Keeping up with IFRS updates as a CFO can feel wild because the standards evolve often, the documents are dense, and each change affects multiple parts of the reporting chain. The easiest way to stay on top of it is to break updates into three simple layers: what changed, why it changed, and what you actually need to do.
For listed and large entities as well as profit-making public sector entities that apply IFRS, there are three key changes that have arisen in the recent past, namely IFRS 18, IFRS 19 and the transition to ZARONIA. I break these down below.
IFRS 18 Presentation and disclosure of financial statements (IFRS 18)
IFRS 18 introduces a more structured, comparable and transparent reporting framework and replaces IAS 1 Presentation of financial statements. The main change in IFRS 18 is to the Statement of Profit or Loss where income and expenses are now required to be classified as operating, investing and financing. This introduced two new mandatory subtotals, namely, Operating Profit or Loss and Profit or Loss before Financing and Income Tax.
Income and expenses from an entity’s main business activities are operating activities. Additionally, operating is the residual category for all income and expenses that are not investing or financing activities. The same income or expenses may differ across entities based on the main business activities of each entity.
Perhaps the biggest change that IFRS 18 brings is the introduction of management performance measures (MPM) into the financial statements. These previously called non-GAAP measures are crucial to understanding how management defines and measures performance and allocate resources. Bringing these measures into the financial statements allows users valuable insight particularly as these MPMs are required to be reconciled to an IFRS measure.
IFRS 18 also provides clearer guidance on when items presented in the financial statements may be aggregated and disaggregated and guidance on how to label and describe line items.
IFRS 18 is effective for periods beginning 1 January 2027 and retrospective application is required. This means that 2026 comparative information needs to be disclosed. For many entities, this will necessitate a redesign of reporting processes for which a detailed project plan is essential.
IFRS 19 subsidiaries without public accountability (IFRS 19)
IFRS 19 is a voluntary standard issued for qualifying subsidiaries. This standard allows qualifying subsidiaries to maintain IFRS accounting policies while simplifying the disclosure requirements. The standard was issued in response to subsidiaries often having to keep two sets of records, one that complies with IFRS for group reporting purposes and another for financial statements prepared under IFRS for SMEs or local GAAP. IFRS 19 is effective for periods beginning 1 January 2027 and early adoption is allowed.
JIBAR to ZARONIA – change of the primary used interest-rate benchmark
The financial landscape in South Africa is significantly shifting as the long used primary interest rate benchmark, JIBAR (Johannesburg Interbank Average Rate) is being phased out and replaced by ZARONIA (South African Rand Overnight Index Average). This is not a new IFRS standard but an economic change that will have a significant impact on financial reporting under IFRS. Financial contracts, valuation models, and financial reporting practices will all need to be reviewed and assessed for the changes.
So why will there be a significant impact on financial reporting? Are all interbank interest rates not equal? JIBAR is a forward-looking interbank rate that naturally includes credit risk and liquidity premiums of contributing banks while ZARONIA is a backward-looking, near risk-free overnight rate. This fundamental difference in rate means that once the change is effective, financial instruments using JIBAR can see a significant increase or decrease in value immediately. To avoid this and ensure value neutrality on implementation, a phased approach will be implemented. Existing financial instruments will convert to ZARONIA plus a Credit Adjustment Spread (CAS) to ensure there is no significant change in value. All new financial instruments issued or valued after the effective date will reference ZARONIA only. Valuations, hedge relationships, and disclosures will all be linked to ZARONIA only.
Key financial instruments impacted but not limited to are loans at fair value through profit or loss, loans at amortised cost, interest rate swaps, floating rate bonds, basis swaps and cross currency swaps.
The move to ZARONIA follows global trends to a more transparent, reliable and resilient benchmark as it is based on actual overnight transaction data. CFOs wishing to minimise the impact of the change will ensure that they have the tools to navigate through the change. As with similar reforms in the US (SOFR) and UK (SONIA), the South African market will find its equilibrium.
JIBAR will be permanently discontinued after its final publication on 31 December 2026, at which point it will be fully replaced by ZARONIA as South Africa’s primary interest rate benchmark. ZARONIA has been published for use since November 2023 by the South African Reserve Bank.
Changes impacting small and medium-sized entities such as NPOs
Small and medium-sized entities such as certain non-profit organisations will be impacted by the introduction of the updated IFRS For SME standard which will be effective for annual reporting periods beginning on or after 1 January 2027.
The updated IFRS for SMEs Standard introduces several significant changes aimed at improving alignment with full IFRS while retaining proportionality for smaller entities. Key amendments include a simplified financial instruments model replacing legacy categories derived from IAS 39, enhanced guidance on revenue recognition aligned more closely with the principles of IFRS 15, updated lease accounting requirements that bring greater transparency to lessee arrangements, and strengthened fair value measurement and disclosure principles.
In addition, the revisions introduce clearer consolidation guidance, updated requirements relating to income taxes and business combinations, and improved presentation and disclosure expectations, all of which are intended to enhance consistency, comparability and decision-usefulness of financial statements prepared by SMEs and non-profit organisations.
Changes impacting the public sector
Several important updates have been made to the Standards of GRAP, aimed at improving alignment with international public sector reporting practices and strengthening financial reporting transparency. The most notable development is the revised GRAP 104 on Financial Instruments, effective for reporting periods beginning on or after 1 April 2025, introducing updated classification and measurement principles and an expected credit loss impairment model similar to IFRS 9.
In addition, refinements to standards dealing with heritage assets and transfers of functions, together with updates to Directive 5 on the GRAP Reporting Framework, have clarified applicable reporting requirements and promoted greater consistency across public sector entities.
