The Value Relevance of IFRS Earnings Totals and Subtotals and Non-GAAP Performance Measures

37 Pages Posted: 25 May 2018

See all articles by Greg Clinch

Greg Clinch


Ann Tarca

University of Western Australia

Marvin Wee

Australian National University (ANU); Financial Research Network (FIRN)

Date Written: March 8, 2018


We explore the association between earnings and price for 400 IFRS adopting firms from eight countries (Australia, France, Germany, Hong Kong, Italy, Singapore, Sweden and the UK) in their annual reports for the years 2005, 2008, 2011 and 2013 (1,577 firm-years). We find no difference in the earnings/price association for firms that present non-GAAP earnings and those that do not. However, we find significant differences based on the non-GAAP measures presented. The disclosure of non-GAAP earnings provides value relevant information for firms that provide underlying operating (also EBIT and EBITDA) earnings but not for firms disclosing underlying net profit. For the first group the adjusting items are not associated with price, providing support for their exclusion by managers. The evidence points to non-GAAP earnings being informative, but only for firms basing adjustments and reconciliations on operating profit.

Keywords: IFRS, IASB, performance reporting, underlying earnings, pro forma earnings, street earnings, non-GAAP earnings, alternative performance measures

JEL Classification: G10, G38

Suggested Citation

Clinch, Greg and Tarca, Ann and Wee, Marvin, The Value Relevance of IFRS Earnings Totals and Subtotals and Non-GAAP Performance Measures (March 8, 2018). Available at SSRN: or

Greg Clinch


No Address Available

Ann Tarca

University of Western Australia ( email )

Business School
35 Stirling Highway
Crawley WA 6009
+61 8 6488 3868 (Phone)
+61 8 6488 1047 (Fax)

Marvin Wee (Contact Author)

Australian National University (ANU) ( email )

The Australian National University
College of Business and Economics
Canberra, 2601
+61 2 61250416 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane


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