05 November 2014

FEE comments on IOSCO’s consultation: “Proposed Statement on Non-GAAP Financial Measures”

Non-GAAP measures play an important role in Corporate Reporting. They can improve the communication between the entity and its stakeholders, as long as they are reported in a transparent and unbiased manner.

FEE supports the improvements in Corporate Reporting. However, FEE identifies that there is a lack of coordination between market oversight bodies and regulators on one hand and the IASB on the other hand, which leads to a high degree of divergence in practice when it comes to the definition and scope of guidance dealing with Alternative Performance Measures/Non-GAAP Measures.

FEE believes that the IASB should also be involved in the reporting of Non-GAAP Measures in the context of financial reporting. Some IFRSs currently include guidance on how an entity can present Non-GAAP Measures within its financial statements. Therefore, in line with its comments to the ESMA’s consultation on Alternative Performance Measures, FEE suggests all the market oversight bodies and regulators (international, regional and national) to work with the IASB in order to develop a common comprehensive framework on Alternative Performance Measures/Non-GAAP measures.

That said, FEE welcomes IOSCO’s initiative and in general it agrees with the IOSCO Proposed Statement. In line with FEE’s comments to ESMA’s consultation on the Alternative Performance Measures, FEE identifies 6 main issues encountered with the use of Non-GAAP measures. These are:

• The definition of Non-GAAP measures
• The calculation of Non-GAAP measures
• The linkage and reconciliation to financial information prepared under IFRS or other GAAP
• The consistent application
• How the Non-GAAP measures facilitate benchmarking analysis and comparisons with industry information
• Whether management takes an unbiased position when explaining or interpreting Non-GAAP measures (“management interpretation”)

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