Getting Started with IFRS 18 Implementation – Part 1

Part 1: A Practical Guide for Finance Teams

• IFRS 18 is more than a reporting change
  It requires alignment across your chart of accounts, systems, data, and organisation. 
• Data consistency across entities is the real challenge
  Especially in multi-entity, multi-ERP environments where local postings do not always align with IFRS 18 classification. 
• Balance is critical: avoid over-engineering
  Too much automation and too many exceptions increase complexity and make your model harder to maintain and adapt. 

IFRS 18, effective January 1, 2027, is rapidly moving up the financial reporting agenda. While advisors and auditors are actively discussing its implications, hands-on implementation experience remains limited.

In this and the following articles, we focus on the practical side of IFRS 18 implementation. We share insights from our project experience, along with concrete guidance and proven approaches to help you get started with confidence.

1. Chart of Accounts Redesign under IFRS 18: More than Adding Accounts

IFRS 18 introduces new reporting lines and roll-ups, resulting in a more defined structure for operating profit measures.  One of the first steps for organisations is to redesign their chart of accounts. IFRS 18 often requires adding new accounts or splitting a single account into multiple categories (operating, investing, and financing). 

This requires careful interpretation, supported by clear guidance across the organisation. A clear (group) chart of accounts and accounting guidance is the foundation for a successful IFRS 18 transition. 

2. IFRS 18 Data Gathering Across Entities: The Coordination Challenge 

The impact of an IFRS 18 transition largely depends on the number of reporting entities and ERP systems involved. Requirements need to be defined centrally and translated into clear, consistent guidance, with sufficient assurance that local entities can deliver the required data. 

A key challenge is aligning accounting entries across both local ERP systems and the group consolidation environment. In many cases, this can be achieved through adjustments to posting rules using a principle-based mapping approach. However, there are situations where this is not sufficient, making allocation mechanisms or manual reclassifications necessary to address specific exceptions. 

Typical challenges arise in areas such as central overhead allocations, shared-service cost distributions, treasury-related allocations, and foreign exchange reclassifications. In these cases, local systems often capture transactions in generic accounts, requiring additional logic, allocation rules, or manual reclassifications to ensure alignment with IFRS 18 classification requirements. 

3. Striking the Right Balance: Accuracy vs. Over-Engineering in IFRS 18 Classification

Organisations must balance the need for accuracy with the risk of over-complicating their systems. The key challenge is finding the right balance between principle‑based mapping and automated classification across operating, investing, and financing categories. Excessive customisations and the introduction of numerous exception rules can quickly lead to unnecessary complexity, including: 

• Local entities struggle to consistently select the correct accounts, leading to posting errors and increased manual corrections. 
• The finance team introduces numerous exception rules in the consolidation system to “fix” misclassifications, making the data model harder to understand and maintain. 
• When IFRS guidance evolves, or management changes its performance measures (MPMs), the entire structure must be revisited, requiring significant rework across ERP mappings, reporting logic and historical restatements.

4. Change Management in IFRS 18: The Human Factor

While technical system changes are significant, in practice, effective change management proves even more critical. Local accounting departments must be ready to report at the new level, and if people are not prepared, even the best technical setup will not deliver results. This typically requires a clear runbook, targeted training sessions, and a pilot phase with a small group of entities to ease the transition. 

5. Navigating Dual Reporting: IFRS 18 Transition and Parallel Runs

Many organisations will need to report IAS 1 and IFRS 18 in parallel during the 2026 close, while preparing restated comparative figures for inclusion in the 2027 annual report. This introduces additional complexity, requiring parallel reporting structures, extra data roll-ups, and enhanced data quality controls. 

In practice, dual reporting significantly increases workload and can lead to confusion if not carefully coordinated. Clear ownership, alignment of definitions, and robust validation processes are essential to avoid inconsistencies between the two reporting views. Parallel reporting should therefore be treated as a core component of the overall change management plan. 

6. IFRS 18 Classification Challenges for Companies with Multiple Businesses 

In practice, the requirement to classify data according to operating, investing, or financing activities is not always straightforward. This becomes particularly challenging for diversified groups with multiple business models. Classification outcomes can differ between holding entities and subsidiaries, depending on their role in the value chain. For example, a subsidiary may classify an activity as operating, while the parent company considers the same activity as investing. Without clear group-wide principles, this can result in inconsistent classification and reduced comparability across the group. 

Turning Challenges into Solutions 

IFRS 18 implementation is not merely a technical exercise; it requires alignment across systems, processes, and people. The level of complexity depends on factors such as the number of entities, the system landscape, and the maturity of the reporting function. Organisations that approach IFRS 18 as a structured transformation, rather than a compliance exercise, are better positioned to deliver a sustainable and future-proof reporting model.  

Ready to move from insight to action?

In our next article, we share practical design principles, key decisions, and proven approaches based on our IFRS 18 implementation experience.