Why this matters now
IFRS 18 changes how the statement of profit or loss is presented. It introduces consistent categories, new required subtotals, and clearer disclosures. The first mandatory application will need a comparative year. That is why 2026 matters. If you plan ahead, you will avoid last-minute rework and you will be able to explain the effects with confidence in SBR ACCA answers.
This guide sets out what changes, what to do in 2026 to build clean comparatives, and how to write about it in the exam. If you want a calm place to begin with exam craft and study tactics, start with this hub for an acca exam success guide written in plain English.
The core changes in IFRS 18 – short and practical
Think about three themes. If you can explain these well, you are ready for most SBR scenarios on the topic.
- Clear categories in profit or loss
Income and expenses are classified into operating, investing, and financing categories. The aim is consistent subtotals and better comparability. - Required subtotals
Operating profit becomes a defined subtotal. There are also defined financing subtotals. You must apply the definitions, not a personal preference. - Management-defined performance measures
If management uses measures not required by IFRS – like an adjusted operating profit – you must reconcile them to IFRS totals and explain them.
There are wider points on disaggregation, unusual items, equity-accounted results, and notes. But those three ideas will carry most answers.
What this means for SBR answers
Markers want applied writing. Your script should do three things:
- Set out the rule in a line or two – IFRS 18 requires categories and subtotals with consistent definitions.
- Apply to the case – show where the entity’s current presentation does not fit and how to fix it.
- Conclude – state the required change in presentation and any extra disclosure.
Use short sentences. Avoid filler. Keep it precise. This approach supports pass acca exams in a calm way.
If you want structured practice that fits around work, explore a guided acca sbr course and plug the techniques from this article into your weekly plan.
Planning 2026 comparatives – a simple roadmap
You will need 2026 numbers that already follow IFRS 18 rules, so that 2027 financial statements have clean comparatives. Here is a practical plan.
1) Map old lines to new categories
- Take the 2025 P and L and map each line to operating, investing, or financing based on IFRS 18 definitions.
- Flag judgement areas – for example, income and expenses from associates and joint ventures, and costs that are financing in nature.
2) Define operating profit properly
- Identify items that sit outside operating profit because they are investing or financing.
- Ensure the resulting subtotal reflects the entity’s main business activities without one-off classification moves.
3) Create a policy for management-defined performance measures
- List the measures management uses internally.
- Keep only those that help users understand performance.
- Prepare reconciliations to IFRS subtotals and draft clear descriptions.
4) Disaggregate where it helps users
- Split material lines by nature or function if it improves understanding.
- Avoid long lists that do not change decisions.
5) Build a 2026 trial balance that supports the new presentation
- Update the chart of accounts with category tags.
- Train the finance team to code items correctly.
- Prepare 2026 monthly reports using IFRS 18 style so issues are found early.
6) Prepare the notes
- Draft language for unusual items and explain why they are unusual.
- Plan the reconciliations for management-defined performance measures.
- Decide how to describe changes from the previous presentation.
This is operational work, but it is also exam craft. You can turn each step into a short, applied paragraph using the issue – rule – apply – conclude frame.
Example – moving to a defined operating profit
Scenario
A retailer currently shows “Operating profit” that excludes some store closure costs, interest on lease liabilities, and gains on sale of surplus property. Under IFRS 18, interest on lease liabilities is financing. Gains on sale of property are usually investing. Store closure costs may be operating if they arise from core activities.
Answer structure
- Issue – whether the current subtotal labelled operating profit meets IFRS 18.
- Rule – IFRS 18 defines categories and required subtotals. Subtotals must follow the standard, not management preference.
- Apply – reclassify interest on lease liabilities to financing and gains on sale of property to investing. Review store closure costs and include them in operating unless they relate to discontinued operations or meet a specific definition that takes them outside operating.
- Conclude – present a compliant operating profit subtotal and explain any management-defined performance measure separately with a reconciliation.
This is the level of clarity that earns marks.
Where linking topics can appear
SBR blends presentation with recognition and measurement. IFRS 18 will surface alongside other standards.
- IFRS 11 – share of profit or loss of joint ventures and joint operations needs clear placement and explanation. Practise a short paragraph that classifies equity-accounted results and explains their position relative to operating profit. This is a common area for sbr acca questions.
- Hedge accounting – cash flow hedges that affect cost of sales will change operating profit when recycled. You can use a compact example to bridge from the reserves movement to the line in profit or loss. This helps if the scenario mentions a commodity hedge or a forward contract.
- Impairment and provisions – material impairment losses and restructuring provisions need clear presentation and disclosure. Tie your writing back to the category and the message it gives users.
Connecting the dots keeps your answer focused and professional.
Building 2026 comparatives without stress
A light routine beats a big push. Here is a plan you can start this week.
Weekly loop
- Targets – two short mapping tasks and one 20 minute scenario.
- Midweek check – confirm any judgement calls for category placement.
- Submission – produce one neat paragraph that sets out the new operating profit and explains key reclassifications.
- Reset – add one phrase to your notes and plan next week.
If you like accountability, fold this into a course timetable. You can review formats under online acca courses uk and choose a run with scheduled submissions.
Phrase bank you can reuse
- “Operating profit is derived from the entity’s main business activities and excludes income and expenses classified as investing or financing.”
- “The subtotal labelled operating profit must follow IFRS definitions – management cannot adjust it by policy choice.”
- “Management-defined performance measures are presented with a clear reconciliation to IFRS subtotals and a description of why the measure is useful.”
- “Unusual items are explained with their nature and financial effect so users can understand their impact on performance.”
Keep these lines short. Use them to open paragraphs. This saves time and lifts clarity.
Common pitfalls and how to avoid them
- Creating a personal definition of operating profit
Use the standard’s categories. Do not cherry pick items to improve the subtotal. - Hiding adjustments in new labels
If you present an adjusted measure, reconcile it and explain it. Do not rename an IFRS subtotal. - Over-disaggregation
Split only where it helps understanding. Excess detail hurts clarity and time control. - Weak link to cash flows
Remember that users care about cash. If category changes move items between operating, investing, and financing, the narrative should reflect the business story. - Not planning 2026 early
If you wait until 2027 to reformat 2026, you will spend time on detective work. Build IFRS 18 style reports during 2026 to find issues as you go.
Two compact drills for exam practice
Drill 1 – 12 minutes
A manufacturer shows interest income from surplus cash within operating profit. Write a paragraph that classifies it under IFRS 18, explains the effect on operating profit, and states any further disclosure needed.
Drill 2 – 18 minutes
A group presents an “adjusted operating profit” that removes stock losses from a warehouse fire. Draft a short response setting out whether this is an acceptable management-defined performance measure, how it should be reconciled, and what an SBR-quality disclosure looks like.
Practise both. Then rewrite the weakest lines using the four step frame.
How to talk about IFRS 18 in SBR without over-explaining
Markers reward applied, concise writing. You do not need pages of theory. Keep a one page note for IFRS 18 and use it to shape answers.
Your one page note might include:
- Categories in profit or loss and the logic behind them.
- Defined subtotals and how to compute them.
- Management-defined performance measures with reconciliation.
- Guidance on unusual items and disaggregation.
- A short list of typical reclassifications for your industry.
Rehearse the note by writing a six line summary out loud. If a sentence feels long, split it. This supports a high reading score and lowers stress.
Tying planning work to exam technique
You can turn 2026 planning into study fuel.
- From mapping to writing – each reclassification becomes a neat paragraph you can reuse in the exam.
- From reconciliations to clarity – building a reconciliation for a management-defined measure teaches you to write short bridge statements.
- From monthly IFRS 18 reports to time control – presenting monthly results to time helps you build the habit of finishing answers.
If you want this built into a timetable with marking, look at a structured acca sbr course and align planning tasks to the study weeks.
Frequently asked candidate questions
Is IFRS 18 only a disclosure change
No. It changes presentation and requires specific subtotals. It also introduces rules around management-defined performance measures. The numbers may not change, but how you present and explain them will.
How does this affect group reporting for equity-accounted investees
You will need to place those results consistently and explain the impact on operating profit. Keep your answer short – classification, effect, and any note reference.
Will this make SBR harder
It changes the context, not the craft. You still apply the rule to the case and conclude clearly. Practise short, applied paragraphs and you will be fine.
What should I prioritise in 2026 if time is tight
Update the chart of accounts, map key lines to categories, define operating profit correctly, and draft reconciliations for any management-defined measure. That work gives you clean comparatives and clear exam material.
A two week micro plan for 2026 setup
Week 1
- Day 1 – Map five major P and L lines to categories and draft one paragraph on operating profit.
- Day 2 – Identify all management-defined performance measures and write one reconciliation example.
- Day 3 – Prepare a one page IFRS 18 note with key phrases.
- Day 4 – Timed 20 minute scenario on reclassifying interest and gains on disposal.
- Day 5 – Review and clean your mapping.
- Day 6 – Practise a six line answer on unusual items.
- Day 7 – Rest or light review.
Week 2
- Day 1 – Update the chart of accounts with category tags.
- Day 2 – Build a template P and L for 2026 monthly reporting.
- Day 3 – Write a paragraph that explains an adjusted measure and its reconciliation.
- Day 4 – Short case on equity-accounted results placement.
- Day 5 – Sit a 30 minute mixed set and finish each part.
- Day 6 – Rewrite one weak section to 8 to 10 lines.
- Day 7 – Set three targets for next week.
This keeps momentum without long days. It also builds content you can use in real answers.
Where tuition fits if you want support
Some candidates prefer guidance. A steady path with an acca sbr course can provide deadlines, mocks, and practical marking. If you want light touch help or quick checks on scripts, you can also browse the main site for a calm acca exam success guide and connect to support that matches your schedule.
Final check before you move on
- I can define operating, investing, and financing categories.
- I can state what operating profit includes and excludes.
- I can explain a management-defined performance measure and reconcile it.
- I have a 2026 plan – mapping, chart of accounts, monthly IFRS 18 style reports, and draft notes.
- I can write a clear six line answer that applies IFRS 18 to a case.
If you can tick these points, you are ready for both planning and exam writing. Keep your language simple. Keep your structure tight. Finish the paper. That is how to approach IFRS 18 with calm confidence and build towards acca exam success in the coming sitting.
