What does AASB 18 change, and what should finance teams do first?
AASB 18 changes the shape of the income statement for annual periods beginning on or after 1 January 2027. Income and expenses move into five categories, two new subtotals become mandatory, and public performance measures need an audited reconciliation. The first practical step is one mapping: every ledger account and KPI classified once, checked by a person.
Profit is measured exactly as before. What changes is where each amount sits and what you must explain about it. The comparative year is restated on the same basis, and for many groups that year is already running.
This guide is for financial controllers, CFOs and group finance managers whose consolidation runs through a spreadsheet fed by Xero, MYOB, Dynamics 365 Business Central or NetSuite. The usual pressure point is key-person risk: one person knows which spreadsheet rows feed which line of the income statement.
Key takeaways
- AASB 18 applies to for-profit Tier 1 entities for annual periods beginning on or after 1 January 2027. The comparative year must be restated.
- Every income and expense item goes into one of five categories, and two subtotals are required on the face of the statement.
- Measures like underlying EBITDA quoted in public must be reconciled in an audited note.
- Groups on several ledgers feel it first, because the classification must match across all of them.
- AI can propose a category for each account, but a person approves every decision and nothing is written back to the ledgers.
When does AASB 18 apply to your reporting year?
The Australian Accounting Standards Board issued AASB 18 Presentation and Disclosure in Financial Statements in June 2024 as the Australian equivalent of IFRS 18. It replaces AASB 101. According to the AASB's announcement (2024), it applies to for-profit entities preparing Tier 1 general purpose financial statements for annual periods beginning on or after 1 January 2027, with earlier application permitted.
Not-for-profit private and public sector entities, and superannuation entities applying AASB 1056, start a year later, from 1 January 2028.
The date that catches finance teams out is the comparative year. The standard applies retrospectively, and the transition requirements in AASB 18 call for a line-by-line reconciliation of the comparative income statement, from the amount previously presented under AASB 101 to the restated AASB 18 amount.
- 1 Jul 2026Comparative year startsFY2027 is the year that will be restated. It is already running.
- NowMapping preparedEvery account and public KPI given a category, a subtotal and a reason
- 1 Jul 2027First AASB 18 year startsAnnual period beginning after 1 January 2027
- 31 Dec 2027First half-yearThe same line-item reconciliation applies to interim reports in the first year
- 30 Jun 2028First annual statementsNew categories, both subtotals, the measures note and the restated FY2027
A 31 December year end runs one step earlier. The 2026 calendar year is the comparative, and 2027 is the first AASB 18 year.
What about Tier 2 simplified disclosure statements?
For Tier 2 preparers the date is not settled. In June 2026 the AASB opened Exposure Draft ED 341, proposing to align AASB 1060 with AASB 18 from a later date, with early application permitted. It is still a proposal. The mapping described below is the same work either way, so it can be done once and used whenever your date lands.
What changes in the month-end and year-end pack under AASB 18?
Recognition and measurement do not change. Revenue, expenses and assets are counted as before. The presentation and the disclosures change.
| AASB 101 today | AASB 18 | Impact | |
|---|---|---|---|
| Income statement structure | Line items chosen by each entity | Operating, investing, financing, income taxes, discontinued operations | Every account needs a category |
| Subtotals | Optional, defined by the entity | Operating profit and profit before financing and income taxes required | Two subtotals the pack must produce |
| Underlying EBITDA in the investor deck | Outside the audited accounts | Disclosed and reconciled in a single note | Each measure needs a reconciliation |
| Lines labelled other | Common | Only where no more informative label exists | Large other lines split out |
| Expenses by function | Nature disclosures vary | Depreciation, amortisation, employee benefits, impairment and inventory write-downs disclosed in one note | Nature totals traced to each function line |
| Comparative year | Presented as previously reported | Restated, with a line-by-line reconciliation | Prior year mapped at account level |
What are the five AASB 18 income statement categories?
Every item of income and expense goes into one of five categories: operating, investing, financing, income taxes and discontinued operations. Operating is the residual category, so anything that is not one of the other four lands there. The statement must then show two subtotals: operating profit or loss, and profit or loss before financing and income taxes.
Classification depends on your main business activities. Tiffany Tan of CPA Australia told Accounting Times (2024) that this calls for careful judgement and documentation. Interest income is investing for a distributor and may be operating for a business that lends to customers.
What is a management-defined performance measure?
A management-defined performance measure is a subtotal of income and expenses that you use in public communications to show management's view of overall performance. Underlying profit and adjusted EBITDA are the common ones.
For each measure, AASB 18 requires a description, how it is calculated and a reconciliation to the nearest required subtotal. Each reconciling item also needs its income tax and non-controlling interest effect. Net debt and free cash flow are not subtotals of income and expenses, so they fall outside the definition.
What happens to the "other" line?
Items must be disaggregated whenever the result is material, and the label "other" is allowed only where no more informative label exists. A large "other expenses" line built from dozens of accounts is the first thing a reviewer will ask about.
If you present expenses by function, such as cost of sales and administration, you must also disclose totals for depreciation, amortisation, employee benefits, impairment and inventory write-downs, split by the operating line each sits in.
Why does spreadsheet consolidation feel AASB 18 first?
A group on one ledger can add a reporting code to each account and rebuild its statements. A group on several ledgers has more work, because the AASB 18 classification has to be the same in every one of them.
For example, picture a group with a parent on Business Central, two subsidiaries on Xero and an acquired business still on MYOB. Each chart of accounts was built by a different person for a different purpose. Interest received is its own account in one ledger and folded into "other income" in another. The consolidation spreadsheet pulls each trial balance into hard-coded rows.
Three things tend to go wrong at the first AASB 18 close in a setup like that:
- The prior year has to be rebuilt. Restating the comparative needs each account's prior-year balance mapped to the new categories. A spreadsheet that only held summarised rows cannot produce it.
- Mixed accounts surface late. An account holding both operating and investing items has to be split, and nobody finds it until a reviewer asks.
- The KPI reconciliation is rebuilt by hand. Underlying EBITDA often lives in a separate tab with adjustments typed in. AASB 18 wants every adjustment traced, with its tax and minority effect.
Contracts are a separate trap. If a bank covenant or a bonus scheme refers to "operating profit", check whether its definition still matches the new subtotal.
For the consolidation side, see our guide to AI for multi-entity financial consolidation.
How do you map every ledger account to AASB 18 once?
The bottleneck is classification. Someone has to look at every account, in every ledger, and decide its category, its subtotal and the reason. That decision is made once, and every close reads it afterwards.
This is the step where AI helps, inside clear limits. A model reads each account's name, code, description and a sample of its transactions, then proposes a category with its reasoning. A person accepts, changes or splits every proposal. The model never decides and never writes to a ledger.
- Trial balances pulledCurrent and prior year, every ledger, read only
- Category proposedEach account gets a suggested category and reason
- Subtotals builtFixed rules roll categories into the two subtotals
- Controller approvesEvery proposal accepted, changed or split by a person
- Pack restatedCurrent and comparative year from the same map
- Reasons filedEach decision kept as audit evidence
Proven against your own classifications first
Before anyone relies on the proposals, the model classifies a sample your team has already mapped by hand. The two are compared side by side, and you set the accuracy threshold it must reach. It runs alongside your team until it proves accurate. Until then, its output is a suggestion list and nothing more.
Your data stays in your environment
Trial balances and transaction samples are read from your ledgers through their APIs or exports. The work runs on your infrastructure in Australia or New Zealand (your cloud or your own servers), and no data is used to train a third-party model.
One table every pack reads
The mapping is a table with one row per account: ledger, account code, AASB 18 category, subtotal, function line if used, nature total if relevant, the reason, who approved it and when. A new account added in Xero next March shows as unmapped until someone classifies it, so the pack cannot drift.
How is your group consolidated today?
- One ledger, standard reportsAdd the category as a reporting code inside the ledger
- Several ledgers, consolidated in a spreadsheetOne central mapping table outside the ledgers, read by every pack
- Consolidation module or tool already in placeAdd the category and subtotal as attributes in that tool
- Board pack built in Power BIMap once in the data model so statutory and management packs agree
Our system integration work is the plumbing behind the second and fourth options: read-only connections to each ledger, and one table every report reads. Where the board pack lives in Power BI, our data, BI and analytics team builds the model so statutory and management numbers agree.
How are management KPIs reconciled from the ledger?
The same table carries your public measures. List every subtotal quoted outside the accounts: the annual report, investor presentations, ASX announcements and lender reporting. For each one, record which categories and accounts it starts from and which adjustments it makes.
Each adjustment then needs its income tax effect and its effect on non-controlling interests. If the adjustments come from tagged accounts or journal references, the reconciliation in the note can be produced from ledger data. Nobody retypes it from the investor deck.
Two checks are worth doing early:
- Does any measure you quote stop being useful once operating profit is a required subtotal? Retiring it is cleaner than reconciling it for years.
- Does the board pack use a measure the market never sees? If it stays internal, it is not a management-defined performance measure.
What will you have at the first AASB 18 close?
- Account-to-category mapEvery account, every ledger
- Comparative yearRestated from the same map
- Measures noteEach adjustment traced to accounts
- New accountsFlagged until someone classifies them
- Audit evidenceA reason and approver per decision
The work fits three phases, each a fixed fee agreed before we start. Phase 1 maps the ledgers, measures the starting point and agrees the accuracy threshold. Phase 2 runs the model alongside your team's own classification of a sample. Phase 3 has the model draft and a person approve every line. You can stop after any phase and keep everything delivered. Your team owns the table from then on.
The approach comes from reporting and data platform work across our consultants' careers, including engagements at BHP, Rio Tinto and Senex Energy, where every report depends on an agreed mapping of source accounts.
It sits naturally beside a faster close. Our guide to month-end close automation across several entities covers reconciliations and journals, and our piece on Peppol e-invoicing compliance covers structuring data at the source.
How Solve8 can help
We map multi-ledger groups to AASB 18 as the first phase of an AI strategy engagement, with read-only connections to each ledger and a person approving every classification. If your comparative year is running and the mapping still lives in one spreadsheet, talk to our team.
Sources: AASB, "New Standard AASB 18 issued" (June 2024); AASB 18 Presentation and Disclosure in Financial Statements (2024); AASB, "Open for comment: ED 341" (2026); Accounting Times, "CPA urges accountants to prepare for major IFRS 18 changes" (October 2024).
