New Zealand regulator seeks comments on non-GAAP financial information
May 29, 2012
The New Zealand Financial Markets Authority (FMA) has issued a draft guidance note on the disclosure of non-GAAP financial information. The guidance note sets out the FMA's expectations on the use of financial information in corporate documents, such as transaction documents and market announcements, and is largely based on equivalent guidance recently issued in Australia.
The draft guidance note deals with financial information presented other than in accordance with generally accepted accounting practice (GAAP, as defined under New Zealand law and including New Zealand equivalents to IFRSs). The guide deals with common forms of non-GAAP information such as the alternative performance measures of 'underlying profit' or 'normalised profit'.
The guidance note states FMA's view that it "is reasonable for users of financial information to expect information to be presented in accordance with GAAP". In order to ensure that non-financial information is not misleading, FMA sets out a number of factors to consider, such as disclosure as to why the non-GAAP financial information is useful, how it is calculated, and the need for a reconciliation to financial information included in the financial statements. The guide also notes information should be unbiased and not describe items as "one-off" or "non-recurring".
Also included is guidance on information included in transaction documents such as prospectuses, noting that financial information in such documents are required under New Zealand law to comply with GAAP in certain respects. The guide goes on to state that other financial information, such as pro-forma information, should be presented in accordance with the recognition and measurement requirements of GAAP and provides further guidance on how this information should be presented.
The draft guidance note borrows heavily from similar guidance issued by the Australian regulator, the Australian Securities & Investments Commission (ASIC). The ASIC Regulatory Guide (link to ASIC website), issued in December 2011, goes further than the FMA document by providing additional guidance on the disclosure of financial information within the financial statements themselves, giving ASIC's sometimes controversial views on topics such as whether additional line items and subtotals are appropriate in the statement of comprehensive income. (More information on the ASIC guide is available in this Accounting Alert from Deloitte (Australia)).
The FMA consultation document is open for comment until 29 June 2012. Click for more information (link to FMA website).