Three IFRS Updates for Accounting, Audit and Finance Professionals

Three IFRS Updates for Accounting, Audit and Finance Professionals

I have been an IFRS trainer and consultant for 20 years. From my experience, I can say that the only thing constant about IFRS reporting is change. Whether you work in finance, accounting or audit, here are my three key IFRS updates for 2026.

IFRS 18 Presentation and Disclosure in Financial Statements

IFRS 18 brings about a new era in presentation of the statement of financial performance. Though the effective date of this Standard is 1 January 2027, the 2026 comparatives in the 2027 financial statements need to be based on IFRS 18. IFRS 18 replaces IAS 1 Presentation of Financial Statements with the following three key changes:

• Classification of income and expenses into categories (operating, investing, financing, income taxes, discontinued operations) and requirements for defined subtotals (including operating profit)
• Disclosure and reconciliation of management-defined performance measures (MPMs)
• Grouping (aggregation and disaggregation) of information in profit or loss

These changes will most likely affect the operating profit figure (which is widely used by investors and analysts). A key element of IFRS 18 is to determine whether an entity has a specified main business activity of:

• Investing in particular type of assets e.g., debt securities; or
• Providing financing to customers

This assessment of main business activities may require use of judgement and will impact the classification of income and expenses in the statement of financial performance. In addition to income and expenses classification, IFRS 18 requires companies to identify and disclose management-defined performance measures (MPMs) in the audited financial statements.

IFRS 9 Financial Instruments

The amendments to IFRS 9 Classification and Measurement of Financial Instruments, and IFRS 7 disclosures are the result of post-implementation review of the Standard. These include:

• Clarification on how the contractual cash flows on loans with ESG and similar features should be assessed for classification at amortised cost or fair value i.e. when would these loans meet the contractual cash flow test?
• Accounting policy option to allow a company to derecognise a financial liability before it delivers cash on the settlement date if specified criteria are met
• Additional disclosure requirements for financial instruments with contingent features, for example, features tied to ESG-linked targets

IFRS 9 and IFRS 7 have also been amended to better report the financial effects of nature-dependent electricity contracts, which are often structured as power purchase agreements (PPAs):

• Clarify the application of own-use requirements which can be applied if the company is a net-purchaser of electricity
• Permit hedge accounting if these contracts are used as hedging instruments
• Add new disclosure requirements to enable investors to understand the effect of these contracts on the financial performance and cash flows

It is also important for companies to assess the impact of the current geopolitical environment, for example, conflicts, tariffs, on the staging of financial assets and measurement of expected credit losses. There will be an increase in the loss given default and probability of default on exposures depending on the counterparties. Expected credit loss measurement is an area which requires use of significant judgements and estimations, especially for banks and financial institutions.

IFRS Sustainability Disclosure Standards

As we move from voluntary to mandatory sustainability/ESG reporting, the IFRS Sustainability Disclosure Standards published by the International Sustainability Standards Board (ISSB) will play an important role. In addition to IFRS S1 (covering general requirements for reporting of sustainability-related information) and IFRS S2 (climate-related disclosures), the ISSB is also working on a practice statement to cover nature-related risks and opportunities.

The reporting under the ISSB Standards depend on the identification of material sustainability-related risks and opportunities, and the industry-specific disclosures. There are some differences to financial statements, for example, focus on the anticipated financial effects of material sustainability-related risks and opportunities including in the value chain. Regulators are keeping a close eye on the company’s reporting of the impact of sustainability-related risks and opportunities on the financial statements. With the need for limited to reasonable assurance, this is an area where finance and audit teams will have to be more involved.

I have covered the three key IFRS updates above. The other areas of interest to prepares and users of financial statements often are:

• IFRS 19 Subsidiaries Without Public Accountability: Disclosures (effective 1 January 2027)
• Introduction to AI in Financial Reporting
• Accounting for digital assets