IFRS 18 in Dynamics 365 Finance: how the Financial Services Accounting Hub (AccountingFlow 365) speeds up compliant reporting.

The short answer

IFRS 18 Presentation and Disclosure in Financial Statements replaces IAS 1 for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted. It is applied retrospectively, so comparatives are restated. It does not change how revenue, leases or financial instruments are measured. It changes how income and expenses are classified, subtotalled and explained, and that classification has to come from the ledger.

If you report on a calendar year, your first IFRS 18 statements are for 2027 and your 2026 transactions are the comparatives. That makes the 2026 close the real deadline for the design work.

This article explains what changes, how to design it into Dynamics 365 Finance, and, in a step-by-step practical guide, how the Financial Services Accounting Hub (AccountingFlow 365) shortens the path for banks, lenders and insurers.

The changes that touch the ledger

IFRS 18 is a presentation standard, but five of its requirements depend on data the ledger has to hold.

• Categories: income and expenses in the statement of profit or loss are classified as operating, investing, financing, income taxes or discontinued operations.
• New subtotals: operating profit, and profit or loss before financing and income taxes, become required lines.
• Management-defined performance measures: any subtotal of income and expenses used in public communications outside the financial statements must be disclosed in a single note, reconciled to the nearest IFRS subtotal, with the tax and non-controlling interest effect of each adjustment.
• Aggregation and disaggregation: stricter rules on what can be grouped, limits on how much sits under an 'other' label, and a requirement to disclose certain expenses by nature when the statement presents expenses by function.
• Cash flows: the indirect-method statement of cash flows starts from operating profit rather than profit or loss, and the options for classifying interest and dividends are removed for most entities.

Entities whose main business activity is investing in assets or providing financing to customers, which includes banks, lenders and many insurers, follow specific classification rules, so their operating category looks different from a manufacturer's.

Why this is a design question in Dynamics 365 Finance

Most groups have a chart of accounts built for IAS 1 and local statutory books. IFRS 18 asks for a second dimension of classification across the same accounts: an interest expense on a lease may be financing for one entity and operating for another, depending on its main business activity. A mapping file maintained by one person at quarter-end is exactly the control weakness an auditor will sample.

The goal is simple to state. The group controller should be able to produce local management accounts, local statutory accounts and IFRS 18 statements from the same trial balance, on the same day, with the category of every posting traceable to a rule.

Designing IFRS 18 into Dynamics 365 Finance

These building blocks exist in Dynamics 365 Finance today. The design decides how they are combined.

• Main account categories and a dedicated IFRS 18 category attribute: decide where classification lives, on the natural account, on a financial dimension, or on the source transaction. Accounts that can fall in more than one category by entity or by activity are better classified by dimension than by account number.
• Financial dimensions for function and for nature: keep the natural account for expenses by nature and a function dimension for presentation by function, so both views and the required disclosure come from one posting.
• Financial reporting row definitions and trees: build the operating, investing, financing and income tax sections, and the new subtotals, as reusable rows, so that every entity reports the same structure.
• Posting layers or a parallel ledger for the transition: restating 2026 comparatives is easier when IFRS 18 reclassifications post in their own layer than when they overwrite local books.
• A reconciliation view for management-defined measures: each MPM adjustment needs a ledger source, an owner and its tax effect.
• Consolidation and intercompany: eliminations should agree before classification, so that categories are not distorted by internal balances.

Across entities, the chart and the dimension model should be shared, with a local statutory overlay on top. Our blueprint on IFRS 18 reporting sets out that design in one document.

Where an accounting hub helps: the Financial Services Accounting Hub

For banks, lenders and insurers, the hard part sits upstream of the ledger. Core banking, lending and insurance systems produce millions of transactions that have to be summarised into journals. If the IFRS 18 category is assigned by a person at the end of the month, it will be late and inconsistent.

The Financial Services Accounting Hub, delivered as AccountingFlow 365, sits between those source systems and Dynamics 365 Finance. It receives sub-ledger activity and posts it to the general ledger under controlled, rule-based posting, with an audit trail from each journal back to its source transactions. That structure is what IFRS 18 reporting needs.

• Classification at posting: the rules that decide how a source transaction posts can carry the category and the function dimension, so operating, investing and financing arrive in the ledger already classified.
• One rule set across source systems: lending, deposits, treasury and insurance feed the same rules, so two systems cannot classify the same kind of income differently.
• Traceability for the auditor: every category in the statement can be traced to a posting rule and the source transactions behind it.
• Rules as data: when a policy decision changes, such as how a fee is treated, the rule changes in one place. The restated comparatives are produced by applying the updated rules to the 2026 transactions, subject to what your volumes and retention allow, which we confirm in discovery.
• Multi-entity consistency: entities in different countries post through the same hub, so the group structure is the same everywhere.

The hub does not decide your accounting policy. The classification policy stays with you and your auditor. What the hub gives you is a way to apply that policy consistently, at the point where the data is created, and to prove it.

Practical guide: how the Financial Services Accounting Hub accelerates IFRS 18 compliance

This is the sequence we use on a programme. Each step produces something your finance team and auditor can inspect, and each one is easier when classification is applied in one place, the hub, instead of in every source system and every journal.

• Step 1, inventory the transaction types: list every kind of transaction the source systems send, such as loan interest, fees, premiums, claims, deposit interest, treasury results, foreign exchange, impairment and tax. Each one becomes a row in the classification matrix.
• Step 2, build the classification matrix: for each transaction type, product and entity, record the IFRS 18 category (operating, investing, financing, income taxes or discontinued operations), the function, and the nature. This is where your policy on the specified main business activity rules is written down, with an owner and a reference to the policy paper.
• Step 3, put the matrix into the hub's posting rules: the rules that already decide the debit, credit and dimensions of each journal now also carry the IFRS 18 category and function. The classification is applied when the sub-ledger activity is summarised, not afterwards.
• Step 4, map the rules to Dynamics 365 Finance: align the hub's output to the natural accounts, the financial dimensions and the main account categories you designed in the ledger, so a posting arrives already in the structure the row definitions read.
• Step 5, replay the 2026 comparatives: run the closed 2026 activity through the new rules to produce the comparative figures. Reconcile the result to the published 2026 statements, and investigate every difference before the 2027 close, when it will be harder to explain.
• Step 6, reconcile source to statement: prove that source system totals agree to the hub, the hub to the general ledger, and the general ledger to each line of the statement of profit or loss. The management-defined measures note is reconciled from the same data.
• Step 7, govern the rules: put classification changes under change control, with a reason, an approver, an effective date and a log. When the standard's application is clarified or your policy changes, the rule changes once and the effect is visible.
• Step 8, assemble the evidence pack: the classification matrix, the rule change log, the reconciliations and a traced example for each category. This is what your auditor asks for, and it is built as a by-product of the process.

Why this is faster: without a hub, every source system and every manual journal needs its own classification step, and each of those is a place to be late or inconsistent. With a hub, classification is a single decision applied at a single point, so adding a source system or a country is adding a feed to rules that already exist.

A worked example, for illustration

The examples below show how a matrix row reads. They are illustrations only. The classification of each item depends on your main business activities, your accounting policy and your auditor's view.

• Loan interest income at a lender: the matrix records the category your policy assigns, which depends on whether providing financing to customers is a main business activity, and the function dimension used for the presentation by function.
• Funding costs, such as interest on deposits or borrowings: the matrix records whether the liability relates to financing customers, because that decides whether the cost sits with the operating activity or with financing.
• Fee and commission income: classified with the activity that earns it, with the same rule applied whichever source system produced the fee.
• Interest on a lease liability: classified as financing, with the lease schedule as its source.
• Investment income at an insurer: classified according to whether investing is a main business activity of the entity.

In each case the row names the rule, the source transactions it applies to, the policy reference and the owner. That row is the unit of evidence.

A practical plan for the next 90 days

If you report on a calendar year, the work breaks into four steps, in this order.

• Weeks 1 to 3, assess: map each income and expense line to a proposed IFRS 18 category, identify the entities that follow the specified main business activity rules, and list your management-defined performance measures.
• Weeks 4 to 6, design: decide where the category lives, define the function and nature dimensions, and design the row definitions, the cash flow start point and the MPM note.
• Weeks 7 to 10, build and test: configure the reporting structure, set up the posting rules or the hub rules, and run the 2026 comparatives through them.
• Weeks 11 to 13, rehearse: produce a full set of IFRS 18 statements for a closed 2026 quarter, reconcile it to the current statements, and walk your auditor through the traceability.

The earlier the first rehearsal runs, the more of 2026 you can restate with live data instead of reconstructing it at the 2027 year-end.

Where to start

Start with a discovery workshop on your current chart, your entities and your management-defined measures. You leave with a written fit-gap against IFRS 18, a proposed place for the classification in Dynamics 365 Finance, and a plan for the 2026 comparatives.

This article is general information, not accounting advice. Confirm the standard's application and your jurisdiction's adoption timetable with your accountants and auditors. The IFRS 18 reporting blueprint, linked on this page, is available as a PDF on request.

If you are rolling Dynamics 365 across more than one country, this is the conversation we should have. Book a consultation