ASIC is not totally opposed to the use of non-IFRS
financials, but there's no room for them in financial
ASIC gives some ground on financial information that doesn't
comply with accounting standards, but maintains its opposition to
their use in financial statements.
Instead, it will ban the inclusion of "non-IFRS profit
information" in financial statements.
For practical purposes, this is a distinction without a
difference, but it is one of the amendments that ASIC has
incorporated in its final Regulatory Guide on the use of financial
information that isn't compliant with the IFRS accounting
ASIC says that financial information which is prepared other
than in accordance with the accounting standards should not be
included in financial statements. It is prepared to make an
information required by law;
details of a breach of a lending covenant that is determined by
reference to a non-IFRS financial ratio;
an explanation of director and executive remuneration that is
determined by reference to something other than IFRS profit
Non-IFRS financials can also be included in the notes to the
financial statements, but only in what ASIC describes as the
"rare circumstances" where the non-IFRS information would
be necessary to give a true and fair view of the company's
In addition, non-IFRS profit figures may not be included as line
items or subtotals in the income statement, or presented in
additional columns of financial statements.
Transaction documents and other documents
The Commission is slightly more relaxed about the inclusion of
non-IFRS information in transaction documents (prospectuses,
target's statements, bidder's statements (where it may
appear as pro-forma financials) etc) and other non-statutory
documents (such as market announcements, analyst briefings,
Nevertheless, it warns that the non-IFRS information should not
be presented in a misleading manner.
To that end, ASIC says that companies should:
give equal or greater prominence to IFRS-compliant financial
explain the non-compliant information and reconcile it to the
IFRS financial information;
calculate the information consistently from period to period;
not use information to remove "bad news".
There is also a specific set of guidelines for the use of
non-IFRS financials in transaction documents.
When ASIC first proposed this policy, there was considerable
controversy, largely because of the fact that companies regularly
refer to underlying profit figures.
The final policy responds to these concerns by making it clear
that ASIC is not totally opposed to the use of non-IFRS financials.
However, there has been no resiling from the view that there is no
room for them in financial statements. ASIC's view is that, if
directors believe that IFRS-based profit figures don't tell the
whole story, they can address that issue in their operating and
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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