Financial Reporting and IFRS 18: What to Expect in 2025?

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2025 marks the entry into force of the IFRS 18 standard. The event "Financial Reporting: What's in store for 2025?", recently organized by EFRAG, provided an overview of future work, focusing on anticipated developments in the sector. During the meeting, experts such as Nick Anderson (IASB) and Wolf Klinz (EFRAG) outlined the main goals for 2025, including the need for greater clarity and consistency in financial information, particularly to meet investor demands. Among the aspects addressed, the importance of transparent communication, including risks and opportunities related to sustainability, a crucial theme for investors, was highlighted. The new standard is seen as a response to the challenges of transparency and comparability, with the intention of harmonizing financial statements globally, making it easier for companies and analysts to compare financial results.

The new IFRS 18 standard is designed to improve the quality and transparency of information in corporate financial statements. One of the main novelties is the clearer definition of income statement subtotals and the performance measures (MPM) adopted by management. IFRS 18 aims to respond to investors' demands for greater consistency and clarity in financial reporting. The new standard will come into effect on January 1, 2027, with the possibility of early adoption. Some companies may begin to report the impacts of adopting IFRS 18 on their financial statements as early as 2026, offering a clearer view of how the changes will affect the presentation of economic and financial data. The adoption of IFRS 18 is considered a crucial step to modernize reporting and improve comparability among companies.

Nick Anderson highlighted that the IASB is working on projects aimed at integrating sustainability into financial reporting, responding to investors' growing demand for comprehensive and consistent information on business risks and opportunities. A crucial topic is the review of IAS 38 on intangible assets, with the aim of modernizing the standard and reflecting the growing importance of intangible assets such as carbon credits and cryptocurrencies. These changes respond to the need to adapt reporting to new economic realities. Additionally, the EFRAG has launched a research project on improving cash flow statements, in response to economic changes and new business needs. The project aims to review IAS 7, updating it to improve the quality and usefulness of financial information, especially concerning environmental impacts.

Wolf Klinz, President of EFRAG, outlined the organization's main expectations for 2025, with a focus on the EU's adoption of IFRS 18, expected by the end of the year. This change will involve significant updates in corporate financial statement presentations, particularly concerning the integration of sustainability. EFRAG plans to publish discussion papers on the connectivity between financial and sustainability reporting, aiming to stimulate debate about the future of reporting in Europe. In addition, EFRAG will initiate proactive and reactive activities to monitor the proposals of the IASB, gathering opinions and suggestions from various stakeholders. Future activities will also include studies on pollution tariffs and tools to stimulate the integration of environmental factors into corporate financial statements.

In 2025, the IASB will initiate the fourth agenda consultation, setting the priorities for the 2027-2031 period. This process will determine the topics on which the IASB will focus its research, with particular attention to intangible assets and improving the cash flow statement. The IASB has already initiated research on the regulatory changes needed to address the growing importance of intangible assets in the modern economy. In parallel, it will continue to work on amendments to existing standards, including those related to sustainability and cash flow management. The proposed changes aim to enhance the comparability and transparency of company financial statements, providing investors with more accurate and useful information for making informed decisions. This update process will be crucial in responding to new economic and environmental challenges.

This article was created as part of the project "Biodiversity services EU expansion" (CUP: E43D22000480009) under the Lombardy Region call "PR FESR 2021-2027 – LINEA INTERNAZIONALIZZAZIONE 21-27", aimed at supporting the internationalization of Italian companies. 3Bee is a naturetech company that develops innovative technologies for monitoring, protecting, and regenerating biodiversity, supporting businesses in defining customized climate strategies based on the analysis of their impacts and dependencies on nature. With a consolidated portfolio in Italy, Germany, and France and significant partnerships, 3Bee continues its expansion in international markets to create a tangible impact through technology.