IFRS 18 in 2027: your management metrics now have to be defensible

IFRS 18 is effective for reporting periods beginning on or after 1 January 2027, and it replaces IAS 1. It is the biggest change to how companies present financial performance in a generation, and one part of it matters directly to anyone who reports a “management” number: Management Performance Measures.

What changes

IFRS 18 requires income and expenses to be classified into defined categories, operating, investing, financing, income taxes and discontinued operations, and it standardises how operating profit is presented. It also introduces Management Performance Measures (MPMs): the subtotals management uses in public communications to convey its own view of performance. These can no longer sit only in unaudited commentary. They must appear in a single note inside the financial statements and be reconciled, line by line, to the most directly comparable IFRS subtotal.

Why this is harder than it sounds

Plenty of companies publish an “adjusted operating margin”, a “contribution by segment” or a “true profitability” figure. Under IFRS 18 those numbers move inside the audited boundary. The auditor will ask how the figure is built, what cost is in it, and whether the allocation behind it is consistent and supportable. A measure assembled from spreadsheet adjustments and volume-based overhead splits is exactly the kind of thing that becomes uncomfortable under that scrutiny.

Where a TDABC model earns its keep

If your management measures rest on a Time-Driven Activity-Based Costing model, every figure is traceable to the activity, the capacity and the cost driver behind it. The reconciliation to the IFRS subtotal becomes an exercise in disclosure, not a defence of guesswork. The same model that lets you run the business gives the auditor the evidence trail the standard now demands.

2027 is close enough that the work to put a defensible cost model behind your management measures should start now. We are not your auditor; we build that model. See the IFRS and cost-model overview or how cost connects to strategy and execution.