FMA Releases Final Guide Note on Disclosure of Non-GAAP Financial Information
After the introduction of a bill in the New Zealand Parliament that proposes major alterations in the financial reporting structure of the country, the New Zealand Financial Markets Authority has released its final guide note pertaining to the disclosure of non-GAAP finance related information (incorporating 'underlying profit'). The guide was issued on the 3rd of September 2012 and is available on FMA’s website. The New Zealand Financial Markets Authority has revealed that they would carry out an assessment of non-GAAP finance related information disclosures on the basis of the guide from the 1st of January 2013. The guide note that has been finalized is very much in line with the Financial Market Authority’s proposals issued in the month of May 2012 and is also similar to the guide issued by the Australian Securities and Investments Commission.
The guidance related note underlines the principles for the presentation of non-GAAP finance related information in investor communications (apart from the transaction documents and financial statements). The guidance should mention why the information is of use, ensure that a proper label is being used, take prominence into consideration, clarify the calculation, apply a uniform approach every period, reconcile non-GAAP finance related information to GAAP (Generally Accepted Accounting Principles) financial information, make sure that the adjustments are congruous with comparatives, clarify whether the information is reviewed or audited and ensure referring to 'one-off' items.
The Financial Market Authority released a different response to constituent assessment, stating its opinion on the elements of the original offers that were more controversial. The FMA offered an assessment of the proposal for reconciling of non-GAAP finance related information to GAAP finance related information that would be incorporated in each document where non-GAAP finance related information is revealed. A number of constituents were of the opinion that reconciling shouldn’t be necessarily offered in the document. However, they were fine with the idea of making it available on an organization’ website.
As per FMA’s point of view reconciliation process shouldn’t be very complex. In case they are complex, it would mean that there would have to be more readily available. This would further result in an increase in the transparency level of providers and users of finance related information.
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