IASB 2026 Agenda: Upcoming Standard Changes That Affect Your Audit Files

What’s already effective from 1 January 2026?

Four sets of amendments hit 2026 financial statements simultaneously. The IFRS 9 and IFRS 7 amendments on classification and measurement of financial instruments tighten the rules for assessing contractual cash flow characteristics (the SPPI test) and add new disclosure requirements for financial instruments with environmental, social, or governance-linked features. If your client holds sustainability-linked loans or green bonds, the classification assessment in their 2026 financials needs to reflect these changes.

The IAS 21 amendment on lack of exchangeability fills a gap that existed for decades. When a currency becomes non-exchangeable (due to government restrictions, as seen in Argentina, Lebanon, Venezuela, and Zimbabwe), entities now follow a two-step process: determine whether exchangeability is lacking by assessing whether foreign currency can be obtained for immediate delivery within a normal administrative timeframe, then estimate the spot rate using observable market information if it is. For auditors, this means you need to evaluate management’s methodology for estimating spot rates under IAS 21.A15A through IAS 21.A15E, and that methodology must be documented.

Annual Improvements Volume 11 applies from the same date. It makes targeted fixes across several standards, none individually large but collectively requiring a sweep of your engagement templates. The nature-dependent electricity contracts amendments also take effect, relevant for clients with power purchase agreements tied to renewable energy sources.

IFRS 18: why this changes your audit of profit or loss

IFRS 18 is the biggest change to financial statement presentation since IAS 1 was last substantially revised. The IASB issued it in April 2024. It takes effect for annual reporting periods beginning on or after 1 January 2027, with early adoption permitted. But here’s what makes it urgent now: IFRS 18 requires retrospective application under IAS 8, which means entities preparing 2027 financial statements must restate their 2026 comparatives. Your 2026 audit file is the comparative year.

The standard does four things that directly affect how you audit:

It requires all entities to present an “operating profit” subtotal in the income statement. Currently, IAS 1 doesn’t define operating profit, and over 60 different calculation methods exist across IFRS reporters (per an IASB study of 100 companies cited in the IFRS 18 effects analysis). IFRS 18.BC53 defines the operating category as a residual: everything that isn’t classified as investing or financing goes into operating. That residual definition means you need to test whether your client’s classification decisions are consistent with the standard, not just internally consistent.

It introduces a second mandatory subtotal: “profit before financing and income taxes.” This sits between operating profit and profit before tax, capturing the investing category. For entities that hold significant investment portfolios or equity-accounted associates, the placement of these items will change the face of their income statement.

It requires disclosure of management-defined performance measures (MPMs). If your client uses “adjusted EBITDA” or any non-IFRS measure in public communications, IFRS 18 requires a reconciliation to the nearest IFRS-defined subtotal within the financial statements. Auditors will need to test both the definition of the MPM and the arithmetic of the reconciliation. IFRS 18.106 through IFRS 18.112 set out the requirements.

And it makes consequential amendments to IAS 7 (statement of cash flows), including eliminating the classification options for interest and dividend cash flows. Under IAS 7 as it stands today, entities choose where to present interest paid and dividends received. Under the amended IAS 7, these follow the income statement classification.

Your cash flow audit procedures need updating too.

For non-Big 4 firms, the practical implication is this: if any of your December 2027 year-end clients report under IFRS, their finance teams need to start the classification exercise in 2026. Your 2026 planning meeting with those clients should include a discussion of IFRS 18 readiness. If it doesn’t, you’ll be handling the transition during the 2027 audit instead of reviewing it.

What the rate-regulated activities standard means for utility clients

The IASB expects to issue a new standard on rate-regulated activities in Q2 2026. This standard will introduce accounting for “regulatory assets” and “regulatory liabilities” that arise when the total allowed compensation for goods or services supplied in one period is included in the regulated rates charged in a different period. If you audit utility companies, energy distributors, water companies, or transport operators subject to tariff regulation, this will add a new class of assets and liabilities to your substantive testing.

The standard has been in development for over a decade. The effective date hasn’t been set yet (the standard hasn’t been issued), but given the Q2 2026 issuance target, implementation is likely to follow the IASB’s standard lead time of 18 to 24 months.

For the typical mid-tier audit firm in the Netherlands or elsewhere in Europe that audits one or two semi-public utility entities, the practical question is whether your firm’s methodology covers regulatory assets and liabilities. Most non-Big 4 firm templates don’t include these line items today, because there’s no IFRS standard that currently addresses them. When the standard arrives, you’ll need to build or acquire audit procedures for a new balance sheet category.

Business combinations disclosures and the goodwill question

The IASB’s business combinations project (IFRS 3 improvements) is targeting an exposure draft in H2 2026. The project has two parts. First, it proposes new disclosure requirements about the subsequent performance of acquisitions. If your client completed a significant acquisition, the proposed disclosures would require them to report on whether the acquisition met management’s stated objectives, using the metrics management actually uses to monitor performance internally.

Second, the project may include improvements to the effectiveness of the goodwill impairment test under IAS 36. In November 2022, the IASB decided to retain the impairment-only approach (no return to amortisation), but acknowledged that the test has weaknesses. The “headroom” problem (where unrecognised internally generated goodwill shields acquired goodwill from impairment) is well documented. Staff are now exploring whether targeted changes to the impairment methodology can make the test more effective without a full overhaul.

For auditors, the goodwill impairment test is already one of the most judgment-intensive areas of any engagement involving acquisitions. If the IASB tightens the methodology or expands the disclosures, your ISA 540 procedures for accounting estimates (specifically IAS 36 value-in-use calculations) will need revision. The exposure draft in H2 2026 will be the moment to assess the impact.

Intangible assets, equity method, and what’s still on the research bench

The IASB added the intangible assets project to its standard-setting work plan in January 2026. It explores potential changes to the definition of “intangible asset” in IAS 38, recognition criteria (particularly for internally generated intangibles), and disclosure requirements. The IASB selected test cases to guide its deliberations. This project won’t produce a standard in 2026 or 2027, but it signals a direction: IAS 38, which hasn’t been substantially updated since 2004, is likely to change within the current agenda cycle (ending 2028). Auditors who currently apply IAS 38’s recognition criteria should follow this project because the threshold for recognising development costs, customer relationships, data assets, and brand assets could shift.

The equity method project (targeting an exposure draft in Q1 2026) addresses practical application questions under IAS 28. It isn’t proposing fundamental changes to the equity method itself but resolving specific issues around partial disposals, transitions between consolidation and equity accounting, loss absorption, and the treatment of downstream transactions. If you audit entities with significant associates or joint ventures, the exposure draft will clarify several areas where current guidance is ambiguous.

Four potential new projects sit on the IASB’s radar for when capacity becomes available: operating segments, pollutant pricing mechanisms, hyperinflationary accounting, and cryptoassets. The IASB indicated in its November 2025 advisory council update that work on these could start in late 2026, with stakeholder consultation planned for 2027. None of these will affect 2026 or 2027 audit files directly, but the pollutant pricing mechanisms project (covering emissions trading schemes and carbon credits) is worth monitoring if your clients participate in the EU Emissions Trading System.

The IFRS 16 post-implementation review is also underway. The IASB discussed feedback in January 2026 and expects to finalise its findings before the end of 2026. If the PIR identifies issues requiring amendments, those would follow the normal standard-setting timeline (exposure draft, comment period, final standard), meaning any IFRS 16 changes are unlikely before 2028 at the earliest.

Worked example: assessing IFRS 18 readiness at a mid-tier client

Client scenario: Van Leeuwen Vastgoed N.V., a Dutch real estate investment company with €87M revenue, holds a portfolio of commercial properties and a 40% stake in a logistics joint venture. The entity reports under IFRS with a December year-end. The audit partner wants to know whether to raise IFRS 18 in the 2026 planning meeting.

Step 1: Identify classification impact on the income statement

Van Leeuwen currently presents an operating profit subtotal in its income statement, but includes the share of profit from its 40% joint venture within operating profit. Under IFRS 18, income from associates and joint ventures accounted for using the equity method is classified in the investing category by default (IFRS 18.55), not operating. This moves the joint venture profit below the new operating profit subtotal.

Step 2: Assess MPM disclosure requirements

Van Leeuwen’s annual report uses “EPRA earnings” (a real estate industry measure) in the management discussion, investor presentations, and its website. Under IFRS 18.106, this qualifies as an MPM because it’s a subtotal of income and expenses used in public communications outside the financial statements to communicate management’s view of performance. The entity will need to include a reconciliation of EPRA earnings to the nearest IFRS 18 subtotal within the notes.

Step 3: Evaluate cash flow statement impact

Van Leeuwen currently classifies interest paid as a financing activity and dividends received from the joint venture as an operating activity. Under the amended IAS 7, interest paid follows the financing category classification in the income statement (which aligns with current practice), but dividends received from equity-accounted investees move to the investing category. The entity will need to restate its 2026 comparative cash flow statement.

Step 4: Timeline recommendation to the client

Advise Van Leeuwen’s finance director to complete a classification mapping exercise (income and expense line items to IFRS 18 categories) by Q3 2026. The 2026 year-end audit file should include a note in the “subsequent events and forward-looking matters” section confirming the client’s awareness of IFRS 18 and their preparation timeline.

Your preparation checklist for 2026 audit files

1. Review each IFRS-reporting client’s financial instruments for IFRS 9/7 classification changes effective 1 January 2026, with particular attention to sustainability-linked loans and ESG features affecting the SPPI test.
2. For clients with operations in countries with exchange restrictions, confirm that management’s IAS 21 spot rate estimation methodology is documented and that the two-step exchangeability assessment (IAS 21.A15A through A15E) has been applied.
3. Add an IFRS 18 readiness question to your 2026 planning meetings for every IFRS-reporting client with a December 2027 year-end. Document whether the client has started the income statement classification exercise.
4. If you audit utility or rate-regulated entities, subscribe to the IASB’s project updates for the rate-regulated activities standard (expected Q2 2026) and assess the need for new audit procedures when the standard is issued.
5. Monitor the business combinations disclosures exposure draft (expected H2 2026) for any changes to IAS 36 impairment testing methodology that would affect your ISA 540 procedures.

Common mistakes when a new standard lands mid-cycle

• The AFM has previously flagged audit files where the auditor failed to assess the impact of a new standard on comparative periods during the year before it took effect. IFRS 18’s retrospective application requirement makes this particularly relevant for 2026 files.
• Firms that wait until the standard is effective to update their methodology templates lose lead time. The FRC’s thematic review of IFRS 15 transition in 2018 found that non-Big 4 firms were disproportionately affected by late methodology updates compared to larger firms with dedicated technical departments.

Related content

Frequently asked questions

Further reading and source references

• IFRS 18, Presentation and Disclosure in Financial Statements: replacing IAS 1, effective 1 January 2027 with retrospective application.
• IFRS 9 / IFRS 7 Amendments, Classification and Measurement of Financial Instruments: effective 1 January 2026.
• IAS 21 Amendment, Lack of Exchangeability: effective 1 January 2026.
• IASB Work Plan, updated January 2026: project timelines for rate-regulated activities, business combinations disclosures, intangible assets, and equity method.
• IFRS Foundation Advisory Council, November 2025 update: pipeline projects including pollutant pricing mechanisms, operating segments, and cryptoassets.