Ind AS 118: what changes in your profit and loss statement, and what doesn't

Short answer: Ind AS 118 does not change a single number in your profit. It changes the shape of the statement that shows it: every line of income and expense goes into one of five categories, two new subtotals become mandatory, and the “adjusted” measures you use with investors move into the audited notes. For most Indian groups the first year it bites is FY 2026-27, because that year becomes the restated comparative.

Where things stand in India

Ind AS 118 is the Indian equivalent of IFRS 18, which replaces IAS 1’s presentation requirements globally from 1 January 2027. In India, NFRA recommended Ind AS 118, with consequential amendments to other standards, to the Central Government at its December 2025 meeting. The proposed start is annual periods beginning on or after 1 April 2027, with calendar-year companies allowed to adopt from 1 January 2027 so that Indian subsidiaries of foreign groups can stay in step with their parents.

A recommendation is not a notification. Until the MCA notifies the standard, plan on the recommended date but keep an eye on the final text.

What actually changes

Five categories. Every item of income and expense is classified as operating, investing, financing, income taxes or discontinued operations. Operating is the default: anything that isn’t in another category lands there.

Two new subtotals. Operating profit, and profit before financing and income taxes. Operating profit becomes a defined, comparable number for the first time.

Classification follows your main business activities. Interest income, dividends and fair value gains are investing items for a manufacturer, but operating items for a company whose main business is lending or investing. That judgement is made at the reporting-entity level, so a holding company’s standalone statements and the group’s consolidated statements can land differently.

Some familiar items move. Your share of profit from associates and joint ventures sits in investing, below operating profit. Foreign exchange differences follow the item that created them, so an exchange loss on a trade payable is operating while one on a borrowing is financing.

Expenses by nature, function or a mix. Whatever you choose has to be applied consistently. If you present by function, you disclose certain natures (depreciation, amortisation, employee benefits, impairment and inventory write-downs) in a single note.

Less room for “other”. The standard pushes for meaningful grouping and discourages vague captions. If “other expenses” is a large number today, expect to break it up.

Management-defined performance measures (MPMs). Adjusted EBITDA, adjusted PAT and similar subtotals used in public communication must be defined, reconciled and disclosed in one note. This is big enough to deserve its own post: your adjusted EBITDA is about to be audited.

Knock-on changes. The cash flow statement starts the indirect method from operating profit and loses most of the classification choices for interest and dividends. Interim reports pick up MPM disclosures, and there are tighter rules on additional per-share figures.

The Schedule III question

Indian companies present under Division II of Schedule III, which is built around a nature-wise statement of profit and loss. Ind AS 118’s category structure doesn’t sit neatly on top of it. Schedule III will need to be aligned, and the results formats that listed companies file will likely follow. Until those texts are out, nobody can finalise a layout. What you can do is get your data ready for either answer.

What doesn’t change

Recognition, measurement, profit for the year, EPS on the basic and diluted basis, and the balance sheet totals. If someone tells you Ind AS 118 will move your bottom line, they are describing a presentation choice, not a measurement change.

Where the judgement sits

• Main business activities. NBFCs, treasury-heavy groups, holding companies and conglomerates need a documented assessment, entity by entity.
• FX and derivative gains. Splitting them by source is simple in principle and painful in the ledger.
• Grouping. What counts as “similar characteristics” for aggregation is judgement, and auditors will ask for your reasoning.
• Which of your subtotals are MPMs. Look at everything you have said publicly, not just the annual report.

What I’d do in FY 2026-27

1. Write the main-business-activity assessment for each reporting entity and agree it with your auditors.
2. Tag every ledger with its Ind AS 118 category now, so the FY 2026-27 comparative can be rebuilt without re-reading a year of vouchers. The detail is in the transition data plan.
3. List every non-GAAP subtotal used in investor decks, press releases and earnings calls in the last four quarters.
4. Brief the audit committee: the new operating profit will not match what analysts are used to.
5. Draft a pro forma FY 2025-26 statement in the new layout and see what moves.

Where FINAHQ fits

FINAHQ produces your statutory statements from approved templates on top of a mapped trial balance. Category tags live on the mapping, so the current Schedule III layout and a draft Ind AS 118 layout can be produced from the same numbers, side by side, while the final formats are settled. If you want to see what that means for your close, calculate your value or talk to us.

This article is general information, not professional advice. Check the notified text and discuss your position with your auditors.