ASIC guidance on use of non-IFRS financial information
Monday, 12 December 2011— The Australian Securities and Investments Commission (ASIC) has released detailed guidance on the disclosure of financial information prepared or presented on a basis not in accordance with accounting standards.
The guidance addresses how non-IFRS financial information is disclosed in documents other than within the financial statements, such as transaction documents and market announcements. It also provides guidance as to the appropriateness of such non-IFRS information being included within financial reports. Non-IFRS financial information includes alternative profit measures such as “underlying profit”, “cash basis profit”, or other measures that exclude one-off, non-recurring or significant items.
Ernst & Young’s National IFRS Leader, Lynda Tomkins says the guidance will be useful for companies and help ensure information is not misleading.
“ASIC has not banned the use of such information in communication with shareholders outside of the financial statements, but has provided more guidance as to how such information should be presented. This should improve the comparability and consistency of financial results presented to investors and analysts,” Ms Tomkins said.
The guide contains recommendations about how to present such information in a manner which would not be considered misleading. Key principles within the guide include clearly identifying the non-IFRS financial information, not presenting it with greater prominence than the IFRS financial information, and reconciling non-IFRS information presented and explaining the nature of the adjustments made.
In May 2011, ASIC issued the first consultation paper (CP 150) on the use of “non-conforming financial information”’, which identified financial reports, documents related to financial reports (such as market announcements, presentations to investors and briefings to analysts) and transaction documents, as three key areas in which guidance was appropriate.
Respondents had raised concerns about the practical issues associated with the proposals.
Ms Tomkins said ASIC have addressed respondents’ concerns by issuing guidance that includes numerous examples of how the principles can be implemented.
“The guide is effective immediately, and therefore will be applicable for the December reporting season. All companies should refer to it before finalising any communication to shareholders. While the document is only a guide, it will be the benchmark against which regulators and others will assess a company’s presentation of their information,” Ms Tomkins said.
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