Exploring Comparability in Disclosure of Non-IFRS Performance Measures

32 Pages Posted: 28 Mar 2019

See all articles by Greg Clinch

Greg Clinch

Macquarie Business School

Ann Tarca

University of Western Australia

Marvin Wee

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

Date Written: February 11, 2019


We investigate the comparability of non-IFRS performance measures and adjusting items (exclusions) disclosed by companies from eight countries adopting IFRS Standards (Australia, France, Germany, Hong Kong, Italy, Singapore, Sweden and the United Kingdom) in their annual reports for the years 2005, 2008, 2011 and 2013 (1,577 company-years). Presently performance measures may be based on undefined IFRS subtotals (e.g., operating profit, EBIT, EBITDA) or may exclude items from IFRS defined totals (e.g., underlying net profit excludes IFRS line items) reflecting managers’ voluntary disclosure choices. We find some categories of adjustments are similar between countries (e.g., for impairment and merger and acquisition expenses) but the incidence and amount of adjustments vary widely between firms. The type of non-IFRS performance measures disclosed differ by country, likely reflecting prior national practices and positions of security market regulators. Based on our evidence, we conclude the IASB’s consideration of mandatory defined subtotals in the statement of financial performance would necessitate changes in financial statement presentation for companies but should improve comparability between them.

Keywords: IFRS Standards, IASB, primary financial statements, performance reporting, voluntary disclosure, underlying earnings, pro forma earnings, street earnings, non-GAAP earnings, management performance measures, comparability

JEL Classification: G14, G15

Suggested Citation

Clinch, Greg and Tarca, Ann and Wee, Marvin and Wee, Marvin, Exploring Comparability in Disclosure of Non-IFRS Performance Measures (February 11, 2019). Available at SSRN: https://ssrn.com/abstract=3343965 or http://dx.doi.org/10.2139/ssrn.3343965

Greg Clinch

Macquarie Business School ( email )

Eastern Rd.
North Ryde
Sydney, NSW 2109
United States

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

HOME PAGE: http://www.firn.org.au

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