgement about the entity, not about the transaction. So it needs to be documented once, at segment level, and applied consistently — because the first analyst who spots an inconsistency between your property segment and your corporate treasury will ask the question in public.

The practical discipline is to write the policy before the numbers, not after. Start with a statement of what each segment's main business is, in plain language, and derive the classifications from it. Teams that work backwards from the desired operating margin tend to produce documentation that does not survive the second review.

Margins will move, and that is the point

For many industrial groups the net effect of IFRS 18 on operating profit will be material and directionally unclear until the mapping is done. Pension interest, FX on trading balances, share of results from associates, government grants, capitalised interest — each moves a different amount in a different direction.

The error to avoid is announcing a number before the analysis is complete. Once an operating margin has been guided to the market on an IFRS 18 basis, a subsequent restatement of the classification is not a technical correction in the eyes of investors. It is a credibility event, and it is entirely avoidable with a dry run in 2026.

Where in your P&L does business model currently hide? IFRS 18 is about to make it visible.

Audience: industrial and energy CFO, group reporting  ·  Hashtags: #IFRS18 #Industrials #Energy #FinancialReporting  ·  Visual: same rental income flowing to two different categories

ARTICLE 06   ·   TRANSITION & CHINA

Two-speed IFRS 18: the comparability gap nobody is pricing

One standard, three start dates

IFRS 18 applies to annual periods beginning on or after 1 January 2027, applied retrospectively. China's revised presentation standard converges to it but phases adoption: entities listed both domestically and overseas, and overseas-listed preparers using IFRS or Chinese standards, start in 2027; other domestic listed companies in 2029; non-listed preparers in 2030, with early adoption permitted.

For up to three years, companies in the same sector, competing for the same capital, will report performance on different bases. That is a deliberate policy choice — a transition period to protect smaller preparers from a cliff edge — but its side effect lands on the capital markets rather than on the preparers it protects.

What that does to comparison

An analyst building a China sector model in 2028 will be comparing an operating profit defined by IFRS 18 with one defined by a predecessor framework. The labels will look identical. The numbers will not be. A stock screen on operating margin will silently mix two definitions, and nobody will notice until a valuation looks wrong for reasons nobody can name.

This is a quiet, structural distortion — and it cuts both ways. It is a risk for anyone relying on cross-company comparison, and an unusual opportunity for companies that adopt early. They become the comparable benchmark, the reference point in every peer table, for two or three years while everyone else is still catching up.

The governance gap

MPMs are triggered by public communication, not by the financial statements. That single sentence moves ownership of the disclosure out of the technical accounting team and into investor relations. Someone has to own a register of every measure published, approve changes to definitions, and keep the earnings release, the investor deck and the note consistent.

In most companies, that owner does not yet exist. The technical team can write the note; it cannot control what the CEO says on a call, or what a regional office puts in a local investor presentation. The control has to sit where the communication is produced, with the accounting team in an approval role rather than an authorship role.

The twelve-month plan

Q4 2026: dry-run 2026 actuals through the new categories, restate comparatives, and quantify the movement in operating profit by line. Q1 2027: auditor pre-clearance on the classification judgements and the MPM note, plus a decision on which existing measures survive. Q2 2027: brief analysts, rebuild the model templates you hand out, and align the equity story with the new structure.

Before the first 2027 interim: the board has seen the new P&L, the audit committee has seen the MPM register, and the equity story has been rewritten around the new presentation rather than patched onto it. Anything later than that is recovery, not preparation.

What early adoption actually buys you

Early application is permitted, and for some groups it is a genuine strategic option rather than a compliance shortcut. It removes the comparability distortion from your own reporting, signals reporting quality to investors ahead of peers, and gives you a full cycle of clean comparative data before the rest of the market arrives.

It also concentrates the pain. Systems work, auditor negotiation and analyst education all land in the same year instead of being spread across three. That trade-off is worth making deliberately, at board level, with a clear view of what the first IFRS 18 results will look like — not by default, because someone in group reporting was keen.

If a peer's operating profit is computed on a different basis for the next three years, how will your investors know?

Audience: cross-border issuers, IR, audit committees  ·  Hashtags: #IFRS18 #China #CapitalMarkets #FinancialReporting  ·  Visual: three-track adoption timeline

PUBLISHING SCHEDULE

Two-week cadence, sequenced so that the framing piece lands before the first sector deep-dive and the transition playbook closes the series.

NOTE ON SCOPE

All six articles summarise presentation and disclosure requirements for a business audience. They describe where judgement is required; they do not conclude on any specific fact pattern. Confirm classification positions with your auditor before publishing anything that quotes a number.

Sources: IFRS 18 Presentation and Disclosure in Financial Statements (IASB, effective for annual periods beginning on or after 1 January 2027); IFRS 17; IAS 7 and IAS 8 as amended; China's revised presentation standard and its phased application dates.