IFRS 18 in ACCA FR: What Changes for the June 2026 Exam (and What Doesn't)

IAS 1 Is Gone. Here's What Replaced It.

IFRS 18 is now examinable in FR from September 2025 onwards. If you're sitting the June 2026 exam, you need to understand the new statement of profit or loss structure — but don't panic. Most of the changes are logical, and the examiner has signalled this won't be a curveball.

IFRS 18 'Presentation and Disclosure in Financial Statements' replaced IAS 1 in the FR syllabus. The biggest change? The statement of profit or loss now has defined categories and mandatory subtotals. No more lumping everything together above 'profit for the year' however you like.

The Five Categories You Need to Know

Under IFRS 18, every item of income and expense in the statement of profit or loss must sit in one of five categories:

Operating — the default. Anything not classified elsewhere lands here. Revenue, cost of sales, admin expenses, distribution costs — all operating. Think of it as the core business bucket.

Investing — income and expenses from assets held to earn returns separately from the main business. This includes dividends and interest from investments, rental income from investment properties, depreciation on investment properties, fair value gains and losses, and the share of profit or loss from associates and joint ventures.

Financing — income and expenses from liabilities that only involve raising finance. Interest on bank loans, interest on lease liabilities, dividends on redeemable preference shares. If a liability exists purely to fund the business, the cost of it sits here.

Income taxes — as per IAS 12. No change here.

Discontinued operations — as per IFRS 5. No change here either.

Three Mandatory Subtotals

This is where most marks will be won or lost. IFRS 18 requires three subtotals in the statement of profit or loss:

1. Operating profit (or loss) — everything in the operating category.

2. Profit (or loss) before financing and income taxes — operating plus investing. This is new and important. It separates the cost of funding from the results of running the business and making investments.

3. Profit (or loss) — the bottom line, after all five categories.

Note: both operating profit and profit before financing and income taxes must be shown, even if they're the same number. Gross profit and profit before tax are not mandatory subtotals under IFRS 18 — though entities can still present them as additional lines if they're useful.

Wrong vs Right: Where Students Will Slip

Wrong: Including share of associate's profit in operating profit. Under IAS 1, you could get away with this. Under IFRS 18, it belongs in the investing category — between operating profit and profit before financing and income taxes.

Right: Operating profit shows core operations only. Then add investing items (associate profits, investment property gains, dividend income) to reach the second subtotal. Then deduct financing costs and tax to reach profit for the year.

Also wrong: Starting the indirect method cash flow statement from profit before tax. Under IFRS 18, the starting point for operating cash flows is now the operating profit subtotal — not profit before tax. This is a direct consequence of the new structure and will catch students who learned the old proforma by heart without understanding why.

What to Do Before June 2026

1. Learn the new proforma. Write out the IFRS 18 statement of profit or loss structure from memory — five categories, three mandatory subtotals. Know where associate profits, investment property income, and finance costs sit.

2. Watch the scenario instructions. The examiner has indicated that questions will guide you on where to classify items. Read those instructions carefully — they're not decoration. If the question says "classify rental income as investing," do it.

3. Update your cash flow starting point. If you're preparing a consolidated statement of cash flows using the indirect method, start from operating profit — not profit before tax. Practise this with past papers by adjusting the starting point yourself.

Keep It in Perspective

FR pass rates have hovered around 50% for the last four sittings. The examiner has said IFRS 18 is not a dramatic shift — the principles of classification and presentation were already in IAS 1, just less prescriptive. The students who lose marks will be the ones who memorised the old proforma and never updated it.

Know the five categories. Nail the three subtotals. Read the question. That's it.