On 14 June 2024, the Malaysian Accounting Standards Board (MASB) issued MFRS 18 'Presentation and Disclosure in Financial Statements', marking a pivotal moment in Malaysian financial reporting. This new standard, identical to IFRS 18, will replace MFRS 101 from 1 January 2027, with early adoption permitted.
MFRS 18 introduces a mandatory 'operating profit' subtotal that must be presented by all entities. This standardizes financial statement presentation and enhances comparability across companies and industries. The operating category includes income and expenses from the entity's main business activities.
A significant innovation is the formal recognition of Management Performance Measures (MPMs). These are subtotals of income and expenses, such as adjusted EBITDA or adjusted profit, that management uses to communicate their view of financial performance outside the financial statements.
For each MPM presented, companies must:
MFRS 18 permits expense presentation by nature, function, or a combination approach. When expenses are presented by function, additional disclosures about depreciation and impairment by nature are required in a single note.
Implementation will require significant changes to accounting systems, chart of accounts, and financial reporting processes. Companies with diverse operations or multiple business activities will face particular challenges in determining appropriate classification.
The standard requires retrospective application, meaning comparative figures for 2026 must be restated to comply with MFRS 18 presentation requirements.
Different industries will experience varying impacts. For example, entities with significant investment activities will need to carefully consider the classification of investment income within the new categorization structure.
Early communication with stakeholders about upcoming changes is essential. This includes briefing audit committees, boards of directors, and external stakeholders on the anticipated impact and timeline.
MFRS 18 represents a fundamental shift in financial reporting presentation that will affect all Malaysian entities applying MFRS. While implementation is not required until 2027, the complexity of changes necessitates early preparation. Companies that begin planning now will be better positioned to implement the standard successfully and realize its benefits in improved financial communication and comparability.