The enforcement of K-IFRS 1118 (Presentation and Disclosure in Financial Statements), starting in 2027, signals a major shift in the existing financial reporting framework. This new standard is designed to enhance the comparability of financial performance between companies and provide greater transparency for information users.
Below is a summary of the key changes and the primary challenges for corporate compliance.
📌 Key Highlights of K-IFRS 1118
1. Total Overhaul of the Income Statement Structure: Income and expenses will be classified into five distinct categories: Operating, Investing, Financing, Income Taxes, and Discontinued Operations. Presenting subtotals for each of these categories is now mandatory.
2. Redefinition of 'Operating Profit': The definition of operating profit will change from a "main business activity" focus to a "residual category" approach (items not classified as investing or financing). Consequently, items previously classified as non-operating—such as gains or losses on the disposal of property, plant, and equipment—may now be included in operating profit, potentially leading to significant fluctuations in reported figures.
3. Disclosure of Management Performance Measures (MPM): Non-GAAP performance indicators, which companies have typically communicated through IR materials or press releases, must now be formally disclosed in the notes to the financial statements.
4. Alignment of Cash Flow Statements and Systems: The starting point for reporting operating cash flows will change from 'Net Income' to 'Operating Profit.' Additionally, since the options for classifying interest and dividend cash flows will be removed, companies must prioritize upgrading their accounting systems to align with this new classification logic.
