1. Overview
K-IFRS 1118, which reflects IFRS 18 Presentation and Disclosure in Financial Statements, was issued in December 2025 and is mandatorily effective for annual reporting periods beginning on or after January 1, 2027. The standard is, in principle, applied retrospectively, which requires comparative prior-period financial statements to be restated under the new requirements. This change is regarded as the most significant revision to the presentation of the statement of profit or loss since Korea adopted K-IFRS in 2011.
2. Key Changes
A. Classification of Income and Expenses into Categories
Income and expenses must be classified into five categories: operating, investing, financing, income taxes, and discontinued operations. Entities are also required to present subtotals such as “operating profit or loss,” “profit or loss before financing and income taxes,” and “profit or loss.”
B. Change in the Concept of Operating Profit or Loss
Under current K-IFRS, operating profit or loss is calculated by deducting cost of sales and selling, general and administrative expenses from revenue. Under IFRS 18, by contrast, operating profit or loss comprises all income and expenses that are not classified in other categories, such as the investing or financing categories. Accordingly, certain items currently presented as non-operating income or expenses, such as gains or losses on the disposal of property, plant and equipment and impairment losses, may be included in operating profit or loss.
C. Disclosure of Management-defined Performance Measures (MPMs)
Performance measures not specified by IFRS Accounting Standards, such as “adjusted operating profit” used in investor relations materials, must be disclosed in the notes if they meet specific criteria to qualify as MPMs. Entities must disclose in the notes the definition and calculation method of each MPM, together with a reconciliation to the most directly comparable subtotal specified by IFRS Accounting Standards. These disclosures are subject to external audit.
D. Enhanced Principles of Aggregation and Disaggregation
Items must be aggregated or disaggregated based on their shared characteristics. As a result, the practice of presenting items of dissimilar nature together as “other” will be restricted.
3. Practical Considerations
(Account remapping) Companies are advised to reclassify their accounts into the new categories and estimate in advance the differences from their existing operating profit. Companies applying the standard from 2027 will need to take the new classification structure into account starting with their accounting data for 2026, the comparative prior fiscal year.
(Upgrading the financial closing system) Companies should update their financial closing systems and consolidation reporting packages so that operating profit or loss under IFRS 18 and under the current standard can be calculated concurrently.
(Review of potential MPMs) Companies should determine whether any performance measures used in external communications qualify as MPMs and prepare in advance a method for calculating the required reconciliations. Companies are advised to consult with accounting professionals and their external auditors in advance regarding the specific application of the standard.
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