IFRS 18 Saudi Arabia is becoming an important reporting change for businesses that prepare financial statements under IFRS. SOCPA adopted IFRS 18 on 26 December 2024, and the standard will apply to annual reporting periods beginning on or after 1 January 2027. It replaces IAS 1 and changes how companies present financial performance, including new subtotals, management-defined performance measures, and rules for grouping information.
MHK Services helps Saudi businesses understand these reporting changes and prepare their finance teams before the mandatory date. The work should not be left until the first 2027 reporting cycle. Companies can review their accounts, reporting systems, internal controls, management measures, and comparative information during 2026 so they have enough time to identify and correct gaps.
What Is IFRS 18?
IFRS 18 is a financial statement presentation and disclosure standard issued by the International Accounting Standards Board. It replaces IAS 1 and focuses mainly on how financial performance is presented and explained. The standard introduces defined subtotals for operating profit and profit before financing and income taxes. It also introduces disclosure requirements for management-defined performance measures and strengthens requirements around aggregation and disaggregation.
For Saudi companies, MHK Services can help finance teams understand which current reporting practices may need review before the new requirements apply. The change does not simply mean changing headings in a financial statement. Businesses may also need to review data, account classifications, reporting processes, disclosures, and management reports.
When Does IFRS 18 Compliance Start in Saudi Arabia?
Saudi businesses using the applicable IFRS Accounting Standards need to pay attention to the 2027 effective date. SOCPA’s endorsement document states that IFRS 18 supersedes IAS 1 for annual reporting periods beginning on or after 1 January 2027, with early application permitted.
- SOCPA adoption: SOCPA locally adopted IFRS 18 on 26 December 2024.
- Mandatory date: The standard applies from annual reporting periods beginning on or after 1 January 2027.
- Early application: Early application is permitted under IFRS 18.
- Listed companies: CMA has allowed listed joint-stock companies on Tadawul to early adopt IFRS 18 during 2026.
- 2026 assessment: Listed companies must disclose a preliminary assessment of the expected impact for interim and annual financial statements covering periods beginning on or after 1 April 2026.
Who in Saudi Arabia Needs to Prepare for IFRS 18?
The impact depends on the financial reporting framework used by the business. IFRS Accounting Standards are required for publicly accountable entities in Saudi Arabia, while other entities may use full IFRS or the IFRS for SMEs Accounting Standard, subject to the applicable Saudi requirements.
- Tadawul-listed companies: These companies should review the CMA requirements and their 2026 preparation status.
- Publicly accountable entities: Entities applying IFRS Accounting Standards should assess the effect of IFRS 18.
- Large private businesses: Companies using full IFRS should review whether the new standard applies to their reporting.
- Groups and subsidiaries: Parent companies should check how IFRS 18 affects consolidation and reporting information.
- Finance teams and auditors: Accounting, reporting, FP&A, internal audit, and audit teams should understand the planned changes before 2027.
What Changes Under IFRS 18?
The main changes relate to how companies present and explain financial performance. The following areas deserve attention during the preparation period.
New Profit or Loss Categories
IFRS 18 introduces operating, investing, financing, income tax, and discontinued operations categories for income and expenses in the statement of profit or loss.
Defined Profit Subtotals
Companies will present operating profit and profit before financing and income taxes as defined subtotals. These subtotals give users a more consistent view of financial performance.
Management-Defined Performance Measures
Companies must disclose certain management-defined performance measures that are used in public communications to explain management’s view of financial performance.
Aggregation and Disaggregation
Businesses need to consider how information is grouped and separated in financial statements. Material information should not be hidden inside overly broad line items.
Cash Flow Statement Changes
IFRS 18 also brings related amendments to IAS 7, including changes connected with the starting point for the indirect method of presenting operating cash flows.
How Will IFRS 18 Affect Financial Statements in Saudi Arabia?
IFRS 18 will mainly affect presentation and disclosure rather than changing the underlying recognition and measurement rules for every transaction. Saudi businesses may need to reconsider where income and expenses appear in the statement of profit or loss and how key subtotals are presented. Management-defined performance measures will also need review if they are communicated publicly.
This can affect reporting templates, account mapping, consolidation processes, and information collected for the notes to the financial statements. Finance teams should also check how internal management reports compare with external financial statements. MHK Services can support this review by helping businesses map existing reporting practices against the new requirements. The earlier these checks begin, the more time the finance team has to resolve data and classification issues before the first mandatory reporting period.
Why 2026 Comparative Information Matters
IFRS 18 is applied retrospectively, so comparative information for the preceding period will matter when businesses first report under the new standard. For a company with a calendar year-end, this means 2026 information needs attention before the 2027 financial statements are prepared.
Businesses should review current income and expense classifications, identify information that may not be available in the required form, and test their reporting processes during 2026. Waiting until the 2027 year-end may leave limited time to correct historical data or reporting problems. Finance teams should also discuss the expected comparative presentation with their auditors early. This preparation can help management understand how the new presentation will look before the first annual financial statements are issued.
What Should Saudi Businesses Prepare Before 2027?
A practical preparation plan can help businesses identify reporting gaps early. MHK Services can assist Saudi finance teams with the following areas:
1. Review the Chart of Accounts
Check whether the existing chart of accounts provides enough detail to classify income and expenses under the new requirements. Accounts that combine different types of transactions may need closer review.
2. Identify Management-Defined Performance Measures
Prepare a list of measures used in annual reports, investor presentations, press releases, management reports, or other public communications. Review how each measure is calculated and presented.
3. Check Finance and Reporting Systems
Review ERP reports, consolidation tools, reporting templates, and historical data. The system should provide the information needed for the new presentation and disclosure requirements.
4. Update Accounting Policies and Controls
Document classification decisions and update relevant accounting policies. Controls should also cover data collection, calculations, reconciliations, approvals, and financial statement preparation.
5. Run a Trial Reporting Exercise
Prepare selected 2026 information using the expected IFRS 18 presentation. Compare the results with the current reporting format and record areas that need correction.
What Should Saudi Listed Companies Do Differently?
Listed joint-stock companies on Tadawul have additional CMA requirements during 2026. The CMA’s 30 June 2026 decision permits early adoption during 2026 and requires a preliminary assessment of the expected impact in specified interim and annual financial statements.
- Review the CMA decision and applicable disclosure requirements.
- Assess the expected effect of IFRS 18 on financial statements.
- Include the required preliminary impact assessment in applicable 2026 financial statements.
- Decide whether early adoption during 2026 is appropriate.
- Keep the Board of Directors informed about progress toward IFRS 18 compliance.
IFRS 18 Amendments and Reporting in Saudi Arabia
Saudi businesses should review not only the main presentation changes but also related reporting effects. The new standard affects the way financial performance information is grouped, presented, and explained.
- Review changes affecting the statement of profit or loss.
- Assess related IAS 7 cash flow presentation changes.
- Review disclosures for management-defined performance measures.
- Check aggregation and disaggregation of financial information.
- Update reporting templates and supporting documentation.
These checks can form part of a wider financial reporting Saudi Arabia review before the 2027 reporting period.
IFRS 18 Deadlines: Timeline for Saudi Arabia
Saudi companies can use 2026 to complete the main preparation work instead of waiting for the mandatory application date.
| Period | Main action |
| 2024 | SOCPA locally adopted IFRS 18 on 26 December 2024. |
| April 2026 onward | Listed companies have a CMA requirement to disclose a preliminary impact assessment for applicable interim and annual financial statements. |
| Q3–Q4 2026 | Review accounts, MPMs, systems, policies, controls, and comparative information. |
| Before 2027 reporting | Test the new presentation and resolve identified reporting gaps. |
| 1 January 2027 onward | IFRS 18 becomes mandatory for annual reporting periods beginning on or after this date. |
The dates above are based on SOCPA’s endorsement information, the IFRS Foundation, and the CMA’s June 2026 decision.
Common IFRS 18 Mistakes
Businesses can reduce reporting problems by checking these common areas early:
- Waiting until 2027 to start the preparation.
- Treating IFRS 18 as a simple financial statement formatting change.
- Ignoring the need for comparative information.
- Failing to identify management-defined performance measures.
- Keeping broad account classifications that make new reporting difficult.
- Not involving the auditor early in classification and presentation discussions.
How Can Businesses Check IFRS 18 Readiness?
A short internal review can show how much work remains before the first IFRS 18 reporting period:
- Has the company confirmed that IFRS 18 applies to its reporting framework?
- Has management completed an impact assessment?
- Have income and expense accounts been reviewed?
- Have management-defined performance measures been identified?
- Have systems, controls, and reporting templates been tested?
- Has the company reviewed the information needed for comparative reporting?
Businesses that need support with IFRS 18 implementation Saudi Arabia can use this checklist as a starting point for a formal readiness review.
Conclusion
IFRS 18 Saudi Arabia preparation should begin before the 2027 mandatory reporting period. SOCPA has already endorsed the standard, while the CMA has introduced specific 2026 requirements for listed joint-stock companies on Tadawul. Businesses should review account classifications, performance measures, systems, controls, policies, and comparative information during 2026.
Early testing can show where reporting data or processes need changes before the first IFRS 18 financial statements are issued. MHK Services can help Saudi businesses assess their current reporting position and prepare a practical action plan for the transition. Starting the review now gives finance teams more time to address issues and discuss reporting decisions with auditors.
FAQs
When does IFRS 18 become mandatory in Saudi Arabia?
IFRS 18 applies to annual reporting periods beginning on or after 1 January 2027. SOCPA has endorsed the standard for application in Saudi Arabia, with early application permitted.
Does IFRS 18 replace IAS 1?
Yes. IFRS 18 replaces IAS 1 Presentation of Financial Statements and introduces new presentation and disclosure requirements.
What are the main IFRS 18 changes?
The main changes include defined profit subtotals, new income and expense categories, management-defined performance measure disclosures, and stronger aggregation and disaggregation requirements.
Can Saudi listed companies adopt IFRS 18 early?
Yes. The CMA permits listed joint-stock companies on Tadawul to early adopt IFRS 18 during 2026 under the conditions set out in its June 2026 decision.
Does IFRS 18 affect IFRS compliance KSA?
Yes, for entities subject to the applicable IFRS requirements, companies should assess the new presentation and disclosure requirements before the mandatory 2027 application date.