IFRS 18 vs ASU 2024-03: The Definitive Comparison for Finance Teams in 2026

Two landmark standards hit the income statement at almost the same moment. IFRS 18 restructures the face of the P&L. ASU 2024-03 adds footnote disclosures and leaves the face untouched. The near-identical effective dates create an implementation collision for multinationals that the existing guidance barely acknowledges. This article gives CFOs, controllers, and dual-reporters a precise, decision-useful comparison so you know exactly what applies to your entity, by when, and what you still need to build.

Key takeaway: IFRS 18 and ASU 2024-03 share the same investor-transparency goal but diverge sharply in method, scope, and transition burden. Assuming they are aligned because they land in the same fiscal year is the most expensive mistake a finance team can make right now.

IFRS 18 vs ASU 2024-03: What Each Standard Actually Does

IFRS 18 is a wholesale replacement of IAS 1, the primary IFRS financial statement presentation standard for more than 20 years. Issued by the IASB on April 9, 2024, it restructures the face of the income statement into five mandatory categories, mandates two new standardised subtotals, and introduces a disclosure regime for management-defined performance measures (MPMs). IASB Chair Andreas Barckow called it "the most significant change to companies' presentation of financial performance since IFRS Accounting Standards were introduced more than 20 years ago."

ASU 2024-03 (Disaggregation of Income Statement Expenses, or DISE), issued by the FASB on November 4, 2024, does none of that. It leaves the face of the income statement entirely unchanged. All new requirements are footnote disclosures: five specified natural expense categories disaggregated within each relevant expense caption, plus total selling expenses and a qualitative description of remaining amounts.

These are not parallel standards. They are two different solutions to the same investor complaint.

Side-by-Side Comparison Table

Does ASU 2024-03 Change the Face of the Income Statement?

No. This is the single most important structural difference between the two standards.

ASU 2024-03 adds ASC 220-40 to the Codification. Every new requirement lives in the footnotes. Functional captions on the face -- cost of sales, SG&A, R&D -- stay exactly where they are. The standard does not create new line items, does not mandate subtotals, and does not require entities to reclassify anything.

IFRS 18, by contrast, requires every IFRS reporter to restructure the face of the P&L into five categories: operating, investing, financing, income taxes, and discontinued operations. Two subtotals become mandatory: operating profit (after the operating section, before investing) and profit before financing and income taxes (after investing, before financing). Even entities that already reported an operating profit subtotal must recast it, because IFRS 18 defines the composition precisely. The IASB's research found that while many companies reported operating profit, they calculated it differently -- IFRS 18 resolves that comparability problem by standardising the definition.

For a US GAAP PBE with no IFRS obligations, ASU 2024-03 is a disclosure project. For an IFRS reporter, IFRS 18 is a financial statement redesign project.

The Five Natural Expense Categories Under ASU 2024-03

Under ASU 2024-03, entities must disclose the amounts of five specified natural expense categories embedded within each "relevant expense caption" on the face of the income statement. A relevant expense caption is any expense line within continuing operations that contains any of these five categories:

1. Purchases of inventory
2. Employee compensation
3. Depreciation
4. Intangible asset amortisation
5. DD&A recognised as part of oil-and-gas-producing activities, or other depletion expenses

The tabular footnote must also include: (a) certain expense, gain, or loss amounts already required to be disclosed under US GAAP; (b) a qualitative description of amounts remaining in relevant expense captions that are not separately disaggregated (no requirement to quantify these); and (c) total selling expenses plus, in annual periods, the entity's definition of selling expenses.

IFRS 18 covers similar ground but more broadly. Entities that classify operating expenses by function on the face of the P&L must also disclose expenses by nature in the notes -- not just five specified categories, but a full nature breakdown (raw materials, salaries, depreciation, etc.). Entities that classify by nature on the face do not need a function breakdown. The IFRS 18 nature/function requirement is conceptually related to ASU 2024-03's natural expense footnote, but it is wider in scope and not limited to five prescribed line items.

Key takeaway: ASU 2024-03 specifies exactly which five natural expenses to disclose. IFRS 18 requires a full nature breakdown if you classify by function -- a broader and more judgement-intensive exercise.

Effective Dates and Transition: The 2027 Implementation Collision

Both standards land in the same fiscal year for most calendar-year entities -- and that is not a coincidence to celebrate. It is a resource planning problem.

• IFRS 18: Annual periods beginning on or after January 1, 2027. Retrospective application is mandatory. Entities must restate prior period comparatives.
• ASU 2024-03: Annual periods beginning after December 15, 2026 (calendar year 2027 for most). Interim periods within annual periods beginning after December 15, 2027 (calendar year 2028 interim periods). Prospective by default; retrospective is an option.

The transition difference matters enormously. IFRS 18 imposes a mandatory retrospective burden: every prior period comparative must be restated to reflect the new P&L structure, the new subtotals, and the nature/function disclosures. ASU 2024-03 lets entities go prospective, avoiding the data archaeology -- but entities choosing retrospective adoption must collect disaggregated natural expense data for comparative years beginning as early as 2025.

For a multinational group reporting under both frameworks, the 2027 close will require simultaneous delivery of a restructured IFRS P&L (with retrospective restatement) and a new ASU 2024-03 footnote table. Finance teams that have not started data architecture work in 2026 will struggle to meet both deadlines.

For a deeper look at the ASU 2024-03 implementation timeline and SAB 74 disclosure obligations, see Finrep's FASB Income Statement Disaggregation ASU 2024-03: 2026 Implementation Guide.

Does IFRS 18 Have a US GAAP Equivalent for MPM Disclosures?

No -- and this gap matters most for foreign private issuers listed in the US.

IFRS 18 introduces a new disclosure category: management-defined performance measures (MPMs). An MPM is any subtotal of income and expenses that an entity uses in public communications outside the financial statements -- earnings releases, investor presentations, analyst calls. Under IFRS 18, entities must:

• Identify every MPM used publicly
• Reconcile each MPM to the most directly comparable IFRS-defined subtotal
• Explain why the MPM provides useful information

ASU 2024-03 has no MPM equivalent. The closest US GAAP parallel is the SEC's non-GAAP disclosure framework: Regulation G and Item 10(e) of Regulation S-K, which require reconciliation of non-GAAP measures to the most directly comparable GAAP measure. These rules are separate from ASU 2024-03 and have been in place for years.

For a foreign private issuer (FPI) that reports under IFRS and is listed in the US, the overlap creates a real compliance question. IFRS 18's MPM rules and the SEC's non-GAAP rules may apply to the same measures simultaneously -- but with different reconciliation mechanics and different disclosure locations (notes to the financial statements under IFRS 18; outside the financial statements under SEC rules). FPIs should map their existing non-GAAP measures against both frameworks before 2027. Finrep's Non-GAAP Financial Measures: 2026 SEC Compliance Guide covers the SEC side of that equation in detail.

Who Is in Scope -- and the Private Company Trap

IFRS 18 Scope

IFRS 18 applies to all entities reporting under IFRS Accounting Standards. There is no carve-out for investment companies or broker-dealers at the standard level (jurisdiction-specific rules may apply). Financial services companies and real estate companies face modified application rules for the five categories rather than exclusions.

ASU 2024-03 Scope

ASU 2024-03 applies to all public business entities (PBEs) as defined in the ASC Master Glossary. Excluded entities include:

• Private companies
• Not-for-profit entities
• Employee benefit plans (ASC 960, 962, 965)
• Broker-dealers under ASC 940
• Investment companies under ASC 946
• Registered insurance separate accounts under ASC 944
• Entities in the process of going public through an IPO (at the time of filing the registration statement)

The private company exclusion has a significant exception. A private company that is acquired and, as a result, is required to file or furnish financial statements with the SEC under Reg S-X Rules 3-05 or 3-09, must apply ASU 2024-03 for those filed or furnished financial statements. This is a scope trap in M&A transactions: the acquiree's finance team may have no history of tracking natural expense categories, and the obligation arrives with the deal close.

Similarly, entities with only debt securities trading in a public market are PBEs and fall within scope -- a point that catches some private operating companies by surprise.

What This Means for Three Types of Entities

Pure IFRS Reporters

Your obligation is IFRS 18 only. The work is substantial: redesign the face of the P&L, define the five categories for your business model, build the two mandatory subtotals, identify all MPMs, and prepare retrospective restatements. If you classify operating expenses by function, add a nature disclosure in the notes. Start the chart-of-accounts and ERP review now -- most entities capture expenses by function, not by nature, and the data extraction for retrospective periods requires 2025 and 2026 actuals to be available in disaggregated form.

For a phased implementation roadmap, see Finrep's IFRS 18 Implementation Guide.

Pure US GAAP PBEs

Your obligation is ASU 2024-03 only. The face of the P&L does not change. The work is a disclosure project: identify relevant expense captions, map which of the five natural categories sit inside each caption, build the tabular footnote, define selling expenses, and decide on prospective vs. retrospective adoption. PwC notes that "it is expected that nearly all PBEs will be required to disclose more information about income statement expenses upon adoption" and that "new system and process changes may be required as well as coordination across geographies, business segments, and multiple reporting systems."

The data challenge is real: employee compensation and depreciation are typically buried across COGS, SG&A, and R&D in functional ERP cost centres. Extracting them by natural category requires either chart-of-accounts restructuring or allocation methodologies that must be documented and defensible for audit.

Dual-Reporters and Multinationals

This is where the implementation collision bites hardest. A European group with US-listed debt, or a US multinational with IFRS-reporting subsidiaries, faces both standards in fiscal year 2027. The obligations do not cancel each other out -- they stack.

IFRS 18's retrospective restatement requirement means the group must recast prior period IFRS P&Ls. ASU 2024-03's footnote requirement means the US GAAP filing needs a new tabular disclosure. The data infrastructure to support both -- natural expense tracking across functional captions, category definitions aligned across entities, ERP configurations that can produce both outputs -- is largely the same underlying problem. Running the two implementation projects separately is inefficient; running them jointly requires careful scoping because the category definitions do not map one-to-one.

One practical decision: whether to adopt ASU 2024-03 retrospectively (to align comparative periods with IFRS 18's mandatory restatement) or prospectively (to reduce near-term data burden). There is no right answer for every entity, but the choice should be made deliberately and disclosed in pre-adoption SAB 74 disclosures.

Are the Two Standards Converging?

Partially, and deliberately not fully. IFRS 18 and ASU 2024-03 were developed in parallel but without formal joint project status. The FASB and IASB were aware of each other's work but did not coordinate. The result is partial convergence on the investor transparency goal -- both boards responded to the same investor feedback that expense information was insufficient -- and deliberate divergence on method.

The FASB chose footnote-only disclosure because it did not want to mandate a restructuring of the income statement face for US GAAP entities, where diversity in P&L presentation is long-established. The IASB chose structural reform because IAS 1 left too much flexibility and produced incomparable operating profit figures across entities.

This is not a temporary gap that will close with a future update. It reflects a genuine philosophical difference about the role of the income statement face versus the notes. Finance teams should plan for these two frameworks to remain distinct through at least the next decade.

FAQ

Does compliance with IFRS 18 satisfy any ASU 2024-03 requirements? No. The two standards operate under different frameworks and have different disclosure locations, category definitions, and scope rules. An IFRS 18-compliant P&L does not substitute for an ASU 2024-03 footnote table, and vice versa. Dual-reporters must comply with each standard independently.

When is ASU 2024-03 effective for private companies? ASU 2024-03 does not apply to private companies. The exception is a private company that becomes required to file financial statements with the SEC -- for example, because it is acquired by a public company and its financials must be included under Reg S-X Rule 3-05 or 3-09. In that case, the private company's filed statements must comply with ASU 2024-03.

What is a "relevant expense caption" under ASU 2024-03? Any expense line item presented on the face of the income statement within continuing operations that contains at least one of the five specified natural expense categories. Most entities will find that COGS, SG&A, and R&D all qualify, requiring disaggregation of each.

Does IFRS 18 require disclosure of the same five natural expense categories as ASU 2024-03? Not exactly. IFRS 18 requires a full nature breakdown in the notes for entities that classify operating expenses by function on the face -- this is broader than ASU 2024-03's five prescribed categories and involves more judgement. The two requirements are conceptually related but not identical.

Can entities early-adopt either standard? Yes. Early adoption is permitted for both IFRS 18 and ASU 2024-03. Dual-reporters considering early adoption of ASU 2024-03 should assess whether aligning the adoption date with IFRS 18 simplifies the data collection and comparative period work -- or whether early adoption creates investor confusion relative to peers who have not yet adopted.

What SEC pre-adoption disclosures are required for ASU 2024-03? SEC registrants must include in their pre-adoption disclosures: a brief description of the standard and the required adoption date; the methods of adoption allowed and the method the registrant expects to use; a discussion of the expected impact on financial statements (or a statement that it is not yet estimable); and disclosure of other significant matters expected to result from adoption. These SAB 74 obligations apply now, ahead of the 2027 effective date.