IFRS 18 is coming: why 2026 is the year to prepare
IFRS 18 is coming: why 2026 is the year to prepare
The biggest change to financial statement presentation in a generation is almost here. IFRS 18 takes effect for reporting periods beginning on or after 1 January 2027, replacing IAS 1 and reshaping how companies present financial performance. Because it requires comparative figures, the practical work starts in 2026, not 2027.
What is changing?
IFRS 18 introduces a common structure for the statement of profit or loss, requiring income and expenses to be sorted into defined categories, operating, investing and financing, with newly required subtotals such as operating profit. It also brings 'management-defined performance measures', the non-standard figures companies use in their communications, into the audited financial statements with a required reconciliation. And it sets sharper principles on how items are aggregated and disaggregated, so that useful detail is not lost in vague line items.
The aim is comparability and transparency: making it easier for investors and analysts to compare one company's performance with another's, and to see how management's preferred metrics relate to the audited numbers. It does not change how profit is measured, but it substantially changes how that profit is presented and explained.
What it means for Azerbaijan?
Azerbaijan applies International Financial Reporting Standards, and under the Accounting Law new and amended standards become effective as the International Accounting Standards Board issues them. Public interest entities report under full IFRS, and larger entities apply IFRS or IFRS for SMEs, so IFRS 18 will reach a wide range of Azerbaijani companies, and audits of those statements will need to reflect it. Major firms, including EY in Azerbaijan, have already begun publishing guidance for the local market.
The requirement to restate the prior year for comparison is what makes timing urgent. A company reporting under the new standard for 2027 will need its 2026 figures presented on the same basis. That means the systems, mappings and judgements behind the new presentation have to be worked out during 2026, not left until the standard formally applies.
The requirement to restate the prior year for comparison is what makes timing urgent. A company reporting under the new standard for 2027 will need its 2026 figures presented on the same basis. That means the systems, mappings and judgements behind the new presentation have to be worked out during 2026, not left until the standard formally applies.
What businesses should do now
Preparation is practical and sequential. Companies should assess how their current income statement maps to the new categories, identify the management-defined performance measures they will need to disclose and reconcile, and check whether their accounting systems can produce the new subtotals and disaggregated information. Early modelling of the new format, on real numbers, surfaces the issues while there is still time to solve them.
This is also a conversation to have early with your auditor, so that expectations align well before the first mandatory statements. BDO Azerbaijan helps companies plan the transition to IFRS 18, from mapping and systems to disclosure and comparatives, so the change is a managed project rather than a year-end scramble.
This is also a conversation to have early with your auditor, so that expectations align well before the first mandatory statements. BDO Azerbaijan helps companies plan the transition to IFRS 18, from mapping and systems to disclosure and comparatives, so the change is a managed project rather than a year-end scramble.