Nigerian companies have been advised to begin preparations for the implementation of IFRS 18, a new global accounting standard expected to significantly affect the presentation of financial statements from 2027.

The recommendation is contained in a technical guide released by Kreston Pedabo, which examines the implications of the new reporting framework and outlines steps organisations can take to ensure a smooth transition.

The report, titled “IFRS 18: From Disclosure Discretion to Structured Accountability – A Technical Guide for Nigerian Entities,” was authored by Managing Consultant Albert Folorunsho, Senior Partner, Tax Compliance & Advisory, Killian Khanoba, Partner, Audit & Assurance, Peter Asemah, and Manager, Audit & Assurance, Olaitan Adesanya.

Issued by the International Accounting Standards Board (IASB) in April 2024, IFRS 18 replaces IAS 1 and introduces new requirements for the presentation and disclosure of financial information.

In Nigeria, the Financial Reporting Council of Nigeria (FRCN) has confirmed that the standard will apply to reporting periods beginning on or after January 1, 2027. Companies will also be required to present comparative information for prior reporting periods in line with the new requirements.

According to the report, IFRS 18 introduces a structured framework requiring income and expenses to be classified into five categories: operating, investing, financing, income tax, and discontinued operations.

The standard also introduces defined profit subtotals, including operating profit and profit before tax, with the objective of enhancing consistency and comparability across financial statements.

The report notes that some items currently presented within operating profit may be classified differently under the new standard. As a result, certain entities may record changes in reported operating profit figures even when overall profitability remains unchanged.

The guide states that organisations should communicate such changes clearly to investors, lenders, and other stakeholders to ensure proper understanding of the impact of the new reporting requirements.

It further explains that the effects of IFRS 18 may differ across industries. Financial institutions, manufacturing firms, trading companies, and holding companies could experience varying reporting outcomes depending on the nature of their operations and sources of income.

The report highlights the need for organisations to review their accounting policies, update reporting systems, and assess transaction classifications ahead of implementation.

Kreston Pedabo recommends that companies use 2026 as a transition period to test systems, evaluate reporting impacts, and address any implementation challenges before the standard becomes mandatory.

The guide also notes that entities may wish to review financial agreements and performance metrics that reference accounting measures affected by the new standard.

In addition, IFRS 18 introduces enhanced disclosure requirements for Management Performance Measures (MPMs), including metrics such as adjusted earnings and EBITDA. Companies disclosing such measures will be required to provide reconciliations to IFRS figures and explain relevant adjustments.

According to the report, the adoption of IFRS 18 is expected to strengthen transparency, improve comparability of financial statements, and support more informed decision-making by investors, regulators, and other stakeholders.

The authors added that the standard could contribute to improved financial reporting practices and enhance confidence in corporate disclosures as Nigerian companies align with evolving international reporting requirements.