![Group 100 chief executive Peter Meehan, who supports the use of non-standard measures "provided they are explained ...](/content/dam/images/g/t/s/x/e/1/image.related.afrArticleLead.620x350.gtsf2h.png/1484633825260.jpg)
The peak body for chief financial officers says the rules around the way companies present non-standard financial measures, such as underlying profit, are too strict and the market should be the ultimate judge of a firm's results.
The Group of 100 – made up of CFOs from ASX 200 firms, government and the private sector – also believes that non-statutory measures give the best overview of a company's normal operations.
"It is a reality that all companies are different," Group 100 chief executive Peter Meehan said.
"Whilst there are similarities, differences in value drivers do exist. Simplistic statutory rules often do little to draw out these differences.
"Non-statutory measures can be an effective and useful means to draw out these differences and enable informed investors to better understand the value drivers of the companies they are evaluating."
Mr Meehan said the Group of 100 supports the use of non-standard measures "provided they are explained correctly and that there is a reconciliation to the statutory numbers".
"We do not support the inappropriate use of non-statutory measures to artificially inflate a company's performance and any adjustments should be consistent from year to year."
Compliance
The comments come amid an ongoing debate about the use of non-standard financial measures by listed firms, with research showing more than 40 per cent of ASX top-500 companies use non-standard measures to promote their performance to the market.
The Australian Shareholders' Association, proxy advisers and market veterans say the use of these measures, as opposed to the measures based on generally accepted accounting rules by listed firms, is out of control and want the practice reined in or the introduction of clear rules around the way this data is presented.
Companies routinely issue reports that do not include any statutory measures and emphasise underlying results that either repeatedly exclude items meant to be "one-offs" for consecutive years or inconsistently exclude or include items from year to year.
Mr Meehan would not comment on the reporting practices of individual companies.
Corporate regulator the Australian Securities and Investments Commission issued guidelines in 2011 on how additional data should be presented to the market, but KPMG research has found that many ASX200 companies are not fully complying with the guidelines.
Directors, as well as the Group of 100, counter that they need to be able to use the metrics that best allow them to explain the performance of their company.
The International Accounting Standards Board is working on a set of guidelines on the use of non-standard measures, but Mr Meehan said creating more standards for the non-standard measures would be counterproductive.
"[The] setting of a standard to cover all the different permutation and combinations of non-statutory measures and the wide range of industries impacted will be difficult," Mr Meehan said.
He said investors should look at both statutory and non-statutory financial measures, as they provided different information.
"Statutory profit provides a clear indication of the actual profit for the period and the possible impact on dividends, whilst such measures as 'underlying profit' can give a better view of a company's profitability from normal operations," he said.
"The [Group of 100] is a strong supporter of less, but more focused, information being made available to investors/stakeholders.
"An increase in the use of non-[standard] measures, if used and explained correctly, can provide significantly enhanced information on the performance of a company."
A broken reporting system
- Part 1: Firms promote their own measure of success, standards for non-standards and how Qantas reports
- Part 2: Top investors slam slippery accounting of listed firms, directors want flexibility
- Part 3: How to fix a broken reporting system and the curious recurring 'one-offs' at Nufarm
- Part 4: Accounting standards too restrictive for chief financial officers