Changes in accounting regulations in Costa Rica

By Angie Navas

IFRS 18, "Presentation and Disclosure in Financial Statements," was issued in April 2024 by the IASB. According to the issuing body, this standard will provide investors with more comparable information about companies' financial performance. It replaces the current IAS 1 and will be effective for financial periods beginning on or after January 1, 2027 (early adoption is permitted). IFRS 18 introduces new structural criteria for financial statements—particularly the income statement—to improve consistency in presentation and the basis for analysis across companies.

Main accounting and presentation changes

IFRS 18 redefines the structure of the income statement and the associated disclosures. The income statement requires three fixed categories of income and expenses (operating, investing, and financing) and the presentation of defined subtotals, such as operating profit or loss. This means that all companies must report uniformly, for example, operating profit and profit before financing and income tax, facilitating comparability across sectors. Furthermore, the standard requires explanations of management-defined performance measures—that is, any non-normative subtotals that the company uses internally to communicate its performance—disclosing their calculation and their relationship to official financial results. According to IFRS 18, these alternative measures add value but must be documented transparently: if the financial statements are audited, the management-defined measures will also be subject to audit. Finally, IFRS 18 provides more detailed guidelines for grouping and disaggregating information in the primary financial statements (balance sheet, income, cash flows) and notes, defining what should appear in each section. Together, these changes seek to standardize criteria (for example, banks and insurers will reclassify certain operating income/expenses consistently), improving the transparency and comparative basis of financial reporting.

Obliged companies: SMEs versus large companies

IFRS 18 will affect all companies that use the full IFRS. In Costa Rica, this primarily includes entities with public accountability (stock markets, banks, insurance companies, etc.), as well as large companies supervised by Conassif and classified as large taxpayers. These organizations must adopt IFRS 18 starting in 2027 (or voluntarily earlier), adjusting their financial statements to the new format. However, small and medium-sized companies reporting under the IFRS for SMEs (simplified framework) are not directly required to apply IFRS 18, as it is part of the full standards. In fact, IFRS for SMEs was updated in 2025 (3rd edition) and will also be effective from January 2027, but it does not incorporate the subtotals or additional requirements of IFRS 18. In practice, Costa Rican SMEs will continue reporting as before (according to IFRS for SMEs or local tax regulations) unless they choose to voluntarily adopt full IFRS.

Practical implications for taxpayers

The implementation of IFRS 18 requires early preparation. The IASB warns that implementation costs and presentation changes will depend on each company's current practices and IT systems. Therefore, companies must review their accounting policies, update their charts of accounts, and adapt their reporting software to generate the new mandatory subtotals and formats. It is also essential to train accounting and finance staff on the new requirements, so it is recommended to begin these adjustments early. In particular, companies must carefully document the calculation criteria for the new subtotals and the defined performance measures, since these items, when disclosed, will be subject to the same verification by external auditors. In short, the entry into force of IFRS 18 requires Costa Rican companies to prepare early: review internal policies, modernize accounting systems, train their teams, and coordinate with their auditors to ensure that their financial statements comply with the new standards from the first report.

Comparison of IAS 1 vs. IFRS 18: Income Statement

IFRS 18, which will come into force in 2027, will replace IAS 1 and introduces for the first time defined income/expense categories—Operating, Investing, and Financing—with two mandatory subtotals (operating profit or loss and profit before financing and tax). Under the current IAS 1, the income statement did not have a fixed structure; each company presented its subtotals (as EBITDA or EBIT) according to its internal criteria. Below is a comparison of how the main items of a hotel example would appear (income from accommodation, restaurant, and services; administrative expenses and depreciation; bank interest; financial gains) under each scheme:

Departure	IAS 1 (current structure)	IFRS 18 (new structure)
Operating income (accommodation, restaurant, other services)	They are recorded as ordinary hotel income, presented by type of service or expense function (by nature or function), with no predefined category.	They are assigned to the Operations category (the hotel's main activity). They contribute to the Operating Income subtotal.
Operating expenses (administrative, depreciation)	They are included in total operating expenses (by function or nature), with no mandatory separate subtotal.	They are included in Operating Expenses (core business expenses). They are part of the Operating Income subtotal.
Operating result (EBIT)	It is not mandatory to submit it; some companies display it unofficially as a subtotal for internal analysis.	Mandatory subtotal that groups all income and expenses classified as Operations.
Investment income/expenses (e.g., gains on financial instruments)	They are recorded as financial income or expenses in comprehensive income, without a special category.	They are assigned to the Investment category (including income from investments in associates, investment properties, financial instruments, etc.). They affect the subtotal Earnings before Financing and Taxes.
Earnings before financing and taxes	It is not explicitly presented as subtotals in IAS1 (equivalent to adding Operation + Investment).	Mandatory subtotal (sum of Operation and Investment) before considering Financing.
Financial expenses (interest on bank debt)	They are recorded as net financial expenses at the end of the income statement, after operating income.	They are included in the Financing category (general debt costs, such as bank loans). They affect the profit after the profit before financing.
Net result for the year	Final result after deducting taxes (same structure as in NIC1).	Final result after taxes (the calculation format itself does not change).

Structural differences summarized: IFRS 18 requires each item to be classified as Operating, Investing, or Financing; it also requires clear subtotals for operating income and earnings before financing and taxes. IAS 1 did not have such requirements, which provided flexibility in presentation but made comparisons between companies difficult. These changes will require Costa Rican companies to adapt their financial statements to reflect the new standardized categories and subtotals of IFRS 18.

Sources: Official IASB information on IFRS 18.