MFRS 18 Puts Adjusted Earnings Under the Microscope

Quick Answer: MFRS 18 replaces MFRS 101 for annual reporting periods beginning on or after January 1, 2027, with early application permitted. It does not ban adjusted earnings, but it forces listed companies to explain each management-defined performance measure and reconcile it to reported profit. That gives Bursa Malaysia shareholders a clearer way to test how a headline ‘adjusted’ figure was built.

What Is MFRS 18 and When Does It Start?

MFRS 18 accounting standard and corporate earnings disclosure in Malaysia — MFRS 18 changes how Malaysian listed companies present financial performance from 2027.

MFRS 18, Presentation and Disclosure in Financial Statements, replaces MFRS 101. It applies to annual reporting periods beginning on or after January 1, 2027.

For December year-end companies, 2026 comparative information must be restated. Companies must also reconcile comparative-period profit or loss line items between the MFRS 101 and MFRS 18 presentations.

MFRS 18 Puts Adjusted Earnings Under the Microscope — Photo: TheEdge

Will the New Income Statement Make Operating Profit Comparable?

The standard introduces defined subtotals for operating profit and profit or loss before financing and income taxes. Companies have not always used ‘operating profit’ consistently, so different inclusions and exclusions can make comparisons hard, even within the same industry.

PwC Malaysia says the new income statement structure will help investors look beyond broad labels to identify true performance drivers.

Does MFRS 18 Ban Adjusted Earnings?

No. MFRS 18 does not require companies to produce adjusted earnings or prohibit their use. Instead, it sets disclosure rules for qualifying management-defined performance measures (MPMs).

MPMs are subtotals of income and expenses that management uses in public communications outside the financial statements. Common examples include adjusted operating profit, adjusted profit and adjusted Ebitda.

Companies must explain what each qualifying MPM represents, why management considers it useful and how it is calculated.

What Must the MPM Reconciliation Show?

A reconciliation to the most directly comparable subtotal listed in paragraph 118 of MFRS 18, or another total or subtotal required by MFRS Accounting Standards
The income tax effect of each reconciling item
The non-controlling interest effect of each reconciling item

Which Numbers Should Bursa Investors Check First?

Start with what was adjusted and which costs were excluded. Then compare the adjusted figure with the profit reported in the financial statements.

Check whether the adjustments recur. Also check whether the same discipline applies when results improve and when they deteriorate.

The Securities Commission Malaysia’s Malaysian Code on Corporate Governance stresses meaningful corporate reporting. Bursa Malaysia’s Corporate Disclosure Guide calls for accurate, complete and balanced disclosures.

Who Is Preparing for MFRS 18 in Malaysia?

The Malaysian Institute of Accountants (MIA) says these disclosures will help investors understand management’s chosen measures. Grant Thornton Malaysia highlights the value of bringing these measures into a single note to the financial statements.

Finance teams may need to review reporting systems, account mapping and public performance measures. Audit committees should question management’s readiness, and comparative figures cannot be assembled at the last minute.

The source article names no specific Bursa-listed company, so no stock code or earnings figure applies to this story. Its author, Hijat A Jabbar, is a professor of accounting at Universiti Utara Malaysia, Kuala Lumpur Campus.

For more on reading company numbers, see AI Stock Analysis for Malaysians, and for income-focused stocks, the Dividend Investing Guide.

Key Takeaways

MFRS 18 applies from January 1, 2027, with 2026 comparatives restated for December year-end companies.
The standard does not ban adjusted earnings. It requires explanation and reconciliation of each qualifying MPM.
Each reconciling item must show its income tax and non-controlling interest effects.
Investors should still examine whether adjustments recur and whether they are applied consistently in good and bad years.

This article is for information only and is not investment advice. Do your own research before making any decision on Bursa Malaysia stocks.

Frequently Asked Questions

When does MFRS 18 take effect in Malaysia?

MFRS 18 applies to annual reporting periods beginning on or after January 1, 2027, and early application is permitted. For December year-end companies, 2026 comparative information must be restated.

Does MFRS 18 stop companies from reporting adjusted earnings?

No. MFRS 18 does not require companies to produce adjusted earnings or prohibit their use. It requires qualifying management-defined performance measures to be explained and reconciled to the closest reported subtotal.

What is a management-defined performance measure under MFRS 18?

It is a subtotal of income and expenses that management uses in public communications outside the financial statements. Examples in the source include adjusted operating profit, adjusted profit and adjusted Ebitda.

What must companies disclose about adjusted earnings under MFRS 18?

Companies must explain what each measure represents, why it is useful and how it is calculated. They must also disclose the income tax and non-controlling interest effects of each reconciling item.

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