Harun Kannan Rajagopal, Partner, Financial Accounting Advisory Services, Ernst & Young Consulting Sdn Bhd
MALAYSIAN companies have less than two years to prepare for one of the most significant changes to corporate reporting. Yet many chief financial officers and finance teams may not fully realise what’s coming.
From Jan 1, 2027, Malaysian Financial Reporting Standards (MFRS) 18 will replace the current accounting standard that governs how companies present their financial statements.
This isn’t just a technical accounting update. It will fundamentally change how companies communicate their financial performance to investors, analysts and stakeholders.
Why the change matters
The problem is straightforward: Investors cannot easily compare companies anymore.
Right now, a Malaysian bank, plantation group and manufacturer might all report “profit from operations”, but each calculates it differently. Companies use alternative measures like “normalised profit” in investor presentations without clear links to their audited financials. Important details get buried under vague line items like “other expenses”.
This flexibility was meant to reflect how different businesses operate. Instead, it has created confusion. It limits investors’ ability to compare performance across companies and undermines trust in reported results.
What’s changing? MFRS 18 introduces three major shifts.
First, companies must now classify all income and expenses into five clear categories: Operating, investing, financing, income tax and discontinued operations. Two new mandatory subtotals will become standard: “operating profit” and “profit before financing and income tax”.
Take a Malaysian bank. Its interest income will appear in the operating category because lending is its main business. But for a manufacturer, similar income would fall under investing activities. This distinction helps investors compare performance across different industries.
Second, companies that use non-generally accepted accounting principles measures (terms like “underlying profit” or “adjusted Ebitda” that often appear in investor presentations) must now disclose them in a dedicated note. These must be fully reconciled to official accounting figures. More importantly, auditors will now review these measures. This significantly increases their credibility.
Third, the standard tightens rules on how companies’ group and separate items. Companies can no longer bury impairment charges on property and equipment under “other expenses”. Material items must be separately disclosed.
The clock is ticking
January 2027 may seem far away. But transitioning to MFRS 18 will not be a simple systems update. Companies need to review their current financial statements structure against the new requirements.
Many will need to modify their systems and chart of accounts to capture data for the new categories. Finance teams and boards need training on the new subtotals and disclosure rules.
Perhaps most critical: Investor presentations, analyst packs and press releases will need to be reworked to align with the audited MFRS 18 measures.
Banks and lenders may need to renegotiate loan covenants tied to profit metrics that will be calculated differently.
Getting it right
MFRS 18 creates immediate challenges, yes. But it also offers Malaysian companies something valuable. Companies that prepare early and communicate clearly with investors will stand out as leaders in transparent reporting.
Clear, comparable financial statements will strengthen investor confidence. This matters especially as Malaysia competes for foreign capital in an increasingly selective global market.
The standard addresses real investor concerns that have built up over years. By delivering more structured, comparable financial information, MFRS 18 should help rebuild trust between companies and their stakeholders.
What should companies do now? Start with a gap analysis. Run pilot financial statements under the new format. Talk to your auditors and advisers about implementation challenges.
Companies that treat the MFRS 18 as merely a compliance box-ticking exercise will find themselves rushing in 2026 and 2027. Those who see it as a chance to improve how they communicate financially will be better positioned when the standard takes effect.
The question isn’t whether this change is coming. It’s whether your company will be ready.
Harun Kannan Rajagopal is partner, financial accounting advisory services of Ernst & Young Consulting Sdn Bhd. The views expressed here are the writer’s own.
