The International Accounting Standards Board (IASB) issued International Financial Reporting Standards 18 [IFRS 18] Presentation and Disclosure in Financial Statements in April 2024. This release signifies a substantial shift in how the financial statements are presented and disclosed.
It represents more than a technical revision. It responds to users' growing demands for meaningful and useful financial information for economic decision making and therefore reframes the way entities communicate the financial performance and position, emphasises clarity, consistency, and comparability across entities and industries. As the global accounting landscape continue to evolve, the Accounting Standards Council (ASC) of Singapore aims to align with the international trend. Consequently, they released the Singapore Financial Reporting Standards (International) 18 [SFRS(I) 18] Presentation and Disclosure in Financial Statements, six months later in the same year. SFRS(I) 18 will replace SFRS(I) 1-1 Presentation of Financial Statements with effect from 1 January 2027.
Table of contents
- Classification of Income and Expenses and Mandatory Subtotals under SFRS(I) 18
- Management-Defined Performance Measures and Disclosure Requirements under SFRS(I) 18
- Materiality and Aggregation
- Transition
- Conclusion
Classification of Income and Expenses and Mandatory Subtotals under SFRS(I) 18
At its core, SFRS(I) 18 retains the fundamental purpose of financial statements, which is to provide useful information about an entity's financial position, performance, and cash flows to a wide range of users for their economic decision making. However, it introduces a more structured and principle-based approach to how information is presented, particularly within the Statement of Profit or Loss.
Under the SFRS(I) 18, income and expenses are classified into five defined categories, namely Operating, Investing, Financing, Income Taxes and Discontinued Operations. Specifically, the Investing category includes income and expenses from assets that generate returns independently of an entity’s primary operations, such as dividend income from investments, while the Financing category includes income and expenses related to obtaining or servicing financing, reflecting how the entity funds its operations. All income tax-related income and expenses are presented within the Income Taxes category, improving the clarity of the tax effect on an entity’s performance. If an entity discontinues a major part of its operations, the results of it should be classified under the Discontinued Operations category, enabling users to better assess the sustainability of the entity’s ongoing performance.
The Operating category includes income and expenses arising from an entity’s core business activities, such as revenue, cost of sales, administrative and selling expenses, and other items that are not classified as Investing, Financing, Income Taxes, or Discontinued Operations. It reflects the results of the entity’s ordinary operations. If an entity’s main business activities involve investing or lending money, items such as rental income, dividends and interest earned from loans should be shown as part of its Operating Profit. This structured format replaces the flexibility previously allowed under SFRS(I) 1-1, thereby enhancing the transparency, and improving the comparability and understandability of the financial information across entities and reporting periods.
Under SFRS(I) 18, entities are required to present three defined subtotals in the Statement of Profit or Loss, namely Operating Profit or Loss, Profit or Loss before Financing and Income Taxes, and Profit or Loss (net result for the period). Previously, under SFRS(I) 1-1, such subtotals were not defined, which reduced comparability in performance reporting among entities. The Operating Profit or Loss subtotal enables users to assess an entity’s profitability from its core operations. The Profit or Loss before Financing and Income Taxes subtotal shows how an entity performed independently of its financing structure and the tax effects. Finally, the Profit or Loss subtotal reflects an entity’s overall performance for the period.
Management-Defined Performance Measures and Disclosure Requirements under SFRS(I) 18
SFRS(I) 18 introduces the concept of “management-defined performance measures” (MPM). It represents a direct response to concerns about non-GAAP or non-SFRS(I)1 measures that often appear in earnings releases but not in financial statements.
A non-GAAP or non-SFRS(I) measure such as EBITDA2 are commonly used by companies to show their underlying performance. For example, Singapore Exchange Limited (SGX) uses adjusted EBITDA to show the profitability of its exchange operations independent of financing costs and amortisation of acquired intangibles. This helps users assess the efficiency of its recurring trading, clearing and listing activities. Genting Singapore Limited, the operator of Resorts World Sentosa, discloses EBITDA to demonstrate the cash-generating ability of its resort and casino operations. As depreciation on large buildings, theme-park rides, and hotel assets is substantial, EBITDA helps investors understand the cash generated from operations before these non-cash expenses.
Under SFRS(I) 18, any measure such as EBITDA that is communicated externally and qualifies as an MPM must be disclosed in a single note in the financial statements, together with a clear reconciliation to the nearest SFRS(I)-defined subtotal, such as Operating Profit or Loss. In this regard, similar disclosure practices can be seen in the United States. In its third quarter 2025 financial report, Tesla provides a reconciliation between GAAP and non-GAAP financial measures in line with US Securities and Exchange Commission (SEC) rules. The SEC requires public companies to clearly label non-GAAP measures and provide a reconciliation to the most directly comparable GAAP measure.
This requirement does not prohibit the use of EBITDA, rather it ensures that such measures are presented transparently and consistently, reducing the risk of misleading performance portrayals and enhancing the credibility and comparability of financial reporting.
Materiality and Aggregation
The standard also places renewed emphasis on the disclosure of material information. Under the new guidance, entities must prioritise the most relevant information while avoiding immaterial or boilerplate disclosures. To support this, the standard strengthens the concept of materiality, requiring entities to exercise professional judgment in assessing what is material and to organise notes in a more logical, entity-specific manner. Disclosures may be grouped by similar themes to improve clarity and avoid unnecessarily lengthy notes. Entities are also encouraged to use cross-referencing, tables, and visual aids to enhance readability and facilitate users navigation through complex disclosures.
Furthermore, SFRS(I) 18 calls for enhanced reporting of financial statement items. The standard sets out the principle of aggregation in primary financial statements, emphasising the grouping of similar items to provide structured and useful summaries. It also calls for disaggregation in the notes, requiring entities to disclose separate line items based on characteristics that are not shared. This principle discourages grouping significant items under broad categories such as Other Expenses, thereby improving clarity for users and capital providers.
Transition
An entity shall apply SFRS(I) 18 for annual reporting periods beginning on or after 1 January 2027, retrospectively. It must present, in its annual financial statements, a reconciliation of each income statement line item from IAS 1 to SFRS(I) 18 for the comparative period before first-time application. Reconciliation for the first year of application is optional.
Conclusion
SFRS(I) 18 is more than a mere update to a legacy standard. It represents a recalibration of financial reporting principles to address the evolving needs of users and regulators. As the transition approaches, early preparation and thoughtful implementation will be essential, especially since entities must present comparatives based on the five new categories of information. Ultimately, entities that embrace the standard not simply as a compliance requirement, but as an opportunity to enhance clarity, transparency and stakeholder communication, will be best positioned to leverage the reframed financial narrative the standard enables.
By Lau Chew King, Senior Lecturer, Nanyang Business School, Nanyang Technological University and Rony Lim, Senior Lecturer, Nanyang Business School, Nanyang Technological University
