MFRS 18: Preparing for Presentation and Disclosure Changes

Two Malaysian financial reporting frameworks change for the same periods. MFRS 18 Presentation and Disclosure in Financial Statements replaces MFRS 101 for entities applying MFRS, and MPERS (2025) replaces MPERS (2016) for private entities. Both apply for annual periods beginning on or after 1 January 2027. Neither changes how transactions are recognised or measured; both change what must be presented and disclosed. The first question for a company is therefore not what MFRS 18 does, but whether it is on the MFRS framework at all.

Start with which framework applies

Which framework a Malaysian company reports under is not a preference. It follows from a definition.

MASB defines a private entity as a private company under section 2 of the Companies Act 2016 that:

• is not itself required to prepare or lodge financial statements under any law administered by the Securities Commission Malaysia or Bank Negara Malaysia; and
• is not a subsidiary or associate of, or jointly controlled by, an entity which is required to do so.

MASB's MPERS implementation guidance adds a carve-out that is easy to miss: a private company that is itself — or is a subsidiary or associate of, or jointly controlled by — a management company as defined in section 2 of the Interest Schemes Act 2016 is not a private entity.

The definition turns on the terms subsidiary, associate and jointly controlled, which MASB states are defined and explained in MFRS 10, MFRS 128 and MFRS 11 respectively, rather than carrying a loose commercial sense. A company assessing its own status should confirm those definitions against MASB's current guidance rather than assume the everyday reading.

The status can change without a decision being taken

MASB states that an entity may only be treated as a private entity in relation to annual or interim periods throughout which it is a private entity. Status is assessed across the whole period, not at a convenient date within it.

This is where companies are caught out. The second limb of the test looks at group relationships, so a company can cease to be a private entity because of something another entity did — an investor coming onto the register, a group reorganisation, or becoming an associate of a regulated entity. No decision by the company itself is required, and nothing on its own board agenda will necessarily flag it.

One consequence runs the other way and is often assumed wrongly. MASB confirms that a private company which is a subsidiary of a parent listed outside Malaysia is still a private entity by this definition. A foreign listing in the group does not, by itself, remove the status.

Being a private entity permits MPERS; it does not require it

Qualifying as a private entity is a permission, not an instruction. MASB's standards for private entities require a private entity to apply either MPERS or the MFRS framework in its entirety. The two cannot be mixed.

There are legitimate reasons to elect MFRS: a parent that reports under MFRS, lenders or investors who expect MFRS information, or an anticipated transaction or listing. There are equally legitimate reasons not to. MPERS is the lighter framework, and a company with none of those pressures gains little from carrying the heavier one.

What matters is that the choice is made deliberately and recorded, including who approved it. Moving between frameworks later is a transition exercise with restated comparatives, not a change of format.

Both frameworks change for periods beginning 1 January 2027

MASB's Malaysian Financial Reporting Standards index records MFRS 18 as issued on 14 June 2024, with the status Enacted, applicable for annual periods beginning on or after 1 January 2027.

MASB's standards for private entities page records that MPERS (2025) applies for annual periods beginning on or after 1 January 2027, with earlier application permitted, and that MPERS (2016) is withdrawn for annual reporting periods beginning on or after that date.

A December year-end company on either framework therefore first reports under the new requirements for the year ending 31 December 2027. A group holding entities on both frameworks faces both changes in the same cycle, which is a scheduling point worth recognising early rather than discovering at year-end.

What MFRS 18 changes in the income statement

The most visible change is structural. Income and expenses are classified into five categories — operating, investing, financing, income taxes, and discontinued operations — and defined subtotals must be presented, rather than the structure being left largely to the entity as MFRS 101 allowed.

Two subtotals are newly defined and required: operating profit, and profit before financing and income taxes. The second is not demanded of every entity: one that provides financing to customers as a main business activity is exempt from presenting it. That will not apply to most private companies, but it is worth confirming rather than assuming. Operating functions as the residual category, capturing income and expenses not classified into any of the other four.

Classification is not mechanical. Whether an entity invests in assets or provides financing to customers as a main business activity affects how items fall between the categories, so two companies with similar transactions but different business models may classify the same item differently.

This matters for two reasons. Presentations that were previously a matter of entity choice become more directly comparable between companies. And a subtotal a business has reported for years may no longer sit where its readers expect it. Where internal targets, bank covenants, incentive schemes or investor communications reference a line drawn from the income statement, check whether that line survives the change in the same form. Confirm the categories and the required subtotals against the text of MFRS 18 itself before designing a new presentation.

Performance measures, cash flows and interim reporting

MFRS 18 brings management-defined performance measures into the notes to the financial statements. These are subtotals of income and expenses that are not specified by the accounting standards but are used in public communications to convey management's view of an aspect of financial performance — in other words, the adjusted measures many groups already publish in commentary.

The consequence is governance rather than arithmetic. A measure presented in a results announcement or an investor deck may now need a defined calculation, a reconciliation to the nearest specified subtotal, and an explanation of why management considers it useful, inside a document subject to audit. Whoever owns that measure should be identified before the reporting cycle rather than during it.

MFRS 18 is also not a self-contained change. It carries consequential amendments into a range of other standards, and two are worth singling out.

The cash flow standard is amended so that the operating profit subtotal defined by MFRS 18 becomes the starting point for the indirect method, together with new requirements for classifying interest and dividends. A company that has reconciled from a self-selected profit figure will need to rebuild that reconciliation.

The interim reporting standard is amended to require the management-defined performance measure disclosures in the notes to condensed interim financial statements. Where a company reports interim figures, the change reaches them as well as the annual statements.

MASB also maintains supporting material that is versioned around the point at which an entity begins applying MFRS 18. Confirm which version applies to the period being reported against MASB’s own pronouncement pages rather than a summary.

Why the work belongs in the current cycle

MFRS 18 is applied retrospectively, with comparative information restated, and the new requirements apply to interim financial statements in the first year of application. For a December year-end company that means the 2026 figures are affected, and the interim statements published during 2027 are affected before the first annual statements under the standard are issued. The practical deadline sits earlier than the effective date suggests.

1. Confirm the entity's framework against both limbs of the private-entity definition and the Interest Schemes Act carve-out, for the whole period.
2. Re-test that status after any share issue, acquisition, disposal or group reorganisation, including changes at other entities in the group.
3. Where MPERS applies, plan the move from MPERS (2016) to MPERS (2025), including comparatives.
4. Where MFRS applies, map current income-statement lines to the five categories and identify any subtotal that changes or disappears.
5. List every contract, covenant, incentive plan or external communication that references an affected subtotal.
6. Identify management-defined performance measures already published, and who owns each definition.
7. Assess the chart-of-accounts, consolidation and reporting changes needed to produce both the new presentation and the restated comparatives.
8. Confirm whether the entity publishes interim financial statements, which brings the interim amendments into scope.

Where outside help is not needed

Much of the above is internal work. A company with settled shareholding, a simple structure and a straightforward income statement can confirm its own framework and map its own lines without engaging anyone, and should not be persuaded otherwise. For a private entity that remains on MPERS, MFRS 18 does not apply at all; the only change to plan for is the move to MPERS (2025), and for many smaller entities that is a contained exercise.

The situations where outside input more often earns its cost are narrower: a group with entities on both frameworks, a status question that turns on the second limb of the definition or on the Interest Schemes Act carve-out, an income statement that feeds covenants or incentive arrangements, or a set of published performance measures that will now sit inside audited statements. Where the question is which of those applies, that is itself a short assessment rather than a project. Our accounting and financial reporting work covers the applicability test and the transition planning that follows it.

General-information limitation

This article is general information, not accounting or audit advice for a particular entity. It does not determine the reporting framework applicable to any company, nor the presentation, classification or disclosure appropriate to any set of financial statements. The private-entity definition is fact-specific and depends on a company's own circumstances and group relationships. Confirm the current requirements against MASB's own published standards and guidance, and obtain advice on your own facts where the matter is material.

To discuss your circumstances, contact Saifudin & Co.