March 2026 Articles - Suits the C-Suite

30 March 2026

Rossana A. Fajardo

The SGV journey toward inclusive leadership and empowerment

In brief:SGV & Co. advances women leaders through a strong meritocratic culture, resulting in a leadership bench where women have actively helped shape the Firm’s direction.The Firm’s efforts highlight that inclusiveness is vital for a thriving future, demonstrated through impactful initiatives empowering women and girls in historically underrepresented areas.Equally vital to the ongoing journey towards equity are the male allies and supporters whose shared goals and mutual respect strengthen and amplify these efforts.“For the women leaders who have risen through the Firm’s ranks, and for those who will follow, the message is clear: capability remains the currency of advancement."In an industry where leadership development and career pathing have traditionally been narrow, SGV & Co. has built something more enduring and increasingly relevant. The Firm has long treated meritocracy as an operating principle. The result is a leadership bench where women have advanced and actively help shape its direction.This International Women’s Month, we celebrate the women honored as leaders and changemakers, exemplifying power that nurtures, uplifts, and transforms lives with grace and purpose. Their leadership guards legacies and guides future generations with courage and compassion, built on a foundation of meritocracy that SGV has always upheld.Women setting the paceSGV’s record on women leadership was built over decades by individuals who navigated, and often remodeled, the structural barriers of their time. Erlinda T. Villanueva’s appointment as SGV’s first female partner in 1961 signaled a shift that would resonate for decades. It demonstrated that advancement within the firm was anchored in performance, not precedent. The rise of Gloria L. Tan-Climaco to become the firm’s first woman Chair and Managing Partner marked a defining moment. Her recognition as both a Young Lady Achiever in Public Accounting and an Outstanding CPA in Public Accounting from the Philippine Institute of Certified Public Accountants reflected a career grounded in technical excellence and credibility. Her subsequent role advising former President Gloria Macapagal Arroyo on strategic initiatives underscored the broader influence SGV leaders would wield. SGV Senior Consultant Delia Domingo Albert followed a similarly expansive path. As former Secretary of Foreign Affairs and Philippine Ambassador, she brought institutional discipline to the global stage. Her tenure included serving as chair of the United Nations Security Council in 2004, where she championed the role of women in peacebuilding. Her career has since become a template for leadership that crosses sectors while consistently advocating gender equity. These women leaders did more than succeed individually. They embodied the values of integrity and excellence that the Firm’s founder, Washington SyCip, built the firm upon. Today, women make up the majority of SGV’s workforce and more than half of its Partners and Principals. Meritocracy by designAt SGV, meritocracy is part of the organizational infrastructure. From recruitment to promotion, the firm has relied on performance metrics, technical proficiency, and leadership potential as its primary filters. Advancement is neither automatic nor arbitrary.This philosophy is reinforced through deliberate investments in mentorship and professional development. Programs ensure that high-potential employees, regardless of gender, gain access to sponsors, stretch assignments, and leadership exposure. Over time, this has produced a steady influx of women leaders who are not only qualified but also well-suited for the positions.The result is an organizational culture that is both competitive and collaborative. Individuals are encouraged to excel and contribute to the firm’s collective strength. For women professionals steering through a historically male-dominated industry, this environment has been significantly influential.Impactful initiatives to empower and upliftThe Firm takes pride in the progress it has made in its ongoing journey toward equity. Its efforts serve to underscore that inclusiveness is essential to shaping a future where everyone can thrive. These efforts include a range of impactful initiatives designed to empower and uplift women and girls, particularly in areas where they have been historically underrepresented.One such initiative is the EY STEM Program, which equips girls aged 13 to 18 with future-ready STEM skills through a free, gamified app. This innovative approach builds confidence and curiosity in science and technology, engaging 600 students during its first local launch at one high school. The program has inspired many young Filipinas to explore STEM fields and is set to expand its reach in 2026 through a new memorandum of agreement with the school’s LGU. This expansion aims to bring STEM opportunities to more public schools, empowering even more young women to pursue careers in science and technology.Complementing this is the EY Women in Tech (WiT) program, which SGV participates in as a member firm of EY. This global initiative was established by EY in 2020 to empower girls and women to enter, remain, and lead in the technology sector. Serving as an umbrella network of over 40 regional and competency-based WiT communities across the EY network, the program connects members, shares best practices, and fosters a strong sense of community. Open to everyone regardless of gender, rank, or professional background, WiT encourages participation in both global and local events that promote learning, inclusiveness, and career growth within the technology space.Further strengthening SGV’s commitment to gender equality is the Gender Equality Assessment, Results, and Strategies (GEARS) Program. Building on the Firm’s distinction as the first professional services firm in the Philippines and Southeast Asia to receive the EDGE Assess-level certification, GEARS enables the Firm to measure its progress and continuously enhance gender equality in the workplace. This program reflects the Firm’s dedication to creating an equitable environment where all employees can thrive.Together, these initiatives highlight the Firm’s holistic approach to inclusiveness, ensuring that equity is not just an aspiration but a lived reality for women and girls across all levels and sectors.A pragmatic blueprint for leadersThe SGV model offers a pragmatic blueprint for business leaders. While essential, meritocracy is not sufficient on its own. Without conscious efforts to eliminate systemic barriers, organizations risk underutilizing significant portions of their talent pool.Embedding inclusiveness into leadership training is a critical first step. Bias, often subtle and unintentional, can accumulate into structural disadvantage if unchecked. Equally important is cultivating mentorship and sponsorship networks. At SGV, these have been instrumental in bridging the gap between potential and opportunity, especially for younger professionals. Transparency plays a pivotal role as well. Setting clear diversity targets and holding leadership accountable ensures that progress is visible and sustained.Finally, flexibility should be viewed as part of the policy, and not just a perk. In a global talent market, accommodating diverse needs can be a decisive differentiator.Collaboration across all gendersAs SGV celebrates its 80th anniversary, it is important to see the bigger picture: SGV’s story is ultimately one of continuity. The firm’s early commitment to meritocracy laid the foundation for a leadership culture that could evolve without losing its identity. Today, SGV is extending that legacy into a more complex and demanding era, shaping it in its own image. For the women leaders who have risen through the Firm’s ranks, and for those who will follow, the message is clear: capability remains the currency of advancement. In a system that increasingly values inclusiveness, that currency now circulates more freely. In celebrating International Women's Month, it is important to recognize that true progress toward equity and empowerment is achieved through collaboration across all genders. Equally vital to this journey are the male allies and supporters whose shared goals and mutual respect strengthen and amplify these efforts. Together, women and men stand united, building a brighter, more inclusive future. This collective commitment ensures that the impact made today will inspire lasting positive change for generations to come.Rossana A. Fajardo is the Chairman and Country Managing Partner of SGV & Co.This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.

17 March 2026

Noel P. Rabaja and Christine Rose L. Lapada

The Next Move: Reshaping strategy through AI

In brief:Philippine CEOs are advancing transformation agendas to sustain growth and competitiveness in a rapidly digitalizing market.AI and digital technologies are becoming central to strategic decision‑making as leaders recalibrate investments amid global shiftsGovernance, capability building, and strategic transactions are emerging as critical levers for CEOs preparing for the next phase of enterprise reinvention.“As AI becomes increasingly central to strategy, one message is clear: the next phase of growth will belong to companies that embed AI at the core of their business, enabling not only operational efficiency but enterprise‑wide reinvention."Philippine CEOs are entering the next phase of transformation with a clearer mandate: to convert measured optimism into decisive, capability‑building action. As digital acceleration and geopolitical shifts redefine the competitive landscape, leaders are anchoring their strategies on modernization, strengthened governance, organizational resilience, and AI‑driven reinvention. At the same time, they are leveraging strategic transactions to reshape portfolios, reinforce competitive positioning, and unlock new avenues for sustainable growth.The first part of this article discussed how Philippine CEOs face a complex economic and technological landscape marked by measured optimism amid global uncertainty, with AI readiness emerging as a critical priority for competitive advantage and growth.The second part of this article will discuss how Philippine CEOs are advancing transformation agendas focused on modernization, AI integration, governance, and strategic transactions to sustain growth and competitiveness amid a rapidly digitalizing and geopolitically shifting market.Transformation intensifies as CEOs pursue growthPhilippine CEOs are accelerating their transformation agendas in 2026 as they work to sustain growth in an increasingly digitalized market. Revenue growth remains their top priority, with 65% placing top‑line acceleration at the core of their strategic agenda.At the same time, CEOs maintain a balanced mix of ambition and measured optimism, showing strong confidence in their competitive positioning as they invest in digital tools, deepen customer engagement, and strengthen workforce capabilities. This momentum carries into their operational focus. Although operational optimization ranks as the second‑highest priority at 53%, only one‑third of CEOs are very confident in fully achieving this goal — underscoring the inherent complexity of transforming processes, improving efficiency, and integrating new technologies at scale.This more cautious sentiment around operational transformation contrasts with the stronger confidence CEOs express in people‑ and customer‑centric outcomes. A notable 75% are very confident in improving employee engagement and retention, while 66% report the same level of confidence in strengthening customer engagement. These perspectives reinforce a consistent theme: people and customer experience remain foundational to long‑term competitiveness, even as organizations push forward with broader enterprise transformation.As organizations lean more heavily on technology to enable these ambitions, the growing role of AI introduces both new possibilities and new pressures. Yet despite AI’s rising strategic importance, execution challenges continue to temper expectations. A net 46% of CEOs currently view AI outcomes unfavorably, reflecting a persistent gap between ambition and realized value. Additionally, 28% cite the rapid pace of technological change as a key barrier to effective integration and long‑term sustainability. Still, momentum is building. Despite the implementation hurdles many CEOs face, the survey shows that leaders continue to view AI as a critical driver of business success in the years ahead. Nearly half of CEOs have already implemented significant transformation initiatives, and their expectations for AI’s impact further reinforce this momentum: 12% anticipate AI to be truly transformative, and 42% expect it to deliver significant improvements across their organizations. As AI becomes increasingly central to strategy, one message is clear: the next phase of growth will belong to companies that embed AI at the core of their business, enabling not only operational efficiency but enterprise‑wide reinvention. This growing momentum reflects the measured optimism taking shape in Philippine boardrooms—confidence grounded not in assumption, but in deliberate, forward‑looking action.CEOs recalibrate investment amid geopolitical shiftsGeopolitical and trade policy developments have prompted Philippine CEOs to recalibrate their investment strategies. Over the past year, many leaders adjusted their plans — 42% accelerated a planned investment in response to global shifts, while others delayed or halted initiatives as part of a disciplined reassessment. Rather than pull back, CEOs repositioned by relocating operational assets, shifting suppliers, entering new markets, or exiting unviable ones, underscoring a deliberate effort to reinforce resilience while protecting growth momentum.CEOs are now prioritizing levers they can directly influence, with 32% identifying AI and digital technologies as their most important strategic response — well ahead of supply‑chain diversification or market realignment. By contrast, engaging policymakers registered a –16% net importance, signaling a preference for internally driven, high‑impact actions.Governance strengthens as AI adoption acceleratesAs AI adoption deepens, governance is becoming a central priority for Philippine CEOs. As much as 68% now report clear C‑suite or board‑level accountability for AI outcomes, signaling a shift toward stronger oversight, clearer ethical guardrails, and enterprise‑wide alignment. Leaders increasingly recognize that AI is not simply a technological upgrade; it is a strategic capability requiring transparency, responsible design, and disciplined execution.Expectations for AI’s impact vary, but momentum is evident. 54% of CEOs anticipate that AI will drive major improvements and become a key determinant of business success, while 22% expect benefits limited to specific functions and another 22% foresee only incremental gains. These differing views highlight a leadership climate that is optimistic but pragmatic — pursuing AI’s potential while carefully managing capability readiness, risk, and pace of change.Philippine CEOs use strategic transactions to strengthen positioningStrategic transactions are gaining importance as CEOs reshape portfolios and pursue new pathways for value creation. More than half at 54% plan to actively pursue deals in the next year, with 34% specifically considering mergers, acquisitions, or strategic partnerships. Leaders are placing strong emphasis on operational optimization within their acquisition and divestment strategies, underscoring a disciplined approach to strengthening enterprise performance.Among CEOs actively evaluating opportunities, 65% expect acquisition activity to accelerate revenue growth, reflecting the role of M&A in reinforcing growth and productivity. Cost optimization remains a dominant theme, with 70% identifying cost reduction as essential to competitiveness. Confidence in the domestic market is also firm, as 72% of CEOs plan to invest capital in the Philippines — reinforcing the cautiously optimistic sentiment shaping strategic decisions across the business community.AI at the center of enterprise strategyAs CEOs look to 2026, their strategies reflect a renewed sense of purpose grounded in the same measured optimism shaping the broader Philippine business landscape. Leaders are sharpening priorities, accelerating modernization, and elevating governance as they navigate a rapidly evolving environment. AI and digital capabilities have shifted from promising enablers to core strategic drivers — reshaping how organizations invest, compete, and grow.The next move for Philippine CEOs is unmistakable: modernize systems, build future‑ready talent, and embed AI at the center of enterprise strategy. Those who act decisively today will not only chart the next phase of their organization’s growth — they will help define the direction and competitive strength of Philippine enterprise in the years ahead.Noel P. Rabaja is the Deputy Managing Partner, Strategy and Transactions Leader, and Markets Leader, and Christine Rose L. Lapada is a Strategy and Transactions Associate Director, both of SGV & Co.This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the authors and do not necessarily represent the views of SGV & Co

16 March 2026

Noel P. Rabaja and Christine Rose L. Lapada

The Next Move: Reshaping strategy through AI

In brief:Measured optimism defines 2026 as CEOs balance domestic confidence with global uncertainty and rising cost pressures.AI readiness becomes the decisive priority, with national assessments highlighting both urgency and opportunity for Philippine enterprises.The advantage goes to the prepared enterprises that upgrade systems, invest in skills, and build digital strength to lead the next wave of growth.“AI readiness is no longer optional — it is the defining advantage for Philippine enterprises in 2026, and it is rapidly becoming the differentiator that sets industry leaders apart."With 2026 reshaping competitive realities at unprecedented speed, Philippine CEOs face a strategic landscape where decisions carry amplified impact. Insights from the Philippine edition of the 2026 CEO Outlook Pulse Survey, gathered from CEOs across the country’s major sectors, reveal how enterprises are rebalancing portfolios, accelerating AI integration, and strengthening resilience amid ongoing uncertainty. In today’s NAVI world, where change is nonlinear, accelerated, volatile and interconnected, these insights offer Philippine business leaders a sharp lens into how organizations are adapting to rapid and interconnected change. AI readiness is no longer optional — it is the defining advantage for Philippine enterprises in 2026, and it is rapidly becoming the differentiator that sets industry leaders apart.Economic pressures reshaping CEO prioritiesPhilippine CEOs enter 2026 facing economic pressures that mirror those of the previous year, now intensified by geopolitical dynamics and accelerating technological change. The World Uncertainty Index indicates that global uncertainty remains elevated due to persistent geopolitical tensions and volatile trade policies—conditions that continue to affect cost structures, capital allocation, and long‑term planning. Domestically, concerns around fiscal governance persist, weighing on investor confidence and contributing to a more cautious business outlook.These combined forces have shaped the country’s recent economic performance. Philippine GDP slowed from 5.7% in 2024 to 4.4% in 2025, falling short of the government’s minimum target of 5.5%, as noted in the Development Budget Coordination Committee’s review of medium‑term macroeconomic assumptions. Meanwhile, the Bangko Sentral ng Pilipinas, in its February 2026 briefing, projected a modest recovery to 4.6% in 2026 and 5.9% in 2027 — projections that hinge on strengthened governance and renewed investor trust.While the macroeconomic environment remains constrained, the technology landscape is advancing at a pace that demands CEO‑level attention. Global competition is accelerating investment in artificial intelligence (AI), creating meaningful openings for economies that modernize quickly — and exposing vulnerabilities in those that lag.AI readiness and structural gapsThe 2025 UNESCO AI Readiness Assessment Report notes that the Philippines has made real progress in building responsible, ethics‑driven AI governance. Yet the same assessment underscores structural gaps that now carry strategic consequences: weaknesses in digital infrastructure, limited R&D investment, siloed policymaking, inconsistent public–private collaboration, and shortages in critical technology skills. As AI becomes a core driver of competitiveness, these gaps must be addressed with urgency.Reinforcing this, the 2025 Government AI Readiness Index by Oxford Insights ranks the Philippines 43rd among 195 economies, reflecting improved policy direction, governance, and public‑sector readiness. For enterprise leaders, this signals that government has largely set the foundation; the real challenge now lies in execution, specifically, scaling AI with speed, discipline, and measurable business outcomes.One of the speakers at the 2026 Philippine CEO Outlook event from the Asian Development Bank underscored the scale of the country’s AI opportunity. Citing Public First’s Turbocharging Growth: The Philippines’ AI Opportunity, they highlighted that today’s AI technologies could significantly augment roughly 37% of Filipino workers, driving substantial productivity gains and enabling higher incomes. The message to CEOs is direct: AI is no longer merely an operational enhancement — it is a national productivity catalyst.Global insights further reinforce the urgency of enterprise‑level action. The World Economic Forum’s Future of Jobs Report 2025 identifies AI and information technologies as the strongest forces reshaping business models worldwide, while Microsoft’s Work Trend Index 2025 notes that although awareness of AI is rising, many organizations remain underprepared for transformation at scale.This readiness gap is even more pronounced in the Philippines. The Philippine Institute for Development Studies (PIDS), in its 2024 study Readiness for AI Adoption of Philippine Business and Industry, found that only 14.9% of local firms are currently using AI, with adoption concentrated among digitally mature ICT and BPO organizations. PIDS emphasized that industry‑wide AI uptake continues to be limited by infrastructure gaps, low levels of awareness, constrained investment capacity, and widespread shortages in critical digital skills. The study also cited the Salesforce Asia Pacific AI Readiness Index, where the Philippines scored 25.4 out of 100 in Business AI Readiness — ranking 10th out of 12 economies, well behind regional leaders such as Singapore, China, and South Korea.This signals a substantial opportunity for Philippine enterprises to accelerate AI capability and strengthen their competitive position in the region. As highlighted by the Global Consulting Markets Leader at Ernst & Young during the 2026 Philippine CEO Outlook event, AI offers a genuine productivity leapfrog opportunity for companies that act decisively. He underscored that realizing this potential will depend on CEOs modernizing legacy systems and rethinking enterprise capabilities to overcome entrenched barriers that hinder transformation.Philippine CEOs enter 2026 with measured optimismThe CEO Outlook Pulse Survey shows that Philippine business leaders enter 2026 with measured optimism. While 48% express net optimism about business prospects, sentiment remains nuanced. Leaders retain confidence in domestic and sector‑specific performance yet remain cautious about global conditions and persistent cost pressures. The 2026 CEO Confidence Index registered a score of 59, down from 74 the previous year — a reflection of sourcing challenges, rising operational costs, and continuing uncertainty. Even with this softer sentiment, CEOs still anticipate improvements across key metrics: 64% expect revenue growth, 54% foresee stronger profitability, and 64% project productivity gains, with 26% pointing to meaningful efficiency improvements.Executives remain confident but deliberate in capital deployment. Net optimism of 46% for revenue, 42% for competitiveness, and 36% for investment in existing operations signals a clear emphasis on strengthening core capabilities. Expansion plans, technology investments, and R&D spending are being paced with greater discipline, shaped by pressures around input costs, limited cost‑through mechanisms, and tighter cash flow.Cost pressures continue to loom large, with 42% of CEOs expecting operating expenses to rise due to supply‑chain disruptions, higher input prices, and labor market tightening. Leaders are accelerating efficiency, digital adoption, and reskilling to manage cost pressures and reinforce organizational resilience.Clear-sighted and transformative leadershipThis direction aligns with the International Monetary Fund’s view in Gen‑AI: Artificial Intelligence and the Future of Work, which notes that economies with strong digital foundations and adaptable labor markets are best positioned to benefit from AI while managing disruption. The Philippines’ ASEAN Chairmanship in 2026 further amplifies this opportunity, positioning the country to help shape regional digital priorities that will define the operating environment for CEOs in the years ahead.As Philippine CEOs move through 2026, the realities of a NAVI world demand leadership that is clear-sighted and transformative. This moment is both a signal and mandate: business leaders who modernize core systems, build future-ready talent, and strengthen digital foundations will be best positioned to turn uncertainty into advantage — driving growth while advancing the country’s competitiveness in a rapidly shifting region. The second part of this article will discuss how Philippine CEOs in 2026 are advancing transformation agendas focused on modernization, AI integration, governance, and strategic transactions to sustain growth and competitiveness amid a rapidly digitalizing and geopolitically shifting market.Noel P. Rabaja is the Deputy Managing Partner, Strategy and Transactions Leader, and Markets Leader, and Christine Rose L. Lapada is a Strategy and Transactions Associate Director, both of SGV & Co.This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the authors and do not necessarily represent the views of SGV & Co

04 March 2026

Aris C. Malantic and Dwayne Justin G. Ignacio

PFRS 18 in focus: Confidently navigating changes in financial reporting

In brief:PFRS 18 emphasizes Management-Defined Performance Measures (MPMs), which are specific subtotals reflecting management's view of financial performance, and requires detailed disclosures to enhance transparency and accountability.The standard enhances the guidance on aggregating and disaggregating financial information, which is expected to reinforce more disciplined financial reporting.Companies must prepare for the implementation of PFRS 18 by aligning their financial reporting processes, assessing data management systems, and engaging with stakeholders to ensure a smooth transition and capitalize on the opportunity for modernization in financial reporting.“PFRS 18 represents a significant shift in financial reporting standards that will enhance the clarity, comparability, and transparency of financial statements."Entities often provide certain information about their financial performance beyond typical PFRS totals, such as certain additional performance metrics to guide decision-making and communicate results. These data and metrics are generally communicated outside the financial statements and included in management’s press releases, strategic reports, management discussion and analysis. Users of financial statements find these to be useful; however, there are concerns about the lack of transparency on how these measures or metrics are calculated.In the first part of this article, we discussed the upcoming IFRS 18 standard, its significant changes to financial statement presentations, and the implications for clarity, comparability, and compliance in financial reporting starting from January 2027. In this second part, we discuss how under PFRS 18, certain performance measures, known as Management-Defined Performance Measures (MPMs), will move to the financial statements, along with the enhanced guidance on disclosures of financial information and implications for companies as they prepare for its implementation.Spotlight on MPMsPFRS 18 places a significant emphasis on MPMs, which are specific subtotals of income and expenses that reflect management's view of the entity’s financial performance as a whole and are used in public communications outside of financial statements. The introduction of MPMs is a strategically significant change that directly impacts how an entity communicates its performance. However, the narrow definition of MPMs means that not all performance measures used in an entity’s communications will qualify as MPMs. An adjusted profit figure, which modifies a total or subtotal required by PFRS Accounting Standards, can qualify as an MPM. However, non-financial performance measures such as market share, store surface and customer satisfaction score will not meet the definition of an MPM. In addition, certain financial performance measures, such as free cash flows, net debt and adjusted revenues will also not qualify as MPMs since they do not represent subtotals of income and expenses. PFRS 18 also provides that certain subtotals of income and expense, such as those already required or specified by a PFRS Accounting Standard (like operating profit) or are specifically excluded (like gross profit or loss), are not MPMs. Lastly, while financial ratios such as return on equity are not MPMs, a subtotal that is a numerator or a denominator in a financial ratio could qualify as an MPM.Disclosure requirements for MPMsPFRS 18 requires entities to include all necessary information about MPMs in a single note to the financial statements, which includes how the measure is calculated, why it is useful, and a reconciliation to the most comparable PFRS subtotal.This requirement ensures that users have access to relevant information about MPMs, enhancing transparency and accountability.Implications for financial reporting processesMany entities currently use alternative performance measures (APMs) when explaining financial performance, but information about these measures is generally communicated outside the financial statements, which has led to some concerns about the quality of such information. As a result of PFRS 18’s guidance on MPMs, companies must ensure that their current financial reporting process can capture all the required information about MPMs. Entities that use APMs will also need to assess whether any of such APMs meets the definition of an MPM, which will then require additional disclosures that they may not be preparing currently, such as the reconciliation to the most comparable PFRS subtotal. The financial reporting process should also be able to monitor any changes to public communications, as these can affect which measures qualify, or cease to qualify, as MPMs. Additionally, since MPMs are required to be disclosed in a single note to the financial statements, they will face increased scrutiny from regulators and investors.Aggregation and disaggregation guidancePFRS 18 improves the general requirements for aggregating and disaggregating information in financial statements. It provides guidance on how entities should aggregate items based on shared characteristics and disaggregate them based on dissimilar characteristics.Importance of clearer line item presentationIn financial reporting, clarity is paramount. Users should not be left guessing about the nature of line items. PFRS 18 emphasizes that entities must avoid using vague labels like "other" unless absolutely necessary. If an entity cannot find a more informative label, it may use "other," but this should be the exception rather than the rule.Planning for PFRS 18 implementationPFRS 18 will be effective for periods beginning on or after 1 January 2027. Entities are required to apply the standard retrospectively for comparative periods in both interim and annual financial statements. PFRS 18 also introduces consequential amendments to other PFRS Accounting Standards that entities must apply when adopting PFRS 18.Given the requirement to retrospectively restate comparative periods and disclose certain reconciliations, companies need to plan ahead and start determining the impact of PFRS 18 as early as possible. For example, the annual financial statements in the year of adoption for an entity that adopts PFRS 18 beginning 1 January 2027 will require information from 2025 onwards if the entity presents more than one comparative period in its statement of profit or loss. For companies that prepare quarterly financial statements in accordance with PAS 34 Interim Financial Reporting, the impact of adopting PFRS 18 will already be reflected in their first quarterly report during the year of adoption by presenting the headings and subtotals and disclosing the reconciliations required by PFRS 18. Key considerations for companiesCompanies preparing for the implementation of PFRS 18 should consider the following key areas:Compliance: Ensure that financial reporting processes align with the new requirements and that the impacts on contracts and debt covenants which currently use subtotals from the statement of profit or loss as inputs have been considered.Processes: Evaluate existing processes and identify areas that may require modification.Data and Systems: Assess whether current data management systems can accommodate the changes introduced by PFRS 18.Internal reporting: Assess any potential changes to the current structure and contents of internal management reports and explore any opportunities for alignment with the new categories and subtotals required by PFRS 18.Performance measurement: Revisit how management incentive structures are currently designed and how key performance indicators are measured, particularly those that are tied to certain subtotals in the statement of profit or loss.Investor Relations: Communicate with investors, analysts, regulators and creditors about the changes and how they will impact financial reporting.Strategy and People: Engage relevant stakeholders across the organization to ensure a smooth transition.Driving modernization in financial reporting processesThe countdown to PFRS 18 has begun, and as companies inch closer to the initial application of the new standard, it is essential that management understands the potential impact on their reporting. While the changes may seem daunting, they also present an opportunity for organizations to modernize their financial reporting processes.PFRS 18 can serve as a catalyst for improving transparency and encouraging stronger cross-department collaboration in financial reporting. By redefining conversations about financial performance and performance measures, companies can rethink how they tell their story and shape how they are understood by stakeholders.PFRS 18 represents a significant shift in financial reporting standards that will enhance the clarity, comparability, and transparency of financial statements. As companies prepare for the implementation of this new standard, they must embrace the opportunity to improve their reporting processes and engage with stakeholders effectively. By doing so, they can navigate the changes with confidence and position themselves for success in a rapidly evolving financial landscape.Aris C. Malantic is the Assurance Growth Areas Leader and Financial Accounting Advisory Services (FAAS) Leader of SGV & Co, and Dwayne G. Ignacio is a FAAS Senior Manager from SGV & Co.This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the authors and do not necessarily represent the views of SGV & Co.

02 March 2026

Aris C. Malantic and Dwayne Justin G. Ignacio

PFRS 18 in focus: Confidently navigating changes in financial reporting

In brief:The new IFRS 18 standard, effective 1 January 2027, will transform financial statement presentations by mandating a structured approach to income and expenses, enhancing clarity and comparability for users.Key changes include defined categories for income and expenses, the introduction of new subtotals like operating profit or loss, and stricter presentation and disclosure requirements to improve transparency in financial reporting.Companies will need to adapt their reporting systems and engage with stakeholders to ensure compliance and effectively communicate their financial performance under the new standard.“These changes mean companies must ensure that existing policies, processes and governance structures can accommodate the new requirements and deliver the enhanced transparency that the new standard requires."In 2027, users of financial statements will encounter a transformative shift in how companies present their financial performance. The new standard, IFRS 18 Presentation and Disclosure in Financial Statements, issued by the International Accounting Standards Board (IASB) in April 2024, is set to replace the existing IAS 1 Presentation of Financial Statements. In the Philippines, this standard was adopted as PFRS 18, which will be effective for periods beginning on or after 1 January 2027. This change is not merely a compliance exercise; it represents a fundamental rethinking of how financial performance is communicated to stakeholders.Financial reporting standards provide a framework that helps organizations present their financial performance in a manner that is understandable to users, including investors, regulators, and analysts. The introduction of PFRS 18 aims to enhance these qualities, addressing existing challenges and improving the overall quality of financial reporting.Key changes under PFRS 18PFRS 18 introduces several significant changes that will reshape the structure of the statement of profit or loss. These changes are designed to enhance clarity and comparability across entities, making it easier for users to assess financial performance.New structure for statement of profit or loss and defined categories: At its core, the statement of profit or loss provides a window into how an entity has translated its strategy into financial results. However, the existing practice for preparing the statement of profit or loss allows for significant variability in how amounts are reported. To improve the structure of the statement of profit or loss, PFRS 18 requires companies to classify income and expenses into one of five distinct categories: operating, investing, financing, income taxes, and discontinued operations. This classification aims to provide users with a clearer understanding of the sources of income and expenses.Introduction of new subtotals: The standard introduces two new subtotals — operating profit or loss and profit or loss before financing and income taxes — which means that certain subtotals will soon become more visible and comparable across companies. Together with the new categories, these new subtotals will create a more structured narrative, allowing users to better understand operating results, evaluate investment impacts and see the cost of financing.Management-defined performance measures (MPMs): PFRS 18 requires entities to disclose MPMs within their financial statements, providing insight into how management views the financial performance of the entity.Enhanced disclosure requirements: The standard imposes stricter disclosure requirements, ensuring that descriptions and labels used in financial statements faithfully represent the characteristics of items presented and disclosed. This ensures that users have access to relevant information about the measures used to assess performance.Addressing current gaps in financial reportingThe existing standard, PAS 1, requires the presentation of profit or loss but does not require any specific subtotals, leading to inconsistencies and a lack of comparability. For instance, the commonly used term operating profit lacks a standardized definition across different entities. This results in varying interpretations and calculations, making it challenging for users to compare financial information between companies, even those operating within the same industry.To address these issues, PFRS 18 mandates that companies classify income and expenses into one of five categories:Operating: Includes income and expenses arising from the entity’s main business activities, such as the revenue from the sale of products and services, and all items not required to be classified in any of the other categories.Investing: Typically includes income and expenses from cash and cash equivalents and income from rental properties and dividends from financial instrument investments that are not part of the entity’s main business activities. It also includes the share of earnings and losses from equity-accounted investments.Financing: Covers income and expenses related to liabilities arising from transactions involving only the raising of finance, such as bank loans, and interest expenses like interest expense on lease liabilities.Income Taxes: Includes all income tax-related expenses and income recognized in profit or loss.Discontinued Operations: Includes income and expenses from operations that have been discontinued.Together, these five defined categories do not just reorganize line items on the statement of profit or loss. Instead, they also introduce greater discipline into how financial performance is framed and presented by sharpening the distinction between the main business activities of the entity and its ancillary activities.Clarifying specified main business activitiesThere have been concerns that when applying the general requirements for classifying income and expenses, certain entities need to classify the income and expenses from their main business activities in categories other than the operating category. In response, PFRS 18 introduces the concept of specified main business activities. Under PFRS 18, entities need to assess if they have a specified main business activity of investing in assets (e.g., investment property companies) and/or providing financing to customers (e.g., banks). Consider a bank, XYZ Bank, which invests in financial assets like bonds and shares. Under PFRS 18, if XYZ Bank determines that investing in such financial assets is a main business activity, it can classify the interest and dividend income that they generate in the operating category, providing a clearer picture of its financial performance. Similarly, consider a real estate entity, ABC Company, which invests in non-financial assets like land and buildings that are classified as investment properties. Under the new standard, ABC Company can classify rental income from those properties and certain expenses like depreciation expense in the operating category if it assesses that investing in such assets is a specified main business activity. This classification helps users easily identify the core business activities of the entity. With PFRS 18 now anchoring the classification requirements to an entity’s specified main business activities, what will qualify as “operating” will no longer simply be a matter of preference, but of whether an item of income or expense arises from what an entity is really doing at its core. Improving comparability through defined subtotalsIn order to improve comparability across financial statements, PFRS 18 introduces two new defined subtotals:Operating Profit or Loss: This comprises all income and expenses classified in the operating category, providing a clear view of the profitability of the core business operations.Profit or Loss Before Financing and Income Taxes: This includes operating profit or loss along with all income and expenses classified in the investing category. It offers insight into the overall profitability, allowing users to analyze and compare performance before considering financing costs and tax implications. It will also provide an opportunity for analysts and investors to compare the results of operations of entities independent of how they finance their operations.The introduction of these defined subtotals enhances the ability of users to compare financial performance across different entities. For instance, investors can more easily assess the operating performance of companies within the same industry, leading to more informed investment decisions. Given the potential changes to how subtotals are calculated under PFRS 18 compared to their legacy definitions, entities also need to consider the impact on how key performance indicators are currently measured and evaluated. There may also be potential impact on the terms and provisions of contracts, management incentive structures and covenants that are currently tied to those subtotals.Compliance beyond numbersWhile the changes introduced by PFRS 18 focus on improving the presentation of financial statements, they also require companies to evaluate their reporting systems. This may involve redesigning charts of accounts, recategorizing certain items, and modifying existing controls. The shake-up in financial reporting that PFRS 18 brings may also change the way entities currently tell their story. This means that companies should consider engaging early with analysts, investors, creditors, regulators and other stakeholders to discuss how the new standard will affect their financial reporting. These changes mean companies must ensure that existing policies, processes and governance structures can accommodate the new requirements and deliver the enhanced transparency that the new standard requires. In the second part of this article, we will discuss how, under PFRS 18, Management-Defined Performance Measures (MPMs) will soon move to the financial statements, along with the enhanced guidance on disclosures of financial information and the implications for companies as they prepare for its implementation.Aris C. Malantic is the Financial Accounting Advisory Services (FAAS) Leader of SGV & Co, and Dwayne G. Ignacio is a FAAS Senior Manager from SGV & Co.This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the authors and do not necessarily represent the views of SGV & Co.