Guidance and research issued on the use of Non-GAAP financial information 

Non-GAAP financial information, sometimes referred to as alternative performance measures (“APMs”), is financial information outside of financial statements that is not prepared and presented in accordance with generally accepted accounting practice (“GAAP”), or is presented as an alternative to statutory profit.  The use of non-GAAP financial information is becoming increasingly common in New Zealand, with many companies incorporating such information into their communications with investors and the market. 

Recently there have been two significant publications released on non-GAAP financial information in the New Zealand context – the first is a report by the External Reporting Board (“XRB”) outlining its findings from research into users’ perceptions of the usefulness of APMs and the second is updated guidance, issued by the Financial Markets Authority (“FMA”), on the disclosure of non-GAAP financial information.     

Research findings

The XRB recently released a report, Alternative Performance Measures: A New Zealand user-needs survey on the results of its research into whether non-GAAP financial information is meeting the needs of users. 

The research was conducted via an online questionnaire, which was completed by a total of 87 people.  The respondents were evenly split between those who identified themselves as expert users of financial information and those who identified themselves as non-expert, and there was no statistically significant difference between the two groups in their use of APMs, their information needs or their understanding of APMs and related information. 

Some of the highlights from the research findings are:

  • 88.5% of respondents found APMs useful or sometimes useful
  • 67.8% of respondents found multiple APMs really useful or usually useful
  • 56.3% of respondents use GAAP measures and APMs together, while only 20.7% use GAAP as the primary measure of performance and only 18.4% use APMs as the primary measure of performance
  • 80.2% of respondents found the reconciliation or explanation between an APM and a GAAP measure useful
  • 68.7% of respondents agreed that performance measures should not be limited to GAAP measures.
  • The two most useful APMs identified by respondents were underlying profit and EBITDA.

Respondents also suggested that companies could improve the quality and usefulness of APMs by:

  • Explaining how the APM is derived/calculated
  • Providing comparatives for previous years and explaining any changes
  • Explaining why selected components are included or excluded
  • Explaining why the APM is being used and is suitable
  • Indicating whether the measure is an APM or a GAAP measure
  • Reconciling the APM to the closest GAAP measure.

The XRB has made a summary of the research and the full research report available.

New guidance issued

In 2012 the FMA released a guidance note on disclosing non-GAAP financial information.  It has now released an updated version of the guidance note that reflects:

  • The requirements under the Financial Markets Conduct Act 2013 (“FMC Act”)
  • The FMA’s observations and findings from its review of non-GAAP financial information since 2012
  • Alignment with the principles of the International Organisation of Securities Commissions’ June 2016 statement on non-GAAP financial measures (except where those principles were inappropriate or inadequate for the New Zealand market).   

The guidance note is primarily intended for FMC Act reporting entities (“FMC reporting entities”) and their directors, but the FMA encourages other entities to apply the principles in the guidance note when presenting non-GAAP financial information.

In summary, the FMA’s updated guidance note on presenting non-GAAP financial information states as follows:



Defining the non-GAAP financial information

Entities should:

  • Define non-GAAP financial information and support it with a clear explanation of the basis of calculation
  • Clearly label non-GAAP financial information in a way that distinguishes it from GAAP financial information – that label should accurately describe and reflect the non-GAAP financial information and should not cause confusion with GAAP information
  • Clearly explain the reasons for presenting the non-GAAP financial information, including why the information is useful to investors and how it is used internally by management
  • Make a statement that the non-GAAP financial information does not have a standardised meaning prescribed by GAAP and therefore may not be comparable to similar financial information presented by other entities
  • Disclose whether the non-GAAP financial information has been subject to audit or review.


Entities should:

  • Not present non-GAAP financial information with undue and greater prominence, emphasis or authority than the most directly comparable GAAP financial information
  • Ensure that their presentation of non-GAAP financial information does not in any way confuse or obscure presentation of GAAP financial information.


Entities should provide a reconciliation from the non-GAAP financial information to the most directly comparable GAAP financial information.  An entity may disclose a reconciliation in each document where non-GAAP financial information is disclosed, or make a direct reference to where this information is available. If an entity provides the reconciliation by reference, the reconciliation must be easily and readily accessible.

Each significant adjustment should be itemised and explained separately.  When reconciling items that are components of GAAP financial information, entities should identify them in the financial statements.  If a reconciling item cannot be extracted directly from the financial statements, the entity should show how the number is calculated in the accompanying notes.  If an entity is presenting comparative non-GAAP financial information for a previous period, it should provide a reconciliation to the corresponding GAAP financial information for that previous period.


If an entity chooses to present non-GAAP financial information, a consistent approach should be adopted from period to period. Where non-GAAP financial information is presented, entities should also provide the non-GAAP financial information for comparative periods.  If there has been a change in approach from the previous period, the entity should explain the nature of the change, provide the reasons for the change and provide the financial impact of the change.


Non-GAAP financial information should be unbiased. Entities should not use it to avoid presenting adverse information to the market or to over-emphasise favourable information.

One-off / non-recurring items

Entities should not:

  • Describe items that have occurred in the past or are reasonably likely to occur in a future period (such as impairment losses or restructuring costs) as “one-off” or “non-recurring”.  
  • “Cherry pick” adjustments. When excluding non-recurring items, the exclusion should reflect all non-recurring items for the relevant period (i.e. both non-recurring charges as well as any non-recurring gains) regardless of whether they are related or not.


The primary differences from the 2012 guidance are:

  • Prominence: The FMA updated this principle to state that non-GAAP financial information should not be presented with undue and greater prominence than the most comparable GAAP financial information.  This change was made because the FMA’s review of non-GAAP disclosures against the 2012 guidance note revealed that entities often gave greater prominence to non-GAAP financial information, which in many cases resulted in an unbalanced view of performance.
  • Reconciliation: The FMA removed the need for a reconciliation to be provided in every document where non-GAAP financial information is disclosed. Instead, entities may provide a reference to where the reconciliation can be easily accessed.
  • One-off / non-recurring items: The FMA updated this principle to specify that the policy to exclude one-off / non-recurring items should entail all items of such nature, regardless of whether they are related. This avoids cherry-picking of the adjustments and ensures the non-GAAP financial information reflects the entity’s approach in its entirety.

The FMA also encourages FMC reporting entities to have an internal policy, authorised by their directors, on the use and disclosure of non-GAAP financial information. That policy should be specific to the entity and consistently applied from period to period.

The guidance note is available on the FMA’s website.  The FMA’s website also includes a question and answer section that provides additional insight into specific aspects of the guidance note.


For more on the above, please contact your local BDO representative.