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23 Jan. 2020

General Presentation and Disclosures –Proposals to improve the financial statements and the use of non-GAAP measures

It has become increasingly common for Australian entities to report measures of financial performance that do not reflect the requirements of Australian Accounting Standards – known commonly as ‘non-GAAP measures’, ‘non-IFRS financial information’ or ‘Management Performance Measures’ (MPM). These measures, sometimes termed ‘underlying profit’, ‘cash profit’, or ‘core earnings’, are frequently highlighted in the media, investor presentations and even in many cases within the annual report.


The proposals in ED 298 General Presentation and Disclosure are intended to address user concerns over MPMs by:


• reducing the need for alternative MPMs by providing more information in the statement of financial performance to assist predicting future cashflows. To do this, the ED proposes new sub-totals, defining ‘operating profit’ and ‘profit or loss before financing and income tax’. In addition, unusual and infrequent items are defined and required to be disclosed in the notes (but not on the face of the financial statements). As many non-GAAP measures appear to correspond with some entity specific definition of ‘operating’, guidance on what does (and does not) constitute operating profit is an important improvement to aid comparability; and


• providing enhanced credibility to MPMs by requiring them to be included in the audited financial statements with specified disclosures.
ASIC’s RG 230 Disclosing non-IFRS financial information currently provides guidance to directors and preparers of financial reports on the use of financial information presented other than in accordance with accounting standards inside and outside of financial statements. The preface to this Exposure Draft provides a comparison of the requirements. The AASB will work with ASIC to determine how these proposals and RG 230 would interact going forward, and your feedback in this regard is welcomed.

Please have your say and send your comments to the AASB by 15 May 2020 via the AASB website, LinkedIn or email.