MFRS 18, Presentation and Disclosure in Financial Statements, becomes effective for annual reporting periods beginning on or after 1 January 2027. For many companies, however, the practical work should begin much earlier.
MFRS 18 will replace MFRS 101 Presentation of Financial Statements. The new Standard does not fundamentally change how companies recognise or measure their assets, liabilities, income and expenses. Instead, its main impact is on how financial performance is presented and explained in the financial statements.
For companies with a 31 December financial year-end, the first mandatory financial statements applying MFRS 18 will generally be for the year ending 31 December 2027.
But there is an important point that may easily be overlooked: the 2026 comparative figures will also need to be presented under the new requirements.
MFRS 18 is applied retrospectively, including the restatement of comparative information. This means 2026 should not simply be treated as a year to wait for MFRS 18 to arrive.
What is actually changing?
Three areas are likely to receive most of the attention.
1. A more structured statement of profit or loss
MFRS 18 introduces defined categories for income and expenses in the statement of profit or loss, including:
- operating;
- investing;
- financing;
- income taxes; and
- discontinued operations.
It also introduces defined subtotals, including:
- Operating profit; and
- Profit before financing and income taxes.
The objective is to improve consistency and make financial performance easier to compare across entities.
At first glance, this may look like a presentation exercise only. In practice, it may require more work, especially where the existing chart of accounts, reporting templates or group reporting packages were designed around the current presentation format.
2. Management performance measures will receive greater scrutiny
Many companies communicate performance using measures that are not specifically defined by MFRS Standards.
Examples may include:
- adjusted operating profit;
- normalised earnings; or
- internally defined profit measures used in public communications.
Under MFRS 18, certain measures may meet the definition of management-defined performance measures (MPMs).
Where they do, additional disclosures will be required, including reconciliation to an MFRS-defined total or subtotal.
This creates an important connection between financial reporting and how management communicates performance outside the financial statements.
A useful question is no longer only:
Is this measure useful to management?
It may also become:
If we communicate this number publicly, can we clearly explain how it is calculated and reconcile it to the financial statements?
3. More discipline around aggregation and disaggregation
MFRS 18 also introduces enhanced principles on how information is grouped and presented.
Companies will need to consider whether:
- items with different characteristics have been grouped too broadly;
- material information is being obscured by aggregation; and
- items described as “other” are sufficiently clear and meaningful.
This may affect both the primary financial statements and the notes.
For entities that have accumulated many line items over time, this may be a good opportunity to reassess whether the current presentation still communicates information effectively.
Changes to the cash flow statement
The effects of MFRS 18 are not limited to the statement of profit or loss.
There are also consequential amendments affecting the statement of cash flows. For companies using the indirect method, operating profit will generally become the starting point for presenting cash flows from operating activities.
The amendments also reduce some of the existing alternatives for classifying interest and dividend cash flows.
Accordingly, implementation should not focus only on the statement of profit or loss. Cash flow templates and reporting systems should also be reviewed.
Why start looking at this in 2026?
For many organisations, financial reporting is not just about changing a few lines in an annual report.
The final reporting output may depend on:
- the chart of accounts;
- general ledger mapping;
- consolidation packages;
- reporting templates;
- automated financial statements;
- management reporting; and
- information submitted by subsidiaries.
If those processes currently reflect the existing MFRS 101 presentation, changes may be required upstream.
There is also a practical reason to start early.
Because comparative information is required, companies applying MFRS 18 for the year ending 31 December 2027 will need to understand how their 2026 results would have been presented under MFRS 18.
Waiting until the 2027 year-end process may therefore create unnecessary pressure.
What should companies do now?
A sensible starting point would be an initial impact assessment.
Management can begin by:
- mapping the existing statement of profit or loss to the new MFRS 18 categories;
- identifying areas where classification will involve judgement;
- reviewing performance measures currently used in public communications;
- assessing whether existing financial statement line items are appropriately aggregated or disaggregated;
- reviewing the impact on the statement of cash flows; and
- identifying changes required to templates, consolidation packages or reporting systems.
For groups with multiple subsidiaries, it may also be worth considering whether the current reporting package captures enough information to support a consistent presentation across the group.
A presentation standard — but not merely a presentation exercise
MFRS 18 does not significantly change the underlying measurement of financial performance.
That does not mean implementation will necessarily be simple.
For some companies, the impact may be largely confined to presentation and disclosure. For others, particularly larger groups or entities with automated reporting processes, the implications may extend into chart-of-account mapping, consolidation procedures and management reporting.
The effective date may be 1 January 2027, but for many December year-end companies, 2026 is effectively the comparative year.
That makes 2026 a good time to understand the impact — before MFRS 18 becomes a year-end reporting issue.
Sources & references
- Malaysian Accounting Standards Board (MASB)
- IFRS Foundation
This article provides general information only and does not constitute tax, legal, accounting or financial advice. The appropriate treatment depends on the specific facts, applicable legislation and standards at the relevant time.