Earn Free CPE: You Don't Get to Define Operating Profit Anymore
IAS 1 is gone.
IFRS 18 replaces it, and it doesn't just tweak the edges. It rewrites how entities present the statement of profit or loss, which changes how you read financial statements for years to come.
Start with the classification framework, because it drives everything else. Every item of income and expense now has to land in one of five categories: operating, investing, financing, income taxes, or discontinued operations. Everything goes somewhere.
And here's the part that will bite people. You can't pull something out of operating just because it's volatile, unusual, or non-recurring. If it doesn't meet the criteria for another category, it's operating. Full stop. For any company that's been flexible about defining its own version of operating profit, that's a real change in mindset.
There are also two mandatory subtotals now: operating profit, and profit before financing and income taxes. If you've ever tried to compare two companies in the same industry and found they defined "operating" differently, this is the fix. Both were complying with IFRS. You were still comparing apples to oranges.
This is the first episode of a new show we just launched at Earmark called Standard Practice. Standards aren't just boxes to check, and this show digs into the audit, accounting, and tax rules that shape the profession and what they actually mean when you're the one applying them.
Meredith Mednick, CPA, CA, and I got into all of it in episode 1. And you can earn free CPE credit just for listening.
Register here: https://earmark.app/c/3645
Here's what else we covered:
A naming trap: The investing and financing categories in IFRS 18 are not the same as investing and financing activities in IAS 7. The IASB acknowledged this would cause confusion and kept the names anyway.
Management-defined performance measures: Your adjusted, non-GAAP style metrics now come with real disclosure requirements. This pulls management's own numbers into the financial statements in a controlled, transparent way.
Aggregation and disaggregation: New rules on how much you group and how much you break out. A lot of the judgment lives here.
What doesn't change: Recognition and measurement are untouched. This is purely presentation and disclosure, which doesn't make the impact small.
Goodwill and EPS: Goodwill now gets its own line in the statement of financial position, and there are amendments to IAS 33 on what numerators you can use for additional EPS disclosures.
It takes effect for periods beginning on or after January 1, 2027. That sounds far away. It isn't, if you're the one restating comparatives and rebuilding the mapping from your chart of accounts to those five categories.
How to earn free CPE
Listen to the episode on Earmark, take the quiz, and get your credit. It's free.
Register here: https://earmark.app/c/3645
