Goodbye IAS 1, Hello IFRS 18: A Good Group Case Study

 

To be honest, keeping up with changing accounting standards can feel like a full-time job on its own, right? Just when you think you’ve mastered IAS 1, here comes IFRS 18 to shake things up. If you’ve been looking at the “Good Group (International) Limited” illustrative financial statements and feeling a bit overwhelmed by the new presentation requirements, you are definitely not alone. 😊

The shift to IFRS 18 isn’t just a simple tweak; it represents a significant change in how companies communicate their financial performance. It introduces new defined categories for income and expenses and mandates stricter disclosures for those “non-GAAP” measures we all love to use. But don’t worry! We are going to break down these complex changes using the practical examples from Good Group’s 2025 report. By the end of this guide, you’ll have a much clearer picture of what the future of financial reporting looks like.

 

The End of IAS 1: Hello, IFRS 18! 👋

First things first, let’s establish the context. The financial statements we are analyzing for Good Group have been prepared based on the new requirements of IFRS 18 Presentation and Disclosure in Financial Statements. While IFRS 18 is officially applicable for periods beginning on or after January 1, 2027, Good Group has decided to early adopt it for this illustration.

So, what’s the big deal? IFRS 18 replaces IAS 1. While many principles from IAS 1 are carried forward (some moved to IAS 8), the new standard introduces three major requirements that will impact almost every entity:

• New Classification Categories: Income and expenses in the statement of profit or loss must now be classified into one of five distinct categories.
• Mandatory Subtotals: There are two new mandatory subtotals that must be presented.
• MPM Disclosures: Strict disclosure requirements for Management-defined Performance Measures (MPMs) in a single note.

 

The New Face of the Income Statement 📊

One of the most visible changes in Good Group’s financial statements is the structure of the Consolidated Statement of Profit or Loss. Under IFRS 18, “Operating Profit” is no longer just a common practice; it’s a mandatory defined subtotal. But it gets more interesting with the categorization of income and expenses.

Good Group has classified its income and expenses into the following categories:

Category	What Goes In? (Good Group Example)
Operating	This is the default category. For Good Group, it includes Revenue, Cost of Sales, Selling/Distribution/Admin expenses, and even foreign exchange differences that aren’t classified elsewhere. Ideally, this reflects the entity’s main business activities.
Investing	Items like share of profit from associates/joint ventures, rental income (since it’s not their main business), and fair value changes in investment properties.
Financing	Interest expenses on loans/borrowings and interest on other liabilities (like lease liabilities or defined benefit net interest).
Income Taxes	Income tax expense allocated to the period.
Discontinued	Profit or loss after tax from discontinued operations (like the sale of Hose Limited in the example).

Notice something interesting? Foreign exchange differences are now split! Good Group presents FX differences on loans in the Financing category, FX on cash in the Investing category, and the rest in Operating. This ensures the FX gain/loss sits with the item that generated it.

 

Management-Defined Performance Measures (MPMs) 📏

We’ve all seen them: “Adjusted EBITDA,” “Core Profit,” or “Underlying Earnings.” Companies love using these non-GAAP measures to tell their story. IFRS 18 brings these into the spotlight by defining them as Management-defined Performance Measures (MPMs).

In Good Group’s case, they use ‘Adjusted Operating Profit’. In Note 16 of their statements, they provide a detailed reconciliation between this MPM and the nearest IFRS subtotal (Operating Profit). They adjust for:

• Impairment losses on goodwill and assets.
• Government grants related to assets.
• Gains/losses on disposal of assets.

The note doesn’t just list the numbers; it explains why management believes this measure is useful (e.g., excluding items not indicative of ongoing business) and even details the tax and NCI impact of these adjustments. Transparency is key here!

 

Classification Checker Tool 🧮

Under IFRS 18, classifying income and expenses correctly is critical. For a general corporate entity like Good Group (which doesn’t invest or provide financing as a main activity), the logic is specific. Try this simple tool to see where an item might land!

 

Aggregation, Disaggregation, and Grouping 🧩

One of the stated goals of IFRS 18 is to cut the clutter. We’ve all seen financial statements where immaterial items are given their own line, or conversely, where massive amounts are buried in “Other Expenses.” Good Group’s statements illustrate the new principles of aggregation and disaggregation.

Here is how Good Group approaches it:

• Operating Expenses: They are analyzed by function (Cost of Sales, Selling, Distribution, Admin). However, because they present by function, they must disclose expenses by nature (depreciation, employee benefits, etc.) in a single note (Note 13.5).
• “Other” Labeling: The label “Other” is only used if there isn’t a more informative label. For example, Good Group uses “Other individually immaterial operating expenses” to aggregate truly minor items, ensuring the label is descriptive of what’s inside.
• Specific Line Items: Items with dissimilar characteristics (like Foreign Exchange differences) are presented separately, even within the Operating category, because allocating them arbitrarily to a function wouldn’t make sense.

Even in the Statement of Financial Position, Good Group ensures that items like “Goodwill” are separated from “Intangible Assets” and “Decommissioning Provisions” are separated from “Restructuring Provisions” due to their distinct characteristics.

 

Frequently Asked Questions ❓

Conclusion: Preparation Starts Now 📝

The transition to IFRS 18 is significant, but seeing it applied in Good Group’s 2025 financial statements makes it much less abstract. The focus is clearly on comparability and transparency, forcing companies to be very deliberate about how they categorize every single dollar of income and expense.

While 2027 might seem far away, the requirement for comparative periods means you need to be ready much sooner. It’s time to start looking at your own chart of accounts through the IFRS 18 lens. How will your “adjusted” numbers look in a formal note? Where do your FX gains sit? Tackling these questions now will save you a lot of headaches later. If you have any questions about specific categories or Good Group’s approach, feel free to ask in the comments! 😊