New Zealand regulatory update on non-GAAP measures and differential reporting

  • New Zealand Image

04 Sep 2012

The New Zealand Financial Markets Authority (FMA) has issued its final guidance note on disclosing non-GAAP financial information (including 'underlying profit'). This follows the recent introduction of a Bill into the New Zealand Parliament which proposes significant changes to New Zealand’s financial reporting framework.

FMA guidance on non-GAAP financial information

The FMA issued its guidance note Disclosing non-GAAP financial information on 3 September 2012.    The guidance note is available on the FMA website.  The FMA has announced they will assess non-GAAP financial information disclosures against the guidance from 1 January 2013.

The finalised guidance note is largely consistent with the FMA's May 2012 proposals and mirrors similar guidance issued by the Australian regulator, the Australian Securities and Investments Commission (ASIC).

The guidance note sets out principles for presenting non-GAAP financial information in investor communications (other than in financial statements and transaction documents), including:

  • outline why the information is useful
  • consider prominence
  • ensure an appropriate label is used
  • explain the calculation
  • provide a reconciliation of non-GAAP financial information to GAAP financial information
  • apply a consistent approach period to period
  • ensure adjustments are consistent with comparatives
  • ensure the measure is unbiased
  • take care referring to 'one-off' items
  • explain if the information is audited or reviewed.

The most recent annual survey of 100 listed and other large companies with publicly available information by Deloitte (New Zealand) showed 89 referred to alternative profit measures in addition to “bottom line” statutory profit in their 2011 annual reports, and that many of these entities will need to change the way they disclose this information in the future to comply with the FMA guidance.

The FMA issued a separate response to constituent feedback, outlining its views on the more controversial elements of its original proposals.  In particular, the FMA provided an analysis of the proposal for the reconciliation of non-GAAP financial information to GAAP financial information to be included in every document where non-GAAP financial information is disclosed.  Many constituents felt that the reconciliation should not necessarily be provided in the document, but could be made available on an entity's web site.

FMA’s view is that reconciliations should be included in every document where non-GAAP financial information is disclosed.  The feedback statement notes:

In FMA’s opinion reconciliations should not generally be overly complex. If they are quite complex, it would suggest an even greater need for them to be readily available. Readily available information will increase the transparency between users and providers of financial information. Media will become more informed about GAAP measures vs. non-GAAP measures and this will flow through into their communications.

Click for FMA press release (link to FMA website).

Changes to New Zealand financial reporting framework

The Financial Reporting Bill (link to New Zealand parliament website) was introduced into New Zealand Parliament in August 2012, proposing significant changes to New Zealand’s financial reporting framework.  The Bill currently proposes commencement by 1 April 2015.

The proposals are largely consistent with the New Zealand Government’s previous announcements, such as the removal of financial statement preparation requirements for most small and medium companies, and the clarification of reporting requirements for registered charities. However there are a number of other changes which will affect a wide range of entities such as the removal of the requirement to prepare parent financial statements when group financial statements are already provided, and alignment of the penalties regime.


Deloitte (New Zealand) has published an September 2012 edition of its Accounting alert series exploring both of these developments in more detail.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.