“Start early, and start with the income statement”

Liandie Kies, Assurance Partner at PwC South Africa

In an interview with Bizweek, Liandie Kies, Assurance Partner at PwC South Africa, explains how IFRS 18 will reshape financial reporting by introducing greater consistency and comparability in the presentation of financial performance. With the new standard becoming effective for annual reporting periods beginning on or after 1 January 2027, she urges Mauritian companies to start preparing now, highlighting the importance of assessing management performance measures, reviewing reporting systems and understanding the standard’s entity-specific requirements.

Beyond the buzz, what will IFRS 18 fundamentally change in the way companies present and communicate their financial performance, and why is this standard considered a significant step forward in financial reporting?

From a standard-setting perspective, the objective was to develop a standard that promotes greater consistency and comparability across entities and different types of businesses. The standard introduces new rules and requirements designed to standardise the way companies present their financial performance.

In addition, significantly more work is required to assess management performance measures. These measures are now addressed more explicitly under the standard, helping to improve transparency and enable greater comparability between entities.

IFRS 18 introduces new categories and defined subtotals in the statement of profit or loss, including operating profit. How will these changes improve comparability between companies, particularly across different industries and jurisdictions?

This is really the crux of what IFRS 18 seeks to achieve: a consistent approach to determining operating profit, regardless of an entity’s industry, type of business or size.

Achieving this objective requires companies to understand and apply the new rules introduced by the standard. This involves considerable work in interpreting the requirements, unpacking their implications and determining how they apply to individual entities.

The ultimate objective is to establish a consistent method for determining operating profit under IFRS 18, allowing users of financial statements to make more meaningful comparisons between companies.

With IFRS 18 becoming effective for reporting periods beginning on 1 January 2027, what practical steps should Mauritian companies, finance teams and boards take now to ensure a smooth transition, and what risks could arise if implementation is left until the last minute?

The first priority is not to underestimate the amount of work involved. The volume of questions submitted to the standard setter even before the standard becomes effective illustrates some of the complexities that companies may encounter as they prepare for transition and adoption.

Second, IFRS 18 requires an assessment at the reporting-entity level. Existing practices, whereby businesses rely on standardised reporting packs or established presentation formats, could therefore become challenging. Companies will need to undertake entity-specific assessments rather than assume that existing approaches can simply be carried forward.

Third, businesses must identify and assess their management performance measures and develop the systems necessary to capture the information required for disclosure. 

Leaving implementation until the last minute could make it more difficult to address these complexities systematically and ensure that the necessary information, processes and reporting systems are in place.

What would be your advice to Mauritian companies preparing for IFRS 18?

Start early. If you have not started yet, start now. Begin with the income statement, then move to the cash flow statement, and finally to the notes to the financial statements.

IFRS 18 is systematic in the sense that decisions made at the outset can influence many other aspects of financial reporting. That is why companies need to approach implementation in a structured manner, starting with the income statement and progressively addressing the other requirements.