AASB 18: A New Era for Financial Statement Presentation and Disclosure

The Australian Accounting Standards Board (AASB) issued AASB 18 “Presentation and Disclosure in Financial Statements” on 14 June 2024. AASB 18 represents one of the most significant changes in financial reporting since the introduction of IFRS based standards over two decades ago. AASB 18 will replace AASB 101” Presentation of Financial Statements”.  AAAB 18 aims to enhance comparability, transparency, and provide meaningful communication in financial statements, especially in the statement of profit or loss.

AASB 18 applies to “for profit entities” for annual reporting periods beginning on or after 1 January 2027, with early adoption permitted. For not‑for‑profit private sector entities; not for-profit public-sector entities and superannuation entities applying AASB 1056, AASB 18 applies for annual reporting periods beginning on or after 1 January 2028, with early adoption permitted.

Retrospective application is also required, including detailed comparative reconciliations

AASB 18 will require entities to revisit the structure, labelling, and explanatory content of their primary statements and notes.

Key Changes Introduced by AASB 18

1. A New Structure for the Statement of Profit or Loss

The statement of profit or loss must categorise income and expenses as:

• Operating
• Investing
• Financing

This categorisation is consistent with the current statement of cash flows

And include two new mandatory subtotals:

• Operating profit, and
• Profit before financing and income taxes

These changes are expected to improve comparability and provide a stronger connection between board/management commentary and the audited financial statements.

2. Management Defined Performance Measures (MPM’s)

MPM’s such as EBITDA or “adjusted profit” can no longer be disclosed without:

• A reconciliation to the nearest AASB defined subtotal
• A statement explaining why the measure reflects management’s view
• A clear methodology for their calculation, and
• Disclosure of any changes to the measure from period to period

3. Enhanced Aggregation and Disaggregation Requirements

AASB 18 provides guidance on when items should be disclosed separately versus aggregated, reducing the use of uninformative “other” categories. Entities must consider:

• Nature and function
• Similarity of characteristics
• Materiality and relevance to users

This is expected to significantly improve clarity both on the face statement of profit or loss and in the notes to the financial statements.

Implications for Preparers

System and Process Changes

Entities may need to:

• Remap their chart of accounts
• Update financial reporting systems
• Reassess performance metrics and MPM’s
• Revisit internal control frameworks over classification and disclosure

As a result, your auditors will expect:

• Clear documentation supporting category assessments
• Transparent reconciliations for both current and comparative periods
• Robust explanations for new subtotals and MPM methodologies

Implications for Users of Financial Statements

AASB 18 aims to provide:

• More decision‑useful information
• Clearer depiction of operations vs. investing/financing activities
• Better insight into how management evaluates performance

This is especially important for investors evaluating comparability across industries and reporting periods.

Preparing for Implementation

To get ready for AASB 18, entities should:

1. Perform an impact assessment especially around categorisation and subtotals
2. Review and reconsider MPM’s in light of the new disclosure requirements
3. Design transition reconciliations early to avoid year‑end pressure
4. Educate audit committees and Boards on the presentation and disclosure changes
5. Update accounting policies to reflect the new standard, where applicable

Conclusion

AASB 18 is designed to modernise the structure of financial reporting in Australia by improving the consistency, comparability, and clarity of performance information.

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