UAE companies preparing financial statements under full IFRS should start getting ready for IFRS 18 before 2027 begins.

The new accounting standard becomes effective for annual reporting periods beginning on or after 1 January 2027 and replaces IAS 1 for the presentation and disclosure of financial statements.

For companies with a calendar financial year, there is another important point: 2026 comparative figures presented in the 2027 financial statements will need to be restated under IFRS 18 because the standard is applied retrospectively.

This means IFRS 18 should not be treated as something to address during the 2027 year-end audit.

Finance teams should start reviewing their reporting structure, accounting data and internal controls now.

What Is IFRS 18?

IFRS 18 changes how companies present and explain financial performance.

It does not generally change the way overall profit is measured. Instead, it introduces a clearer structure for presenting income and expenses and provides additional requirements around performance measures and disclosures.

For most companies, some of the biggest changes involve:

• new categories in the statement of profit or loss;
• new defined subtotals;
• management-defined performance measures;
• greater disaggregation of financial information;
• additional information about expenses; and
• related changes to the cash-flow statement.

The purpose is to make company performance easier for investors, lenders and other users of financial statements to understand and compare.

Which UAE Companies Should Review IFRS 18?

IFRS 18 applies to entities preparing general-purpose financial statements under full IFRS Accounting Standards.

Within the UAE Corporate Tax framework, businesses with revenue above AED 50 million are required to use full IFRS, while businesses within the permitted threshold may be eligible to use IFRS for SMEs, subject to the applicable rules.

Companies should therefore first confirm which accounting framework they actually use.

IFRS 18 readiness can be particularly important for:

• larger UAE companies;
• Qualifying Free Zone Persons using full IFRS;
• listed or regulated businesses;
• public-interest entities;
• subsidiaries reporting into international groups;
• companies with lender reporting requirements; and
• businesses already required to prepare audited financial statements.

A subsidiary may also need IFRS 18 information for group consolidation even where its own local reporting basis is different.

The Main Changes Under IFRS 18

A More Structured Profit or Loss Statement

One of the most visible changes is the structure of the statement of profit or loss.

For most businesses, income and expenses will be classified into categories including:

• operating;
• investing;
• financing;
• income tax; and
• discontinued operations.

Two important defined subtotals will also become more prominent:

Operating profit or loss

and

Profit or loss before financing and income taxes

For finance teams, this means existing general-ledger accounts need to be mapped carefully into the new categories.

Some areas may require more judgement, including:

• foreign-exchange differences;
• investment returns;
• financing components;
• derivatives;
• asset disposals; and
• other non-routine items.

The classification should be documented so it can be consistently reproduced and reviewed during the audit.

Management-Defined Performance Measures

IFRS 18 also introduces specific disclosure requirements for certain management-defined performance measures, commonly called MPMs.

These are performance subtotals used in public communications to explain management’s view of the company’s overall financial performance when the measure is not already specified by IFRS.

Depending on the business, these measures could appear in:

• investor presentations;
• press releases;
• management commentary;
• shareholder reports; or
• other external communications.

Where a measure qualifies as an MPM, the company may need to explain how it is calculated and reconcile it to the most directly comparable IFRS total or subtotal.

Finance and management teams should therefore review the performance measures they communicate externally and ensure the same definitions are being used consistently.

More Detailed Expense Information

IFRS 18 places greater emphasis on presenting financial information at a level that is useful without hiding important information inside broad categories.

Where companies present operating expenses by function, additional information about certain expenses by nature may also be required.

This can include items such as:

• depreciation;
• amortisation;
• employee benefits;
• impairment losses; and
• inventory write-downs.

For some companies, the challenge will not be the disclosure itself.

The real challenge will be whether the accounting system currently captures the information in enough detail to produce the required disclosure reliably.

That is why the chart of accounts and reporting system should be reviewed before 2027.

Why the 2026 Comparative Figures Matter

This is one of the most important preparation points.

For a calendar-year company applying IFRS 18 from 1 January 2027, the 2026 comparative information in the 2027 financial statements must also reflect the new requirements.

That means finance teams may need to revisit 2026 transactions and determine how they would be presented under IFRS 18.

Waiting until the 2027 audit can create unnecessary pressure.

A better approach is to build the required mapping during 2026 and create a clear bridge between the existing IAS 1 presentation and the new IFRS 18 presentation.

IFRS 18 and the Cash-Flow Statement

IFRS 18 also brings related amendments to IAS 7.

For companies using the indirect method, operating profit becomes the starting point for the operating cash-flow section.

For most companies:

• interest paid will generally be classified as financing;
• dividends paid will generally be financing;
• interest received will generally be investing; and
• dividends received will generally be investing.

Companies should review their existing cash-flow mappings before preparing the first IFRS 18 financial statements.

Why IFRS 18 Is an Audit-Readiness Issue

IFRS 18 implementation is not simply about changing the appearance of financial statements.

An external auditor may need to understand how the company arrived at its:

• new classifications;
• subtotals;
• MPM disclosures;
• comparative figures;
• expense disclosures; and
• cash-flow classifications.

The company should be able to demonstrate:

what decision was made, who approved it, what data was used and how the figure reconciles back to the accounting records.

That makes internal controls particularly important.

Finance teams should maintain documentation covering:

• account mapping;
• accounting policy decisions;
• significant classification judgements;
• MPM calculations;
• comparative restatements;
• data sources;
• reconciliations; and
• approval records.

Early discussion with the external auditor can also help identify disagreements before the reporting deadline.

A Practical IFRS 18 Readiness Plan

Businesses do not need to turn IFRS 18 implementation into an unnecessarily complicated project.

A practical approach can follow six stages.

1. Confirm Which Entities Are Affected

Identify which group companies use full IFRS and which use IFRS for SMEs or another permitted reporting basis.

Also review any requirements coming from regulators, lenders, shareholders or group reporting.

2. Review the Current Financial Statements

Compare the existing income statement, expense presentation, cash-flow statement and external performance measures against IFRS 18.

Identify where classifications or additional data will be needed.

3. Map the 2026 Accounts

Create an account-level mapping showing how material ledger balances will be classified under IFRS 18.

Pay particular attention to areas requiring judgement.

4. Review Performance Measures

Identify performance measures used outside the financial statements and determine whether any qualify as management-defined performance measures.

5. Update Systems and Controls

Make sure the accounting and consolidation systems can produce the required information.

Review:

• chart of accounts;
• reporting templates;
• expense classifications;
• consolidation mappings;
• manual adjustments; and
• approval controls.

6. Perform a Trial IFRS 18 Close

Before the first mandatory reporting period, prepare a trial:

• IFRS 18 profit or loss statement;
• revised cash-flow statement;
• MPM disclosure where relevant; and
• selected expense disclosures.

Reconcile the results back to the ledger.

This gives management time to identify data or control gaps before the first formal audit.

IFRS 18 Readiness Checklist

Before 2027, UAE finance teams should consider whether they have:

• confirmed the applicable accounting framework;
• identified affected reporting entities;
• mapped general-ledger accounts into IFRS 18 categories;
• documented significant classification decisions;
• identified potential MPMs;
• prepared MPM reconciliations where required;
• reviewed expense data by nature and function;
• updated cash-flow mappings;
• prepared the 2026 comparative restatement;
• updated financial-statement templates;
• reviewed internal controls; and
• discussed key implementation decisions with the auditor.

Frequently Asked Questions

When does IFRS 18 become effective?

IFRS 18 is effective for annual reporting periods beginning on or after 1 January 2027. Earlier application is permitted.

Does IFRS 18 apply to every UAE company?

No. It applies to companies preparing financial statements under full IFRS. Businesses using IFRS for SMEs should confirm whether that reporting basis remains appropriate and whether separate group, lender or regulatory requirements apply.

Does IFRS 18 change a company’s net profit?

The standard mainly changes presentation and disclosure rather than the measurement of overall profit. However, classifications and reported subtotals can change.

Do 2026 comparative figures need to be restated?

Yes, for a calendar-year company applying IFRS 18 from 1 January 2027. Comparative information is restated because IFRS 18 is applied retrospectively.

Does IFRS 18 create a new UAE audit requirement?

No. Audit requirements arise separately from Corporate Tax rules, company law, Free Zone requirements, regulators, financing arrangements and other applicable requirements.

Does EBITDA automatically become an MPM?

No. Whether a measure qualifies depends on how it is calculated and used in external communications.

Can companies wait until the 2027 year-end audit?

That can create unnecessary risk. Companies may need 2026 comparative information, system changes and documented accounting judgements well before the 2027 annual audit.

Start IFRS 18 Preparation Before 2027

The biggest IFRS 18 challenge for many UAE businesses will not be understanding the new financial-statement headings.

It will be producing the new information consistently from the company’s existing accounting systems and supporting each important judgement with reliable evidence.

Companies that begin during 2026 have time to test their mappings, clean data, prepare comparatives and discuss difficult areas before the first mandatory reporting period.

Those that wait until the 2027 audit may find themselves trying to rebuild comparative information while also completing the current year’s accounts.

How Audit Zone Can Help

Audit Zone helps UAE companies prepare for changes in financial reporting and strengthen the accounting records and controls required for an effective audit.

Our IFRS 18 and audit-readiness support can include:

• IFRS 18 scope and gap assessments;
• accounting-policy reviews;
• profit-or-loss account mapping;
• cash-flow classification reviews;
• 2026 comparative restatement checks;
• management-defined performance measure reviews;
• financial-statement preparation support;
• internal-control testing;
• IFRS reporting reviews; and
• independent external audit services where appropriate.

Preparing before the effective date can help reduce last-minute reporting issues and provide a clearer audit trail for the first IFRS 18 financial statements.

Need to assess your IFRS 18 readiness before 1 January 2027? Contact Audit Zone for a professional review of your financial reporting, controls and audit preparation.

Phone: +971 4 283 4006
WhatsApp: +971 50 156 2703
Email: info@auditzone.ae