Mr Hoogervorst touched on several topics during his speech - including the Disclosure Initiative and the IFRS Taxonomy -, but the main focus of his remarks were non-GAAP measures and their relation to IFRS financial statements.
In his speech, he admitted that alternative performance measures (or 'non-GAAP measures') can be very helpful as IFRSs do not cater to individual sectors but aim at creating comparability across sectors. This makes them comparatively generic, and alternative performance measures can be used to provide investors with additional, more tailored insight into how a company is being run. Yet he also warned that alternative measures are not free of bias as even seemingly common measures such as EBITDA are often presented in an 'adjusted' or 'normalised' or otherwise modified form. In addition, non-GAAP measures are often presented with a prominence that obscures IFRS numbers. Mr Hoogervorst stated:
While the IASB has no ambition to stamp out the use of non-GAAP measures, we do think that investors would benefit from greater discipline in their presentation in the financial statements. That is why the IASB is currently looking at such measures as part of our Disclosure Initiative. Our starting point for this work is the belief that the IFRS numbers should serve as the primary performance measures by which entities describe their financial position and performance. We go to great lengths to ensure the IFRS numbers are neutral, comparable, and verifiable. IFRS financial statements provide information that markets can trust. From this starting point, we have no problem with companies providing additional non-GAAP measures to enrich the IFRS data in financial statements. Yet some basic ground rules should be respected.
The basic rules Mr Hoogervorst referred to were that alternative performance measures should not present information that is misleading and that this information should not be given greater prominence in the financial statements than the IFRS numbers. He also stressed that the IASB is aware that this might be an area where more action is needed. He said: "We are also open to the idea of learning from the use of non-GAAP measures. Where the use of such measures is widespread and many companies are systematically adjusting the IFRS numbers, then maybe there is a vacuum in IFRS that we need to look at." However, he also pointed out that the IASB has already begun to act. Mr Hoogervorst cited the December 2014 amendments to IAS 1 as a case in point and also mentioned that a discussion paper on the principles of disclosure is expected to be published by the end of 2015.
Please click to download the full text of Mr Hoogervorst's speech from the IASB website.