IFRS 18 FACT SHEET

Management-Defined Performance Measures (MPMs)

From annual reporting periods beginning on or after 1 January 2027, IFRS 18 brings the “adjusted” figures companies communicate outside their financial statements into the audited notes. If a measure qualifies as an MPM, it must be described, explained and reconciled in a single note, including the income tax and non-controlling interest effects of every adjustment.

1. What is an MPM?

An MPM is a subtotal of income and expenses that meets all three of the following criteria:

1. The entity uses it in public communications outside its financial statements.
2. The entity uses it to communicate management’s view of an aspect of the financial performance of the entity as a whole.
3. It is not listed in paragraph 118 of IFRS 18 or specifically required to be presented or disclosed by IFRS Accounting Standards.

Reference: IFRS 18.117

Good to know

• Public communications: These include management commentary, press releases and investor presentations, such as statements by the chairman, CEO or finance director, results announcements and investor decks. They exclude oral communications and social media posts. (B119)
• Presumption of management’s view: A subtotal used in public communications is presumed to reflect management’s view of performance. Rebutting this presumption requires reasonable and supportable evidence. (IFRS 18.119–120, B124–B129)
• Presentation in the financial statements: A measure does not have to appear in the statement of profit or loss to qualify as an MPM. (B118)
• Private companies: Private companies are not exempt. If they publish qualifying measures, the requirements apply. (BC342)
• Number of MPMs: An entity may have no MPMs, one MPM or several MPMs. (B113)

2. What is NOT an MPM?

A measure does not qualify as an MPM if it falls into any of the following categories.

A. Measures required by IFRS Accounting Standards

Examples include:

• Operating profit
• Profit before financing and income taxes
• Profit or loss
• Basic and diluted earnings per share

B. Subtotals listed in paragraph 118 of IFRS 18

These are excluded from the MPM definition, including:

• Gross profit and similar subtotals, such as net interest income, net fee and commission income, insurance service result and net rental income.
• Operating profit before depreciation, amortisation and IAS 36 impairments.
• Operating profit plus all income and expenses from equity-accounted investments.
• Profit before income taxes.
• Profit from continuing operations.

Reference: IFRS 18.118, B123

C. Measures that are not subtotals of both income and expenses

MPMs must be subtotals of income and expenses. The following measures therefore do not qualify:

• Income-only or expense-only measures: Adjusted revenue, organic revenue and adjusted operating expenses.
• Balance sheet measures: Net debt, working capital and capital employed.
• Ratios: Return on equity, EBITDA margin and interest cover.
• Cash flow measures: Free cash flow and cash conversion.
• Non-financial measures: Customer numbers, customer satisfaction scores and sustainability metrics.

Reference: IFRS 18.B116

D. Measures not used in public communications

Examples include:

• Measures used only internally or solely to determine management remuneration.
• Figures communicated only orally or through social media.
• Presentations shared confidentially with a small number of identifiable shareholders or potential investors.

Reference: IFRS 18.B119, BC344

E. Measures that do not relate to the entity as a whole

The profit of a single reportable segment is generally not an MPM because it does not represent the financial performance of the entity as a whole.

Reference: IFRS 18.B114

3. Examples of MPMs

Each of the following measures qualifies as an MPM if it meets the applicable criteria and is used in public communications.

Adjusted operating profit

This is one of the most common examples of an MPM. It may represent operating profit before restructuring costs.

It must be reconciled to operating profit, the most directly comparable IFRS subtotal.

Adjusted profit from continuing operations

This measure adjusts profit from continuing operations, an IFRS-specified subtotal, for selected items.

It must be reconciled to profit from continuing operations.

Adjusted EBITDA

Adjusted EBITDA adds back items beyond depreciation, amortisation and IAS 36 impairments. Consequently, it falls outside the exclusion in paragraph 118.

Operating profit before non-recurring expenses

This label is permitted only if the subtotal excludes every expense that the entity defines as non-recurring. The definition of non-recurring expenses must also be disclosed.

Reference: IFRS 18.B134–B135

Adjusted gross profit

Adjusting gross profit takes the measure outside the paragraph 118 exclusion. For example, adjusted gross profit may be used as the numerator in calculating an adjusted gross margin.

Underlying, core or normalised profit

These measures present profit after management removes selected items, such as foreign exchange losses, to communicate its view of financial performance.

4. It depends: measures requiring careful assessment

EBITDA

EBITDA is not an MPM if it is calculated exactly as operating profit before depreciation, amortisation and IAS 36 impairments.

If calculated differently, it may qualify as an MPM.

Even then, the label “EBITDA” is accurate only when all earnings are included in operating profit.

Reference: IFRS 18.118(b), BC362–BC366

Headline earnings

A subtotal required by listing rules may provide grounds for rebutting the presumption that a measure reflects management’s view.

However, this may not apply where management also uses headline earnings to communicate its own view of performance.

Reference: IFRS 18.B129(a), BC351

Segment profit

Segment profit is generally not an MPM unless it reflects the performance of the entity as a whole. An example may be an entity whose single segment represents its only main business activity.

Reference: IFRS 18.B114–B115

5. If it is an MPM: what must be disclosed?

If a measure qualifies as an MPM, the entity must disclose the following information in a single note to the financial statements:

1. Description and explanation

Explain what the measure represents, why it provides useful information about the entity’s financial performance and how it is calculated.

2. Reconciliation to an IFRS subtotal

Reconcile the MPM to the most directly comparable subtotal specified or required by IFRS Accounting Standards.

3. Tax and non-controlling interest effects

Disclose the income tax effect and the non-controlling interest effect of each individual reconciling item.

4. Changes to MPMs

Disclose any changes in how an MPM is calculated, any newly introduced MPM, or any MPM that is no longer used. Explain the reasons for these changes.

Reference: IFRS 18.121–125

Key takeaway: IFRS 18 increases transparency around alternative performance measures by requiring qualifying measures used in public communications to be explained and reconciled within the financial statements. Entities should identify their MPMs early, review how they communicate performance and prepare the necessary disclosures ahead of implementation.