IFRS 18 MPMs: what counts and what the note must contain

A standalone guide to management-defined performance measures under IFRS 18, for the people who have to build the note.

This is the third article in our IFRS 18 series. The first, IFRS 18 is a 2026 problem, covers what changes. The second, IFRS 18 implementation: the work programme, covers how to deliver it.

Almost every listed group publishes at least one adjusted profit measure. Adjusted operating profit, underlying earnings, core profit, a company-specific version of adjusted EBITDA. Under IAS 1 those measures lived outside the financial statements, in the results release and the investor presentation, where the disclosure around them was a matter of preference and market practice.

IFRS 18 does not ban them. It brings the ones that matter inside the audited accounts, into a single note, with a full reconciliation and the tax and non-controlling interest effect of every adjustment. A measure that has sat in an investor relations spreadsheet for a decade now needs a named owner, a documented calculation, traceable source data, a review step and a change log.

This article covers what qualifies as a management-defined performance measure, what escapes the definition, what the note must contain, and what the work looks like before the first reporting date.

What is a management-defined performance measure?

A measure is an MPM if it meets all of the following (IFRS 18.117 and 118):

• It is a subtotal of income and expenses.
• It is used in public communications outside the financial statements.
• It communicates management's view of an aspect of the financial performance of the entity as a whole.
• It is not one of the subtotals the standard lists as excluded.

Each limb narrows the population, and each one is where arguments happen.

"Subtotal of income and expenses" removes ratios, per-share figures, cash flow measures and operational statistics, none of which are subtotals (IFRS 18.B116). "Public communications outside the financial statements" reaches into documents the finance team does not write. "The entity as a whole" removes measures that describe only a segment. And the excluded list removes the subtotals IFRS 18 itself defines, since operating profit does not need reconciling to itself, along with operating profit before depreciation, amortisation and specified impairments, which means a strictly defined EBITDA is not an MPM even though most company-specific adjusted versions of it are.

Which measures qualify, and which do not

COMMON MEASURES AGAINST THE IFRS 18.117 DEFINITION

The pattern is worth naming. What makes a measure an MPM is not that it is unusual or aggressive. It is that management built it, published it, and presented it as a view of how the business performed. A conservative measure with one defensible adjustment is as much an MPM as a heavily adjusted one.

Why the IASB moved adjusted measures into the accounts

The complaint behind the requirement is long-standing. Companies increasingly steer the narrative with alternative performance measures while disclosing comparatively little about how those measures are actually built, which adjustments go in, what tax effect they carry, and whether the basis changed since last year.

The IASB's response was not prohibition. It was to take the measures management already publishes and hold them to the standard expected of financial statement information: defined, reconciled, consistent between periods, and audited. The measure stays. The discretion around how it is explained does not.

That framing matters for how you scope the work. Nothing here asks you to change what you report to the market. It asks you to be able to prove it.

The presumption, and what rebutting it takes

The standard does not ask whether management intended a subtotal to communicate its view. It presumes that it does. A subtotal used in public communications outside the financial statements is presumed to communicate management's view of an aspect of financial performance, and rebutting that presumption requires reasonable and supportable information (IFRS 18.119 and 120, with the supporting factors at B124).

Rebuttal is available. It is an evidenced position rather than an assertion, and it is the kind of position worth documenting at the time rather than reconstructing under audit. In practice, a group that publishes a subtotal and then argues it was never meant as a performance measure is starting from behind.

What the MPM note must contain

Everything the standard requires goes in one note inside the financial statements (IFRS 18.121 to 125, with the single-note requirement at 122):

• A statement that the measures represent management's view of an aspect of the financial performance of the entity as a whole and may not be comparable with similarly labelled measures of other entities.
• A description of the aspect of performance each measure communicates and why it provides useful information.
• How each measure is calculated.
• A reconciliation to the most directly comparable total or subtotal required by IFRS.
• For each reconciling item, the income tax effect and the effect on non-controlling interests, and an explanation of how the tax effect was determined.
• Additions to, removals from and changes in the measures used, with the reasons, and comparative information where required.

The last two are where most of the effort lands. Tax effects per reconciling item are genuinely fiddly, because a restructuring charge does not carry one clean statutory rate across a group, and the standard asks you to explain the method as well as give the number. The change disclosure is the one that constrains future behaviour: once the note exists, quietly redefining a measure between periods becomes a disclosed event.

The MPM disclosures also apply in condensed interim financial statements. For a December year-end group adopting from 1 January 2027, the first external MPM note is the 2027 half-year report, not the 2027 annual report.

A worked reconciliation

The presentation below separates the reconciliation itself from the tax and non-controlling interest effects, because they are not the same thing and combining them is the most common source of confusion in draft notes.

ADJUSTED OPERATING PROFIT RECONCILED TO IFRS 18 OPERATING PROFIT - ILLUSTRATIVE, CU MILLION

Three points the example is chosen to make. The amortisation adjustment also appears in the by-nature expense disclosure, so the two notes have to agree. The derivative adjustment depends on how that derivative was classified between the operating, investing and financing categories, which means the MPM workstream cannot finish before the classification workstream does. And the table on its own does not discharge the requirement: the note must still explain, in words, why adjusted operating profit is useful and how each adjustment is defined.

Where the measures actually live

Building the inventory is the part teams underestimate, because the definition reaches documents finance does not control. Annual and interim reports, results releases, formal investor presentations and comparable written external material all qualify. Oral communications, transcripts of oral communications and social media posts fall outside the definition, so time spent trawling earnings call recordings is time wasted. What counts as a public communication is itself before the IFRS Interpretations Committee, so record the boundary you applied rather than assuming it is settled.

Two practical failures are common. The first is an incomplete population: a measure appears once, in a presentation from March, and nobody on the project saw that deck. The second is inconsistency: the same measure name carries slightly different adjustments in the release and in the annual report, which was survivable when neither was audited and is not survivable now.

This is where controlled reporting technology earns its place. Quillon checks whether management uses adjusted EBITDA, underlying profit, normalised earnings or similar measures in public communications and flags that MPM disclosure may be needed, with the evidence it found attached. It does not decide that a measure is an MPM. Each candidate goes to a preparer or reviewer with that evidence, the decision lands in the audit trail, and the approved definition, source data and reconciliation logic then sit alongside the financial statement drafting process rather than being rebuilt from a spreadsheet each period.

Quillon's SEC research capability can run alongside that, comparing how peers define, reconcile and explain similar measures. Peer practice does not determine your IFRS 18 conclusion, but it exposes terminology and adjustment patterns an internal inventory can miss, and gives investor relations a benchmark for the eventual presentation.

The option most groups have not considered

There is a response to all of this that costs almost nothing, and the IASB anticipated it. With operating profit now defined by the standard rather than by management, some companies will simply stop publishing their bespoke measures and use the defined subtotal instead.

Fewer MPMs means a shorter note, fewer reconciliations, fewer tax effects to compute and less to defend under audit. For a group whose adjusted measure differs from IFRS 18 operating profit by one or two items, the cheapest compliance strategy may be a smaller vocabulary.

That is a decision for the board and investor relations rather than for the reporting team, and it has to be made early, because retiring a measure has its own disclosure consequences and its own conversation with the market. It is worth putting on the table before the project assumes every existing measure survives.

What to do before year-end

Three things, in order.

Build the complete inventory of performance subtotals the company has published in writing, and have someone sign off that the population is complete. Completeness is the assertion the auditor will test first.

For each measure that meets the definition, settle the calculation, the owner and the source data, and confirm you can produce the tax and non-controlling interest effect of every reconciling item with a method you can explain.

Then decide which measures you actually want to keep publishing.

The groups that find this requirement expensive will not be the ones that misread the definition. They will be the ones that arrive at their first reporting date with a measure nobody owns, calculated slightly differently in three documents, and no evidence trail behind any of it.