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As the dust settles after one of the most significant and challenging transitions in recent International Financial Reporting Standard (IFRS) history, and New Zealand insurers are able to settle into an IFRS 17 reporting rhythm, IFRS developments continue to move at pace.

IFRS 18 Presentation and Disclosure in Financial Statements (IFRS 18) replaces IAS 1 Presentation of Financial Statements, and will first be effective for periods beginning on or after 1 January 2027. It will bring significant changes to how companies present their income statement and what information they need to disclose. It also makes certain “non-GAAP�� measures part of audited financial statements for the first time. Retrospective application, including restatement of comparatives, is also required. Aotearoa New Zealand officially adopted this standard in May 2024.

Whilst the presentation and disclosure of New Zealand insurers�� financial statements has just undergone wholesale change due to IFRS 17, IFRS 18 aims to provide greater consistency in presentation of the income and cash flow statements, and more disaggregated information. As with IFRS 17, preparation for implementation will take time, and insurers will need to make new judgements, navigate many new requirements, and oversee changes to systems and processes. 

• A more structured income statement with clearly distinct new categories (operating, investing and financing), a requirement to report a newly defined “operating profit�� subtotal, and an analysis of operating expenses on the face on the income statement;
• Disclosure of “management-defined performance measure�� (MPMs), how these are calculated and why these provide useful information; reconciled to the IFRS reporting; and
•  Greater disaggregation of information.

���ʲѳ�’s&�Բ�����; can assist in your initial assessment of the impact of IFRS 18. ���㣨Leyu���������� has also released its  publication which provides our detailed insights and comprehensive analysis on applying the new standard, together with illustrative examples. 

• IFRS 18 specifies that income and expenses arising from insurance contracts and income and expenses from issued investment contracts with participation features recognised applying IFRS 9, are included in the operating category of the income statement. As the main business activities of insurance companies may involve investing in assets or providing financing to customers, some income and expenses that may otherwise currently be classified in the investing or financing categories are now included in the operating category.
• If an investment in associate or joint venture is measured under the equity method, then the related income and expenses are always classified in the investing category. If the investment is part of the main business activity of the entity, and measured at fair value, then the related income and expenses are classified in the operating category.
• Foreign exchange differences recognised in the income statement are classified in the same category as the income and expenses that gave rise to them.
• IFRS 18 permits operating expenses to be presented in the income statement either by nature, by function, or on a mixed basis. Insurance service expenses are considered a “by function�� presentation, so to comply with IFRS 18 requirements, insurers will be required to disclose a qualitative description of the nature of the expenses, and quantitative analyses of certain types of expenses (including depreciation of PPE, amortisation of intangibles, employee benefits, impairment losses/reversals, and write downs of inventory). You may need to adjust your systems and processes to capture this information.
• Insurers will need to consider if “other operating expenses�� may need to be disaggregated based on dissimilar characteristics, and consider if the line item’s label is appropriately informative.