IFRS 18 as Endorsed in Saudi Arabia: SOCPA Renamed a Category for Zakat, Relabelled Two Subtotals and Kept the Murabaha Disclosures

Most of SOCPA's endorsement of IFRS adds disclosures and leaves the IASB's wording alone, as How SOCPA Endorses IFRS explains. IFRS 18 goes further than SOCPA's earlier zakat edits to IAS 1 and IAS 7. In item 42 of its endorsement document SOCPA renamed the fourth income statement category the "Zakat and income taxes category", relabelled two subtotals and added zakat expense to a listed line item. Where zakat goes, still open under the IASB's text, is settled for a Saudi company.

SOCPA's own announcement of 14 January 2025 described its changes as moving its additional IAS 1 disclosures into the new standard, aligned with its paragraphs. The alignment is where the substance sits.

Not a disclosures-only endorsement: what SOCPA changed in IFRS 18, and when

SOCPA's Accounting Standards Council endorsed IFRS 18, IFRS 19 (item 43, unmodified) and their consequential amendments on 25/06/1446H (26 December 2024). The endorsement document, a public bilingual PDF last revised on 04/07/1447H (24 December 2025), carries IFRS 18 as item 42, pages 42 to 49, with SOCPA's additions underlined. It supersedes IAS 1 for annual periods beginning on or after 1 January 2027, early application permitted. (It is not IAS 18 Revenue, which IFRS 15 replaced.)

Besides a general clarification on Saudi terms, ten paragraphs bring zakat in beside income tax because "Saudi companies are required to pay Zakat and to present its expense as an entity's expense for the period according to the national Standard of Zakat (Revised)". Three carry SOCPA's Islamic finance disclosures across from IAS 1. None changes how zakat is measured.

Paragraph by paragraph: the Saudi modifications in item 42

Labels in quotes are SOCPA's, word for word.

Paragraph	SOCPA's text	Arabic wording	Effect
General clarification	"Income statement"; "net income"	قائمة الدخل؛ صافي الدخل	Saudi terms kept
6	Not-for-profit and public sector entities "allowed to" apply it	تم السماح للمنشآت	Scope wording
47(d), 48	"Zakat and income taxes category"	صنف الزكاة وضرائب الدخل	Category renamed
67	Zakat expense under the national "Standard of Zakat (Revised)", with IAS 12 tax	معيار الزكاة المعدل	Zakat leaves operating
B29	Outside the classification rules in 47(a) to (c)	لا تخضع لمتطلبات التصنيف	No category test for zakat
69(b), 71	"profit or loss before financing and Zakat and income taxes"	الربح أو الخسارة قبل التمويل والزكاة وضرائب الدخل	Required subtotal relabelled
75(a)(iv)	"Zakat expense and income tax expense or income"	مصروف الزكاة ومصروف أو دخل ضريبة الدخل	Zakat in a listed line item
103(q)	Liabilities for accrued zakat	الالتزامات عن الزكاة المستحقة	Balance sheet line item
B97	Zakat among other current liabilities	والزكاة وضرائب الدخل	Example added
118(e)	"profit or loss before Zakat and income taxes"	الربح أو الخسارة قبل الزكاة وضرائب الدخل	Optional; not an MPM
76A (new)	Conventional interest income; other gains by type	أياً كان مبلغها	Note disclosure
85A (new)	Conventional interest expense	أياً كان مبلغها	Note disclosure
B111 (extended)	Balances by the nature of their financing	مرابحة، تورق، صكوك	Face or notes

Paragraph 118 lists subtotals that are not management-defined performance measures (MPMs), so 118(e) is optional and needs no MPM note; paragraph 69 requires two subtotals plus profit or loss, and SOCPA relabelled the second.

The bottom of a Saudi income statement, before and after

Against SOCPA's IAS 1 the last lines change as below (worked numbers: IFRS 18 vs IAS 1, operating profit from 230 to 186, net profit 180). The IASB's text carries no zakat, and its staff expect zakat in operating.

Line	IAS 1 as endorsed, to 2026	IFRS 18 as endorsed in the Kingdom
After investing income	Not defined	"Profit or loss before financing and Zakat and income taxes", 69(b)
Before the tax line	"Profit before zakat and tax", 102 and 103	"Profit or loss before Zakat and income taxes", optional, 118(e)
Listed tax line	"Tax expense and Zakat", 82(d)	"Zakat expense and income tax expense or income", 75(a)(iv)
Zakat's category	No categories	Zakat and income taxes, 67

Still a judgement for the preparer

One line or two. The endorsed text lists zakat and income tax as one line item and does not itself require them on separate lines; whether IFRS 18's disaggregation principles require separation is a judgement, and SOCPA's paper to the IASB favoured separate presentation. That paper, to the IASB's advisory forum in March 2026, used the words "distinctively separate". It matters most to a mixed company paying both (Corporate Income Tax in Saudi Arabia: Who Pays 20%).

The face line. SOCPA added zakat expense to the line items listed in paragraph 75(a)(iv); paragraphs 23 and B8 still let a listed line stay off the face when a useful structured summary does not need it, material information going to the notes.

The MPM tax effect. Item 42 leaves paragraphs 122 to 125 and B141 untouched, so whether the income tax effect required by 123(d) includes zakat is open (Is EBITDA a Management-Defined Performance Measure?).

Conventional interest, murabaha and tawarruq: paragraphs 76A, 85A and B111

76A, a new paragraph, requires disclosure of income from conventional deposits, lending and bonds separately from other finance income such as finance leases, murabaha and the time value of money, and of conventional interest income "no matter how small this amount is" (أياً كان مبلغها); part (b) splits other gains by type. 85A does the same for interest on conventional loans and bonds. Neither mentions tawarruq or sukuk.

Those appear only in B111, an existing paragraph SOCPA extended to balances: receivables and term deposits split between conventional and murabaha, cash equivalents by nature; funds into conventional and Shariah compliant, per the fund manager's classification; bonds apart from sukuk; overdrafts and payables into conventional, tawarruq and murabaha. SOCPA's reason: investors whose decisions turn on "the nature and kinds of the entity's transactions". All three copy SOCPA's IAS 1 paragraphs 97A, 105A and 78, so existing notes carry across; what changes is the category each amount feeds (Operating, Investing or Financing Under IFRS 18: 40 Income Statement Lines Classified).

Zakat in IAS 7, IAS 33 and IFRS 12, and the liquidation basis in IAS 8

Older Saudi zakat changes stay in force beside item 42 (IAS 19 and IAS 26 carry others).

Standard and paragraph	Saudi addition
IAS 7, 14(f) and 35	Zakat paid is operating unless identified with financing or investing, and is disclosed separately
IAS 33, 13	Zakat is deducted in arriving at profit for ordinary equity holders
IFRS 12, B12(b)(vii), B13(g), B16(b)	Joint venture and associate summaries show zakat beside tax
IAS 8, 6K	An entity that is not a going concern leaves full IFRS for SOCPA's endorsed liquidation basis standard; moved from IAS 1

IAS 12 is endorsed unmodified, so zakat shares a category with income tax without becoming one (Zakat or Income Tax? Who Pays What in Saudi Arabia). Cash flows: The Cash Flow Statement Under IFRS 18.

One standard, two texts: Saudi subsidiaries in IASB groups, and the reverse

Saudi issuers on the Saudi Exchange prepare statements under the standards adopted by SOCPA, interims within 30 days (Rules on the Offer of Securities and Continuing Obligations, Article 66(c) and (d)); a foreign issuer on the Main Market uses the IASB's (Article 66(g)). Dates: IFRS 18 for Companies on Tadawul's Main Market.

A Saudi subsidiary of a group on IFRS as issued by the IASB files its own statements on SOCPA's text and reports to its parent on the IASB's, where staff expect zakat in operating until an amendment is final; on that reading, consolidation moves that zakat into operating expenses and relabels the subtotals. A Saudi group with Gulf subsidiaries does the reverse, and needs 76A, 85A and B111 splits its subsidiaries' rules never required.

Item 42 does not address whether a company applying it can also assert compliance with IFRS as issued by the IASB. The IFRS Foundation's Saudi profile says SOCPA's additions "do not affect the ability of a company to assert compliance with IFRS Standards", but it was last updated on 28 July 2022, before IFRS 18. The question is unresolved.

Where the IASB's zakat amendment stands

The IFRS Interpretations Committee's November 2025 tentative decision that charges outside IAS 12 cannot sit in the income tax line or category drew 49 comment letters, 34 from Saudi Arabia; it concluded in March 2026, but publication needs the IASB not to object, and has not followed. On 21 July 2026 the IASB tentatively decided (10 of 12) to propose that "tax charges imposed by a government as a direct substitute for income taxes" go in the income taxes category where legislation specifies that an entity pays either, and (11 of 12) that they be shown apart from income taxes, with faithful subtotal labels and their effect in the MPM reconciliation. The staff paper names zakat paid in place of income tax as qualifying. On 23 September 2026 the IASB set a 120-day comment period and retrospective application; two members intend to dissent.

On 3 November 2026 the exposure draft was not open for comment; the IASB expects it in the fourth quarter of 2026, and staff put final amendments in the fourth quarter of 2027. The package points the same way as item 42 on the category and labels, and goes further on separation. History: Accounting for Zakat in Saudi Financial Statements.

Where to practise this

The SOCPA Fellowship's Financial Accounting paper tests IFRS as endorsed in the Kingdom (guidance framework, p. 5): presentation in main topic 1 (5% to 15%), subtopic 1/1/10 (topics list), at Application (guidance framework); zakat in main topic 2 (45% to 65%), subtopic 2/16, at Remembering and Understanding and Application. SOCPA has not announced which cycle first examines IFRS 18 (Is IFRS 18 on Your Exam?). Prepito's Financial Accounting course covers both topics with practice questions and full explanations; see the study guide and the SOCPA Fellowship programme.

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Sources: SOCPA's endorsement document, announcement, exam topics, guidance framework and ASAF paper; IFRS 18; IFRIC Updates of November 2025 and March 2026; IASB staff papers of May, July and September 2026; IASB Update July 2026; the project page; open for comment; the IFRS Foundation's Saudi profile; the Capital Market Authority's offering rules. As at 3 November 2026: SOCPA may revise item 42, and the IASB's amendment is still to come.