News alert / Presentation of financial statements to change with IFRS 18

A new accounting standard – IFRS 18 Presentation and disclosure in financial statements – will become effective for annual reporting periods beginning on or after 1 January 2027. However, it will need to be endorsed by the the UK Endorsement Board and then adopted and adapted for the public sector by the Treasury before it applies to NHS bodies. IFRS 18 will replace the current standard IAS 1 Presentation of financial statements, but  retains the current requirements with limited changes. It adds three new requirements:

• the income statement will be divided into three categories – operating, investing and financing. There are two newly defined sub-totals – operating profit and profit before financing and income taxes
• where organisations provide measures of financial performance that are specific to them (management defined performance measures), explanations of these measures will have to be disclosed in the accounts and therefore audited
• additional transparency about operating expenditure, the standard enhances guidance on whether information should be included in the primary financial statements or the notes to the accounts.

This standard will also result in some changes to the statement of cash flows and statement of financial position.