BUSINESSDESK: 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The market watchdog has published a draft guidance note on the disclosure of non-Generally Accepted Accounting Principles (GAAP) financial information.
The move is 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.
"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The overriding message in the draft guidance is that alternative performance measures not be misleading and aren't used to remove or disguise bad news.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.
This article is tagged with the following keywords. Find out more about MyNBR Tags
Most listened to
- FMA lawyer Justin Smith counters the Goldman Sachs defence
- ICBC NZ chairman Don Brash is waiting until after the local body elections to give more detail on the bank's investment plans
- Consumer NZ’s Jessica Wilson says Reckitt Benckiser is probably not alone in misleading consumers with identical products.
- Media Snapchat: NBR’s Nick Grant ponders the Human Rights Commission’s role in RHOAKL racism row
- ASB's Jane Turner discusses what's behind NZ's widest month trade deficit