# MFRS 18: The New Profit or Loss Structure for 2027

> What MFRS 18 changes in the statement of profit or loss from 1 January 2027 — the five categories, the two mandatory subtotals, and what the management-defined performance measure rules mean if you already publish EBITDA.

- Category: accounting
- Language: en
- Status: published
- Updated: 2026-07-20
- Canonical: https://negaraku.md/en/accounting/mfrs-18-presentation

---

Every alert written about MFRS 18 so far has been aimed at a listed-company CFO
preparing an investor communication plan. That is not who has to do the work.

The work lands on whoever maintains the chart of accounts, because MFRS 18 changes
what the ledger has to be able to produce. MASB issued it on 14 June 2024, effective
for annual periods beginning on or after 1 January 2027, and it replaces MFRS 101
*Presentation of Financial Statements*. MFRS 108 has been retitled from *Accounting
Policies, Changes in Accounting Estimates and Errors* to *Basis of Preparation of
Financial Statements*, absorbing requirements moved out of MFRS 101.

## What actually changes in the statement of profit or loss?

Two things, and they interact.

**Income and expenses go into five categories.** Operating, investing, financing,
income taxes, and discontinued operations. The first three share names with the
statement of cash flows but they are distinct concepts — do not assume an item that
sits in investing cash flows sits in the investing category of profit or loss.

**Two subtotals become mandatory.** Operating profit, and profit before financing
and income taxes. The important word is *defined*. Until now, an entity that
presented an operating profit line chose for itself what fell above it, which is why
operating profit has never been comparable between two Malaysian listed companies in
the same sector. MFRS 18 defines it.

| Category | Broad content |
| --- | --- |
| Operating | The default category — income and expenses not classified into the other four |
| Investing | Returns from assets that generate returns individually and largely independently of other resources |
| Financing | Income and expenses from liabilities arising from raising finance, and interest on other liabilities |
| Income taxes | Amounts within the scope of MFRS 112 |
| Discontinued operations | Amounts within the scope of MFRS 5 |

MASB notes that classification will differ for banks and insurers, and the
Illustrative Examples accompanying the standard include profit or loss statements
for both.

## What MPMs mean if you already publish EBITDA

A management-defined performance measure is a subtotal of income and expenses that
is not specified by MFRS Accounting Standards and that the entity uses in public
communications outside the financial statements to convey management's view of an
aspect of the entity's financial performance as a whole.

Read that against your own results announcement, analyst pack, annual report
highlights page or investor deck. If you publish EBITDA, adjusted EBITDA, core
operating profit, normalised earnings or a similar figure, you are very likely
inside the regime.

What follows is not a prohibition. It is disclosure:

- The measure must be disclosed in a single note.
- It must be **reconciled** to the most directly comparable total or subtotal
  specified by MFRS 18 or another MFRS Accounting Standard.
- The entity must explain **how it is calculated** and **what it communicates**
  about financial performance.
- **Changes** to the measure during the year must be disclosed and explained.
- The **income tax effect** and the effect on non-controlling interests must be
  given for each reconciling item.

That last requirement is the one that surprises groups. Calculating a tax effect for
each individual adjusting item, across multiple tax jurisdictions, is a modelling
exercise that does not exist in most finance functions today. MFRS 18 does provide a
simplified approach for the tax effect calculation, which is worth locating early.

The strategic consequence is worth stating plainly: a measure you publish casually
in a press release acquires an audited-adjacent disclosure obligation. Some entities
will respond by disclosing properly. Others will quietly retire measures they were
never especially attached to. Both are legitimate; neither should be decided in the
week before the first MFRS 18 results.

## What this does to the chart of accounts

Four practical demands:

1. **Category must be derivable.** Every income and expense account needs to map to
   one of the five categories. Where an account currently mixes items that will fall
   into different categories, it has to be split.
2. **Foreign exchange differences must be allocated.** FX differences are allocated
   to the same category as the income or expense that gave rise to them. Groups that
   manage currency exposure centrally, through a single treasury account, will find
   this is the biggest system change in the standard. There is an undue cost or
   effort relief, so identify whether you can rely on it before you rebuild.
3. **Nature or function has to be a deliberate choice.** Operating expenses are
   presented by nature (raw materials, staff costs, impairments) or by function (cost
   of sales, distribution costs), or a mix — the standard permits presenting some
   lines by nature and others by function where that is more useful.
4. **The by-function route carries a note cost.** An entity presenting operating
   expenses by function must disclose, for each functional line item in the operating
   category, the amounts of depreciation, amortisation, employee benefits, impairment
   losses and inventory write-downs included in it. Five specified amounts, per line.
   If your ledger cannot currently produce depreciation by function, that is a
   dimension you need to add.

## Cash flow statement changes you will meet at the same time

Consequential amendments to MFRS 107 mean:

- The **indirect method starts from operating profit**, not from profit before tax
  or profit for the year.
- The **presentation choices for interest and dividends are removed** for most
  entities. Dividends and interest paid generally sit in financing; dividends and
  interest received generally sit in investing.

Both changes are small to describe and awkward to implement, because they alter
comparatives in a statement most preparers build from a spreadsheet template that
has not been touched in years.

## Common mistakes

- **Waiting until 2027.** Application is retrospective, so the comparative year is
  prepared on the new basis. A December year-end entity is capturing MFRS 18 data
  from 1 January 2026.
- **Assuming the five profit or loss categories mirror the three cash flow
  categories.** MASB says explicitly that they are distinct concepts despite the
  shared names.
- **Treating MPMs as a disclosure the investor relations team owns.** The
  reconciliation and its per-item tax effects are prepared and audited alongside the
  financial statements.
- **Thinking operating profit is whatever you called operating profit before.** It
  is now defined, and the definition will move items for many entities.
- **Applying MFRS 18 to an MPERS entity.** It does not apply. Private entities on
  MPERS have a different standard landing on the same date.
- **Forgetting the retitled MFRS 108.** Compliance statements and accounting policy
  notes that cite MFRS 101 will need updating.

## What's next

If your group contains both MFRS entities and MPERS entities, you are facing two
transitions in the same reporting cycle and they need a single project plan, not two.
Start by confirming which framework each entity in the group is actually on, and
check whether any entity is about to be pushed off MPERS by a change in ownership or
regulatory status — that is a third transition, and it has its own restatement rules.

## Sources

- MASB issues new presentation and disclosure Standard to improve companies reporting of financial performance — https://www.masb.org.my/press_list.php?id=455 (MASB)
- Be prepared for a new standard, IFRS 18 Presentation and Disclosure in Financial Statements — https://www.masb.org.my/pdf_file/BE%20PREPARED%20FOR%20A%20NEW%20STANDARD%20IFRS%2018%20PRESENTATION%20AND%20DISCLOSURE%20IN%20FINANCIAL%20STATEMENTS.pdf (MASB)
- Malaysian Financial Reporting Standards (MFRSs) — status and effective dates — https://www.masb.org.my/pages.php?id=89 (MASB)
- IFRS 18 Presentation and Disclosure in Financial Statements — https://www.ifrs.org/issued-standards/list-of-standards/ifrs-18-presentation-and-disclosure-in-financial-statements/ (IFRS Foundation)

---
Source of truth: https://github.com/negaraku-md/NegaraKu.md
License: CC BY-SA 4.0