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EFRAG believes that non-GAAP measures can provide useful information to users when properly used and presented, and can assist investors in gaining a better understanding of a company's financial performance and position. Therefore, EFRAG supports the idea that non-GAAP financial measures should be clearly defined and explained by preparers, unbiased and presented consistently over time to improve the understanding of the performance by users of financial statements.
However, EFRAG believes that the proposed Statement does not articulate clearly enough what the underlying principle is that determines the scope of the requirements and the types of disclosures that are asked for. In particular, EFRAG is concerned that the scope of the Statement could result in lengthy disclosures that contain relatively little valuable information. As explained in the comments on the ‘scope of the proposed Statement’, EFRAG believes that the requirements should be targeted more narrowly so as to avoid clutter and boilerplate language in financial reporting.
EFRAG observes that the proposed Statement would apply to any non-GAAP measure that is ‘reported outside of the financial statements’. The Statement also provides one exception for financial measures that are ‘specifically required by a securities regulator” which are not within its scope.
EFRAG notes that the proposed scope would also include measures derived from the primary financial statements that are presented outside the financial statements and whose definition is self-evident from their name (e.g. results before share of investee’s results, total fixed assets) or measures that are merely totals or subtotals of measures that are directly readable from the financial statements.
EFRAG notes that no relief is provided for such measures. In EFRAG´s view, this would result in a scope that is much broader than it believes is appropriate.