The Financial Markets Authority has this week released a consultation paper requesting feedback on its Draft Guidance Note: Disclosing non-GAAP financial information. The draft guidance note concerns the use of financial information in corporate documents such as transaction documents and market communications where that financial information is not presented in accordance with general accepted accounting practice (referred to as non-GAAP financial information).
The guidance note accepts that non-GAAP financial information may be useful in corporate documents and may be necessary to meet disclosure obligations under the Securities Act and Companies Act and provide insights into the financial performance of a business. The guidance note sets out points to follow in order to ensure that the information is not misleading and the additional disclosure that is required. The guidance is different for information in transaction documents and financial statements and other investment communications.
- Transaction documents and financial statements: information must not be misleading and should enable users to properly assess the information by outlining the assumptions, an explanation of how the information was calculated, reconciliation, statements of comprehensive income and financial position, and consideration of the whole transaction rather than selected aspects of it.
- Other investment communications: information must not be misleading and not be given undue prominence or emphasis. The information must be consistent with financial statements, reconciled with the GAAP financial information, calculated consistently from period to period, and must be unbiased and not used to disguise bad news.
Submissions are due by 29 June and the FMA proposes to issue a final version of the guidance note by 31 August. The draft guidance note and consultation paper can be accessed here.