If your business publishes an adjusted profit figure — adjusted EBITDA, underlying profit, normalised earnings — IFRS 18 brings it inside the audited financial statements. It must be disclosed in a single note, reconciled to the nearest IFRS subtotal, and explained. Measures that lived in investor decks and board packs, outside the audit boundary, are now inside it.
What counts as an MPM
A management-defined performance measure is a subtotal of income and expenses that:
- Is used in public communications outside the financial statements;
- Communicates management’s view of an aspect of financial performance; and
- Is not a subtotal specified by IFRS
All three must apply. Operating profit is specified by IFRS 18, so it is not an MPM. Gross profit is a familiar subtotal, not a management-defined one. Adjusted EBITDA used in a lender presentation is squarely an MPM.
The trigger is public communication. A measure used purely internally, never shown outside, is not caught. But “public” is broader than a press release: lender presentations, investor updates and materials shared with prospective buyers can all qualify.
What you have to disclose
In a single note, for each MPM:
- A description of the measure and how it is calculated
- Why management believes it provides useful information
- A reconciliation to the most directly comparable IFRS subtotal, showing each reconciling item
- The income tax effect and the effect on non-controlling interests of each reconciling item
- An explanation of any change in how the measure is calculated, and why
The tax effect requirement catches people out. It is not enough to say you added back a restructuring charge; you must show the tax consequence of that specific adjustment. For a UAE group that means allocating corporate tax to individual reconciling items, which many businesses have never done.
These are now audited
This is the substantive change. Sitting in the notes means the measure falls within the scope of the audit. Your auditor will test that the calculation is as described, that the reconciliation is arithmetically and conceptually sound, that the adjustments are what they claim to be, and that the measure is applied consistently year to year.
Adjustments that were never scrutinised now are. Three patterns tend not to survive contact:
- Recurring “one-off” items. A restructuring charge adjusted out in four consecutive years is not exceptional, and describing it as such is difficult to defend once it is in the audited notes.
- Asymmetric adjustments. Removing one-off costs while retaining one-off gains. Consistency cuts both ways.
- Definitions that drift. Changing what is adjusted out from year to year now requires explanation of the change and the reason.
Who this affects in the UAE
It is easy to assume this is a listed company issue. It is broader:
- Companies with bank facilities. Lender packs routinely carry adjusted EBITDA against covenants.
- Businesses raising investment. Any normalised earnings figure shown to investors.
- Groups reporting to a foreign parent, where the parent publishes adjusted figures that include your numbers.
- Businesses preparing for sale. Adjusted EBITDA is the basis of most valuations — and now it is auditable. See business valuation.
The sale process point
Worth dwelling on. Sellers routinely present an adjusted EBITDA with owner costs and one-off items removed. A buyer’s advisers challenge those adjustments in due diligence — that is normal.
Under IFRS 18, if that measure is publicly communicated, it is in the audited notes with a reconciliation and a tax effect. That strengthens a well-supported adjustment and weakens a speculative one, because the buyer is no longer arguing with your spreadsheet. They are reading a note your auditor has tested.
What to do in 2026
- List every adjusted measure you publish anywhere outside the accounts. Check lender packs and investor updates, not just formal reports.
- For each, decide whether to keep publishing it. Some businesses will simply stop, which is a legitimate response.
- Write the definition down and apply it consistently.
- Build the reconciliation now, including the tax effect of each item.
- Test each adjustment against the question your auditor will ask: is this genuinely non-recurring, and would you treat the opposite item the same way?
Frequently asked questions
What is a management-defined performance measure?
A subtotal of income and expenses used in public communications outside the financial statements to convey management’s view of performance, which is not specified by IFRS.
Is adjusted EBITDA an MPM?
Where it is publicly communicated and reflects management’s view of performance, yes.
Is operating profit an MPM?
No. IFRS 18 specifies it, so it falls outside the definition.
Are MPMs audited?
Yes. Disclosing them in the notes brings them within the scope of the audit, including the calculation, the reconciliation and the consistency of adjustments.
Do I need to show the tax effect of adjustments?
Yes — the income tax effect and the effect on non-controlling interests of each reconciling item.
What if we only use the measure internally?
Purely internal measures are not caught. The trigger is use in public communications, which includes lender and investor materials.
Can we change the definition?
Yes, but you must explain the change and the reason for it in the note.