08 December 2014

Deloitte commented on IOSCO's non-GAAP financial measures proposals

In Deloitte´s view, non-GAAP financial measures have a role in corporate reporting as they can improve the communication between an issuer and its stakeholders, provided that they are reported in a consistent and unbiased manner. However, Deloitte notes that the regulatory approaches of various IOSCO members may not be easy to reconcile, given their differences of views about the role of non-GAAP financial measures in financial reporting. Deloitte believes that it would be in the best interests of global securities markets if the Statement was applied consistently in all IOSCO jurisdictions and not overlaid with local guidance.

For the Proposed Statement to have the maximum effect, Deloitte encourages IOSCO to develop a common definition of a ”non-GAAP financial measure” and to determine which such measures should be subject to this common discipline. Deloitte notes that several national and regional securities market regulators have already issued (or are developing) guidance for their markets. It is important for the efficient operation of global capital markets that such guidance is consistent and does not contradict the requirements of globally-recognised financial reporting frameworks.

Deloitte notes also that the Proposed Statement states that it is intended to apply to “any non-GAAP financial measure wherever the measure is disclosed outside of the financial statements.”  Deloitte agrees with this approach as it recognises the standard-setters responsibility to set financial reporting standards for the financial statements. Further, Deloitte sees this application as a way of achieving consistency in the use of non-GAAP financial measures across the annual report as a whole.

However, Deloitte does suggest that IOSCO works with the IASB to obtain clarification about what is considered to be an “IFRS measure.” This is because currently there is no clear understanding of what is “a measure defined in the applicable financial reporting framework” and yet non-GAAP financial measures are often defined by contrast to a measure defined in the applicable financial reporting framework.

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