IFRS 18 Starts in 2027. Why Nigerian Companies Need to Act in 2026

Your total profit may not change. But your operating profit, bank covenants, management KPIs, investor story, cash-flow presentation and financial-reporting architecture might.

By Joe Adinma, FCA, FCTI — Managing Partner, Joe Adinma & Co. (Chartered Accountants)

Last updated: 16 September 2026

ACT I Why IFRS 18 Is Already a 2026 Problem

The 2027 standard that is already a 2026 problem

Imagine a Nigerian manufacturing group closing its September 2026 management accounts.

It is profitable. It has significant bank facilities. Some borrowings are dollar-denominated. Its loan agreements contain interest-cover and leverage tests. Management routinely tells the board and lenders that “adjusted EBITDA” is the best measure of underlying performance. Its finance team records exchange gains and losses in a broad general-ledger account and prepares the annual financial statements through a combination of ERP reports and year-end Excel schedules.

Nothing about that description is unusual.

Now introduce IFRS 18 — Presentation and Disclosure in Financial Statements.

From annual reporting periods beginning on or after 1 January 2027, IFRS 18 replaces IAS 1. The new Standard does not ordinarily change whether the company has earned ₦10 billion, ₦15 billion or ₦20 billion of total profit. What it can change is how that performance is classified, presented, explained and compared.

And because IFRS 18 is applied retrospectively, a calendar-year company will need its 2026 comparative information on the new basis.

IFRS 18 starts in 2027. But for a 31 December year-end company, the numbers being generated today are already becoming the IFRS 18 comparatives.

That changes the implementation question completely. The issue is no longer whether finance teams should learn a new presentation standard before next year. The issue is whether today's systems, charts of accounts, treasury coding, management reports, public performance measures and loan documentation can support tomorrow's financial statements.

NIGERIA'S REGULATOR IS ALREADY LIVING THIS TRANSITION

The Financial Reporting Council of Nigeria's own signed 2025 financial statements confirm this is not a foreign-standard commentary imported into Nigeria. The FRC states that IFRS 18's presentation and disclosure effects are expected to be “pervasive” for its own accounts, confirms its 2026 comparative information will require restatement, and identifies expected changes to how it presents interest received and interest paid. Nigeria's own financial-reporting regulator is preparing its own 2026 comparatives for IFRS 18 right now — not in 2027.

THERE IS ANOTHER REASON 2026 DATA MATTERS — YOU WILL HAVE TO RECONCILE IT

Restating the 2026 comparative is not simply a matter of re-presenting it in a new format. Paragraph C3 of IFRS 18 requires an entity, in its first IFRS 18 financial statements, to disclose a line-by-line reconciliation for the comparative period between the amounts previously presented under IAS 1 and the restated IFRS 18 amounts. The same reconciliation requirement extends to comparative interim periods under IAS 34, per paragraph C5 — so for companies that report quarterly or half-yearly, the transition pressure does not wait for the December 2027 annual report. The practical implication is sharper than “keep the 2026 numbers”: companies will need to demonstrate, line by line, how the old presentation became the new one.

This is therefore not a formatting project for December 2027. It is a financial-reporting transition that has already begun.

ACT II What Actually Changes

Three changes that matter most

IFRS 18 was issued by the International Accounting Standards Board in April 2024 to improve how companies communicate financial performance. It replaces IAS 1, while carrying forward many familiar presentation requirements and relocating some requirements to other Standards.

• A more structured statement of profit or loss, including defined subtotals for operating profit and profit before financing and income taxes.

• New disclosures for qualifying Management-defined Performance Measures (MPMs).

• Stronger principles for aggregation, disaggregation and labelling, intended to reduce the loss of useful information inside overly broad captions.

IFRS 18 also brings consequential amendments to IAS 7 on the statement of cash flows and to IAS 34 for interim reporting.

Same profit. Very different business.

Consider two simplified Nigerian companies operating in the same industry:

Both companies report ₦15 billion profit before tax. Yet they are not telling the same economic story.

Company A has a strong operating engine. Company B's core operations are weak — its ₦18 billion largely reflects a gain on disposal of a non-core equity stake and dividend income from treasury investments. Both qualify for the investing category under IFRS 18 because they arise from assets that generate returns largely independently of Company B's main business activity, rather than from the business itself.

That distinction matters enormously in Nigeria, where high finance costs, investment income, foreign-exchange movements and complex funding structures can materially reshape the journey from operating performance to profit before tax.

IFRS 18 responds by requiring income and expenses to be classified into operating, investing, financing, income taxes and discontinued operations, subject to specific rules — including special requirements for entities with specified main business activities.

What the new profit or loss architecture can look like

For a simplified non-financial company, an IFRS 18-style presentation could look like this:

The example is deliberately simple; actual classification must follow IFRS 18. But the visual point is important. Users can see the operating result before investing and financing effects reshape the bottom line.

A company can have a good factory, a good product and a good operating margin — and still have a financing structure that destroys much of the value created by operations.

A CLARIFICATION WORTH MAKING EXPLICIT — OPERATING DOES NOT MEAN RECURRING

It is tempting to read IFRS 18's operating category as shorthand for “core” or “recurring” business activity. That is not how the Standard works. Operating functions as the default, residual category: paragraph 52 of IFRS 18 requires an entity to classify income and expenses in the operating category unless a specific requirement directs them into investing, financing, income taxes or discontinued operations. An unusual, volatile or non-recurring item is not automatically excluded from operating profit simply because it is unusual. A large one-off item that does not meet the specific definition of investing or financing income or expense stays in operating — and can move the operating-profit subtotal in ways management may not expect. Non-recurring does not mean non-operating.

In Nigeria, finance costs may become an even louder boardroom number

Suppose a manufacturer earns ₦12 billion of operating profit but incurs ₦8 billion of finance costs. The factory may be performing well, yet two-thirds of the operating result is being consumed by financing.

For boards, the conversation can shift from “we made a profit” to harder questions: How much did the operating business actually earn? How much value did financing consume? Is the debt structure still rational? Should facilities be refinanced, repriced or reduced?

IFRS 18 is an accounting standard, not a corporate-finance strategy. But clearer presentation can make the economic cost of financing decisions much harder to overlook inside the final profit number.

Foreign exchange: one GL account may no longer be good enough

Foreign-exchange gains and losses are a particularly Nigerian implementation issue.

Consider three exposures: a dollar loan used to finance the business; a foreign supplier payable for imported inventory; and a foreign-currency intercompany balance. All may generate exchange differences. But under IFRS 18, classification generally follows the category of the income or expense arising from the item that generated the exchange difference.

A finance team that currently posts all exchange differences into one broad account called “FX Gain/Loss” may therefore lack the information required for reliable classification.

IFRS 18 does build in a practical safety valve. Where tracing an exchange difference to its underlying item would involve undue cost or effort, paragraph B65 of IFRS 18 permits the entity to classify it in the operating category instead. That relief is genuinely useful — but it should not become a substitute for fixing weak source coding where a company can reasonably identify its material FX exposures. Relief for what is genuinely difficult to trace is different from relief for what nobody has bothered to trace.

For companies with material foreign-currency exposures, IFRS 18 should still trigger a review of treasury accounting, ERP configuration, intercompany coding, loan schedules and the chart of accounts — the relief narrows the burden, it does not remove it.

Banks, finance companies and investment businesses cannot be treated like manufacturers

Consider a Nigerian deposit money bank. Interest income on customer loans and the cost of funding those lending activities are not peripheral in the way interest on a factory loan may be for a manufacturer; financing customers is part of the bank's economic engine. IFRS 18 therefore contains specific classification requirements for entities whose main business activities include providing financing to customers or investing in particular types of assets.

That distinction is critical for Nigerian banks, mortgage institutions, finance companies, investment businesses, insurers and diversified financial groups. A classification that is appropriate for an industrial company cannot simply be imposed mechanically on a financial institution.

The assessment is made at the reporting-entity level. That creates another subtle issue: a subsidiary's classification in its separate financial statements may differ from the classification needed when the subsidiary is consolidated into a group with different main business activities — which can require changes to subsidiary reporting packs and consolidation mappings, not merely the group's published statement.

ACT III Where Management May Get Caught

“Adjusted EBITDA” is about to face a more disciplined question: adjusted from what?

Management teams routinely use non-IFRS performance measures because statutory profit does not always tell the story they want investors, lenders or boards to understand. That can be legitimate. It can also become selective.

A restructuring charge is excluded. An impairment is called exceptional. An FX loss is described as unusual. Then another “one-off” item appears the following year.

IFRS 18 introduces specific disclosure requirements for qualifying Management-defined Performance Measures. If a measure qualifies, management must explain it, show how it is calculated, and reconcile it to the most directly comparable IFRS-specified subtotal or total, including required tax and non-controlling-interest effects.

A worked MPM example

Assume the company publicly reports “Adjusted Operating Profit” of ₦23 billion while IFRS 18 operating profit is ₦18 billion. IFRS 18 requires the reconciliation to disclose not just the pre-tax adjustments but their income-tax and non-controlling-interest effects — so a complete reconciliation looks closer to this (figures illustrative):

The accounting question is not whether management is forbidden from using ₦23 billion. The transparency question is whether users can see exactly how management moved from ₦18 billion to ₦23 billion — including that the ₦5.0 billion of adjustments carries an estimated ₦1.5 billion tax effect and ₦0.3 billion attributable to non-controlling interests, information many adjusted-profit reconciliations under the old regime never showed. That is a significant shift from “trust our adjusted number” towards “show your work.”

Not every number executives discuss publicly becomes an MPM. Revenue, free cash flow, net debt, customer counts and operational KPIs do not automatically qualify merely because management refers to them in a results call. The IFRS 18 definition is specific: an MPM is a subtotal of income and expenses used in public communications outside the financial statements to communicate management's view of an aspect of financial performance as a whole, subject to specified exclusions. Finance teams should neither over-apply the MPM machinery to every KPI a business unit reports, nor assume a measure is exempt simply because it looks operational.

IFRS 18 IS EFFECTIVE IN MONTHS — AND THE INTERPRETIVE WORK IS STILL ACTIVE

At its 16–17 June 2026 meeting, the IFRS Interpretations Committee published tentative agenda decisions on live IFRS 18 questions — including MPMs involving hypothetical income and expenses, what counts as a public communication, and classification for entities with specified main business activities; comments closed 9 September 2026. The Committee met again on 15–16 September 2026, adding a question on assets that generate a return individually and largely independently of an entity's other resources — the same investing-category boundary this article discusses. Separately, the IASB has tentatively decided to propose an amendment on classifying tax charges imposed as a direct substitute for income tax, including OECD Pillar Two charges, with further discussion in September 2026 and an Exposure Draft expected Q4 2026. None of this changes IFRS 18's core requirements or its 1 January 2027 effective date — but it confirms that implementation interpretation is a moving target through the transition period, not guidance to read once and file away.

Investor relations is now part of the accounting implementation

Because the MPM definition looks to specified public communications outside the financial statements, IFRS 18 reaches beyond the finance department. Management commentary, press releases and investor presentations are expressly relevant examples under the Standard.

For listed and other publicly communicating companies, finance, investor relations, corporate communications, legal, tax, internal audit and the audit committee need a common inventory of performance measures and a control process around their use.

A catchy earnings metric created outside the accounting department can become a financial-reporting issue.

“Other expenses” cannot become an accounting warehouse

IFRS 18 strengthens requirements for aggregation, disaggregation and meaningful labelling. Financial statements must aggregate information, but aggregation becomes a problem when materially different items disappear inside broad captions such as “other expenses”, “other income”, “other receivables” and “other payables”.

The word “other” is not banned. The question is whether the grouping obscures information material to understanding the company's financial position or performance. A ₦7 billion balance does not become informative simply because it is labelled “Other expenses — ₦7 billion.”

Expense presentation can expose weaknesses in the accounting system

Many Nigerian companies present operating expenses by function — cost of sales, administrative expenses, selling and distribution expenses. IFRS 18 introduces specified disclosures by nature where operating expenses are presented by function, including specified totals for depreciation, amortisation, employee benefits, impairment losses and reversals, and inventory write-downs and reversals.

One nuance worth knowing: these disclosed amounts do not have to equal the expense recognised in profit or loss for the period. Paragraph B84 of IFRS 18 confirms they can include amounts recognised as part of the carrying amount of an asset — for example, staff costs capitalised into work-in-progress or property, plant and equipment. Where that happens, the entity must explain it qualitatively and identify the assets involved. A company that simply pulls its income-statement expense lines without checking for capitalised amounts elsewhere may under-disclose.

For a well-designed ERP, this is a reporting exercise. For a weak chart of accounts supported by year-end manual allocations, it can become a reconstruction exercise.

The statement of cash flows changes too

IFRS 18 also amends IAS 7. For entities using the indirect method, operating profit or loss becomes the required starting point for reporting cash flows from operating activities. Nigeria's FRC has itself flagged this exact change in its own expected presentation of interest received and interest paid.

The classification requirements for interest and dividend cash flows change too, and the change is concrete. For an entity without specified main business activities, the old accounting-policy choice is largely removed:

Entities with specified main business activities — for example, an entity that provides financing to customers — follow different, activity-specific rules. But for an ordinary Nigerian manufacturer, trading company or services business, this table is the starting point for reviewing existing cash-flow policy. Companies therefore need to review cash-flow mappings and policies alongside the statement of profit or loss; treating IFRS 18 as an income-statement-only project would be incomplete.

ACT IV Why This Becomes a Governance and Systems Project

The covenant risk: IFRS 18 may not change profit, but it can change the conversation with your bank

Loan and bond agreements often contain covenants linked to measures such as operating profit, EBIT, EBITDA, interest cover or leverage. The effect of IFRS 18 will depend on the exact contractual wording. A covenant with a carefully fixed contractual definition may behave differently from one that refers dynamically to financial-statement subtotals or accounting standards.

Companies should therefore not assume that “presentation only” means “no covenant impact.” They should identify facilities and other agreements that use accounting-derived measures, determine whether definitions could be affected, model the consequences and engage lenders early where clarification or amendment is needed.

A breach caused by ambiguity that could have been identified months earlier is not an accounting problem. It is a governance failure.

One caution: this accounting analysis identifies where a contractual definition may be exposed to IFRS 18's effects. It cannot replace a legal review of the actual wording. The practical sequence runs from the accounting classification, to the covenant's contractual definition, to legal interpretation of that wording, to quantitative modelling of the effect, and finally to lender engagement — not straight from accounting change to conclusion.

IFRS 18 does not rewrite Nigerian tax law

IFRS 18 is principally a presentation and disclosure standard. Nigerian tax legislation determines taxable profit, allowable deductions, capital allowances and other tax consequences. Reclassifying an expense from one financial-statement category to another does not, by itself, make the expense deductible or non-deductible for tax.

But tax teams cannot ignore the transition. Where the presentation of financial performance changes, tax schedules and reconciliation processes may also need to be remapped so that the audit trail from accounting profit to taxable profit remains clear. IFRS 18 does not determine Nigerian tax liability, but tax and financial reporting should not implement it in separate rooms.

Why implementation may be harder in Nigeria than the Standard itself suggests

IFRS 18 was not written with any single jurisdiction in mind. But several features that are common — not universal, but common — in Nigerian finance functions make implementation more demanding here than the Standard's own text would suggest:

• multiple bank facilities and comparatively high financing costs, which make the operating/financing boundary matter more;

• material foreign-currency exposures, from dollar borrowings to imported inventory to intercompany balances;

• import-heavy supply chains with foreign supplier payables;

• related-party and intercompany funding arrangements that complicate financing/operating classification;

• Excel-heavy financial reporting processes layered on top of ERP systems;

• broad general-ledger accounts — a single “Other Income” or “FX Gain/Loss” line covering unrelated items;

• year-end reclassification as a habit, rather than transaction-level coding at the point of entry;

• management reporting structures that were never designed to mirror IFRS classification logic.

These are not uniquely Nigerian weaknesses. But their combination can make IFRS 18 implementation particularly demanding in Nigerian reporting environments — a systems-and-process exercise more than a training exercise. This applies equally beyond the Nigerian Exchange: unlisted entities applying full IFRS face the same classification questions as listed ones, though entities properly applying the IFRS for SMEs Accounting Standard should not import IFRS 18 into their accounts simply because the Standard exists.

The IFRS 18 transition bridge: one methodology for the whole exercise

The most useful practitioner response to the difficulties above is not to review IFRS 18 category by category. It is to build a transition bridge for every material income or expense stream, tracing it end to end:

THE BRIDGE

GL account → transaction source → today's IAS 1 presentation → IFRS 18 category → IFRS 18 line item → cash-flow mapping → MPM impact (if any) → covenant impact (if any).
Worked example: a foreign-currency loan's interest cost traces from the USD facility, through today's finance-cost line, into the financing category, into the finance-expense line item, into a financing cash flow, into or out of any adjusted-EBITDA measure the company reports publicly, and finally into the interest-cover covenant calculation on that same facility.

Built once for each material stream, this bridge does two things at once: it produces the classification mapping IFRS 18 requires, and it surfaces every downstream consequence — cash flow, MPM, covenant — that a category change on one line can trigger elsewhere. That is a materially more useful implementation tool than treating classification as a line-by-line exercise in isolation.

The global implementation wave is already moving

IFRS 18 is not sitting dormant until 2027. In February 2026, the European Union formally endorsed the Standard for financial years beginning on or after 1 January 2027, and the European Securities and Markets Authority issued a public statement urging timely, high-quality implementation — flagging IT systems, management reporting, communication strategy and audit-committee oversight as the areas regulators expect to scrutinise.

For Nigerian companies, the detail of European endorsement matters less than what it signals: major international regulators are already treating IFRS 18 implementation as a systems and governance exercise, not a formatting one — the same message Nigeria's own FRC is sending through its transition disclosures.

The biggest IFRS 18 risk is not misunderstanding the Standard. It is starting too late.

A company can download an IFRS 18 specimen financial statement and rearrange its headings in a day. That is not implementation.

Real implementation can reach into the chart of accounts, ERP, consolidation packs, treasury coding, management reporting, investor communications, accounting manuals, internal controls, tax reconciliations, budgets, covenant calculations and audit documentation. The organisations most likely to struggle are not necessarily those with the most complex financial statements. They are those whose financial statements are produced by heroic year-end manual work that the underlying accounting system cannot reproduce consistently.

If the finance team cannot explain where an exchange difference came from, cannot reconcile an adjusted performance measure, cannot disaggregate a material “other” balance, or cannot reproduce a KPI without one person's spreadsheet, the problem is bigger than IFRS 18.

ACT V What Nigerian Companies Should Do Before 31 December 2026

What a Nigerian CFO should do before 31 December 2026

If management does nothing else before the 2026 year-end close, these five actions should be completed. The fuller diagnostic that follows provides the implementation framework around them:

1. Run a dry IFRS 18 profit-or-loss using 2026 year-to-date numbers, even informally, to see where the classification lines actually fall.

2. Trace every material FX balance to its underlying source, rather than relying on one broad FX account.

3. Inventory every adjusted or “underlying” profit measure currently communicated outside the financial statements, and test each one against the MPM definition.

4. Test whether the ERP can produce the required expense-by-nature disclosures — including amounts capitalised into assets — without a manual year-end reconstruction.

5. Model existing covenant calculations under both the current presentation and the IFRS 18 presentation, and flag any measure at risk of ambiguity before the covenant test date, not after.

The Joe Adinma & Co. IFRS 18 Readiness Diagnostic

The international standard-setter has issued the rules. The European Union has endorsed them. Nigeria's Financial Reporting Council has assessed the effects as pervasive and is preparing its own 2026 comparatives. For Nigerian boards and CFOs, the conversation should therefore have moved from “Is IFRS 18 coming?” to “Are we ready?” The following twelve points, grouped into four workstreams, are the diagnostic we run with clients.

Reporting

1. Framework: Confirm which entities in the group apply full IFRS and therefore need IFRS 18.

2. Profit-or-loss mapping: Map material income and expense streams to the new categories and subtotals.

3. Business-activity assessment: Document whether any entity has specified main business activities that change classification.

Data & systems

4. FX architecture: Identify the source of material exchange differences and redesign coding where one broad FX account is insufficient — reserving the undue-cost-or-effort relief for genuinely untraceable items.

5. Aggregation review: Challenge material balances hidden in broad “other” captions.

6. Expense-by-nature readiness: Test whether systems can produce the specified nature disclosures, including capitalised amounts, where expenses are presented by function.

7. Cash-flow mapping: Update IAS 7 classifications and indirect-method starting points.

Performance & contracts

8. MPM inventory and controls: Catalogue adjusted, underlying and normalised subtotals used in public communications, and build reconciliation, tax/NCI, ownership and approval controls around each.

9. Covenants and contracts: Review facilities, bonds, incentive plans and agreements tied to accounting-derived performance measures — accounting analysis first, legal review before conclusions.

Transition & governance

10. Group reporting: Assess whether subsidiary reporting packs and consolidation mappings need redesign.

11. 2026 comparatives: Capture the information now, structured so it can support the required line-by-line IAS 1-to-IFRS 18 reconciliation, rather than reconstructing it under audit pressure.

12. Governance: Put implementation progress before the audit committee, involve the external auditor early, and for interim reporters build the paragraph C5 comparative reconciliation into the first-year interim timetable, not just the annual one.

What IFRS 18 is really asking Nigerian boards

Behind the technical requirements are a handful of uncomfortable but valuable questions:

• How much of our reported profit actually comes from our operating engine?

• Which performance measures do we present publicly, and can we reconcile every adjustment — including its tax and NCI effects?

• Could a change in accounting presentation create uncertainty in a loan covenant or contractual KPI?

• Are our 2026 transactions being captured today in a way that will support the 2027 financial statements, including the required comparative reconciliation?

Those are not merely accounting questions. They are questions about governance, capital structure, systems, transparency and the quality of management information.

Conclusion: 2027 is the effective date. 2026 is the preparation year.

IFRS 18 will not make a weak Nigerian business strong or a profitable company more profitable. But it can make the architecture of performance much clearer.

A company may still report the same total profit. Users may nevertheless see more clearly what came from operations, what came from investing, what financing consumed, how management constructed its preferred performance measures, and whether material information has been lost inside broad captions.

For calendar-year companies, 2026 is no longer merely the last IAS 1 reporting year. It is the comparative year that will have to be reconstructed, restated and reconciled when IFRS 18 is first applied. The companies that use the remaining months of 2026 to test classifications, data architecture, performance measures and contractual consequences will enter 2027 with a controlled transition. Those that wait for the 2027 audit may discover that the missing information cannot be recreated cleanly after the event.

The question is no longer, “When does IFRS 18 start?” The better question is: “If our 2026 numbers must tell the IFRS 18 story next year, are our systems, contracts and controls ready to tell it accurately?”

Professional note

This article is intended for professional education and general information. IFRS 18 implementation depends on an entity's facts, reporting framework, contractual terms and accounting judgements. Companies should perform an entity-specific assessment before changing accounting presentation, systems or contractual interpretations.

Authoritative and further reading

• IFRS Foundation — IFRS 18 Presentation and Disclosure in Financial Statements

• IFRS Foundation — Tentative Agenda Decision: Classification of a Foreign Exchange Difference from an Intragroup Monetary Liability (or Asset) (IFRS 18)

• IFRS Foundation — Tentative Agenda Decision: Scope of the Requirement to Disclose Expenses by Nature (IFRS 18)

• Financial Reporting Council of Nigeria — 2025 Financial Statements (including IFRS 18 transition disclosure)

• European Securities and Markets Authority — Reshaping performance: Implementation of IFRS 18 (17 February 2026)

• EUR-Lex — Commission Regulation (EU) 2026/338 endorsing IFRS 18

• Kreston Pedabo — IFRS 18: From Disclosure Discretion to Structured Accountability

• IFRS Foundation — IFRIC Update June 2026 (IFRS 18 tentative agenda decisions)

• IFRS Foundation — IFRS Interpretations Committee meeting, 15–16 September 2026 (agenda: Assets that Generate a Return Individually and Largely Independently of an Entity's Other Resources)

• IFRS Foundation — IASB Update July 2026 (proposed targeted IFRS 18 tax-classification amendment)