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Feb 26, 2014
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IFAC Issues Proposed Guidance on Supplementary Financial Measures
The Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC) today issued proposed International Good Practice Guidance, Developing and Reporting Supplementary Financial Measures, for public comment. This guidance seeks to establish a benchmark for the use of supplementary financial measures, in order to improve understanding of an organization’s performance among management, investors, and other stakeholders.
The proposed guidance provides principles regarding the qualities measures should have and disclosures that should accompany them if reported externally. Building on the qualitative characteristics of useful financial information, the guidance recommends professional accountants consider a number of attributes when developing and reporting supplementary financial measures. The guidance also provides a number of tips for disclosure of supplementary financial measures.
The guidance is meant for all organizations that want to use supplementary financial measures, regardless of size or structure, private or public. Many such measures are widely used in both internal and external reporting, for example, Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA); Underlying Profit; and Free Cash Flow.
“High-quality information is crucial for well-informed decision making about an organization, both internally and externally,” said Charles Tilley, chair of the PAIB Committee. “Well-developed supplementary financial measures increase users’ understanding of an organization and its performance.”
Supporting the profession and accountants in business is a key objective of the PAIB Committee. This type of principles-based guidance is an important aspect of achieving that objective.
“This guidance will help professional accountants in business and their organizations improve communications with their stakeholders,” said Karyn Brooks, chair of the PAIB Committee’s Business Reporting Task Force. “It will enable organizations to provide their stakeholders with improved financial and non-financial measures.”
Professional accountants, their organizations, and other interested parties are encouraged to respond to the proposed guidance to help improve its applicability in organizations of all sizes.
How to Comment
The PAIB Committee invites all stakeholders to comment. To access the Exposure Draft and submit a comment, visit the IFAC website. Comments on the Exposure Draft are requested by May 26, 2014.
About International Good Practice Guidance
International Good Practice Guidance issued by the PAIB Committee cover areas of international and strategic importance in which professional accountants in business are likely to engage. In issuing principles-based guidance, IFAC seeks to foster a common and consistent approach to those aspects of the work of professional accountants in business not covered by international standards. IFAC seeks to clearly identify principles that are generally accepted internationally and applicable to organizations of all sizes in commerce, industry, education, and the public and not-for-profit sectors. Previously issued guidance is available on the IFAC website, including Preface to IFAC’s International Good Practice Guidance.
About the PAIB Committee
The PAIB Committee serves IFAC member bodies and professional accountants worldwide who work in commerce, industry, financial services, education, and the public and the not-for-profit sectors. Its aim is to promote and contribute to the value of professional accountants in business by increasing awareness of the important roles professional accountants play, supporting member bodies in enhancing the competence of their members, and facilitating the communication and sharing of good practices and ideas.
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 179 members and associates in 130 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.