IFRS 18 in Colombia: the 2028 timing gap

In April 2024, the International Accounting Standards Board issued IFRS 18 — Presentation and Disclosure in Financial Statements, replacing the long-standing IAS 1. With an effective date of 1 January 2027 and comparative restatement required, the window for preparation is not approaching. It has arrived.

The Colombian Timeline Is Not the International One

This distinction is frequently missed, and it changes the planning calendar materially. IFRS standards do not apply automatically in Colombia. They take effect only once incorporated by decree into the technical annexes of Decreto 2420 of 2015.

Decreto 0701 of 2026, in force since 9 July 2026, incorporated five IFRS amendments for Groups 1 and 2 — but expressly excluded IFRS 18 and IFRS 19. A separate draft decree from the Ministry of Commerce, based on a December 2025 recommendation from the Consejo Técnico de la Contaduría Pública, proposes mandatory application for Group 1 entities from 1 January 2028, with voluntary early adoption permitted from 1 January 2027. As of August 2026, that decree has not been issued.

The practical consequence for a Colombian reporting entity is a one-year offset from the international calendar: the comparative period begins in 2027 rather than 2026, and first mandatory application falls in 2028. Groups that consolidate into a parent applying IFRS 18 from 2027 will, however, need Colombian data on the new basis a year before local law requires it. That gap — not the standard itself — is where the operational difficulty sits.

A Structural Shift, Not a Cosmetic One

IFRS 18 is not an incremental update. It introduces a fundamentally different architecture for the income statement — one that the IASB describes as the most significant change to financial statement presentation since the original adoption of international standards. The standard mandates three new defined categories within the statement of profit or loss: operating, investing, and financing. Each category carries specific classification requirements that eliminate much of the discretion entities previously exercised under IAS 1.

For multinational organizations operating across Latin America, North America, and Europe, this means every line item in the income statement must be reassessed against new classification criteria. Items that were previously grouped under broad headings — or buried within operating results at management's discretion — will now require explicit categorization according to the standard's framework.

Management-Defined Performance Measures

Perhaps the most consequential element of IFRS 18 is the introduction of management-defined performance measures, or MPMs. For the first time, the IASB formally acknowledges that entities communicate performance through non-GAAP metrics — adjusted EBITDA, core earnings, underlying profit — and brings these measures within the scope of audited financial statements.

Under the new standard, any subtotal of income and expenses that an entity uses in public communications and that is not defined by IFRS must be disclosed in a single note, reconciled to the most directly comparable IFRS-defined subtotal, and subjected to the same audit scrutiny as any other line item in the financials. The implications are considerable. Organizations that have relied on loosely defined adjusted metrics to frame their narrative to investors will now face a discipline of transparency that many have never experienced.

"IFRS 18 does not restrict how management tells its story. It requires that the story be told with precision — and that the numbers behind it withstand audit."

The Operating Profit Question

Under IAS 1, the presentation of operating profit was effectively optional. Many entities disclosed it; others did not. Those that did often defined it differently, making cross-entity comparison an exercise in forensic accounting. IFRS 18 resolves this by requiring all entities to present an operating profit subtotal, defined as a residual — revenue minus operating expenses, with investing and financing activities classified separately.

This residual approach means operating profit becomes a standardized, comparable metric across industries and jurisdictions. For analysts covering Latin American operations of US and Canadian parent companies, this change will significantly improve the quality of performance benchmarking. For the entities themselves, it means the income statement will look materially different from what boards and investors have grown accustomed to.

Aggregation and Disaggregation: The New Rigor

IFRS 18 also introduces enhanced requirements for how information is aggregated and disaggregated in the financial statements and notes. The standard establishes explicit principles — based on shared characteristics — that entities must apply when deciding how to group line items. Labelling must be specific and informative; generic descriptions like "other expenses" used to absorb material amounts will no longer satisfy the standard's requirements.

For organizations with complex, multi-jurisdictional operations — the kind of entities that Castillo & Co serves across Colombia, the United States, Canada, and France — this means a thorough reassessment of chart of accounts structures, ERP configurations, and reporting templates. The technical accounting change cascades into systems, processes, and governance.

The 2026 Preparation Imperative

Because IFRS 18 requires comparative period restatement, the practical effective date always precedes the formal one by a full reporting year. Organizations that have not yet begun their impact assessment are already operating at a deficit.

The preparation workstream is substantial. It includes mapping existing income statement line items to the new three-category structure, identifying all management-defined performance measures in current use, building reconciliation frameworks for MPM disclosures, updating financial reporting systems and consolidation tools, retraining finance teams and audit committees, and engaging with auditors on the transition approach. None of this is trivial. For entities with operations spanning multiple regulatory environments, the complexity multiplies.

The firms that navigate this transition effectively will be those that treat IFRS 18 not as a compliance exercise, but as an opportunity to strengthen the integrity and clarity of their financial communication. The standard, at its core, is an invitation to present performance with greater precision. The organizations that accept that invitation early will find themselves better positioned — with investors, regulators, and counterparties — than those that arrive at the deadline unprepared.