IFRS 18 and the ESEF 2025 taxonomy: what changes, and when?

The recent introduction of IFRS 18 is one of the most important changes to IFRS financial reporting. It will affect how companies present financial performance in the primary financial statements, and it will also have an impact on how those statements are tagged in ESEF.

At the same time, ESMA has introduced the ESEF 2025 taxonomy, which includes updates connected to IFRS 18. Naturally, this has raised questions from reporting teams:

Do we need to change how we tag now?
Does IFRS 18 already apply?
Which taxonomy entry point should we use for the next reporting cycle?

This article aims to explain the timeline and what these changes mean for companies preparing ESEF reports in Vicosight.

IFRS 18 is an accounting standard change — not just a taxonomy update

IFRS 18, Presentation and Disclosure in Financial Statements, replaces IAS 1. The standard changes how financial performance is presented, especially in the statement of profit or loss.

The main changes include:

• a new structure for the statement of profit or loss;
• new required subtotals, including operating profit or loss;
• new disclosure requirements for Management Performance Measures (MPMs);
• stronger principles for aggregation and disaggregation.

For reporting teams, this means IFRS 18 is not only a technical XBRL change. It may affect accounting policies, report structure, internal review processes, and the data used to prepare the annual report.

The standard becomes mandatory for annual reporting periods beginning on or after 1 January 2027, however, earlier application is permitted.

Why the ESEF 2025 taxonomy already includes IFRS 18

The ESEF 2025 taxonomy will be in use before IFRS 18 becomes mandatory. This is intentional as it gives companies, auditors, advisors and software providers time to prepare for the transition.

The important point is that the ESEF 2025 taxonomy supports two different reporting paths:

This means that using the ESEF 2025 taxonomy does not automatically mean that every company must apply IFRS 18 immediately.

For most companies, the 2026 reporting cycle will be a transition period. The updated taxonomy will be available, but companies that do not adopt IFRS 18 early will continue to work with the IAS 1 entry point.

Companies that decide to apply IFRS 18 early will need to use the IFRS 18 entry point. This is the entry point that includes the new IFRS 18 concepts and structures, including the updated statement of profit or loss structure and the taxonomy model for management-defined performance measures.

Timeline: optional or mandatory?

The ESEF 2025 taxonomy becomes mandatory for annual financial reports covering financial years starting on or after 1 January 2026. Voluntary use for 2025 reports depends on the adoption of the regulatory technical standards (RTS) and applicable regulatory requirements. The transition can be summarised as follows:

In other words:

For 2026 reporting, prepare for a transitional ESEF taxonomy.
For 2027 reporting, IFRS 18 becomes globally mandatory.

The use of IFRS 18 in EU reporting should also be considered together with the applicable endorsement and regulatory requirements.

What changes in tagging?

The main tagging changes are linked to three areas:

1. The new statement of profit or loss structure;
2. Management Performance Measures (MPMs);
3. Notes and block tagging.

These are the areas that reporting teams should prioritise when preparing for IFRS 18.

The new structure is intended to make primary financial statements more comparable, make labels more informative, reduce the use of vague items such as “other”, and improve the link between the primary financial statements and the notes. For ESEF tagging, this means that concept selection, labels and cross-references become more important, which supports better digital consumption of financial data.

1. The new P&L structure

IFRS 18 introduces a more structured statement of profit or loss, with five categories: operating, investing, financing, income taxes and discontinued operations. It also mandates newly introduced subtotals, such as operating profit or loss and profit or loss before financing and income tax.

For ESEF tagging, this matters because the category is not only an accounting presentation issue. It also affects which taxonomy concept should be selected.

Under IFRS 18, preparers will need to pay closer attention to whether a concept is intended for use in the statement of profit or loss, and whether it belongs to the correct category. In some cases, a concept that may look close in meaning may be intended for the notes rather than for the P&L. In other cases, an extension concept may be needed if the standard taxonomy does not contain a suitable element.

The practical message for preparers is that the P&L should not simply be retagged concept by concept from the old structure. The new structure should first be reviewed from an accounting and presentation perspective, and the tagging should then follow that structure.

2. Management Performance Measures

MPMs are performance measures used by management, such as adjusted operating profit, adjusted EBITDA or similar measures communicated outside the financial statements. If a company uses measures that meet the IFRS 18 definition of an MPM, these measures will need to be disclosed in the financial statements and reconciled to the most directly comparable IFRS-defined subtotal.

For reporting teams, this means the MPM note may require more than tagging a single figure. Companies will need to explain why the measure is useful, describe how it is calculated, and show how it reconciles to the relevant IFRS subtotal.

From an ESEF perspective, this may involve extension concepts, anchoring and structured tagging of the reconciliation. The taxonomy model allows the reconciliation to be tagged using a dimensional structure. Where this voluntary tagging is applied, preparers should expect more detailed tagging work for MPM notes than for a simple narrative disclosure.

3. Notes and block tagging

IFRS 18 may also affect note disclosures and block tagging. Block tagging means applying a tag to a whole disclosure or note, rather than to individual figures only. This includes disclosures for the transition from IAS 1 to IFRS 18, specified expenses by nature, and MPMs.

Some new block tags in the 2025 IFRS taxonomy may be useful for users of financial statements, even where they are not part of the mandatory RTS block tag list.

What reporting teams should start preparing

Although the mandatory IFRS 18 date is still ahead, preparation should start early. The change may require more than selecting new tags.

Reporting teams should begin reviewing:

• How income and expense line items will be classified under IFRS 18;
• Whether the current statement of profit or loss structure will need to change;
• Which existing tags may be replaced, relabelled or deprecated;
• Whether MPMs are currently used in public communications;
• How MPMs reconciliations will be prepared, reviewed and tagged;
• How comparative information will be handled when IFRS 18 is applied.

This work should involve finance, accounting, legal, investor relations, auditors and the teams responsible for ESEF tagging. IFRS 18 affects both the human-readable report and the machine-readable data.

How Vicosight is approaching the transition

At Vicosight, our focus is to make complex reporting requirements easier to manage for the teams who work with them every year.

The ESEF 2025 taxonomy and IFRS 18 transition will be handled as part of that same approach: supporting the correct entry points, and making the tagging workflow as clear and reliable as possible. You can now choose between the ESEF 2025 - IAS 1 and ESEF 2025 - IFRS 18 in the XBRL settings in Vicosight.

A practical next step

If your company prepares an ESEF report, the best next step is to review your current statement of profit or loss structure and identify where IFRS 18 may change presentation, subtotals, MPM disclosures or tagging.

Starting this review early will make the transition easier — and help ensure that your financial story remains clear, consistent and compliant in both the annual report and the digital filing.