IFRS 18 and SAP S/4HANA Group Reporting: What It Means and How to Get Ahead

[giulio_peretti]

Introduction

According to the IASB, IFRS18 represents the most significant change to companies’ presentation of financial performance since IFRS was introduced. SAP S/4HANA Group Reporting is designed to adapt to evolving standards like IFRS 18. Together with PwC, we help organizations not only stay compliant, but also use the transition as an opportunity to strengthen financial insights. This blog, co-authored by SAP and PwC, provides a practical perspective on what the new standard introduces, how SAP S/4HANA for Group Reporting is equipped to support it, and how PwC brings added value

IFRS 18 at a glance

IFRS18 ‘Presentation and Disclosure in Financial Statements’ was published by the International Accounting Standard Board (IASB) in April 2024 and supersedes IAS 1 ‘Presentation of Financial Statements’. The standard aims to achieve more transparent and comparable financial reporting between similar entities.

As it will most likely result in several reclassifications in the statement of profit or loss, entities should start thinking about what the new standard will mean for them. Even though only effective 1 January 2027, comparative information will be required as of 31 December 2026.  Finance leaders must begin assessing IFRS 18 impacts now.

In summary, there are three sets of new requirements introduced:

1. Defined structure for the statement of profit or loss.  Income and expenses are now required to be split into five categories (operating, investing, financing, income tax and discontinued operations) based on specified criteria. Even though the categories in the statement of profit or loss seem similar to the categories in cash flow statements, the underlying requirements for classification within these categories in the statement of profit or loss are different to those of the cash flow statement. Furthermore, there will now be defined subtotals and totals required within the statement of profit or loss.
2. Required disclosures for management-defined performance measures (MPMs). Profit or loss (i.e. a subset of income and expenses) performance measures that are reported outside of an entity’s financial statements are now required to be disclosed within a single note. These MPMs should also be reconciled to the most directly comparable IFRS-defined subtotal or total, and for each reconciling item the income tax effect and effect of non-controlling interest should be disclosed.
3. Aggregation and disaggregation. IFRS 18 provides enhanced guidance on how entities should aggregate and disaggregate financial information based on shared characteristics. These principles apply to both the primary financial statements and the disclosure notes.

PwC’s perspective: Deep understanding of the standard and how to become compliant

While IFRS18 may not appear as disruptive as IFRS15 or IFRS16, its implementation should not be underestimated. Implications could however vary by industry and current reporting practices of a company, e.g. on the presentation of foreign exchange differences and disclosure of MPMs.

To date, many companies have not started the implementation yet. Given the potential implications and the need for restated comparatives, companies could consider the below high-level indicative implementation timeline:  

As a firm, we have an in-depth understanding of the new standard, the potential impact on systems and how to get your reporting compliant. We approach this topic with multidisciplinary teams that can support you in all phases. This includes amongst others:

• Impact assessment. supporting clients with understanding the new requirements (e.g. through on site/virtual training, eLearnings) and identifying the impacts on reporting, systems (e.g. S/4HANA, SAP Group Reporting) and processes, as well as cross-business impacts (e.g. covenants, remuneration).
• Implementation. supporting clients with implementing and testing SAP solutions as well as, amongst others, implementing/updating internal controls and the iXBRL report.

SAP’s Perspective: Enabling Compliance and Insight

SAP Group Reporting for S/4HANA is well-positioned to enable organizations to comply with IFRS18 and deal with, for example, creating new accounts and subtotals.

Functionality: Current Capabilities in SAP Group Reporting

SAP Group Reporting for S/4HANA has been designed to support dynamic compliance with evolving financial standards, allowing organizations to scale their financial reporting processes and adapt to future changes in standards without requiring extensive reconfiguration. Specifically, the solution already enables parallel versions, flexible FS mapping, and easy reconciliations that enable to address the changes required to comply with IFRS18 requirements:

• Setup of Consolidation Extension Versions. This functionality provides a robust and future-ready framework for managing parallel financial reporting and restatements. Extension versions enable organizations to create derived consolidation versions from a base version, allowing for adjustments or restatements without impacting the original consolidated results ensuring compliance while maintaining transparency and auditability. This is especially useful in the context of the upcoming IFRS 18 requirements, which will mandate the reporting of financials under dual accounting principles starting in fiscal year 2026.
• Consolidation Chart of Accounts Updates. The solution facilitates updates and maintenance of changes in the Consolidation Chart of Accounts, ensuring alignment with newly defined requirements for financial statement disclosure.
• Mapping from Operating Chart of Accounts. SAP Group Reporting facilitates and automates the mapping between Operating and Consolidation Chart of Accounts, ensuring that the Consolidation Chart of Accounts is correctly tied to the Operating Chart of Accounts and enables the required reporting changes. Integration with the group reporting preparation ledger allows defining custom substitution rules that flexibly derive categorized financial statement items using fields from underlying accounting postings. Streamlines and automates the mapping process, reducing errors and enabling flexible and customized reporting. This integration ensures accurate ties between operational and consolidated accounts.
• Time-dependent FS Item Hierarchy Maintenance. The system supports ​​time-dependent maintenance of the FS item hierarchy​​, enabling continuous updates over time. App Group Data Analysis supports restating prior years' data with the updated hierarchy by specifying a key date. This facilitates continuous updates to financial statement hierarchies, ensuring up-to-date and efficient maintenance. Allows restatement of prior years' data with updated hierarchies, enhancing accuracy and compliance. 

• Group Reporting Data Collection. Through this functionality, organizations can structure and manage the collection of additional information needed to comply with IFRS18 (e.g. reporting of expense items to arrive at Adjusted EBITDA).
• Consolidation Monitor (New Version). It is feasible to open and close several fiscal periods for several consolidation groups with one click thanks to process year periods that bundle multiple fiscal year periods. It’s also possible to process multiple fiscal year periods at once by grouping multiple fiscal year periods in one process year period. New consolidation monitor simplifies the opening and closing of multiple fiscal periods with a single click, enhancing efficiency and allowing simultaneous processing of several fiscal year periods.

• Cross Version Balance Validation. The balance validation framework allows to define cross-version validation rules, including a predefined scenario for comparing the Restated Actuals version, with configurable validity periods. This functionality enables balance validation by comparing the Actuals version with the restated IFRS 18 version and reconciling the results. This facilitates accurate financial reporting and compliance with IFRS 18. 

Upcoming Group Reporting Reference Content (Scope Item 1SG) Update

​​The Group Reporting reference content (including the Consolidation Chart of Accounts and primary financial statements) is IFRS-compliant, designed for generic industries not primarily engaged in asset investment or customer financing.​​ Primary statements prepared at the group level include​​:

• Consolidated Balance Sheet Statement
• Consolidated Income Statement – by Nature
• Consolidated Income Statement – by Function of Expense
• Consolidated Cash Flow Statement – Indirect Method
• Consolidated Statement of Changes in Equity
• Consolidated Statement of Comprehensive Income

To meet new requirements in IFRS 18, the following changes will be made:

• Extend & Restructure Income Statement. The Consolidation Chart of Accounts (CoA) will be extended, and the Consolidated Income Statement will be restructured to comply with IFRS 18's presentation requirements.
• Update Cash Flow Statement. The starting point of the Consolidated Cash Flow Statement – Indirect Method will be updated to use the operating profit subtotal, defined in the newly structured IFRS 18-compliant income statement, as the starting point.
• These planned updates will be incorporated into the standard offering. New cloud customers can leverage these pre-configured, IFRS 18-compliant settings as a foundation for their implementation projects.

However, SAP cannot automatically update these configurations for existing live customers. We recognize that customers often need to ​​adapt pre-delivered financial statement items and structures​​, or create ​​custom financial statement designs​​, to align with their unique business requirements. To preserve these valuable customizations, SAP does not overwrite customer-specific configurations with standard content updates.

Given that the operational impacts of IFRS 18 vary significantly across organizations, we advise existing customers to begin by ​​evaluating the implications specific to your financial reporting processes​​. Following this assessment, we recommend proactively implementing tailored updates across your ​​SAP Cloud ERP solutions​​ — including Accounting, Group Reporting, Financial Planning and Analytics — to maintain compliance.

​​In summary, the standard content is currently IFRS compliant and will be proactively updated for IFRS 18. ​​New​​ cloud customers will benefit from these compliant settings out-of-the-box. ​​Existing​​ live customers cannot receive automatic updates due to potential customizations; they must analyze their specific IFRS 18 impact and implement the required changes themselves within their configured cloud ERP system and other impact systems.

References

Connect with me and my PwC colleagues for tailored IFRS 18, ERP and EPM readiness support - Marco Sartor, Giulio Peretti, Astha Makhija. Our team is happy to guide you through the transition.

*This blog reflects the current understanding as of October 2025. Readers should consult with accounting and legal professionals regarding specific compliance requirements.