IFRS 18 in SAP S/4HANA: Income Statement by Function with FS Versions and Drilldown Reporting

IFRS 18 replaces IAS 1 from 1 January 2027 and changes the structure of the income statement. This guide shows how to deliver it in SAP S/4HANA with a financial statement version and G/L drilldown reporting by functional area, based on a real implementation.

IFRS 18 at a glance

IFRS 18 Presentation and Disclosure in Financial Statements replaces IAS 1. The IASB issued it on 9 April 2024 and the European Union endorsed it with Commission Regulation (EU) 2026/338. It applies to annual reporting periods beginning on or after 1 January 2027, with earlier application permitted.

It applies retrospectively: the 2026 comparative must also be presented under IFRS 18. In practice, the 2026 figures are needed in two views, IAS 1 and IFRS 18, so the system must support both during the transition.

Impact on SAP S/4HANA

• Every income and expense item must map unambiguously to an IFRS 18 category. That means clean G/L accounts and correctly derived functional areas.
• The financial statement version (OB58) needs the new categories and subtotals, while the IAS 1 view stays available in parallel during the transition.
• Reporting must be adapted and the 2026 comparative restated.
• If the income statement is presented by function, the functional area becomes a first-class reporting dimension, and its derivation (cost centers, OKB9, substitutions) must be reliable.

Solution design

The target is an income statement in the IFRS 18 layout, by function, where every line can be broken down by functional area and G/L account. The solution uses four standard building blocks:

Why not F.01

F.01 reads the financial statement version but has no functional area column, and one cannot be added: the functional area only decides which item an amount lands in. To see the structure and the functional area as a characteristic, you need G/L drilldown reporting (FGI*).

SAP constraints to know before you start

• In OB58 an item can have either accounts or functional areas, not both. Assigned intervals cannot overlap and each functional area can sit in only one item, so a full functional area × nature matrix cannot be built in the FS version alone.
• In the FAGLFLEXT report type the Functional Area characteristic is not enabled for hierarchies or sets: GS01 sets are accepted neither in the report nor in the form rows.
• In the report, the FS version hierarchy comes through the Financial Statement Item characteristic (or FS Item/Account), not through FS Version.
• FS versions, sets, drilldown forms and reports, and roles are client-specific.

Financial statement version (OB58)

1. In OB58, create the IFRS 18 version by copying the current one, so balance sheet assignments are inherited.
2. In the general specifications, activate Functional area permitted. Without this flag, functional area assignments are ignored.
3. Check that the version uses the same chart of accounts as the company codes (OBY6).
4. Create the items and subtotals of the IFRS 18 layout.
5. On balance sheet items, assign account intervals; on cost-of-sales income statement items, assign functional areas.
6. Check that no P&L account is left in the “Not assigned” item, then save in a transport request.

Example IFRS 18 layout by function

Income statement
└─ Profit for the year
   ├─ Profit before taxes
   │  ├─ Profit before financing and income taxes
   │  │  ├─ Operating profit
   │  │  │  ├─ Gross profit
   │  │  │  │  ├─ Revenue
   │  │  │  │  └─ Cost of revenue
   │  │  │  ├─ Administrative expenses
   │  │  │  ├─ Selling and distribution
   │  │  │  ├─ Other operating expenses
   │  │  │  └─ Other operating income
   │  │  └─ Investing category
   │  └─ Financing category (finance costs)
   └─ Income tax expense

Each line is fed by one or more functional areas. Keep one logic in the primary statement: an item with a by-nature name but functional areas assigned makes totals hard to read. The by-nature breakdown under each function cannot be built in the FS version alone; in the report it comes from drilling down by G/L account.

Exporting and checking the structure

To share the structure, expand all items in OB58 and save the list as a spreadsheet. To analyse it, read the FS version tables in SE16N:

Execution, navigation and checks (FGI0)

1. In FGI0, open the folder for table FAGLFLEXT and run the report for company code, year and periods 1–16.
2. In the navigation panel, double-click Financial Statement Item and expand the income statement.
3. Select an item and double-click Functional Area for the breakdown by function, or G/L Account for the account detail.
4. To show functional areas in columns, swap rows and columns; then save the layout.

Checks on the result

• Not assigned under the structure: P&L accounts not assigned in the FS version, or functional areas missing from it.
• Not assigned under Functional Area: postings without a functional area, so check derivation (cost centers, OKB9, substitutions).
• Reconciliation: the income statement total must equal the net result in F.01 for the same version and period.
• Zero balance columns with debit totals filled: check which column represents the period and the year and periods selected.

Design decisions to take early

• Which functional areas feed the Investing and Financing categories, and whether new ones are needed (for example for income from investments or interest on financing).
• How to classify capital projects and other functional areas that do not fit the operating lines.
• Whether selling and administrative expenses can be separated with existing functional areas, or need a split by account.
• How to deliver the “nature under function” detail: account drilldown in SAP, or Group Reporting, SAP Analytics Cloud or a spreadsheet with an account-to-nature mapping.
• How to handle the share of results of joint ventures and associates, usually a consolidation entry rather than a company code posting.
• How to keep the IAS 1 version in parallel for the 2026 comparative, and when to retire it.
• Clean-up of test objects and the transport path of the final FS version, form and report.

The PDF also covers the drilldown form and report step by step, authorizations, export to Excel, a troubleshooting table and the list of transactions and tables.