IFRS 18 applies for annual reporting periods beginning on or after 1 January 2027 and will change how businesses present and disclose information in their financial statements. As implementation planning gathers pace, four IFRS Interpretations Committee agenda decisions finalised in April 2026 provide timely practical guidance on areas where judgement, data and documentation will matter.

The agenda decisions do not amend IFRS accounting standards, but they explain how the committee expects existing requirements to be applied. Businesses applying IFRS 18 should therefore consider whether these decisions affect their transition assessments, accounting policies, reporting processes or conversations with auditors.

What do the latest IFRIC agenda decisions mean for IFRS 18 implementation?

1. Foreign exchange classifications on intragroup balances require policy decisions

The committee considered how a group should classify foreign exchange differences arising from an intragroup monetary asset or liability where the underlying intragroup balance is eliminated on consolidation, but the exchange difference remains in consolidated profit or loss.

The decision confirms that more than one approach may be supportable. A group may classify the exchange difference in the default operating category or in the category in which the income and expenses from the item that gave rise to the exchange difference would have been classified before their elimination on consolidation, unless doing so involves undue cost or effort. The key practical point is that groups need a clear accounting policy, applied consistently to similar items.

2. Parent companies’ IFRS 18 conclusions may be different from those of the group

The committee considered a parent company whose only substantive activities were holding investments in subsidiaries, making decisions about managing those investments and distributing returns to shareholders. In its separate financial statements, the parent accounted for the subsidiaries at cost under IAS 27.

The decision confirms that the assessment of a specified main business activity is made from the perspective of the reporting entity. For a parent’s separate financial statements, this may lead to a different conclusion from the consolidated group financial statements. Furthermore, the committee concluded that in the scenario considered, if the parent did not have a specified main business activity of investing in unconsolidated subsidiaries, then the result would be that the parent did not have any main business activity.

This was considered inconsistent with the underlying requirements of the standard. Therefore, where the parent’s only substantive activity is investing in subsidiaries, it may be considered to have a specified main business activity of investing in unconsolidated subsidiaries, and therefore the income and expenses from those investments may be classified in operating profit or loss. The absence of indicators such as segmental information or operating performance subtotals does not preclude this conclusion. Businesses should document the evidence supporting their conclusion for each reporting entity.

3. Disclosure requirements could be wider than expected

IFRS 18 requires additional disclosure of specified expenses by nature when an entity includes any expense-by-function line item in the operating category. The committee confirmed that this requirement is not limited to the operating expense line items specifically listed in IFRS 18. It can apply to any financial statements where the income statement includes an operating category line item that comprises expenses classified by function, including line items required by other IFRS accounting standards.

This may widen the disclosure exercise for certain entities. Businesses will need to identify functional expense line items and ensure systems can capture specified nature-based amounts, such as depreciation, amortisation and employee benefits. In some cases, disclosed amounts may include costs initially recognised as part of an asset before being recognised in profit or loss, with appropriate qualitative explanation.

4. Classification of derivative gains and losses depends on the risks being managed

The committee considered a group that used an external forward contract to manage the foreign currency risk of a net liability exposure, without designating the derivative as a hedging instrument under IFRS 9. The decision considered whether gains and losses on the derivative should be classified based on the net exposure being managed or the gross exposure, being the underlying investing and financing positions.

The decision confirms that classification of derivative gains and losses depends on the identified risk the derivative is used to manage, based on the facts, circumstances and risk management policy.

Where the derivative manages a net exposure affecting a single category, gains and losses are classified in that category. In the fact pattern considered, this was the financing category. The committee also highlighted that grossing up of gains and losses is prohibited. If a derivative manages gross exposures affecting more than one category, classification may be more complex and could default to operating if allocation would require grossing up or involve undue cost or effort.

What should businesses do to prepare for IFRS 18?

These agenda decisions are a useful reminder that IFRS 18 implementation is not just a formatting exercise. The standard may affect accounting policy choices, entity-specific judgements, consolidation data, treasury documentation and disclosure processes.

Businesses should use the period before adoption to identify affected transactions and reporting entities, test whether current systems can provide the required information, and agree a supportable approach with auditors before the first IFRS 18 reporting period.

Practical implementation actions

• Map material foreign currency, treasury and intragroup arrangements that could affect IFRS 18 categories.
• Assess specified main business activities separately for each reporting entity, including parent company separate financial statements.
• Identify all operating category line items that include expenses classified by function and capture data to disclose operating expenses by nature.
• Review risk management policies and derivative documentation to confirm the nature of the identified risks managed by each derivative.
• Document accounting policy choices, judgemental classifications and any undue cost or effort conclusions.
• Engage early with auditors, particularly where classification affects key subtotals, performance measures or management reporting.

How RSM can help

The April 2026 agenda decisions provide helpful clarification, but they also underline the need for a practical and well-documented implementation plan. Our accounting and financial reporting specialists can help you assess how IFRS 18 affects your financial statements, identify data and process gaps, and develop a supportable approach to presentation and disclosure. Reach out to Tiaan Fourie, Lou Ward, or your usual RSM contact to discuss how we can support your organisation with IFRS 18 implementation.

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