{"id":28989,"date":"2026-10-22T15:04:32","date_gmt":"2026-10-22T12:04:32","guid":{"rendered":"https:\/\/insightss.co\/blogs\/?p=28989"},"modified":"2026-10-22T15:09:52","modified_gmt":"2026-10-22T12:09:52","slug":"ifrs-18-readiness-saudi-arabia-2027","status":"publish","type":"post","link":"https:\/\/insightss.co\/blogs\/ifrs-18-readiness-saudi-arabia-2027\/","title":{"rendered":"Saudi Financial Reporting 2027: IFRS 18 Readiness Guide"},"content":{"rendered":"

Saudi finance leaders enter 2027 with a major change to the income statement. IFRS 18 applies to reporting periods beginning on or after 1 January 2027, roughly ten weeks from today, and boards across the Kingdom increasingly turn to specialist IFRS Consulting Services to guide the transition. The IASB issued the standard on 9 April 2024, and it became the first new IFRS Accounting Standard since IFRS 17 appeared in May 2017.<\/span><\/p>\n

This guide gives expert readers a technical view of the standard, the Saudi rules that apply in 2027, and the 2027 economic figures that shape your first IFRS 18 year. It explains how the new categories work, how Saudi regulators sequence the transition, and how IFRS 18 readiness Saudi Arabia programmes should run from late 2026 through 2028. Teams that already rely on IFRS Consulting Services<\/a> will find a practical checklist, and teams that lead their own IFRS 18 implementation will find the technical detail they need.<\/span><\/p>\n

<\/span>What IFRS 18 Changes in the Primary Financial Statements<\/strong><\/span><\/span><\/h2>\n

IFRS 18 acts as the IAS 1 replacement, and it carries forward many IAS 1 requirements without change. Its largest effect lands on the statement of profit or loss, while the statement of financial position changes very little. The IASB also moved some remaining IAS 1 paragraphs into IAS 8, which now carries the title Basis of Preparation of Financial Statements, and into IFRS 7.<\/span><\/p>\n

The standard requires every entity to classify income and expenses into defined categories. Three of them carry most of the weight: operating, investing and financing. Income taxes and discontinued operations remain as two further categories, so the statement of profit or loss has five in total. The standard also requires two new subtotals on the face of the income statement: operating profit, and profit before financing and income taxes.<\/span><\/p>\n

Retrospective application sits at the centre of the transition. Every entity restates comparative periods, so 2027 reports will carry 2026 figures in the new format. The standard also tightens the principles for aggregation and disaggregation, and it asks preparers to group items by shared characteristics instead of by habit.<\/span><\/p>\n

Table 1: IAS 1 vs IFRS 18 \u2013 What Changes for Your Reporting Team in 2027<\/strong><\/span><\/h3>\n\n\n\n\n\n\n\n\n\n\n\n\n
\n

Area<\/strong><\/span><\/p>\n<\/td>\n

Under IAS 1 (until 2026)<\/strong><\/span><\/td>\n\n

Under IFRS 18 (from 1 January 2027)<\/strong><\/span><\/p>\n<\/td>\n<\/tr>\n<\/thead>\n

Profit or loss structure<\/span><\/td>\nNo mandatory categories. Companies choose their own layout.<\/span><\/td>\nFive categories: operating, investing, financing, income taxes, discontinued operations.<\/span><\/td>\n<\/tr>\n
Required subtotals<\/span><\/td>\nNo mandatory operating profit subtotal.<\/span><\/td>\nTwo new subtotals: operating profit, and profit before financing and income taxes.<\/span><\/td>\n<\/tr>\n
Company-defined profit measures<\/span><\/td>\nNo rules inside the financial statements.<\/span><\/td>\nMPMs sit in one note with calculation, usefulness and reconciliation.<\/span><\/td>\n<\/tr>\n
Cash flow statement (IAS 7)<\/span><\/td>\nIndirect method may start from profit or loss.<\/span><\/td>\nIndirect method starts from operating profit.<\/span><\/td>\n<\/tr>\n
Interest and dividends (non-financial entities)<\/span><\/td>\nChoice of operating, investing or financing.<\/span><\/td>\nInterest and dividends paid go to financing. Amounts received go to investing.<\/span><\/td>\n<\/tr>\n
Interim reports (IAS 34)<\/span><\/td>\nNo MPM disclosure in interim reports.<\/span><\/td>\nInterim statements carry MPM information.<\/span><\/td>\n<\/tr>\n
Earnings per share (IAS 33)<\/span><\/td>\nExtra EPS figures allowed more freely.<\/span><\/td>\nExtra EPS only if the numerator is an IFRS 18 subtotal or an MPM.<\/span><\/td>\n<\/tr>\n
Comparative figures<\/span><\/td>\nNo IFRS 18-style restatement.<\/span><\/td>\nEntities restate prior-period comparatives.<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

<\/span>How the Operating, Investing and Financing Categories Work<\/strong><\/span><\/span><\/h2>\n

The operating category works as the residual. An entity places an item there unless the item belongs to investing, financing, income taxes or discontinued operations. Revenue, cost of sales, selling costs and administrative costs therefore land in operating, and the operating profit subtotal becomes the figure that analysts will compare across Saudi issuers in 2027.<\/span><\/p>\n

The investing category covers income and expenses from assets that generate a return individually and largely independently of the entity\u2019s other resources. Returns on cash and cash equivalents and the results of equity-accounted associates and joint ventures belong here. The financing category covers income and expenses from liabilities that involve only the raising of finance, together with the interest expense and interest-rate effects on other liabilities, including pension and provision unwinding.<\/span><\/p>\n

Special rules apply when an entity\u2019s main business activity involves investing in assets or providing financing to customers. Those entities classify items that would normally sit in investing or financing within operating instead, and banks classify interest income as operating income. Saudi banks, finance companies and investment firms therefore need to assess their main business activity before they map a single line. Foreign exchange differences follow the category of the item that gave rise to them.<\/span><\/p>\n

<\/span>Management-Defined Performance Measures Under IFRS 18<\/strong><\/span><\/span><\/h2>\n

IFRS 18 regulates company-defined profit measures for the first time. A management-defined performance measure is a subtotal of income and expenses that an entity uses in public communications outside the financial statements to convey management\u2019s view of performance. Under the standard, management-defined performance measures (MPMs) sit in a single note. That note states how the entity calculates the measure, why the measure is useful, and how it reconciles to the most directly comparable IFRS subtotal. It also shows the tax and non-controlling interest effect of each reconciling item, and it explains any change to the measure.<\/span><\/p>\n

A financial ratio does not count as an MPM. A subtotal that serves as the numerator or denominator of a ratio can still qualify if it meets the definition on a stand-alone basis. This detail matters for Saudi issuers whose investor presentations rely on profit ratios, because the numerator may now fall inside the audited note.<\/span><\/p>\n

Practical control follows from the definition. Finance teams need one register of every profit measure that appears in earnings releases, board packs, lender certificates and investor decks. Each definition must read the same in the press release as it does in the note, and each reconciliation must tie to the face of the income statement.<\/span><\/p>\n

<\/span>Cash Flow, Earnings Per Share and Interim Effects<\/strong><\/span><\/span><\/h2>\n

IFRS 18 changes more than the income statement. The amended IAS 7 starts the indirect-method cash flow statement from operating profit instead of net profit. Entities without a main business activity of investing or financing classify interest and dividends paid in financing activities and interest and dividends received in investing activities, which removes the old classification choice.<\/span><\/p>\n

Consequential amendments reach other standards as well. IAS 33 allows additional earnings per share figures only when the numerator is an IFRS 18 subtotal or an MPM, and IAS 34 requires MPM information in interim financial statements. Entities that present operating expenses by function must also disclose specified amounts by nature, including depreciation, amortisation, employee benefits, impairment and inventory write-downs, in a single note. Finance teams therefore need ledger data that supports both views of expense.<\/span><\/p>\n

<\/span>What Saudi Regulators Will Require in 2027 and Onwards<\/strong><\/span><\/span><\/h2>\n

SOCPA requires domestic companies to apply SOCPA-endorsed IFRS, meaning IFRS Accounting Standards endorsed in Saudi Arabia plus other pronouncements that SOCPA endorses. SOCPA adopted IFRS 18 locally on 26 December 2024, so the standard already sits inside the framework that every Saudi company follows.<\/span><\/p>\n

The CMA IFRS 18 transition framework sets the path for listed companies. The CMA board took its decision under resolution 3-6-2026 dated 19 January 2026 and announced it on 30 June 2026. The framework allowed listed joint-stock companies to adopt IFRS 18 early during 2026 by announcing statements prepared under the new standard, together with the effect of early adoption, on the Saudi Exchange website. During that window, companies keep preparing their approved statements under IAS 1 and publish them through Tadawul\u2019s designated electronic systems. The framework also requires a preliminary assessment of the expected impact of IFRS 18 in interim and annual statements for periods beginning on or after 1 April 2026.<\/span><\/p>\n

Mandatory application begins for periods beginning on or after 1 January 2027, and the early adoption window closes on 31 December 2026. IFRS 18 readiness Saudi Arabia teams should therefore plan for approved statements under IFRS 18 from the first quarter of 2027. Companies with a December year-end will publish their first full-year IFRS 18 statements for the 2027 financial year in early 2028, and those statements will restate 2026 comparatives.<\/span><\/p>\n

Zakat deserves early attention from Saudi preparers. Entities need to confirm with their auditors how their Zakat charge and income tax charge fit into the new category structure, and they should settle that treatment before they build the 2026 comparatives.<\/span><\/p>\n

<\/span>The 2027 Saudi Numbers Behind Your First IFRS 18 Year<\/strong><\/span><\/span><\/h2>\n

The official outlook shows a sharp rebound in 2027. The Saudi government\u2019s pre-budget statement, issued on 30 September 2026, projects real GDP growth of 12.8% in 2027 after a 3.6% contraction in 2026, which it links to a 21.8% fall in oil activities. International forecasts published in October 2026 sit lower, with a 3.3% contraction in 2026 and 7.9% growth in 2027, and they assume that regional shipping conditions normalise through 2027. Both views point the same way, so finance teams should expect revenue and margin movements that need clear explanation under the new operating profit subtotal.<\/span><\/p>\n

The same pre-budget statement estimates 2027 government revenue at SAR 1.202 trillion and expenditure at SAR 1.392 trillion, which leaves a deficit of about SAR 191 billion, or 3.6% of GDP. Revenue should reach SAR 1.351 trillion by 2029, while expenditure should reach SAR 1.544 trillion. Cumulative deficits between 2027 and 2029 total SAR 560 billion. The government says it will fund the 2027 deficit through borrowing, and it expects debt to rise by the end of 2027.<\/span><\/p>\n

These figures matter for IFRS 18 readiness Saudi Arabia work in three ways. Government spending of SAR 1.392 trillion feeds contractor, supplier and service revenue, so growth will flow into operating profit. Heavy public borrowing keeps the debt market active, and that market already listed 63 sukuk and bonds with a total issuance size of SAR 772.93 billion on 31 August 2026, so financing costs will draw close scrutiny once they sit outside operating profit. Inflation of 1.9% to 2.2% in 2027 points to steady cost pressure, which makes consistent expense classification more important.<\/span><\/p>\n

Table 2: 2027 Saudi Figures That Shape Your First IFRS 18 Year<\/strong><\/span><\/h3>\n\n\n\n\n\n\n\n\n\n\n\n\n
Indicator<\/strong><\/span><\/td>\n2027 figure<\/strong><\/span><\/td>\n\n

Why it matters for IFRS 18 reporting<\/strong><\/span><\/p>\n<\/td>\n<\/tr>\n<\/thead>\n

Real GDP growth<\/span><\/td>\n7.9% (October 2026 international forecast); 12.8% (government pre-budget estimate)<\/span><\/td>\nLarge swings need clear operating profit and MPM explanations.<\/span><\/td>\n<\/tr>\n
Government revenue<\/span><\/td>\nSAR 1.202 trillion, rising to SAR 1.351 trillion by 2029<\/span><\/td>\nSupports the demand that feeds operating revenue.<\/span><\/td>\n<\/tr>\n
Government expenditure<\/span><\/td>\nSAR 1.392 trillion, rising to SAR 1.544 trillion by 2029<\/span><\/td>\nDrives contractor and supplier activity across sectors.<\/span><\/td>\n<\/tr>\n
Budget deficit<\/span><\/td>\nAbout SAR 191 billion, or 3.6% of GDP<\/span><\/td>\nBorrowing keeps debt markets and financing costs in focus.<\/span><\/td>\n<\/tr>\n
Cumulative deficits, 2027\u20132029<\/span><\/td>\nSAR 560 billion<\/span><\/td>\nSignals sustained issuance and rising leverage.<\/span><\/td>\n<\/tr>\n
Inflation<\/span><\/td>\n1.9% (government); 2.2% (international forecast)<\/span><\/td>\nCost pressure raises the value of consistent expense classification.<\/span><\/td>\n<\/tr>\n
Non-oil share of GDP (first half of 2026 baseline)<\/span><\/td>\n57.3%, a record level<\/span><\/td>\nShows how much activity reports through operating lines.<\/span><\/td>\n<\/tr>\n
IFRS 18 start date<\/span><\/td>\n1 January 2027<\/span><\/td>\nInterim and annual periods use the new format.<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Capital market scale adds weight. The Saudi Exchange recorded a market capitalisation of SAR 9.45 trillion, about USD 2.52 trillion, at the end of July 2026, which ranked it 13th largest in the world. Foreign holdings reached SAR 437.87 billion, or USD 116.77 billion, and on 31 August 2026 the main market counted 253 listed companies while the parallel market listed 124 symbols. Each of these issuers will present profit on a new basis in 2027, and investors will compare the first IFRS 18 quarter with restated 2026 figures.<\/span><\/p>\n

<\/span>Building an IFRS 18 Readiness Programme for 2026 to 2028<\/strong><\/span><\/span><\/h2>\n

Effective IFRS 18 readiness Saudi Arabia programmes assign clear owners, fixed milestones and a steady reporting rhythm to the audit committee. They run in three phases that match the Saudi timeline.<\/span><\/p>\n

Phase 1: Now to 31 December 2026<\/strong><\/span><\/h3>\n