Sharechat Logo

FMA seeks submissions on use of non-standard earnings measures

Tuesday 22nd May 2012

Text too small?

The Financial Markets Authority is seeking submissions on the growing use of irregular earnings measures in preference to statutory profit.

The market watchdog has published a draft guidance note on the disclosure of non-Generally Accepted Accounting Principles (GAAP) financial information.

That's in response to the growing number of companies using underlying earnings measures to strip out the ‘noise’ of unrealised movements in fair value that have to be recognised under International Financial Reporting Standards.

"These measures can provide useful information to investors, but they also have the potential to be misleading if used to mask bad news," FMA head of compliance Elaine Campbell said in a statement. "It is important for both issuers and investors to have greater clarity on the use of non-GAAP financial information, which will contribute to increasing confidence in our markets."

The IFRS accounting standards became mandatory in 2007, requiring companies to recognise the market value of assets such as property and financial instruments in their financial statements, sparking disquiet among corporates who claimed they exaggerated the global downturn in 2008.

The watchdog wants to promote meaningful communication of financial information, reduce the chance of misleading results, and offer greater clarity on the disclosure of irregular measures. The overriding message in the draft guidance is that alternative performance measures not be misleading and aren't used to remove or disguise bad news.

The FMA began talks with market participants in November, holding discussions with small groups of chief financial officers, independent directors and audit firms. Submissions close on June 29, and a final guidance note will be issued by the end of August.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Investore Property Limited (Investore) today announced its financial results for the twelve months ended 31 March 2020 (FY20).
Rabobank GDT Analysis - Event 261
SkyCity Entertainment Group Limited - Update on COVID-19 Impacts and Recent Trading
ANZ announces sale of UDC Finance
Foley Wines Limited Announces Harvest Result, Earnings Outlook and Development in Martinborough
BLIS delivers substained profitable growth
Infratil - Full year results announcement for the year ended 31 March 2020
COMVITA LIMITED Announces NZ$50 Million Equity Raising to improve balance sheet flexibility and build resilience
GMT’s delivers statutory profit of $284.4 million before tax

IRG See IRG research reports