The Financial Markets Authority (FMA) is updating its guidance on non-GAAP financial disclosure. We look at the changes it is proposing, how they will apply and what they mean. The changes will particularly impact market announcements and investor presentations made under continuous disclosure.

Submissions on the consultation paper close on 7 April 2017.

Key changes


The FMA is proposing that non-GAAP financial information should not be presented with “undue or greater prominence" than the most comparable GAAP financial information. This is in response to a review by the FMA showing that the reverse is commonly the case currently, in many cases resulting in “an unbalanced view of their performance".


The FMA is recommending removing the requirement for a reconciliation to be provided in every document featuring non-GAAP information. Instead entities would be able to provide a reference to where the reconciliation could be easily accessed.

One-off/non-recurring items

The FMA wants to update this principle to specify that the policy to exclude one-off or non-recurring items should cover all such items, regardless of whether they are related. The view is that this would avoid cherry-picking of the adjustments and ensure that the non-GAAP information reflected the entity's approach in its entirety.

Presentation of pro forma financial information

In addition to its proposed changes to general non-GAAP financial information, the FMA has included guidance for the presentation of pro forma financial information aimed at ensuring that it is not misleading for investors.

The FMA notes that pro forma adjustments must be relevant and not extend past the relevant proposal. Any underlying assumptions, judgements, and explanations should be provided in full as well as the reconciliations detailing any material changes to the statutory financial information.


The regime applies to any non-GAAP information a Financial Markets Conduct Act reporting entity discloses outside the financial statements. Such information is commonly presented in:

  • market announcements
  • management commentary
  • investor presentations
  • disclosure documents filed with the Registrar and licensed market operators
  • other communications to shareholders and market participants, and
  • the prescribed non-GAAP disclosures for Product Disclosure Statements (PDS) and any additional non-GAAP financial and profit measures added to or substituted for the prescribed information.

Chapman Tripp comments

The prominence change will require some changes of behaviour as a lot of issuers like to headline their market announcements with the normalised or underlying profit, rather than net profit after tax.

The second two changes are sensible. Including reconciliations in every document can become quite cumbersome so a link to the issuer's website makes a lot of sense. And some recent PDS documents – for example, Tegel's IPO register entries - have had extensive pro forma adjustments.

The continuing tension between IFRS/GAAP and non-GAAP disclosure is due to the fact that historical financial reporting does not always serve corporate finance purposes in that it does not enable investors to assess what a company is really worth, particularly because of the extent of non-cash adjustments through the profit and loss statement.

Upcoming changes to accounting standards relating to leasing and financial instruments may further compound this disconnect.

For IPOs, the changes broadly align the FMA with the recent ASIC report on IPO marketing. The previous Securities Act approach to IPO financial disclosure focussed on production of a full set of accounts and five year summaries. The Financial Markets Conduct Act has relegated the historical detail to the online register entry. PDS financial disclosure requirements focus on summary disclosure three years back, and up to two years forward. The emphasis is on corporate finance measures (Total Revenue, EBITDA, dividends, total assets and cash) alongside net profit after tax.