This speech highlights the potential challenges linked to companies’ reporting of alternative performance measures, also known as non-GAAP measures.
Many companies present additional performance measures in their annual reports to give investors better insight into how the company is run. That is not necessarily a problem, however, because companies treat these measures differently and, as they represent a selective presentation of a company’s financial performance, they can be biased and difficult to compare.
Hoogervorst commented:
“Alternative performance measures can provide useful additional information to investors. The IASB has no ambition to stamp out the use of non-GAAP measures. However, IFRS numbers should serve as the primary performance measures by which companies describe their financial position and performance. Alternative performance measures must not be misleading and should not be given so much prominence in financial statements that they over-shadow the IFRS numbers.”
The IASB is looking at alternative performance measures as part of its longer-term Disclosure Initiative, a broad-based initiative to explore how disclosures in IFRS financial reporting can be improved.
Hoogervorst said that the IASB is open to the idea of learning from the use of non-GAAP measures. Where the use of such measures is widespread and companies are systematically adjusting the IFRS numbers, there may be a need for the IASB to consider defining or specifying some of the more commonly used measures.
Digital reporting
Hoogervorst also reaffirmed his commitment to the development of a high quality IFRS Taxonomy as the IASB’s primary contribution to digital reporting. The IASB has recently made efforts to align the development of its IFRS Taxonomy more closely with the standard-setting activity. Instead of looking at it at the end of a project, electronic reporting is now considered throughout the standard-setting process.
Hoogervorst said:
“We recognise that technology is changing the way in which financial information can be accessed – and we need to respond to that accordingly.”
Full speech
© IASB - International Accounting Standards Board
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