By making financial performance more transparent and comparable, IFRS 18 increases investor scrutiny. The quality of the narrative around the numbers now matters more than ever.
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From 1 January 2027, a new accounting standard, IFRS 18, comes into force. While it is formally a change to the financial statements, its implications reach far beyond the back end of the annual report.
Beyond the financial statements, IFRS 18 will directly shape how companies explain performance, strategy and value creation in the strategic report.
IFRS 18 is a new accounting standard that changes how financial performance is presented and is designed to make company results more consistent, more comparable and easier for investors to understand.
How IFRS 18 changes the presentation of financial performance
To summarise the key changes:
- It introduces a clear, standard definition of operating profit under IFRS 18, to be used consistently across companies, making it much easier for investors to assess core performance and compare results between peers.
- It brings management’s key performance measures into the audited financial statements, meaning measures companies already talk about publicly (such as “adjusted” profit or EBITDA) will need to be clearly explained, defined and reconciled. This will create greater credibility as a result
- It improves how information is grouped, subtotalled and labelled, reducing clutter and inconsistency in the financial statements so that the story the numbers tell is clearer, more structured and easier to follow.
A clearer picture of core performance under IFRS 18
One of the most significant impacts of IFRS 18 is the clarity it brings to a business’ core operations. Because the numbers will now speak more clearly on their own, the front-end narrative in the strategic report must work harder to provide context and direction. This is where strong communication matters.
While financial statements are inherently backward looking, the impact of IFRS 18 emphasises the importance of effective storytelling to connect the numbers to the wider business narrative: linking performance to purpose, strategy and long term priorities. Done well, this brings the results to life and helps create a more credible and compelling picture of the business.
Why IFRS 18 matters for the strategic report
For communications teams supporting coporate reporting, IFRS 18 is more than a technical accounting change. It represents a shift in how performance is understood. Greater transparency raises expectations for the quality of explanation and strategic direction, creating a new point of differentiation. The companies that stand out will be those that clearly connect results to long term value creation with clarity and conviction.
In a more transparent and comparable reporting environment, how you tell your story really does matter. As financial reporting strengthens, the quality of storytelling in the strategic report will matter more than ever before and presents a clear opportunity for strategic communications to add value.
Set against these wider shifts, reporting is evolving. Explore other key reporting and regulatory changes in our From Renaissance to Readiness campaign to stay ahead.