Most Canadian public companies include KPIs in their Management Discussion and Analysis (MD&A) and earnings press releases. KPIs may also be found in other information sources, such as investor presentations.

KPIs provide investors with additional insight into aspects of a company’s overall performance that cannot always be described in its financial statements. However, concerns are often raised that these measures lack transparency, comparability within industries, and year-over-year consistency.

It is critical for management to understand its responsibility for establishing appropriate controls related to the selection, preparation, and disclosure of KPIs.

What will you learn?

Because of the importance of KPIs and the lack of guidance on how to approach them, this Reporting Alert aims to provide:

• a description of management's role in relation to KPIs
• six principles to assist management in appropriately selecting and effectively disclosing KPIs

More information

The KPI reporting landscape is in a state of transformation as stakeholders and regulators push for change. Stay tuned for the following two initiatives:

• The Accounting Standards Board of Canada is developing a framework to enhance the quality and reliability of performance measures reported based on best practices. The draft framework is expected to be published in June 2018.
• The Canadian Securities Administrators (CSA) are establishing a rule on the disclosures required for non-GAAP financial measures and other financial information. The proposed rule would replace CSA Staff Notice 52-306 (Revised) Non-GAAP Financial Measures and is expected to be published for comment in the second half of 2018.

For additional information on investor views on KPIs, see:

• CPAB 2017 Audit Quality Symposium – Key Messages

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