IFRS 18 Management Performance Measures vs SEC Non-GAAP Rules: The Compliance Collision Every CFO Needs to Understand

IFRS 18 brings non-GAAP measures inside the audited financial statements. The SEC's non-GAAP rules were written for measures that sit outside them. For foreign private issuers filing on Form 20-F, that gap is not a technicality, it is an unresolved regulatory collision with real audit and enforcement consequences.

This article is for CFOs, controllers, and reporting teams at IFRS-reporting companies that are also SEC registrants. It compares the two frameworks head-to-head, maps the specific points of conflict, and tells you what to do before the January 2027 effective date arrives.

Key takeaway: The SEC has not updated its non-GAAP guidance to address IFRS 18 MPMs as of September 2026. Companies subject to both regimes must navigate genuine regulatory uncertainty, and the window to prepare is closing fast.

What Is a Management Performance Measure (MPM) Under IFRS 18?

An MPM is a specific, narrowly defined subset of non-GAAP measures, not every alternative performance measure qualifies. IFRS 18, issued by the IASB on 9 April 2024 and effective for annual periods beginning on or after 1 January 2027, defines an MPM as a subtotal of income and expenses that: (a) management uses in public communications outside the financial statements; (b) management believes communicates financial performance; and (c) is not specified by IFRS.

The public-communication trigger is the critical scoping point. As PwC notes, a measure used only internally, or disclosed only within the financial statements, does not qualify as an MPM. The measure must be used publicly, in earnings releases, investor presentations, or annual reports, and it must be an income-statement subtotal, not a ratio or volume metric.

What is explicitly excluded from the MPM definition:

• Measures required or specified by IFRS (including the new IFRS 18 operating profit subtotal itself)
• Ratios, per-share measures, and volume metrics (free cash flow, return on equity, net debt)
• Non-financial measures (carbon emissions, occupancy rates, employee satisfaction)
• Measures used only in internal management reporting
• Measures disclosed only inside the financial statements

The most common MPM candidates in practice are adjusted EBITDA, adjusted operating profit, and adjusted net income. If your company uses any of these in earnings releases or investor presentations, they almost certainly qualify.

For a step-by-step guide to building the MPM reconciliation note itself, see IFRS 18 MPM Reconciliation: A Step-by-Step Practitioner Guide.

What IFRS 18 Requires for MPMs

IFRS 18 requires MPMs to be disclosed in a single dedicated note inside the audited financial statements, a fundamental departure from the current environment where non-GAAP measures live in earnings releases and investor decks, outside the audit perimeter.

The MPM note must include, for each measure:

1. A clear explanation of what aspect of financial performance the MPM represents and why management considers it useful
2. A description of how the MPM is calculated
3. A reconciliation to the most directly comparable IFRS-specified subtotal or total
4. The tax and non-controlling interest effects of each reconciling item
5. An explanation of how each reconciling item and its tax effect was determined

If a company stops using an MPM, it must explain why in the period it is discontinued. Companies cannot simply drop a measure without disclosure.

Because MPMs appear inside the financial statements, they fall within the scope of the statutory audit. KPMG's US technical team flags this as a "new dynamic" for SEC registrants: auditors must now opine on whether the MPM note complies with IFRS 18, which is a significant operational change from the current regime.

IFRS 18 also requires retrospective application. For MPMs, this means the reconciliation note must include comparative period data, a material data-gathering and systems challenge for companies with complex non-GAAP measures, as Deloitte IAS Plus notes.

How the SEC's Non-GAAP Rules Work

The SEC's non-GAAP framework under Regulation G and Item 10(e) of Regulation S-K applies to all SEC registrants, including foreign private issuers filing on Form 20-F. Regulation G was adopted on 22 January 2003 under Section 401(b) of Sarbanes-Oxley. It has not been substantively amended since, meaning it predates IFRS 18 by over 21 years and contains no provisions addressing IFRS-mandated non-GAAP disclosures.

The SEC's framework requires:

• A reconciliation to the most directly comparable GAAP measure
• That the non-GAAP measure not be given greater prominence than the comparable GAAP measure (the "equal-or-greater prominence" rule under Item 10(e)(1)(i)(A))
• That the measure not be misleading, including by excluding normal, recurring cash operating expenses, presenting measures inconsistently between periods, or cherry-picking adjustments

The SEC staff's Compliance and Disclosure Interpretations (C&DIs) on non-GAAP measures were last substantively updated in December 2020, with a prior major update in May 2016. No C&DI update addressing IFRS 18 MPMs has been issued as of September 2026.

For a full breakdown of what the SEC is currently flagging in comment letters on non-GAAP measures, see SEC Comment Letter Trends: Non-GAAP Measures in 2026.

IFRS 18 MPMs vs SEC Non-GAAP Rules: The Head-to-Head Comparison

The table below maps the two frameworks against each other on the dimensions that matter most for a dual-reporting company.

The Four Specific Conflicts, and What They Mean in Practice

The comparison above reveals four concrete points of friction that dual-reporting companies must resolve.

1. Inside vs Outside the Financial Statements

This is the foundational conflict. The SEC's historical position, reflected in its C&DIs, is that non-GAAP measures presented inside GAAP financial statements are generally not subject to Regulation G, but may still be subject to Item 10(e) if included in an SEC filing, and remain subject to anti-fraud provisions. That position was developed before IFRS 18 existed. The specific situation where IFRS itself mandates a non-GAAP measure inside the financial statements has never been addressed.

For a Form 20-F filer, the MPM note will be inside the financial statements filed with the SEC. Does Regulation G apply? Does Item 10(e)? The honest answer, as of September 2026, is that no one knows for certain, and the SEC has not said.

2. The Equal-or-Greater Prominence Rule

Item 10(e)(1)(i)(A) prohibits presenting a non-GAAP measure with greater prominence than the comparable GAAP measure. The IFRS 18 MPM note structure, a dedicated note presenting the MPM and its reconciliation, could itself create prominence questions. If the MPM note appears before the primary financial statements, or is structured in a way that emphasizes the MPM over the IFRS-defined subtotal, the SEC staff may view that as a prominence violation. IFRS 18 does not contain an equivalent prominence rule, so the two frameworks pull in different directions on note design.

3. The Reconciliation Anchor Point Has Changed

IFRS 18 introduces three mandatory income statement categories, Operating, Investing, and Financing, and defines "operating profit" as a new IFRS-specified subtotal. This matters for MPM reconciliations because the "most directly comparable IFRS subtotal" is now the IFRS 18 operating profit, not whatever management previously used as the anchor. A company reconciling adjusted EBITDA to EBIT under IAS 1 will need to re-anchor that reconciliation to the new IFRS 18 operating profit definition. For the SEC side, the comparable GAAP measure remains whatever the closest US GAAP equivalent is, creating a potential mismatch between the IFRS 18 reconciliation and any parallel SEC-facing disclosure. See IFRS 18 Subtotals on the Income Statement: A Practitioner Walkthrough for how the new categories work.

4. The Audit Scope Asymmetry

Under current SEC rules, non-GAAP measures in earnings releases are outside the audit scope. Under IFRS 18, MPMs inside the financial statements are within it. This creates an asymmetry: the same adjusted EBITDA figure may be audited in the IFRS 18 note but unaudited in the earnings release. The SEC's Division of Corporation Finance will review the MPM note in Form 20-F filings, both for IFRS 18 compliance and for consistency with SEC non-GAAP rules. A figure that passes audit scrutiny under IFRS 18 could still attract a comment letter if it violates Item 10(e) prominence or anti-cherry-picking rules. This dual-review exposure is not widely discussed in practitioner literature, but it is real.

The Three-Way Problem for European FPIs

For companies listed on EU-regulated markets and also registered with the SEC, the compliance challenge has a third dimension. ESMA's Guidelines on Alternative Performance Measures, which have applied since 3 July 2016, require APM disclosures outside the financial statements, the opposite of IFRS 18's requirement to bring MPMs inside. European companies face a structural tension: ESMA wants APMs disclosed outside the statements with specific labelling and reconciliation requirements; IFRS 18 requires the same measures inside the statements in a prescribed note format; and the SEC requires reconciliation to GAAP with prominence rules that were never designed for this scenario.

The three frameworks share the same goal, transparency around management-defined measures, but they pull in different directions on where and how those measures are disclosed. No regulator has yet issued guidance on how to satisfy all three simultaneously.

What the SEC Has (and Has Not) Said

The SEC has acknowledged awareness of IFRS 18 but has not issued any guidance on the MPM-non-GAAP interaction as of September 2026. The SEC EDGAR system already contains Form 20-F filings that disclose IFRS 18 as a recently issued standard not yet in effect, using the IASB's definition of MPMs verbatim, evidence that companies are beginning to prepare, but the SEC has not told them how to handle the regulatory overlap.

The SEC accepted IFRS as issued by the IASB for FPI financial statements under Release No. 33-8879. When IFRS 18 becomes effective, compliance with it, including the MPM note, will be required for Form 20-F filers using IFRS. The SEC has not indicated it will grant any accommodation or exemption.

The IASB has established a Transition Resource Group (TRG) for IFRS 18 to address implementation questions. Practitioners can submit questions for TRG consideration, a route worth using for unresolved dual-reporting questions.

What to Do Now: A Practical Gap Analysis Framework

The mandatory effective date is 1 January 2027. For December year-end companies, the first mandatory IFRS 18 financial statements cover the year ending 31 December 2027, published in early 2028. But the preparation work needs to happen now, and for companies considering early adoption for periods beginning 1 January 2026, the window is already extremely tight.

Here is a structured approach:

Step 1: Inventory your public non-GAAP measures List every income-statement subtotal your company uses in earnings releases, investor presentations, annual reports, and regulatory filings. Flag any measure that is: (a) a subtotal of income and expenses, (b) used publicly outside the financial statements, and (c) not defined by IFRS.

Step 2: Apply the MPM definition test For each measure on your list, confirm it is not excluded by the IFRS 18 definition. Ratios (return on equity), cash flow measures (free cash flow), and non-financial metrics (carbon emissions) are out. Adjusted EBITDA, adjusted operating profit, and adjusted net income are almost certainly in.

Step 3: Map to the new IFRS 18 reconciliation anchor For each MPM, identify the most directly comparable IFRS 18-specified subtotal, remembering that "operating profit" is now defined by IFRS 18, not by management. This may require re-anchoring existing reconciliations.

Step 4: Assess the SEC conflict points For each MPM, evaluate: (a) whether the proposed note structure could create a prominence issue under Item 10(e); (b) whether the reconciling items could attract comment-letter scrutiny under the misleading-measure C&DIs; and (c) whether the measure is presented consistently with how it appears in earnings releases.

Step 5: Engage your auditors and audit committee early The MPM note is within audit scope. Auditors need time to develop their approach to auditing MPM reconciliations, including the tax and NCI effects of each reconciling item. Audit committees should be briefed on the new disclosure obligations and the unresolved SEC interaction.

Step 6: Consider whether to seek SEC staff input For companies with complex MPM situations, a pre-filing conference with the SEC's Division of Corporation Finance, or a formal no-action request, may be warranted. The SEC has historically been willing to engage on novel IFRS-SEC interaction questions.

Step 7: Update investor relations and earnings release processes MPMs disclosed in the financial statements must be consistent with how those measures are presented in earnings releases. IR teams, legal counsel, and finance teams need to coordinate on the MPM definition exercise, inconsistency between the audited note and the earnings release is a comment-letter risk.

For the disclosure controls and procedures implications of IFRS 18, see IFRS 18 and DISE: Disclosure Controls and Procedures Walkthrough.

Should You Eliminate Measures to Avoid MPM Classification?

Some companies are considering whether to restructure or eliminate certain non-GAAP measures to avoid MPM classification, and the audit and SEC scrutiny that comes with it. This is a legitimate strategic question, but it carries its own risks.

Dropping a measure that investors have relied on for years will attract investor relations scrutiny and may itself prompt SEC comment letters if the change is not adequately explained. IFRS 18 requires an explanation when an MPM is discontinued. And the SEC's C&DIs make clear that presenting a measure inconsistently between periods, including by eliminating it, can be misleading if not properly disclosed.

The better path for most companies is to accept MPM classification, invest in the systems and processes needed to produce an audited reconciliation, and use the IFRS 18 note as an opportunity to standardize and discipline non-GAAP reporting that has often been inconsistent.

FAQ

Does Regulation G apply to IFRS 18 MPMs disclosed inside the financial statements? The SEC's historical position is that Regulation G generally does not apply to non-GAAP measures inside GAAP financial statements. However, that position predates IFRS 18 and was not developed for IFRS-mandated non-GAAP measures. Item 10(e) of Regulation S-K may still apply to MPMs in Form 20-F filings, and the anti-fraud provisions always apply. The SEC has not issued guidance on this specific question as of September 2026.

Which of our non-GAAP measures will qualify as MPMs? Any income-statement subtotal that management uses in public communications outside the financial statements and that is not defined by IFRS will likely qualify. Adjusted EBITDA, adjusted operating profit, and adjusted net income are the most common candidates. Ratios, cash flow measures, and non-financial metrics are excluded.

Does the SEC's equal-or-greater prominence rule apply to the IFRS 18 MPM note? This is unresolved. The IFRS 18 note structure could create prominence questions if it is perceived to emphasize the MPM over the IFRS-defined subtotal. Companies should design the note with the SEC prominence rule in mind, even in the absence of explicit guidance.

What does the IFRS 18 MPM reconciliation note need to contain? For each MPM: a label and description, an explanation of why it communicates financial performance, a description of how it is calculated, a reconciliation to the most directly comparable IFRS subtotal, and the tax and NCI effects of each reconciling item. The note must also cover comparative periods, given IFRS 18's retrospective application requirement.

When is the IFRS 18 effective date, and do we need to early-adopt? IFRS 18 is mandatory for annual periods beginning on or after 1 January 2027. Earlier application is permitted. For December year-end companies, the first mandatory IFRS 18 financials cover the year ending 31 December 2027. Early adoption for periods beginning 1 January 2026 is possible but requires MPM identification, policy drafting, auditor alignment, and systems changes to be substantially complete now.

Can we engage the IASB's TRG on unresolved MPM questions? Yes. The IASB's Transition Resource Group for IFRS 18 was established specifically to address implementation questions. Submitting a question to the TRG is a legitimate route for getting authoritative guidance on complex dual-reporting scenarios.

The regulatory frameworks will eventually converge, the IASB and SEC share the same underlying goal of disciplining non-GAAP reporting. But until the SEC updates its C&DIs to address IFRS 18 MPMs, dual-reporting companies are navigating a gap that neither regulator has formally closed. Starting the MPM identification exercise now, engaging auditors early, and designing the note with both frameworks in mind is the only way to be ready when the deadline arrives.