For a company with a 31 December year-end that first applies IFRS 18 in 2027, the figures its finance team is booking this quarter will form the comparative in its first IFRS 18 financial statements. IFRS 18 Presentation and Disclosure in Financial Statements applies to annual periods beginning on or after 1 January 2027, with earlier application permitted, and applies retrospectively. The financial statements issued for 2026 remain as issued under IAS 1. In the 2027 statements, however, the 2026 comparative amounts are restated under IFRS 18, and each line item in the 2026 statement of profit or loss must be reconciled between the restated amount and the amount previously presented. For those companies, the comparative year began on 1 January 2026.

IFRS 18 does not, in general, change profit for the year, because it introduces no new recognition or measurement model. It changes where income and expenses are classified, which subtotals a company must present, and which of management’s own measures must be explained inside the financial statements.

To see what it means in practice, we read the audited 2025 financial statements of 11 companies listed on the Nigerian Exchange, across telecommunications, cement, oil and gas, consumer goods, construction, agriculture and conglomerates. We prepared an indicative re-presentation of each statement of profit or loss for 2025 and 2024 from published figures. Where the statements did not identify the source of an item, particularly an exchange difference, we did not estimate it; we treated its classification as unresolved.

Three limits apply throughout. This is a purposive sample of 11, not the market. On their stated principal activities, we treated none of the 11 as investing in assets or providing financing to customers as a main business activity; IFRS 18 has specific requirements for entities that do, under which certain income and expenses are operating (paragraphs 49 to 51). For ten that is clear from the description of the business. For one, a group that describes itself as investing in and operating portfolio companies is a judgement, and the company’s own assessment may differ. And the published statements show what each company discloses, not what its accounting records can produce.

Three findings stand out.

1. For ten of the 11, the effect on operating profit cannot be determined from the published statements

IFRS 18 sorts income and expenses into operating, investing, financing, income taxes and discontinued operations, and requires companies to present two new defined subtotals: operating profit, and profit before financing and income taxes. All 11 companies already present an operating subtotal, but its composition varies: eight report exchange differences wholly or mainly below it, and three within it.

Under the standard, an exchange difference follows the item that produced it (paragraph B65). In general, a loss on trade payables is operating, a loss on a borrowing is financing, and a gain on an investment deposit is investing.

Only one of the 11 gives an analysis sufficient, from the published statements alone, to link its exchange differences to the underlying items. The other ten do not. Some disclose a net amount, some distinguish realised from unrealised, and some separate financing items from the rest; none of those answers the classification question in full.

That one company illustrates the mechanism. In 2024, moving the exchange losses on its trade balances into operating profit reduces reported operating profit by about a quarter. In 2025, when its exchange differences were far smaller, the same reclassification moves operating profit by less than 1 per cent. Profits for the year are unchanged in both years. This is one company in two years; it shows how the effect arises; not how common it will be.

For all 11, counting only the items we could classify, the change in 2025 is no more than about 6 per cent of reported operating profit. The unresolved items are the larger question: for one company, the unclassified exchange gain reported within operating profit exceeds the operating profit itself. The effect on the 2026 comparative will depend on exchange-rate movements, on each company’s foreign-currency exposures, and on the items that generate the differences.

2. Management’s own profit measure will move into financial statements

In the documents we read, at least five of the 11 companies use EBITDA (earnings before interest, tax, depreciation and amortisation), an adjusted measure or an underlying measure. Such a measure is a management-defined performance measure if it meets the definition in paragraph 117: a subtotal of income and expenses, used in public communications outside the financial statements, to communicate management’s view of an aspect of performance.

The label does not decide the answer. The calculation and the use do. Operating profit before depreciation, amortisation and impairment within the scope of IAS 36 is a subtotal the standard lists and is not a management-defined performance measure (paragraph 118). A measure that also excludes costs management describes as one-off falls outside that list and must be tested against paragraph 117. Measures with similar names can therefore fall on different sides of the line, and in this sample they do.

A measure that meets the definition may still appear in the earnings release. The required information must also be disclosed in a single note to the financial statements, including a reconciliation to the most directly comparable subtotal and the tax and non-controlling interest effect of each reconciling item (paragraphs 122 and 123). That raises a completeness question for the audit: has every measure in public communications that meets the definition been captured in the note?

3. For ten of the 11, the statement of cash flows changes at its starting line

IFRS 18 amends IAS 7 Statement of Cash Flows. Under the indirect method, the starting point becomes operating profit (IAS 7 paragraph 18(b). Ten of the 11 use the indirect method: nine starts from profit before tax today and one from profit for the year. The eleventh uses the direct method, which this change does not affect.

For an entity that does not invest in assets or provide financing to customers as a main business activity, the amendments also remove a choice. Interest paid and dividends paid are financing cash flows; interest received and dividends received are investing cash flows (paragraphs 33A and 34A). Where one of those activities is a main business activity, classification follows the related income and expenses instead (paragraphs 34B to 34D). Ten of the 11 already classify these cash flows, where they arise, in that way. For the eleventh, reported net cash from operating activities would have been about 27 per cent higher in 2025, with no change in the net movement in cash and cash equivalents.

What we recommend before the comparative year closes

• Confirm that 2026 exchange differences can be linked to the items that produced them, in the ledger or another controlled system that reconciles to it.
• List every profit measure used in results announcements, investor presentations and other public communications, and test each against paragraphs 117 and 118. Review measures given privately to lenders separately; a covenant report is not, by that use alone, public communication.
• Map transactions and balances to the five categories, and test lines labelled “other” for whether they combine dissimilar items or obscure material information.
• Brief the audit committee on the restated operating subtotal before the market sees it. This is our recommendation, not a requirement of the standard.

The strongest objection

It is fair to say that these changes do not, themselves, alter profit for the year, the net movement in cash or the tax liability, so the work can wait. We do not think that the dates survive. For a company with a 31 December year-end first applying IFRS 18 in 2027, the comparative period is 2026. Where the source of an exchange difference is not captured during the year, reconstructing it afterwards may be costly, judgemental and difficult to evidence. A company whose records already hold that link has nothing to do on this point; the value of checking now is in finding out which kind of company you are.

If it would help to compare notes on how your own statement of profit or loss would be re-presented, we are glad to discuss. Contact: Akeem Taofik, Director, Governance, Risk & Compliance; [email protected].

Method: We reviewed the audited 2025 financial statements, with 2024 comparatives, of 11 companies listed on the Nigerian Exchange, together with results documents and one earnings release, as published at 8 October 2026. The sample is purposive, not random, and none of the 11 is a client of the firm. We assessed main business activities from each company’s stated principal activities; for one company that assessment is a judgement. Two companies were analysed at company level, and one reports an 18-month period, so results are not comparable in every respect. The re-presentations are illustrative applications of IFRS 18 and not the companies’ own assessments. Where published disclosures did not identify the source of an item, we treated its classification as unresolved; percentages are of reported operating profit and exclude unresolved items. We did not obtain information from management and draw no conclusion about any company’s records or readiness.

Stransact Chartered Accountants is a correspondent firm of RSM International. This article is general commentary and is not professional advice.