Operating profit under IFRS 18 the mistakes that will cost marks

Why operating profit has become a bigger deal in SBR

IFRS 18 changes how companies present performance in the statement of profit or loss. The headline is simple. Operating profit becomes a defined subtotal. Income and expenses must sit in clearer categories. Management can still talk about performance in its own way, but it must do so with disciplined reconciliations and clear explanations.

For SBR ACCA, this matters because exam questions love anything that tests judgement and communication. Presentation changes are perfect for that. You can know the technical rules and still lose marks if your answer is vague, badly structured, or full of made up subtotals.

This post shows the operating profit mistakes that cost marks, and how to write answers that stay calm, clear, and marker friendly. If you want a wider base plan for acca exam success, including how to practise and how to use feedback, start with this ACCA exam success guide.

What IFRS 18 is trying to fix

Investors have long complained that profit or loss statements are hard to compare. Some companies present “operating profit” one way. Others strip out items they dislike. Some include investment gains. Some hide financing costs inside operating. Many present an “adjusted operating profit” without a clear bridge back to IFRS numbers.

IFRS 18 aims to reduce that noise. It does this by:

• defining categories such as operating, investing, and financing
• defining key subtotals, including operating profit
• improving disclosure for management-defined performance measures
• pushing companies to disaggregate large lines where it helps users understand performance

Your exam answers should reflect that purpose. When you show the marker you understand what the standard is trying to achieve, your advice sounds realistic.

The operating profit mindset that scores in SBR

A strong SBR answer does not start with a long explanation of the standard. It starts with the requirement and the scenario.

Use this simple frame again and again:

Issue – Rule – Apply – Conclude

Keep each part short. Two lines for the rule is usually enough. The rest is application and conclusion.

This approach works in technical areas too. It works for IFRS 11 classification. It works for derivative accounting. It works for derivative hedge accounting. It also works for current issues topics like Pillar Two narratives and sustainability reporting. The skill is the same. You write to the point, you apply, you conclude.

The mistakes that cost marks

Candidates lose marks on IFRS 18 operating profit for the same reasons they lose marks elsewhere. They either invent a rule, ignore the definitions, or hide behind vague language.

Below are the most common mistakes. Read them as a checklist you can apply to your own scripts.

Mistake 1 inventing your own operating profit

Some candidates treat operating profit as “profit before interest and tax” or “profit from the main business, excluding one-offs.” That is not the point under IFRS 18.

Operating profit becomes a defined subtotal. You cannot decide that a cost is “non-operating” simply because it is awkward. If it is part of operating activities under the standard’s definitions, it belongs in the operating category and affects operating profit.

How to fix it in your answer
State that operating profit follows the standard’s definitions. Then show the reclassification that must happen in the scenario. Finish with a clear conclusion about the subtotal presented.

Mistake 2 misclassifying financing items as operating

This one is common because many companies have built habits under older presentation styles. The question might mention lease interest, other interest, or foreign exchange items linked to financing.

How to fix it in your answer
Identify the nature of the item. Explain why it belongs in financing. State the effect on operating profit.

This is also where you can show judgement if the scenario includes hedging. If a hedge is used to manage forecast purchases, your narrative may link to cost of sales. If it is a financing hedge, classification may differ. Keep it short and applied.

Mistake 3 treating investing gains as operating performance

Gains on sale of property, proceeds from selling investments, or fair value movements on investment assets often appear in questions. Candidates sometimes leave them in operating profit because “management sees them as part of performance.”

IFRS 18 aims to stop that kind of inconsistency.

How to fix it in your answer
Classify the gain as investing where that fits the definitions and the entity’s business model. Explain the effect on operating profit and the benefit for comparability.

Mistake 4 using adjusted operating profit as a substitute for IFRS subtotals

Management often presents an adjusted profit measure. Under IFRS 18, this becomes more controlled. If management-defined performance measures are used, they must be explained and reconciled.

The common exam mistake is to treat the adjusted number as the main subtotal and forget the reconciliation.

How to fix it in your answer
State that the IFRS operating profit subtotal must be presented as defined. Then state that any adjusted measure is an MDPM and must be reconciled and explained. Conclude with what management can still do, but in a disciplined way.

Mistake 5 calling routine costs unusual

IFRS 18 pushes clearer disclosure of unusual items. Candidates often label anything messy as unusual. That can be misleading.

If stock write-downs happen every year, they are not unusual. If a restructuring happens every year, it may be a recurring feature of the business.

How to fix it in your answer
Use plain language. Describe the item. Explain why it is unusual in nature or frequency. If it is routine, say so and advise against presenting it as unusual.

Mistake 6 ignoring disaggregation

IFRS 18 encourages disaggregation when it improves understanding. Exam questions may give you a single large line such as “other expenses” or “cost of sales” and ask how to improve clarity.

The trap is to propose a long list of tiny lines that adds no insight. The other trap is to ignore disaggregation entirely.

How to fix it in your answer
Suggest a simple split that reflects what users need to know. Keep it to a few meaningful components.

Mistake 7 failing to link narrative to numbers

SBR rewards connectivity. If the company plans to change operating profit presentation, that affects board reporting, analyst messages, and any performance targets.

Candidates often reclassify items but forget to explain the story. The result is a technically correct paragraph with weak professional marks.

How to fix it in your answer
Add one line that links the reclassification to comparability and investor understanding. Keep it calm and direct.

Mistake 8 writing too much theory under time pressure

Even if you know IFRS 18 well, long theory costs time and marks. The marker does not need a lecture. The marker needs applied points that answer the requirement.

How to fix it in your answer
Write two lines of rule, then apply. Conclude. Move on.

This time discipline is also what helps candidates who ask “how difficult is passing ACCA.” Many failures come from unfinished scripts, not lack of knowledge.

How to write an exam-ready operating profit paragraph

Here is a clean model you can adapt. It is short by design.

Issue
The company’s operating profit subtotal excludes certain costs and includes gains that are not operating in nature.

Rule
Under IFRS 18, operating profit is a defined subtotal based on category definitions. Items classified as investing or financing sit outside operating profit. Any management-defined performance measures must be reconciled to IFRS subtotals.

Apply
Reclassify lease interest and other finance costs to the financing category. Present gains on sale of investment property or financial assets within investing. Keep core operating costs within operating even if management sees them as one-off, unless the standard’s definitions place them elsewhere.

Conclude
Present a compliant operating profit subtotal, then present any adjusted measure as an MDPM with a clear reconciliation and explanation.

That is enough for a 6 to 8 mark requirement if it is applied to the facts well.

A short worked example that links to other syllabus areas

Example scenario

A manufacturer reports operating profit excluding foreign exchange losses on a dollar loan and excluding restructuring costs. It also includes a gain on sale of surplus land. Management also reports an adjusted operating profit excluding the restructuring costs and the gain, and it uses this adjusted figure in bonus targets.

How to answer

Start with classification. Dollar loan FX and interest are typically financing in nature. Gain on sale of surplus land is usually investing. Restructuring costs may still be operating if they arise from operating decisions within the business. Do not treat them as non-operating just because they are unpleasant.

Then deal with the adjusted measure. If management insists on an adjusted operating profit, treat it as an MDPM. Reconcile it to IFRS operating profit. Explain why the measure is used and make sure it does not mislead.

Finally, add one line on disclosure. If the restructuring is genuinely unusual, explain nature and effect. If it is recurring, avoid calling it unusual.

You have now integrated:

• presentation and disclosure
• professional marks
• governance around performance measures
• and the discipline of applied writing

This is the kind of integrated approach that lifts SBR ACCA scripts.

What to do if the question includes hedging

Questions may include hedging because it creates movement between reserves and profit or loss and affects how users understand performance.

If the case includes a cash flow hedge of a forecast purchase, you can use one short applied sentence that shows you understand the mechanics:

• effective hedge gains or losses go to OCI
• they are released when the hedged item affects profit or loss
• if it relates to inventory, the amount may be included in the initial cost of inventory and then in cost of sales when sold

That is enough. You do not need a full hedge accounting lecture. If you want to practise, write a simple commodity hedge accounting example and keep it to eight lines. That is how you keep derivative hedge accounting under control in the exam.

The most reliable way to practise IFRS 18 for SBR

The fastest improvement comes from strict practice, not more reading.

Use a three-part loop:

1. Timed attempt using ACCA sample exams
2. Mark and identify one weak paragraph
3. Rewrite that paragraph using Issue – Rule – Apply – Conclude

Repeat twice a week. This approach helps first-time sitters and those on ACCA resit exams. It also reduces stress because you can see what to fix.

If you want structured deadlines and marking as part of the loop, you can use a timetable built around an ACCA SBR course. A course is useful when it forces regular submissions and provides clear feedback on your writing.

Choosing support when IFRS 18 changes the exam conversation

Some candidates want to self-study. Some want guidance. Either is fine, but be honest about what you need.

If you regularly drift, you may benefit from ACCA tutoring. If you struggle to mark your own work, you may benefit from an ACCA tutor online who marks scripts and gives practical rewrites. If you prefer face to face, ACCA tuition near me may feel more comfortable, but it costs travel time.

The key is not the label. It is the feedback quality.

If you are searching for best ACCA tutors or best ACCA SBR tutor, ask this one question: can they show you how to improve a weak paragraph in a simple way.

That is what changes your score.

The exam-centre reality and why it matters for IFRS 18 questions

Presentation questions can feel easy, so candidates spend too long on them. In an exam centre, that time loss can cost you later marks.

Treat IFRS 18 questions like any other:

• write a short rule
• apply it
• conclude
• move on

This habit is part of passing ACCA exams. It also supports staying motivated during ACCA exams because you avoid the spiral of “I am behind” halfway through the paper.

A short self-marking checklist

After any IFRS 18 practice answer, ask yourself:

• Did I state that operating profit is defined, not personal preference
• Did I classify items using operating, investing, and financing categories
• Did I address any adjusted measure as an MDPM with reconciliation
• Did I add one line of connectivity or governance where relevant
• Did I conclude clearly

If you can tick those, your answer is in good shape.

Common candidate questions answered in plain English

Will IFRS 18 change recognition or measurement

The main impact is presentation and disclosure. The numbers may not change, but where they appear and how they are explained can change. That is why operating profit becomes a battleground in questions.

Does this make SBR harder

It makes the paper more realistic. The skill set is the same. Apply the rule, write clearly, manage time. If you already practise with ACCA exams questions and answers and you finish your timed sets, you will cope well.

What if I am resitting and feel behind

Do not start again from zero. Take a mock, identify three issues, and fix them with rewrites. Most resit gains come from better execution, not more notes.

One bullet list you can keep by your desk

Use this as your operating profit quick check in every practice session:

• Operating profit is a defined subtotal, not a personal adjustment
• Classify items into operating, investing, and financing based on definitions
• Do not hide adjustments inside relabelled IFRS subtotals
• Treat adjusted measures as MDPMs with reconciliations and clear explanations
• Use unusual item disclosure carefully and avoid calling routine costs unusual
• Disaggregate only where it improves understanding
• Add one line that links the presentation choice to user understanding
• Conclude and move on when time ends

That list is short for a reason. It protects time and marks.

A final calm plan for the next two weeks

If you want a simple plan that fits around work:

• Two strict timed IFRS 18 questions per week
• Two short paragraph rewrites per week
• One full question under exam timing each weekend
• One lean note page covering categories, operating profit, and MDPM reconciliations

This routine is enough to shift your scripts in a short period. It works whether you study alone, use online ACCA tuition, join an ACCA revision class, or work with an ACCA private tutor. The method stays the same.

If you want the structure done for you, use the ACCA SBR course route and commit to regular submissions and feedback.

Closing thought

Operating profit under IFRS 18 is not hard because the rules are complex. It is hard because candidates drift into vague language and invented subtotals under time pressure. Fix that and the marks come more easily.

Keep answers short. Classify correctly. Reconcile any adjusted measure. Add a line of connectivity. Conclude. Move on.

That is how you avoid the IFRS 18 mistakes that cost marks, and how you write SBR ACCA scripts that look confident in an exam hall.