Management-defined performance measures under IFRS 18

Adjusted profit, adjusted operating profit and adjusted EBITDA are common in board reports, earnings announcements and investor presentations. From financial year 2027, IFRS 18 brings these measures into the notes to the financial statements, where they are reconciled, explained and audited.

1. What counts

A measure is a management-defined performance measure when all of these are true:

• It is a subtotal of income and expenses.
• It is used in public communications outside the financial statements.
• It gives management’s view of the financial performance of the company as a whole.
• It is not a total or subtotal that IFRS 18 lists or another standard requires.

2. What the note must contain

1. A reconciliation of each measure to the nearest subtotal defined by IFRS 18.
2. For each reconciling item, the income tax effect and the effect on non-controlling interests.
3. How the measure is calculated and why it gives management’s view of performance.
4. An explanation of any change to a measure, or of a measure added or dropped.
5. A statement that the measure is management’s view and may not be comparable with measures of other companies.

All of this sits in one note. The disclosures are also required in interim financial statements.

3. What changes for the finance team

• List every measure published in the last two years: annual report, board report, Tadawul announcements, investor presentations, press releases.
• Decide which ones meet the definition, and whether management wants to keep them.
• Build the reconciliation from the ledger, including the tax and non-controlling-interest columns.
• Agree a control so that what investor relations publishes matches the audited note.
• Brief the audit committee: the note is audited, so the measures need evidence like any other figure.

4. How Entry Post helps

Entry Post prepares the IFRS 18 impact study, restates the comparatives, and builds the disclosure templates and the board and audit-committee briefing. Most impact studies take 4–6 weeks. If we are your auditor, our role stays within what independence rules allow; otherwise we work alongside your auditor.