Australia

Details

  • Service: Audit, Financial Statement Audit, Financial Reporting & Accounting Standards, Accounting Advisory Services, International Financial Reporting Standards (IFRS)
  • Type: Regulatory update
  • Date: 18/02/2014

IFRS In the Headlines

IFRS In the Headlines
In the Headlines (formerly IFRS Briefing Sheets) provide a timely update on International Financial Reporting Standards (IFRS) developments.

Bridging the GAAP (2014/03) 

Investors invest globally and demand for alternative performance (Non GAAP) measures does not stop at regulatory borders. The European Securities and Markets Authority (ESMA) has issued a consultative paper on alternative performance measures anticipated to be followed with interest beyond the EU. In Australia, companies governed by the Corporations Act 2001 should refer to guidance contained in ASIC Regulatory Guide 230 Disclosing non-IFRS financial information when incorporating Non-GAAP measures into any form of external communications.
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GAAP rarely tells the whole story of a company’s performance. To bridge the gap, companies and investors communicate through key performance indicators alongside the GAAP numbers.

 

Disaggregation and subtotals (earnings before...), quasi-financial measures (sales per square foot, order pipeline) and operational metrics (cost per... proven and probable reserves) have become commonplace. A few such measures are the subject of agreed, usually sector-specific, definitions; but many are not.

 

This topic has prompted much debate. When do KPIs enhance GAAP and when do they present a confusing or overly optimistic picture?

 

To date, regulators around the world have taken different approaches to non-GAAP information or alternative performance measures (APMs). The most recent contribution to this important subject comes from the European Securities and Markets Authority (ESMA).