IFRS 18 Presentation and Disclosure in Financial Statements: 2026 Comparative Restatement & 2027 Readiness Guide for Omani Enterprises

For more than twenty years, IAS 1 (Presentation of Financial Statements) gave corporate finance teams across the Sultanate of Oman wide latitude in how they formatted their Statement of Profit or Loss. One trading group in Muttrah might include share of profit from associates and fair-value gains inside “Operating Profit,” while a competing industrial conglomerate in Sohar excluded them. That flexibility ends with the arrival of IFRS 18 (Presentation and Disclosure in Financial Statements), which replaces IAS 1 in its entirety.

Although IFRS 18 becomes mandatory for annual reporting periods beginning on or after 1 January 2027, its requirement for full retrospective restatement means that 2026 is the live comparative reporting year for every calendar-year company in Oman. As a trusted provider of Auditing and Accounting Services in Oman, Muscat Audit is already helping CFOs, MSX-listed SAOGs, family holding companies, and mid-market LLCs redesign their ERP Charts of Accounts so their 2026 general ledgers capture Operating, Investing, and Financing items cleanly at the point of transaction entry.

1. Why IFRS 18 Is the Biggest Financial Reporting Overhaul in Two Decades

In Oman, full compliance with International Financial Reporting Standards (IFRS) is required by the Commercial Companies Law (Royal Decree 18/2019), the Financial Services Authority (FSA), and the Oman Tax Authority (OTA). While recent standards such as IFRS 15 (Revenue), IFRS 16 (Leases), and IFRS 9 (Financial Instruments) changed how specific transactions are measured, IFRS 18 transforms how every company presents its financial performance.

IFRS 18 rests on three core pillars that directly impact Omani financial statements and statutory audits:

1. Mandatory Income Statement Categories & Subtotals: All income and expenses must be classified into five strict categories—Operating, Investing, Financing, Income Taxes, and Discontinued Operations—accompanied by two newly standardized subtotals: Operating Profit or Loss and Profit or Loss Before Financing and Income Taxes.
2. Audited Disclosure of Management-Defined Performance Measures (MPMs): Non-GAAP metrics communicated publicly by management (such as “Adjusted EBITDA” or “Core Operating Income”) must be disclosed in a single audited note and reconciled to the nearest IFRS subtotal.
3. Enhanced Aggregation, Disaggregation & Operating Expense Transparency: Companies can no longer bury large miscellaneous expenses in “Other Operating Expenses” and must provide specific disclosures on depreciation, amortization, employee benefits, impairments, and inventory write-downs when presenting expenses by function.

2. The New Five-Category Statement of Profit or Loss & Mandatory Subtotals

For a standard commercial, industrial, construction, or services enterprise in Oman (whose specified main business activity is neither banking/financing nor investing in financial assets), IFRS 18 requires income and expenses to be sorted into three primary operational/capital buckets before tax:

A. The Operating Category (Default Residual Bucket)

The Operating category captures all income and expenses from the company’s main business activities—as well as any income or expense not classified in the other categories. Crucially, even volatile or unusual operating items (such as warehouse fire losses in Sohar, restructuring severance under Oman Labour Law, or inventory obsolescence write-downs) remain inside Operating Profit unless they meet the strict criteria of another category.

B. The Investing Category

The Investing category captures returns from assets that generate a return individually and largely independently of the entity’s other resources. For a typical Omani conglomerate or LLC, this includes:

• Rental income and fair-value gains/losses from Investment Properties (IAS 40) held in Muscat or Salalah (unless real estate investment is the company’s main business activity);
• Share of profit or loss from Associates and Joint Ventures accounted for using the equity method (IAS 28)—which can no longer be included inside Operating Profit;
• Dividends and interest income earned on cash, fixed deposits, and debt/equity investments; and
• Incremental expenses directly attributable to acquiring or disposing of those investing assets.

C. The Financing Category

IFRS 18 draws a sharp distinction between liabilities that arise from transactions that involve only the raising of finance (such as commercial bank term loans, overdrafts, Islamic Murabaha/Sukuk facilities, and shareholder loans) and other liabilities (such as IFRS 16 lease liabilities, decommissioning provisions under IAS 37, and net defined-benefit end-of-service gratuity liabilities under IAS 19). Both categories’ interest expenses and interest unwinding are placed in the Financing category, right below the new subtotal Profit or Loss Before Financing and Income Taxes.

3. Worked OMR Example: IAS 1 vs. IFRS 18 Income Statement for a Muscat Group

To see how IFRS 18 alters reported Operating Profit and debt-covenant ratios, consider Al Batinah Industrial & Trading SAOC (an illustrative Muscat corporation with an IAS 40 commercial rental building in Al Khuwair and a 30% equity-method associate in Duqm):

Notice the strategic implication: while net profit remains OMR 1,281,000, moving the OMR 210,000 associate profit and OMR 95,000 property rental income out of Operating Profit and into Investing reduces reported Operating Profit by OMR 305,000. Any Omani corporate with bank loan covenants or executive bonus plans tied to “Operating Profit” or “Operating Margin” must proactively review its facility agreements with its IFRS & Financial Reporting advisors.

4. Bringing Management-Defined Performance Measures (MPMs) Inside the Audit

Many MSX-listed companies, IPO candidates, and large private groups in Oman highlight custom performance subtotals—such as “Adjusted Operating Profit,” “Core Earnings,” or “Normalized EBITDA excluding pre-opening costs”—in their Chairman’s Report, investor presentations, or bond prospectuses. Under IFRS 18, any subtotal of income and expenses used in public communications outside the financial statements to communicate management’s view of financial performance is classified as a Management-Defined Performance Measure (MPM) (note that standard Operating Profit before Depreciation, Amortization, and Impairments within the scope of IAS 36 [OPDAI] is now an IFRS-specified subtotal and therefore exempt from extra MPM reconciliation rules).

When an Omani company reports an MPM, IFRS 18 requires a dedicated, audited note in the financial statements containing:

• A clear statement that the MPM reflects management’s view of an aspect of financial performance and is not necessarily comparable with measures shared by other companies;
• An explanation of why the MPM provides useful information to users of the financial statements;
• A quantitative reconciliation between the MPM and the most directly comparable IFRS-defined subtotal; and
• The income tax effect (calculated in Oman at the applicable statutory tax rate or tax law rules in the jurisdiction) and the non-controlling interest (NCI) effect for each individual reconciling item!

5. IAS 7 Cash Flow Alignment, Foreign Exchange Rules & ERP Chart of Accounts

Alongside replacing IAS 1, the IASB made consequential amendments to IAS 7 (Statement of Cash Flows) that simplify and standardize cash flow reporting in Oman:

1. Mandatory Starting Point for Indirect Cash Flows: Every entity using the indirect method must now begin its Statement of Cash Flows with the new Operating Profit or Loss subtotal—eliminating the previous patchwork where some Omani companies started with Profit Before Tax and others started with Net Profit After Tax.
2. Elimination of Classification Options for Interest & Dividends: For non-financial corporates in Oman, interest paid and dividends paid must now be classified strictly inside Cash Flows from Financing Activities, while interest received and dividends received must be classified strictly inside Cash Flows from Investing Activities.
3. Foreign Exchange Transaction Tagging in ERP Systems: Because foreign exchange gains and losses must follow the income statement category of the underlying item, your ERP & Accounting Software (SAP, Oracle NetSuite, Microsoft Dynamics 365, Odoo, or Zoho Books) can no longer post all FX revaluation entries into a single generic “FX Gain/Loss” account. You must configure separate GL codes for Operating FX (trade AR/AP), Investing FX, and Financing FX.

6. Mandatory IFRS 18 Rules vs. CFO Transition Recommendations

7. Frequently Asked Questions on IFRS 18 in Oman