IFRS 18 Signals a Shift From Reporting Numbers to Explaining Performance

For many CFOs, the introduction of IFRS 18 is being discussed as a technical accounting change — a new standard that will require updated classifications, revised subtotals, and some reworking of financial statements.

That framing is convenient, and it is also misleading.

In reality, IFRS 18 is not primarily about presentation mechanics. It is about something far more fundamental: how companies explain performance, and how much discretion they retain in shaping the narrative around the numbers.

For years, CFOs have been able to manage performance conversations through a mix of adjusted metrics, alternative subtotals, and carefully constructed explanations. IFRS 18 does not eliminate judgment — but it narrows the space in which judgment can be used to obscure rather than clarify.

That is why this standard matters far beyond the finance function.

How We Got Comfortable Managing the Story

To understand the significance of IFRS 18, it helps to acknowledge how performance reporting has evolved over the last two decades.

As businesses became more complex and investor communication more competitive, CFOs were encouraged — sometimes explicitly — to help stakeholders “understand the business better” through non-GAAP measures, adjusted earnings, and bespoke performance indicators.

In many cases, this started with good intent. Statutory numbers often failed to capture underlying trends, particularly in capital-intensive or fast-growing businesses.

Adjustments were introduced to strip out volatility, one-offs, or non-cash items. Over time, however, a subtle shift occurred.

Instead of explaining performance, many organizations began curating it.

The same company could present different versions of “core performance” depending on the audience. Boards, lenders, and investors would each receive slightly different narratives, all technically defensible, but not always easily reconcilable.

This did not necessarily involve misstatement. But it did weaken comparability, discipline, and trust.

IFRS 18 is, in many ways, a response to that drift.

What IFRS 18 Is Really Trying to Fix

At its core, IFRS 18 aims to bring structure and consistency back to how performance is communicated.

By tightening definitions around operating profit, requiring clearer categorization of income and expenses, and placing guardrails around management-defined performance measures, the standard reduces the scope for performance storytelling that relies more on presentation than substance.

This is not about removing management judgment.

It is about forcing that judgment to be transparent and explainable.

Under IFRS 18, CFOs will find it harder to:

• shift items in and out of “operating” categories without clear rationale,

• rely on loosely defined adjusted metrics without reconciliation,

• or present performance narratives that cannot be traced cleanly back to audited numbers.

The implication is simple: performance must now be defended, not just displayed.

Why This Matters More Than Many CFOs Expect

For CFOs who see IFRS 18 as a future reporting exercise, the real impact may come as a surprise.

Because once performance becomes harder to manage through presentation, pressure moves upstream — into:

• budgeting assumptions,

• cost classification discipline,

• operational decision-making,

• and internal performance management.

If internal reporting is messy, externally explaining performance becomes painful.

If cost structures are poorly understood, operating margins become harder to defend.

If “adjustments” are relied on internally, they will be questioned externally.

In this sense, IFRS 18 does not create problems.

It reveals existing ones.

This is particularly relevant for companies:

• considering an IPO,

• operating in capital-intensive sectors,

• managing multiple business lines,

• or relying heavily on adjusted EBITDA narratives.

The Link to IPO Readiness and Investor Trust

For CFOs preparing businesses for public markets, IFRS 18 is a quiet but important signal.

Public investors care less about perfect numbers and more about credible explanations. They expect volatility, but they distrust opacity. They want to understand how management thinks, not just how it reports.

A company that relies heavily on performance measures that require long explanations, repeated caveats, or extensive reconciliation is immediately at a disadvantage.

IFRS 18 reinforces this dynamic by narrowing the gap between:

• what is reported,

• and what must be explained.

  
  

In IPO contexts, this matters enormously. Once a company is public, performance explanations are not delivered in closed boardrooms. They are tested in analyst calls, investor meetings, and market reactions.

IFRS 18 pushes CFOs to align internal performance logic with external scrutiny much earlier.

Boards and Audit Committees Will Feel This First

One of the less discussed implications of IFRS 18 is its impact on boardroom dynamics.

Audit committees, in particular, will have less tolerance for:

• loosely defined “underlying” results,

• performance narratives that shift quarter to quarter,

• or metrics that cannot be consistently applied.

CFOs will need to spend more time helping boards understand:

• why performance looks the way it does,

• what has genuinely changed,

• and which elements are structural versus temporary.

This requires clarity, not creativity.

In organizations where internal reporting discipline is weak, IFRS 18 will increase friction. In organizations where discipline already exists, it will strengthen credibility.

The Cultural Shift IFRS 18 Forces

Perhaps the most important change IFRS 18 introduces is cultural.

It nudges CFOs away from asking:

“How do we present this?”

And toward asking:

“How do we explain this — consistently, credibly, and without adjustment fatigue?”

That is a meaningful shift.

It requires:

• better cost understanding,

• tighter operating definitions,

• clearer accountability for performance drivers,

• and more honest internal conversations about what the numbers actually say.

This is uncomfortable in the short term. But it is healthy.

Preparing for IFRS 18 Is Not a Technical Exercise

CFOs who approach IFRS 18 as a disclosure or systems project will comply — but they may miss the opportunity.

The more important preparation lies in:

• reviewing how performance is discussed internally,

• challenging long-standing adjustment practices,

• simplifying performance metrics,

• and ensuring that what management believes about performance aligns with what can be defended externally.

In many ways, IFRS 18 is an invitation to rebuild performance credibility.

A Final Reflection

Standards like IFRS 18 rarely change how businesses perform.But they do change how performance is revealed.

For CFOs, this is not a threat. It is a chance to strengthen trust — with boards, investors, auditors, and ultimately the market.

The shift from reporting numbers to explaining performance is not about losing control of the narrative.

It is about earning the right to be believed.

And in an environment where credibility is increasingly scarce, that may be one of the most valuable assets a CFO can build.

---

Published by

Mohammad Kashif Javaid

✅ Strategic Finance Consultant ✅ ACS SYNERGY ✅ At ACS, we help growth seeking businesses with Finance Transformation, Accounting & Finance Operations, FP&A, Strategy, Valuation, & M&A 🌐 acssynergy.com