IFRS 18 applied before 2027 arrives, with the 2026 comparatives already in the new format.

IFRS 18 applies to annual reporting periods beginning on or after 1 January 2027, with early application permitted. It is applied retrospectively, so the comparative period presented in the first IFRS 18 financial statements, the 2026 year for a calendar-year entity, must be restated into the new structure. SOCPA endorses IFRS Standards as issued by the IASB, so Saudi preparers should plan on the IASB date unless SOCPA announces otherwise, and the same applies in Bahrain and the other GCC jurisdictions that adopt IFRS directly. Interim statements in the first year of application also follow the new structure, which means the 2027 first-quarter interim report is the first public output.

Income and expenses are classified into five categories: operating, investing, financing, income taxes and discontinued operations. Two subtotals become mandatory: operating profit or loss, and profit or loss before financing and income taxes. Operating is the residual category and captures everything that is not classified elsewhere, so it includes the main business activities as well as items that were previously presented as non-operating. The investing category holds returns from investments that generate a return largely independently of the entity's other resources, such as associates, joint ventures, investment property and cash and cash equivalents. The financing category holds income and expenses from liabilities that arise from raising finance, and interest on other liabilities such as leases and defined benefit obligations. The result is an operating profit figure defined by the standard rather than by management, which is why comparability across GCC groups will change visibly.

Yes. An entity whose main business activity is investing in assets, or providing financing to customers, classifies income and expenses from those activities in the operating category rather than in investing or financing, so that its operating profit reflects its business. A group has to make this assessment, and where a conglomerate consolidates a bank or a financing company alongside industrial operations, the classification is made at the reporting entity level with the required disclosures about which activities drove it. This is one of the most consequential judgements in the implementation, because it determines what operating profit means for the group and it needs to be settled before the systems are configured.

A management-defined performance measure is a subtotal of income and expenses that the entity uses in public communications outside the financial statements to communicate management's view of financial performance, and that is not a subtotal specified by IFRS. Adjusted EBITDA, underlying profit and normalised earnings are typical examples. Each measure is disclosed in a single note with a description of how it is calculated and why it provides useful information, a reconciliation to the most directly comparable IFRS subtotal, the income tax and non-controlling interest effect of each reconciling item, and an explanation of any change in the calculation. These disclosures are within the scope of the audit, which raises the standard of support required for adjustments that were previously only in investor presentations.

IAS 7 is amended so that entities using the indirect method start the reconciliation from operating profit rather than from profit or loss, and the options for classifying interest and dividends are removed for most entities: interest paid and dividends paid are financing cash flows, interest received and dividends received are investing cash flows, with different rules for entities with specified main business activities. In the notes, the new aggregation and disaggregation principles require items to be grouped by shared characteristics and prohibit obscuring material information through immaterial detail or through unexplained 'other' captions. Entities presenting expenses by function must also disclose specified expenses by nature, such as depreciation, amortisation, employee benefits and impairment, which for many groups is a new data requirement in the ledger.

Three things, in order. Settle the classification policy and the performance-measure inventory with the audit committee and auditor in the first half, because they determine everything downstream. Configure the chart of accounts and consolidation mappings so that the 2026 ledger carries the category tags and the expenses by nature from the earliest possible quarter, avoiding a manual restatement of a full year. Then run a complete set of dry-run financial statements on 2026 interim data to surface the gaps in disclosures and systems while there is still time to fix them. Investor relations should be briefed early, since operating profit under IFRS 18 may differ from the figure the market is used to.