IFRS 18 AS A BASIS FOR THE PREPARATION OF FINANCIAL STATEMENTS

Abstract

The article examines the essence and significance of International Financial Reporting Standards and the implementation of IFRS 18 “Presentation and Disclosure in Financial Statements” within the system of international financial reporting. The main innovations of IFRS 18 in comparison with IAS 1 “Presentation of Financial Statements” are considered. A comparative analysis of IAS 1 and IFRS 18 was conducted, and the advantages of the latter in the preparation and presentation of financial statements were identified. The purpose of the article is to study the essence of IFRS 18, identify its key innovations, and substantiate the importance of the standard as a basis for the preparation of an enterprise’s financial statements. During the research, an analysis of the structure of IFRS 18, the content of its main sections and appendices was carried out, and the innovations introduced by this standard compared to the existing standards were identified. The structure of financial statements and the differences in the predominance of profit and loss information were examined. The Statement of Financial Performance was identified as the primary source of information on an entity’s performance results, becoming the first report in the set of financial statements and replacing the Statement of Financial Position from that leading position. An analysis was conducted and the characteristics of the classification of income and expenses were disclosed within three categories: operating, investing, and financing. It was noted that IFRS 18 proposes alternative methods for presenting expenses in the Statement of Financial Performance, although one of these methods requires additional disclosure in the notes. Information regarding the mandatory presentation of subtotals in the Statement of Financial Performance was also analyzed. The requirements for reflecting management performance measures in financial statements and the role of professional judgment in determining such measures by management were considered. It was emphasized that entities must ensure appropriate aggregation and disaggregation of financial statement items depending on their materiality and in accordance with the principles set out in IFRS 18. Attention was also paid to the interrelationship between different forms of reporting, particularly in determining cash flows from operating activities in the Statement of Cash Flows. The article proposes procedures that entities should already implement in 2026. It is proven that the implementation of IFRS 18 will contribute to increasing the transparency, comparability, and analytical value of enterprises’ financial statements.