Reminder – Non-IFRS profit measures are not permitted in the statutory financial statements

ASIC’s recent Media Release serves as a timely reminder that many entities still inappropriately show non-IFRS profit sub-totals in their Statement of Profit or Loss and Other Comprehensive Income (SOPLOCI). Sub-totals other than earnings before interest and tax (EBIT) are not permitted, and if included, EBIT must not be shown in bold (i.e. must not be more prominent than statutory profit/loss).

The Media Release highlights ASIC’s concerns because this particular entity disclosed – in bold:

  • Profit before depreciation, amortisation, interest, impairment, and fair value movements on derivatives.
This was a step too far! We recommend that entities presenting sub-totals in their SOPLOCI other than ‘Net profit before income tax’, ‘EBIT’, or ‘Operating profit’ reconsider whether these sub-totals conform with the requirements in ASIC’s Regulatory Guide 230 Disclosing non-IFRS financial information (RG 230).

What does RG 230 say about disclosing non-IFRS financial information in the statutory financial report?

RG 230 (section C) does not permit non-IFRS profit measures/information to be presented within the body of the statutory financial report (i.e. the financial statements and the notes). Non-IFRS profit measures therefore cannot be disclosed within the financial statements as:

  • Additional sub-totals within the SOPLOCI (except for EBIT if it is not shown in bold as permitted by RG 230.30(b) because it provides information to assess interest cover)
  • Additional columns in the four primary financial statements
  • A separate section below a primary financial statement, such as a section below the SOPLOCI that adjusts IFRS profit to arrive at a ‘bottom line’ non-IFRS profit measure.

ASIC may accept the following subtotals if so named, provided they are determined after deducting depreciation, amortisation, impairment and other items that are considered part of ‘operating’ activities (i.e. these items are recognised above the line’):

  • Results from operating activities
  • Operating profit or loss.

In this format, finance income/finance costs and share of profits of associates and joint ventures would be presented below the operating sub-total.

Why is non-IFRS financial information not permitted in the financial statements?

Non-IFRS financial information cannot be presented within the financial statements (including in the notes) because sections 295(2) and 303(2) of the Corporations Act 2001 require the annual and half-year financial statements to be prepared in accordance with Australian Accounting Standards - therefore no additional information can be provided unless it is compliant with IAS 1 Presentation of Financial Statements.

Can reconciliations with other GAAPs be presented in the financial statements and notes?

No. Reconciliations of key line items in the financial statements to amounts presented under generally accepted accounting principles (GAAP) of other jurisdictions is permitted in the annual report, but not in the statutory financial statements or notes.

Examples where non-IFRS financial information is permitted in the statutory financial statements

While the following list is not exhaustive, Table 1 in RG 230 notes that the following items may be included in the statutory financial statements and notes:

  • Information about compliance with regulatory financial condition requirements
  • Details of a breach of a lending covenant where the covenant is determined based upon a non-IFRS financial ratio
  • An explanation of the basis for determining director and executive remuneration where the basis is measured on non-IFRS measures.

Can non-IFRS financial information be presented in the directors’ report?

Non-IFRS financial information can be provided in the directors’ report, provided it is properly reconciled to amounts presented in the statutory financial statements.

More information

You can access further information about disclosing non-IFRS financial information, including in other transaction documents in RG 230.

Need help?

Please contact our IFRS & Corporate Reporting team if you require assistance determining the appropriateness of non-IFRS financial information in your financial reports.