IFRS 18 classifier. Two judgements, answered in a minute.
Answer the questions and read the verdict with its reasoning. The first tree tests a KPI against the management-defined performance measure definition. The second follows interest on a bank's liability to its category. Nothing you select leaves the page.
Answer question 1 to begin.
The verdict and its reasoning appear here as you answer. Each answer can be changed at any point.
Bank KPIs against the definition
KPMG survey, May 2026| KPI | Banks using it | Reading |
|---|---|---|
| CET1 ratio | 100% | Not an MPM. A capital measure, not a subtotal of income and expenses |
| Cost-to-income ratio | 72% | Requires assessment. The ratio is not; its numerator or denominator may be |
| Deposits to customer accounts | 64% | Not an MPM. A balance sheet measure |
| Adjusted net profit | 60% | Likely an MPM |
| Adjusted net interest income | 56% | Likely an MPM |
| Adjusted total income | 48% | Requires assessment |
Answer question 1 to begin.
The category, whether a policy choice is involved, and the consequence for the subtotals appear here.
The three groups, at a glance
Bank with a financing main business activity| Liability | Category | Choice? |
|---|---|---|
| Financing liability related to customer financing (deposits) | Operating | No |
| Financing liability not related to customer financing (own debt, wholesale) | Operating or financing | Policy choice, whole population |
| Cannot distinguish the two | Operating | No |
| Other liability (leases, pensions, provisions) | Financing | No |
The two tests, as the standard frames them.
- MPM definition, three limbs. A management-defined performance measure is a subtotal of income and expenses that the entity uses in public communications outside the financial statements, that communicates management's view of an aspect of financial performance, and that is not a subtotal specified by IFRS 18 or required by another IFRS standard. Ratios and balance sheet measures fail the first limb by construction; their components may not.
- The presumption. A subtotal used in public communications is presumed to communicate management's view. The presumption is rebuttable with evidence, which is why the classifier records a "no" to question 4 as a judgement to document.
- Consequence of an MPM. Disclosure in a single note: description, why management finds it useful, reconciliation to the most directly comparable IFRS subtotal, and the tax and non-controlling interest effect of each reconciling item. Audited.
- Interest classification. IFRS 18's default puts income and expenses from liabilities that arise from raising finance in the financing category. For an entity that provides financing to customers as a main business activity, the interest on such liabilities that relate to that activity is operating, the remainder is a policy choice, and if the two cannot be distinguished all of it is operating. Liabilities that do not arise from raising finance are always financing.
- Subtotal exemption. An entity with the financing main business activity that classifies all financing-liability interest in operating need not present profit before financing and income taxes. It still presents operating profit and profit or loss.
Sources: IFRS 18 Presentation and Disclosure in Financial Statements, IASB, April 2024; KPMG IFRG, Banks: are you ready for IFRS 18?, May 2026. Riskweise articles: IFRS 18 and the bank income statement and the comparative year is 2026. Service: IFRS 18 readiness and mapping.
IFRS 18 classification, asked and answered.
What is a management-defined performance measure under IFRS 18?
A subtotal of income and expenses that an entity uses in public communications outside the financial statements, that communicates management's view of an aspect of the entity's financial performance, and that is not a subtotal IFRS 18 or another IFRS standard specifies or requires. All three limbs must hold. An MPM must be disclosed in a single note with a description of what it represents and why management considers it useful, a reconciliation to the most directly comparable IFRS subtotal, and the income tax and non-controlling interest effect of each reconciling item. The note is audited.
Is adjusted EBITDA a management-defined performance measure?
Usually, yes. Adjusted EBITDA is a subtotal of income and expenses, it appears in results announcements, and it is presented as management's view of performance. IFRS 18 treats operating profit before depreciation, amortisation and specified impairment losses as a specified subtotal, so an EBITDA defined exactly that way is not an MPM. As soon as management adjusts it for restructuring, litigation, acquisition costs or anything else, the adjusted figure is an MPM and must be reconciled in the note.
Is the cost-to-income ratio a management-defined performance measure?
Not in itself. A ratio is not a subtotal of income and expenses. Its numerator and denominator may be, and if either is an adjusted figure used in public communications, that figure is an MPM and needs its own disclosure and reconciliation. KPMG's May 2026 survey of bank reporting found 72 percent of banks presenting cost-to-income and classed it as requiring further assessment for exactly this reason.
Does IFRS 18 presume that a measure in a results announcement reflects management's view?
Yes. IFRS 18 contains a rebuttable presumption that a subtotal of income and expenses used in public communications outside the financial statements communicates management's view of an aspect of financial performance. An entity that wants to conclude otherwise needs evidence, for example that the measure is required by a regulator or a lender and is presented only for that purpose. The classifier treats a "no" on that question as a judgement to document rather than a clean exit.
Where does a bank classify interest on customer deposits under IFRS 18?
In the operating category. For a bank that provides financing to customers as a main business activity, interest on liabilities that relate to that activity is operating. Interest on other financing liabilities, such as wholesale funding or own debt securities that do not relate to customer financing, is subject to a one-time accounting policy choice between operating and financing, applied to the whole population; if the two cannot be distinguished, all of it is operating. Interest on liabilities that do not arise from raising finance, such as leases and pensions, is financing with no choice. A bank that chooses to classify all financing-liability interest as operating is not required to present the profit before financing and income taxes subtotal.
Need the full MPM inventory and the mapping?
Main business activity memorandum, the two policy choices, chart of accounts mapping, the MPM inventory from the last four results announcements, and restated 2026 comparatives.
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