IFRS 18 "Presentation and Disclosure in Financial Statements" is mandatory for annual periods beginning on or after 1 January 2027, with earlier application permitted (IFRS 18, Appendix C, paragraph C1). In Ukraine it can already be applied: the Ministry of Finance published the official translation on 2 June 2025, and under Article 12-1(1) of Law No. 996-XIV no separate approval order is needed.
Status in Ukraine: the standard applies without a Ministry of Finance order
There will be no separate order "approving" IFRS 18. Article 12-1(1) of the Law of Ukraine "On Accounting and Financial Reporting in Ukraine" No. 996-XIV of 16 July 1999 provides that financial statements are prepared using the international standards published in the state language on the official website of the central executive body responsible for accounting and audit policy. The publication of the translations of IFRS 18 and IFRS 19 on 2 June 2025 settled the matter: the standard is already part of the regulatory framework in force.
The EU endorsement process has also been completed, with Commission Regulation (EU) 2026/338 of 13 February 2026, published in the Official Journal of the EU on 16 February 2026. Under Article 2 of the Regulation, each company applies the amendments at the latest from the start of its first financial year beginning on or after 1 January 2027, the same date as IFRS 18 itself. For Ukrainian groups with companies in the EU, this means the whole consolidation perimeter moves over at the same time. On 17 February 2026, ESMA issued its statement ESMA32-193237008-9180 "Reshaping performance: Implementation of IFRS 18", noting that together with national competent authorities it will closely monitor how transparent disclosures are about the implementation and (expected) impact of the standard.
Three categories or five: what the standard actually requires
IFRS 18 distinguishes three main categories of income and expenses: operating, investing and financing. Each item of income and expense must be classified into one of five categories: the three main ones plus income taxes and discontinued operations (paragraphs 47–52). The most common mistake when drafting the new layout: the standard does not require the categories to be labelled in the statement, or a subtotal to be shown for each of them (ESMA statement, footnote 4).
There are two new required subtotals: "operating profit or loss" and "profit or loss before financing and income taxes" (paragraphs 69–74). There is one exception: an entity does not present the second subtotal if it applies the accounting policy in paragraph 65(a)(ii) (paragraph 73). The operating category is the default category: it includes everything not classified in the investing, financing, income taxes or discontinued operations categories (paragraph 52).
IAS 1 and IFRS 18 compared
| Area | IAS 1 (until 2027) | IFRS 18 (from 01.01.2027) |
|---|---|---|
| Classification of income and expenses | No set structure | Three main categories within a structure of five (paragraphs 47–52) |
| Subtotals | Not required | Operating profit; profit before financing and income taxes (paragraphs 69–74) |
| Operating expenses | By nature or by function | Mixed presentation permitted (paragraphs 78, 79, B80–B82) |
| Management performance measures | Outside the financial statements | MPMs in a single note with a reconciliation (paragraphs 122–125) |
| "Other" line item | No restrictions | Only when no more informative label is available (paragraphs 43, B25–B26) |
| Line items in the primary statements | Rigid lists | Minimum requirements; material information in the notes (paragraphs 23, 24, B8) |
The key message for investors and lenders: IFRS 18 does not change recognition and measurement requirements and does not affect how financial results are measured. What changes is classification, the structure of presentation and the extent of disclosures. The transition is reviewed as part of an audit of financial statements.
Mapping typical line items: where each amount will go
The main work in 2026 is deciding how specific line items are classified.
Classification of typical items under IFRS 18
| Item | IFRS 18 category | Reference |
|---|---|---|
| Foreign exchange differences | Category of the related item; operating if this would involve undue cost or effort | paragraphs B65, B68 |
| Unwinding of the discount on a provision and the effect of a change in the discount rate | Financing | paragraphs 61, B54(e) |
| Change in the best estimate of the expenditure required to settle a provision | Operating (default) | paragraphs 52, 61 |
| Designated hedging instruments | Category of the risk being managed; operating if grossing up would be required | paragraphs B70–B72 |
| Fair value remeasurement of a contingent consideration liability in a business combination | Operating | paragraph B55(c) |
| Incremental costs directly attributable to acquiring and disposing of certain investments | Investing | paragraph 54(c) |
| Interest on lease liabilities and on IAS 19 liabilities for entities that provide financing to customers | Financing (previously often operating) | paragraphs 65(b), B54(c)–(d) |
A structural trap: the IFRS 18 categories do not match the IAS 7 cash flow categories (paragraph BC86 of the Basis for Conclusions). An item in the investing category is not necessarily an "investing cash flow", so merging the two classifications into a single set of analytics leads to errors.
Specified main business activities: banks, leasing, investment property
Entities with "specified main business activities", meaning those that (i) invest in particular types of assets or (ii) provide financing to customers, classify in the operating category some income and expenses that would otherwise fall into the investing or financing category (paragraphs 49 and 50). The assessment is made for the reporting entity as a whole (paragraph B37), so the conclusion for a consolidated group and for a subsidiary may differ, which affects group accounting policies and reporting packages.
Whether an entity has a main business activity is a matter of fact, and management's assertion alone does not settle it: the conclusion rests on evidence, and the standard gives indicators, such as using a subtotal similar to gross profit as an important measure of operating performance, or segment information (paragraphs B33–B36). ESMA adds that minor or ancillary activities are unlikely to meet the criteria for a main business activity. For banks and leasing companies the consequence is specific: an entity that provides financing to customers keeps in the operating category only the interest expense on transactions that involve only the raising of finance, while interest on lease liabilities and on IAS 19 liabilities moves to the financing category, so operating profit will change.
There is also a "looks like gross profit" trap: the amounts listed in paragraph B123 (net interest income; net fee and commission income; insurance service result; net financial result; net rental income) are not MPMs, and ESMA warns against extending this principle to measures that go beyond the literal wording of paragraphs 118 and B123.
MPMs: management performance measures become part of the audited financial statements
MPMs are subtotals of income and expenses that an entity uses in public communications outside the financial statements, that communicate management's view of an aspect of the entity's financial performance as a whole, and that are not listed in paragraph 118 or required to be presented or disclosed by other standards (paragraph 117). "Public communications" include the management commentary, press releases and investor presentations, and exclude oral communications, written transcripts of oral communications and social media posts (paragraph B119); ESMA adds prospectuses to this list.
Information about all MPMs is given in a single separate note, which includes a statement that the measures provide management's view and are not necessarily comparable with measures with similar names used by other entities (paragraph 122). For each MPM the entity discloses: a description of the aspect of performance and why the measure is useful; how it is calculated; a reconciliation to the most directly comparable subtotal listed in paragraph 118 or another subtotal required by the standards; for each reconciling item, the income tax effect and the effect on non-controlling interests; and a description of how the tax effect was determined (paragraph 123). ESMA notes that these requirements are broadly consistent with the disclosure principles of its Guidelines on Alternative Performance Measures (APMs), and the interaction between the two sets of rules is covered in a separate Q&A (No. 2775). There is a rebuttable presumption that a measure reflects management's view (paragraph 119), and it can be rebutted only with reasonable and supportable information (paragraph 120).
EBITDA deserves a separate mention. IFRS 18 does not define the term; instead, paragraph 118 lists the subtotal "operating profit or loss before depreciation, amortisation and impairments within the scope of IAS 36" (OPDAI). ESMA stresses that OPDAI may be called "EBITDA" only when that label faithfully describes the measure (BC363–BC365). For companies with EBITDA covenants, this is a direct risk.
Changes to the statement of cash flows and earnings per share
Operating profit becomes the starting point for the indirect method under IAS 7, and the choice of classification for interest and dividends is removed.
Classification of interest and dividends in the statement of cash flows
| Cash flow | Before (IAS 7 before the amendments) | After (with IFRS 18) |
|---|---|---|
| Dividends paid | Accounting policy choice | Financing activities (IAS 7, paragraph 33A) |
| Interest paid | Accounting policy choice | Financing activities (IAS 7, paragraph 34A(a)) |
| Interest and dividends received | Accounting policy choice | Investing activities (IAS 7, paragraph 34A(b)) |
| Entities with specified main business activities | — | Classification follows how the related income and expenses are classified in the statement of profit or loss (IAS 7, paragraphs 34B–34D) |
Comparative cash flow information must be restated. Under IAS 33, additional earnings per share figures are permitted only when the numerator is a subtotal under paragraph 69, 86 or 118 of IFRS 18 or an MPM, and they are presented only in the notes (IAS 33, paragraphs 73B–73C).
Disaggregating expenses: a specification for the accounting system
Entities that present operating expenses by function disclose in a single note, for each of five expenses "by nature" (depreciation, amortisation, employee benefits, impairment losses and their reversals, and write-downs of inventories and their reversals): (i) the total amount, (ii) the amount relating to each line item in the operating category, and (iii) a list of any line items outside that category that also include such amounts (paragraph 83(a)–(b)). A qualitative description of the nature of the expenses in each functional line item is also required (paragraph 82(b)). The standard does not separately define what "cost of sales" includes; it only states that this line item includes the amount of inventory expense under paragraph 38 of IAS 2, so the judgement applied must be consistent over time.
This is the list of analytics that must be set up in the accounting system during 2026: ESMA states plainly that adjusting IT systems early may be necessary, because comparative data for 2026 will also have to be presented at the new level of detail. Setting up these analytics is joint work for the finance team and the accounting services provider.
Two local issues: the UA XBRL taxonomy and national forms
On 2 December 2025, the Financial Reporting System Management Committee approved the electronic format of the UA IFRS XBRL Taxonomy 2025 (v.1.0), for preparing electronic financial statements for 2025 and interim financial statements in 2026. As of August 2026, no public timetable had been published for a separate entry point in the Ukrainian taxonomy for the IFRS 18 structure. The IFRS Accounting Taxonomy 2025, by contrast, already has two entry points (IAS 1 and IFRS 18), and ESMA has included this update in its draft RTS on ESEF 2025 (ESMA32-1867552937-3765), warning that companies will need to remap their own extension elements and remove those that duplicate new standard elements.
The second issue is the national forms. The financial statement forms set by National Accounting Standard (НП(С)БО) 1 are used by all legal entities required to file financial statements, except banks and budget institutions (paragraph 3 of Ministry of Finance Order No. 73 of 7 February 2013). The financial statements are an appendix to, and an integral part of, the corporate income tax return (Article 46.2 of the Tax Code of Ukraine; the return form was approved by Ministry of Finance Order No. 897 of 20 October 2015), and under subparagraph 134.1.1 of the Tax Code the tax base is the pre-tax financial result shown in them. The State Tax Service has clarified that reporting based on the UA XBRL taxonomy does not release a company from filing its financial statements with the tax authority in XML format (letter No. 1278/2/99-00-21-01-01-02 of 18 November 2025). The standard will therefore have to be implemented in two digital environments, and it is worth modelling the consequences of this gap in advance as part of a tax audit.
Action plan for 2026
The transition is retrospective under IAS 8; the quantitative information required by paragraph 28(f) of IAS 8 does not need to be presented (paragraph C2). In the first annual financial statements under IFRS 18, the entity presents a reconciliation for each line item in the statement of profit or loss between the restated comparative amounts and the amounts previously presented under IAS 1 (paragraph C3). In addition, paragraphs 30–31 of IAS 8 require disclosure of the expected impact of a standard issued but not yet effective.
IFRS 18 transition timetable
| Period | Action | Basis |
|---|---|---|
| H2 2026 | Test for specified main business activities for the reporting entity, with the evidence documented | paragraphs 49, 50, B33–B37 |
| H2 2026 | Inventory of public communications and a list of future MPMs | paragraphs 117, 118, B119 |
| During 2026 | Analytics for expense disaggregation and mapping of line items to categories | paragraph 83(a)–(b) |
| During 2026 | Review of covenants, KPIs in remuneration plans and tender criteria | ESMA statement of 17.02.2026 |
| 2026 financial statements | Disclosure of the expected impact: judgements, changes to the structure of the statement, the conclusion on main business activities, the list of MPMs | IAS 8, paragraphs 30–31 |
| 2027 | First interim financial statements under IFRS 18, with headings, subtotals and reconciliations of comparative figures | paragraphs C4–C5, B120 |
Keep in mind the transition option in paragraph C7 as well: an entity eligible to apply paragraph 18 of IAS 28 (venture capital organisations, mutual funds, unit trusts and similar entities) may, at the date of initial application, change its election and move from the equity method to measurement at fair value through profit or loss. The IASB clarified the scope of this option separately: on 26 June 2026 it issued "Amendments to the Fair Value Option for Investments in Associates and Joint Ventures", which apply when an entity first applies IFRS 18.
If you are assessing the impact of IFRS 18 on your group's reporting, our IFRS reporting specialists can review your situation and agree the scope of work.
Frequently asked questions
When does IFRS 18 take effect in Ukraine?
IFRS 18 applies to annual reporting periods beginning on or after 1 January 2027, with earlier application permitted provided that fact is disclosed in the notes (IFRS 18, paragraph C1). Ukrainian companies apply the same date.
Is a Ministry of Finance order needed to approve IFRS 18?
No separate order is needed: under Article 12-1(1) of Law No. 996-XIV, financial statements are prepared using the international standards published in the state language on the official website of the Ministry of Finance. The publication of the translation on 2 June 2025 already made IFRS 18 applicable, so waiting for an order only delays preparation.
How does IFRS 18 differ from IAS 1?
IFRS 18 replaces IAS 1 and gives structure to the statement of profit or loss: three main categories of income and expenses within five classification categories, two new required subtotals, MPM disclosures and stronger rules on aggregation and disaggregation. Some IAS 1 requirements have moved to IAS 8 and IFRS 7, and IAS 8 has been renamed "Basis of Preparation of Financial Statements".
Do the 2026 financial statements need to be restated under IFRS 18?
Yes. Comparative figures for 2026 are restated under IFRS 18, because the transition is retrospective under IAS 8, and the first annual financial statements under the new standard include a reconciliation for each line item in the statement of profit or loss to the amounts previously presented under IAS 1. Comparative cash flow information is restated as well.
What are MPMs and which measures must be disclosed in the notes?
MPMs are subtotals of income and expenses used in public communications outside the financial statements that communicate management's view of an aspect of the entity's financial performance as a whole and are not listed in paragraph 118 of IFRS 18. For each one, a single note gives a description, the calculation and a reconciliation to the most directly comparable subtotal, including the income tax effect and the effect on non-controlling interests for each reconciling item.
Will IFRS 18 affect corporate income tax?
The standard does not change recognition and measurement requirements, so the tax base under subparagraph 134.1.1 of the Tax Code of Ukraine, the pre-tax financial result, does not change merely because line items are reclassified. At the same time, the financial statements in the НП(С)БО 1 formats remain an appendix to, and an integral part of, the tax return (Article 46.2 of the Tax Code), and reporting based on the UA XBRL taxonomy does not replace filing them with the tax authority.
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