What Would an IFRS 18 Operating Profit Look Like for the Oil Majors?

Three reclassifications account for the difference: the share of profit of joint ventures and associates moves to the investing category; interest and dividend income moves to investing; and foreign-exchange differences on financing move to financing. On 2025 figures, Shell's margin would move from 12.9% to 11.7% and BP's from 6.8% to 5.5%. ExxonMobil's and Chevron's published figures would not move, but the same reclassifications applied from their notes take them to 10.5% and 9.0%. Only the IFRS 18 basis applied to all four (including the two US GAAP filers, from their notes) compares like with like, and no company publishes that for a mixed peer set.

Terms in this article

EBIT proxy

income before tax plus interest expense, the formula most data providers apply when no operating profit is presented.

Operating profit (IFRS 18)

the mandatory subtotal comprising all income and expenses not classified in the investing or financing categories.

Investing category

income and expenses from associates and joint ventures, from cash and cash equivalents, and from other assets that generate returns largely independently of the entity's other resources.

Financing category

interest expense, interest on net defined-benefit obligations, and foreign-exchange differences on financing.

Equity-accounted entities

joint ventures and associates, whose share of profit is presented as a single line.

These are the figures that appear in comparison tables at present. BP's own "profit before interest and taxation" is close to its proxy figure, but no standard defines that line today; BP sets its content, on a replacement-cost basis and including earnings from joint ventures, so it is not the subtotal IFRS 18 will require.

Operating profit under the standard excludes three items that the proxy includes: the share of profit of joint ventures and associates, which is classified as investing; interest and dividend income, likewise; and foreign-exchange differences on financing, which are classified as financing. Shell discloses all three in its 2025 results. The figures below are the authors' reading of the standard, not Shell's transition disclosure.

Shell's gains of 3.2 billion on the sale of businesses and assets would remain within operating profit to the extent they arise from subsidiaries, property or plant; any gain on the disposal of an interest in a joint venture or associate would be classified as investing with the rest of that line. Restructuring charges, impairments and derivative fair-value movements would also remain within operating profit.

BP's results release does not separate interest income from other income. Any operating component within the 1,609 would return to operating profit when BP's transition note provides the split, so 10,415 should be read as a lower bound. BP's 987 of gains on sale would remain within operating profit.

Section 3 derived an IFRS 18 operating profit for Shell and BP. The same three reclassifications apply to a US GAAP filer: nothing in the arithmetic depends on which standard the company reports under, only on whether the three items can be read from its statements. ExxonMobil and Chevron both show income from equity affiliates on the face of the income statement; their non-service pension cost and their interest and dividend income are in the notes.

For Shell and BP the last two columns coincide: once the company presents the IFRS 18 subtotal, it is already on the common basis. For ExxonMobil and Chevron the last column is the figure no one will publish: the company because the standard does not apply to it, the data provider because the proxy stops at the face of the statement.

On today's figures Shell and ExxonMobil are level at 12.9%. On the IFRS 18 basis Shell leads by 1.2 points, because a larger share of ExxonMobil's income before tax comes from equity-accounted entities and other income, items the standard moves out of operating profit. Chevron's margin moves from 11.4% to 9.0% for the same reason. None of the four companies has changed anything in its business; only the basis of the comparison has.

The first IFRS 18 reporting cycle gives IFRS reporters a published operating profit; US GAAP reporters, to whom the standard does not apply, will continue to publish none. A peer set that includes both (which, in energy, automotive, pharmaceuticals, mining and consumer goods, is most peer sets) will carry a defined subtotal for some members and a computed proxy for the others in the same column, unless the reader applies the IFRS 18 basis to all of them, as Section 4 does.

The work of reconciliation therefore remains with the reader. The standard narrows it: it names the categories, moves the equity-accounted line out of operating profit, and brings management-defined measures into the audited notes with their tax effects. It does not perform the final step, which is to place every company on one basis and hold that basis across years, currencies and fiscal calendars. That step is the subject of this series from Part 1: one basis for every statement, applied to US GAAP and IFRS reporters alike, with each figure bridged to the line from which it came.

IFRS 18 should make Shell's and BP's financial statements clearer than they are today. It is likely to make comparison between Shell and ExxonMobil more demanding for readers who take the presented figures as they stand, and more tractable for those who already rebuild them.

Sources: Shell plc, fourth quarter and full year 2025 unaudited results, consolidated statement of income and the note on interest and other income; bp p.l.c., fourth quarter and full year 2025 results, group income statement; ExxonMobil, 2025 results; Chevron, fourth quarter 2025 results. IFRS 18 classifications are the authors' reading of the standard's requirements. Neither Shell nor BP has yet published a transition note, and the figures the companies present may differ from those estimated here.