FMA seeks submissions on use of non-standard earnings measures

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The market watchdog has published a draft guidance note on the disclosure of non-Generally Accepted Accounting Principles (GAAP) financial information.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 The overriding message in the draft guidance is that alternative performance measures not be misleading and aren't used to remove or disguise bad news.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.

BusinessDesk.co.nz

Father's Day SOON! Crazy Deals on ALL IRG Yearbooks - More than 50% OFF - $19.99 for 44th IRG Yearbook 2018-2019

Comments from our readers

No comments yet

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
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.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.

Related News:

NZ dollar rises after Orr talks up the economy
Comvita posts $27.7m net loss on goodwill write-downs
Buyers emerge for Denton Morrell client book
WEL reviewing capital structure of fibre business
Cavalier announces strategic collaboration with NZ Merino Company
Delegat continues to invest after record year
Kiwibank's annual profit eases as fee income drops
TIL lifts operating earnings, watching for slowdown
Vector profit slides 44% on struggling HRV writedown
Steel & Tube returns to the black but says margins are squeezed