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    37 views39 pages

    Chapter 2 - Non Financial Reporting

    Uploaded by

    Navhin Micheal

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    of 39
    Y, Nok covered byanystd » debale ¢ ota al ( a ee, meen, ~ Pot fo allows > Nok Audi led « 1.2 _ ALTERNATIVE PERFORMANCE MEASURES (non IERS financial information! ee * 5 z Not a ska! ‘The reporting of alternative performence measures (APMs) is currently the focus of fiendabateIn Skeephica | utone nlute 201 the European Secures and Markee Autor (SWA)pubishedGuielineson. 7 AiternativePefarmarce Measures for nied ‘asiers. The im of the uidelnes pros cond to promote the and also t encourage European ues to pubis fon an tet hancal performace nore . Roc to provide users witha comprehensive understanding of thir performance. ite SMA has the legal power to issue guidelines that market partic 1 make eae effart to comply with Though these Guidelines, ESMA alms to promate thd usefulness and wanspareneyet * Mislead ‘Altemative Performance Measures APIs) presented 10 investors. uae -_=—==— a eee = (a vserque fee BR Siione OO i ~ @Esms sunaeacneny each eee A) iy Coa feriag) ‘Soureed from: /www.esma.curopa eu: ‘The Financial Conduct Authorty{ECA) andthe Finercal Reporting Councl(ERC) ae UiSCompstent, usenet fx manor he come tne Goel; Ni 8 ay must ascertain that its finarcia! statements comply with the general 2 rinipies (GAAP) applicable in its own jurisdiction, flexi. Regulators want to obiain assurance that companies are not conveying information that eoult Vivestore, analysts and other imporiant stakeholders and expect entities, with the Hs amunt of their aust gogynitees, to make certain that APM are reported in a consistent, What isan APM? Definition: packveca Ir budqebed cecal fn noms “aia digiaotegtok lars nanc performance, postionorcash Rows of tnt epee Pensa esearch hae {ee eU-adopted IF) applied by the entity. Cem Scam Sock 10s ae Brom (or based on the financial statements prepared in accordance with the applebl rar reporting framework, mostof te tine OUTS FOM oy the figures presented in financial statements. Sfriy} witty FR based meas? NP srement otarmadentedb + 45 earn earnings, earnings bel dey tion and amortization (EB decided pM are to known as 36S RAPI EI EER onan Ks. They covera brad rie - Pe a serene eremincecrsconeor Gomes bogiven) For SB dor 7 APM BIT DA (09 underlying Pate ligt ring SUNTES 2019/20 parce ‘ ao Exam @ 4 Examples of fnaneish APM that are commonly used in company reporting include: “+ Earnings before interest, axes, depreciation and amortization (EBITDA) + Earnings before intrest an tax(FIT) a * + Adjusted earings . Free cach flow IAS F fapic. + bebt ratio + Return on eapitalemployed (ROCE) + Order intake and backiog Examples of non-financial APN's that are commonly used in company reparting include: + Production metres +Sales metrics Reserves Total water or energy consumed + Workforce + Cost savings + Greenhouse gas emissions Leacn \ Advantages and disadvantages of reporting on APMS ‘Auditcommittees should be aware that while there are many advantages to reporting on APMs, there ‘are also some significant disadvantages. Understanding both isthe key to ascertaining the quality of their companies’ reporting : EIGER Fhe on ars: eee eEGh:TSacdlyns< aod cesar” eigenen Grrr cues aerate Fat ice scan viata coun + highlight key val |APMs are a way for management to highlight the key valle drivers Pete Se tenets anne n eonesuicce iconic Eee eee hi ced costa tamove clissimilar Mane a Ao sea + Provide ousefulGomparizon™,sralyets and investors can find APs a vsetal eas to compare and contrast the prospEEI Sf deren companies within the same sector . Geo crore reporting — BPMs can provide a useful link between financial results ani nanan performance, setting te scene forbroader and more relevant integrated reporting iinaesetenonmonamm: Skoshcay | + Lack anperbiy betwen pers — the catpy dee ot eperton sila Pst tseers {he work of analysts and investors becomes more dificult, possibly tothe detrimentof the company’s share price * Risk of management bios ~ management may report on measures that lead to favourable results. APM feporting 1s then being used as a marketing tool, rather than as a means of improving transparency. a unaad TU * Risk of disqualifying the financial statements — if APM reporting is not reconciled to the GAAP ‘reporting they might contradict each other, rendering the financial statements meaningless, o ae SUNTES 2019/20 Parte Coase Suay Directors publish APAY caview Ir : Principles to fol when disclosing APMs =b follow ESMA , igidglions sinas tat adress the concept and descrflon of APMS, a ami a consistency ising APMs. The main requirements ate 2 {guidance or the presentation of APMs ane ae eo ee f the idopted, + in ton a ons ae se ES Ce eo tne (epee perormance of eae a Eines esr os masa seergeanene ae ‘reliability, and more in particular, explair the financial postion, cash flows or financial performance as well 3s the purposes for which the specific APM is used; ess Gente dettins ofa aoa ue ith meaningful electing theit content and basis of ealeuation in order to messages to investors; ( APMs should the nancial statements (@reconcliation should therefore be o- Gabhi ear Saal }APMs that are presented outside financial statements: Se, aes hoe ee as © far the ee no longer Fafiet fever erator and F canshiqiak However, thee pidelines may not be practicable when the sot toting si esi (gata bane obesad ole eior toned wey PRET EST ser witant tly cur bot implantation cet and angolng costs, Mast of he information Toque bythe gels sand colected fr steal magemert prpotes but ray not Be Uhefonat resid to say the daclnure piles ESMA Wf the View tat he costs wl note Seti ecnse ots sod general nt change over pegs. Teretote, onal costs wl Pa tpt oc soy'oiaing formation former pe epeod ESMAls of the opinin that this information wil hep usetsto make better grounded projections and estimates of future cash flows and assist them in performing, ns. The ‘nformation provided by issuers in complying with these aaa, ines will increase: el of Gisclosures but should lead issues to provide more qualitative information. The National Competent Authorities (NCAs} wil have to implement these guidelines as partof their supervisory activities and Provide a framework against which they can require issuers to provide information regarding APs Sourced ond resources -exams-study dakine Basis ‘Reconctiahes Comparah ie £ dis Fe Exp pe Pema Goosistnt 2 S tony! ¢ fF 404 change felevane vsehil ) Cree) raccaglobal.com/my/en/ student) ort ree5/p2/technicalarticles/performance-measures. htm 2 + G'%2 reason ‘suntes 2019/20 pate EXAMPLES OF COMMONLY REPORTED APMs 1. EBITDA [EARNINGS BEFORE INTEREST, TAX, DEPRECIATION, AND AMORTIZATION] EBITDA estat a "eomteaete ego tetas GHOWS ACOMPMNS PRANCAL PEFPORMANCE, SD popes merote a oemecxton a monTz~TON = EBITD, =p = eae REFERENCE FET FOR iets Sa ie nITDAis basicallya measure of earings before paving reahee of a i Pos Fnanctng moy vary fie Co fave borrowing | Gearing help io mpaciesn 7 Taxaa Can Vary Sito aitlan “taRFEEREn tas, uicieAichon Y aeceul #85 ~ Cons ¢ cash exp /campulars Sie (pees 1 Liab /oblig ca . eS i ced at by ang back depreciation and ameartsation 3 Walai ren Sey Pros (juchftable Coos Cif excluded) * Neo cash teen + misiead user ido & * Vacy depending 20 dhe achal raduichen in valet choice of ast / policed of Assak ‘ 2 Subjeckve (manip ce ook cefleck consemy nm paler itis widely utilized as a measure of 3 ‘company’s operating performance and to compare profitability between companies because it efiminates t ‘and aecounting dedsions:'s considered as anindcator ofthe earnings potential 1kStag v0) mowing sine Tax: From group psp (mokve) s all use parent eux calé- hegtee mt «use Avr tor (ale - —‘Nount SUNTES 2019/20 ee & aes if a business: {EBITDA soften used internal by managernent ait represents the earings of thr Ronapercnt as mettecral over aa “= pong tH meaaie ives soeholders an indation of management pscormance Caugatebeudtacruaecpntn gray a arc) 4 elpsinvestorsand analysts set no reuTingr ron-eash venue andl. mht others be oveonked. Disndrantager bie tea 2s eis have discretion 250 whats ined subject to manipulation bythe sce ctor as ent Cs fn ton anal on ange wha ene om one repeting tod othe est EITOA can be manipulated to ariially ‘nite corporate earings and hence rearonfortswidespea es, ; costs and thus provide 30 fon FRS (Non = GAAP eatings fore some eal business cos a0 incomplete picture of company groftaby, FATA TE not a arto tad dinedperforna ater /'s actual earnings Long 170A ison a gine es scat ea ofa copay’ ata nines She be deed itcotersusrgenTOAarapfomancemeasire shoud beavare fit weakness ad shoul use t nconunction with other performance Measures sure EBITDA conden Aiferert msthods of eating EBITDA have created a lackof clarity among investors about iheelsily and creat ofthis meth itisevident that spl by defn operational praia income diferent and ineuding or ecling Income from non-core opernians t would be posible to arive at drastically varying figures for EBITDA, Theresa. common misconception that EBITDA represents cash earnings. es not an accurate indatorofapertig cash Now of ay eompany, THE HCCaIe T doesnt tke ino account the changes in working capital ofthe compar, whichis 3 key determinant inthe context of perting cash fow fo afm EBITDA Manipulation The substitution of EBITDA for conventional profit falls to take into account the need for investment in fied capital tems. Depreciation and Amortization, which are. non-cash expenses but their igures ae also liable to manipulation by a firm with the intent to lnflate its COMA + The inherent problem with Earnings Before interest Taxes Depreciation and Amortizatio that a company is free t utlize one ofthe methods to calculate the figure in one year and follow another one next year in keeping with whatever figures show the firm in a better light. For instance, fa company does not have enough income from eore operations but is eaming a good sum from other investments and or sale of assets, then it might choose to show infated earnings by employing a method for calculation of ESITDA where. those Additional sources of income are also included S, Slowly, this measure gained popularity with ‘companies having expensive assets writtan down over long periods of time. By using Earnings Before Interest Taree Depreciation and Amortization, thay could presenta truer picture of ts earnings by adding back depreciation and amortization. However, later this measure came to be ‘widely used by 2 number of companies whose profitability could not be accurately portrayed through this metric, especialy tech companies, which had no such expensive assets to be written down ‘over a relatively long period of time.{ Sourced from: hitps:/www.wallstreet) a2 “Ths figure, hie is achieved om he 1107 ‘igure, Weteataly being used a TFET ee OP Reshichen, Wes anes ued sere sraorinanitam intheirfnaeil reports Fah the impact one-oever oF» ite rier secountr beeen ne are eraneureeyre pote erected an, ound onan comportesar stopping vp fe eles of stig sharenckes understand dene ‘inane performance “Prach's? Agm tn r there wil ba (ew occasions when there is only one event in 3 Targes tis accepted that there wil be some such cases where rial restructuring that is par ofa single great majority of the companies in the sample who used elther “gusta oF he principal description for their adjusted measure of profit. twas faund {rom the ramon items were excluded from the earesponding IF8S measure in arriving atthe ‘adjusted measufe. These are such 2s: + amorisnisn Se Buinranebles + Noo cash ile ‘teeny pee eeey + Fall in value atleast some restructuring chaeesand 4 oo + major exp ; ‘rou reon-cesh ihaca|ienplicahes + profit orloss on disposal of necietguulle IT ah acuee Cee one Ee Se are ee { + teal ek (ce «+ share-based payments taali'sed Ft CCF Pros cape econhibuld — con) + Nea ca ch ilém ocan cut GY eco ys EPS i = cost for Sevicas eed 2s RomnaxpCMmayer*P}) 2 Aecavog Asset conedt prseatflansgcash — sditfarent malted ea twas ave found that the agjusted measure of profit was higher than the IFRS equivalent TS Cmaléeial may mnisiead Investors when they are assessing an entity's financial performance. event) oh RBH SDe {Sources from: tesa cor getottocrnent 987009 72634 Sr }d05530{¢b5/081117 AP MCAR- themticrvew pe. msc) + if Qwenisad + No of sh*t € fpr Eesv 8 SUNTES 2019/20 “GAP Eorings, Pro frn” ug, od ETON ie ee 205 Holes eaves Ss 4500 ‘Netincome os) shostwode jo fom) | Felded om: iceamnera | Sc ‘tl ela ssaresps Bi) nore i) Sede omprn pe os angen serge E = selioesi a lara eth (66) VERE Te is dinoned) ERS ae ea Gi ay) » | 29 100 Source from: htas://p0o.g/images/i&%Xam& Pasoneacdiscl This APyn {Proforma earnings most often refer to earings that exclude cortain costs that a company believes resultina distorted picture ofits true profitably. This sanother term for underlying profits welll = Rosy [mislead Tad eeaauMlibtapatased aes} wer shouldbe cluded they ppeartobenvals 4 Costof the business and reeve companies ofan ateratve cath expanse. Sh Loh o(clee icc Le om FRC has challenged companies where narratives focus only on news” or if trend information is | ‘ot sufficient to explain the effect of non-recurring items. P01) on abisp Asse FRC has also observed that some companies have also seen labels such as “ used where some ofthe items appearing under that label appear tobe ec SUNTES 2019/20 IPLE: SBR STYLE SECTION B The directors use ‘underiying profit’ to comment on its financial performance. Under ying profit is» ‘measure normally based on earnings before interest, tax, depreciation and amortisation (ESITOA). However, the effects of events which are not part of the usual business actity are alse excluled when evaluating performance. The following items were excluded from net profit to arrive at ‘underivng Profit’ In 20X6, the entity had to write off 2 property due to subsidence and the insurance proceeds Fecovered for this property was recorded but not approved until 20X7, when the company’s insurer ‘concluded that the claim was valid. In 20X6, the entity considered isuing loan notes to finance an «asset purchase, however, the purchase did not go ahead, The entity incurred costs associated with the Dotental issue and so these costs were expensed as part of net profit before taxation, The entity felt that the share-based payment was not a cash expense and that the value of the options was subjective. Therefore the directors wished to exclude the tem from ‘undertying profi Siilay, the slirectors wish to exclude restructuring charges incurred in the year, and Impairments of acquired intangible assets. SOLUTION: An underiying profit describes an actual reflection of a company’s profit. The underlying Profit is not the required accounting profit that is recorded on financial statements and documents ‘mandatory to follow preset rules and regulations, This number is calculated by the company to show ‘what it believe to be an accurate reading of the company's profit position and may exclude one-time ‘charges or infrequent events, The calculation of underlying profit is different for every company. It begins with the accounting profit and makes adjustments as it sees Tt In recent years, it has been argued that there should be some kind of guideline in place so thatthe reporting of underlying profits can be compared between companies. When dealing with proper reporting, the accounting profit will, need to be used for tax purposes. The underlying profit is incomplete and is used forinternal business. planning only. There can be an argument for excluding non-recurring items from the net profit figure Therefore, itis understandable that the deductions for the impairment of property, the insurance recovery and the debt issue costs are made to artve at ‘underlying profit Financial Statements states ‘An entity shall present additional line items, in the statements presenting profit and loss and other comprehensive income iFrelevantyto an understanding of the entity's financial performance’ TEEATO justify presentation of underlying, adjusted and pre-exceptional ‘This paragraph should not ice OF the Income statement. measures of performarice on the: Parte ng Now nl / Brn! hn . ese sformance being achieved — whether in 2 4.BENCHMARAING aang what the est pro ever Benchmarking Ma tera aio atererindty. the sterai sch oF a er eee ecehroingstnae He Beso, movie en aa i ape commoner propostiont> ear fam cters at Seer o rgat ci celeting bh. vr busnsscan ae Pench marking the ea nies oportntes fx Ho ‘SUNTES 2019/20 ‘momentum necessary for implementing change. One Gotoanctter Co PETITIVE BENCHMARKING ‘2 compary already | O Zompany wants {© _ ‘with analyzing. world-class S anised ad proves | ease postion win wot i oie industry. In addition, competitive | performance. This fe of company needs to identify | whena company needs to go | Dd cycle time for opening new | industry leadership performance | outside ofits ewn industry. accounts in branches coast to | targets. coast i identifying, and | necessary if comparable industries are not readily available The steps of benchmarking ‘Benchmarking is a process for obtaining a measure the "what," and benchmarking is the “how.” benchmark. Simply stated, benchmarks are Entities need to document benchmarking objectives and scone and develop a date collection plan. ‘The entity should also identify research sources and initiate data gathering, Benchmarking is not just 2 matter of making inquiries to other companies or touring and documenting another company’s ay facilities or processes. When making use of benchmarking, a company should not limit the scope to its own industry, nor should benchmarking be a one-time event. ‘The information collected from the benchmarking process can then be used to identify gaps in an ‘organization's processes in order to achieve a competitive advantage. Using the findings, itneeded 10 be communicated to the executive leadership to ensure continued support. A recommendation plan must be implemented with process owner Use i 4 Findings Sourced from: www google.com/search 90 ‘SUNTES 2019/20 eRe CONCEPTUAL FRAMEWORK 2018 for performance measures “Stakeholders perspective (SBR exam wil quite candidates to adopt a stakeholder/Investor focus], “The Conceptual framework states that general financial reports vide oa oa 3 sr sources, for example, general economic i acne eens political jolitical climate, and industry and company Bid) ns ad ae cal ear vert soe Sw Stock ao forthe sats that a help existing and potential investors, oA SIT Noa ony beepers aman me ee tet 5 ee ene setae artery 32> diferent, and possibly confictng, information needs and desires. i t inancial statements is to prov ‘According to the Conceptual Framework, the eee Information about an entity’ assets, lables, equity, income anc exper naan ‘of financial statements In assessing the prospects for future net cash inflows ‘assessing management's ‘As a result, financial statements manag sto the entity's er Sor? aa ee eset alles nity whic enies eee neg the reporting period and about income and expenses which arose during the re ie sire erected at users who provide reseurees to the reporting entity eut.ack the ability to oF al ‘entity to provide them with the information which they need. The revised Framework limits the range of addressees of general-purpose fivancial statements to existing or potential investors, lenders, td athar eer. The revedConcaptl Framework contnies to setnawledts that general ements may not provi mation which serves all usors! needs, Purpose financial statements may not provide information which serves al Disclosure of _additional_infor statements The Conceptual Frameworkstates that ‘ reporting entity communicatesinformation about een ty ponent eon Se ee ctw osteo neti ee el ans ae cs spc the eran xargs rater foe tars usconcna ; porting decisiong it also constrains decisions about presentation and disclosure, Effective communication in financial statements is also supported by considering the following principles: (2) Entity specific information is more useful than standardised descriptions, sometimes referred ios bon information in different parts of the financial statements is usually unnecessary Cal-make financial statements less understandable, ce go* IFRS requires an entity to dis information which is relevant to an understanding of OS te ets tne ee nancial performance. A company may disclose additional formation where it is felt that an entity's performance may not be apparent from accounts prepared under IFRS. ractices Coe sufficient information to understand an entity's postion or performance PancipleBaced 22 5 anal sunrts2019/20 pone son (saa ern ene Trrraisea ngassapnerstand managers view of what isimaoreart 6 Une atare of management ects rr acre en tain sane a Pesan Oaenet Secon Beko nancial sateen cemation acrosperece ana betwen aie cous fhe 1 oration ofaddonainformation maybe inconsistent seman excess opus pce ot ‘ere i alo Inex af stand re luith that defined or specied in 1F8S and the entity may 2 san entity financial performance scins information snay rake iw Wety the compete tof Sores Sen RE Te eoinrastedor et Aetionaty, he ormaton nae Ser unde Fees or cred eet because of location win he francel Satan shes it fom the Nomen nnandlalinfrmatin should be com abated 2 ay tat tee eH See io describe the information should be corresponding IFRS financlal information. ca A rege tothe nti of te ermation, The tm o Pel should not cause, i should accurately describe the measure onus with FS infrmatin or cicur vourdares ace not special defined In 5, ut sey do dere om the objective of financial statements Disclosure initlative ‘The IASB is undertaking an initiative £9 eeoved, The 1ASB DizcosureIniative Project as se" 40 00 sta from the use of APMs, Tis iniatveis made uP of 7 jantion i AS 1 that aan corm, The project will constr sch WO Tseful information and adlins + aie th Oe ons, les, Je financal reporting can Be il i too much detail ean of how Sere desied to aape Sania semen “tend of specifying precise Ono mustbe used Ths tudes whethe ARS TERS pumiers such as EBT and EBITDA, should be act believes that adhering to its guidelines wil) ity of APs. The IASB has tated 0 100K Feelosure initiative, Focusing particulary 8 5 part at ide useful information ony statements have suggested that AMS Sleephical fact that many entities Pr vironmental reports an ‘ime, makes clea that such reports ide the scope Of IFRS at the issues arising for IAS 1. The users af financtal theyar IAS 1 acknowledges the reviews by management, statements but, at the 53™Me financial statements are outs scent reports and statements such as francis! crenlue added statements outside the franca, i statements presented outside SUNTES 2019/20 or many peas requttors nd standard oo eee Best ee nance! performance and@t eel Ghaipeipermitted on the face ofthe Rule ei porting, Ba fis iitional analvle Pe te nds oar Penman metas of convevinehe n° osc) lowed oe Wandering sie eae EPR capo in accordance with anton) oa OR prepared i eS to be willing to give Erie oA est aRaES, Spear omthe doce ot ringette. sors eae a ets ness ofthe husnes 9 smay proving more iflormaton ot Se TSS intense asic ce assist users im ing avestment decisions but they have lm! Ns. ca ie ‘APMs, such as normalised profit, earnings before cus toia 1s common prac for ens to present APM, cd rt ears et + CC interest and tax EBIT) and earnings before interest, ta, deprecation and ar iain te Boi: 4 sem snes cmmaniaten nc ce cis Cera These alternative profi figures can appe: ieulor income and ika) _teleases and analyst briefings. Alternative profit calculations normally exclude parts ul am BAe } expense items from the profit figure reported in the financial statemeTts. For exam" papal Foe cc re cons or pees ata outset onary aces ofthe ent or arg Joni eer upto Enhy chs considered rlavant frm dant ier eld be the exon of ncameoreganen which cori theviewpo of he pac TSS WuPsFEMGITERESFAPERorsierng he expected impact on (EW cD inne peromoncsanoampe ct ilar aren unr ses tom ranges nthe a valiz FE elfeancalintument. Tre eaten a erst andar iclpate Setngash Entree teresa of Tm feentysopeatarsand hsenpncrt Tandy andatsion these APMs can help aence ier, a pof the company's results and can be important in assisting users in making investment MOI ysis er FEIT «orca vogerpornc of on evr’ Compa atemeniy atthe nt uh ne ie cee ire entities in the same sector, market or economicarea. However, they can be misleading eater ona ey ye bile ct lady on (oy vo yes, akc casscatn of fensand save abteolanspreny. Saf te Subg/ vary omlo yo Often there ete information ox howe alternative profit igureiscaleuated or how itreconciies 1° © so ith the zed in The nancial statements. the APMW's are often described in terms which WD) ee rchced potest ere ant ue aie ee i Ieghse ort ser Choice oh Policy rola dif! anda to - xl arbre nd eee tT Nel cutie brett ‘+ all measures of financial performance not specifically defined by the applicable financial ‘reporting framework eg £617, EBITDA, fre cash flow, underlying profit, net debt, etc) ‘+ all measures designed to llustrate the physical performance ofthe activity ofan issuer's business (eg sales persquare metre), and all measures disclosed to fulilother disclosure requirements (eg pro-forms financial information ‘ra profit forecast) included in public documents containing regulated information. An example demonstrating the use of APMIS are the financial statements of Telecom Italia Group for the year ended 31 December 31 2011. These contained certain alternative performance measures in addition to the conventional financial performance measures established by IFRS. The nom-iFRS alternative performance measures used are outlined below: 94 * SuNTes 2019/20, Pa 4 eanDAs this fount measre fused Telecom tata athe far aeet a eran ona) ne ee Trenton ee Erato taut representa vel unk of measurement forthe eshtion of he per ‘performance of the Group and the Parent. = si ‘ornanke change in Revenues, EBITDA and EBT: these measures express changes in revenues EBITDA and E617, excluding the effects of the chanez in the scope of consolidation change litlercness and omorganic components constituted by oon-ecuring items and ther ner Sree anor, Tenctueenron erTDAand EBs also used im ‘tse Tomcom tata blve hat Net anc Dede eis ai eerste aay tome Pee de ac eatSerP etter te feo on ows kn free tables showing the amounts taken from the Statement of Ftandat Postion and wed to taleulate the Net Financial Debt ofthe Group and Patent tn onto ea aso mean w intodueed deserved a Adjusted net facial rant ihch enclues effects that are purely accounting in nature reeling fom the fr sive Ineazurernent of derivatives and relate financial assis and Wabi. ‘The iASlundertaing a inne to expos how asdosires in FS fan FONE 2A Insproved. The IASB ‘ys sired to lock at some possible ways to address a ie onthe use FAPMs.Thisiniatve s made up ofa numberof projets, Caen shore term and megium rojec wi consider such ties as adng an explanation (AS 1 eh too much deta ul information th examoes, fof how (AS 1 requirements are designed t ET terms that must be used. This Includes whet eR numbers such a should be acknowledged: In the UK, the Financial Reporting Counc has ss sted that it supports the feson of aerate a eter en tere or pot wh atonal we leant ERAS Pe marl Reporting Counc estat such mente ae cuts aon a 2042, te inal Macets Auto FMA)n he Ucn Gs Ae franc ates Tae periomance mesures ard tp of ronGMAP (anc or eeson such as underhig profits EBT and EBTDS vt appear co be used by srs sure 0 preset coun oT opis DEES Are Pe rameig cern meats spect eens = Congh DS demand for ats en Hee ett ba bane Benet rare Tesi, Buln ne nove the necessary frat fg the wef ft APM ve ths end, the europea Secures nd Mrs Aaosty ESMAYHSS hunched 9 Sree Te een rte Performance Measures The sm 9 morove the Wanye and “Suds ancl informavon, whe reucrg oration 20a of Coan ms, Further EMA wishes trove cberene nthe 0 4 presentation of oar se bern (Ar) a enna prt, coniers 9We AE and Usefulness of financial information. the guidance forthe presentat follows: hat address the eancept and description of APM, Soe sand consistency in using APS, The man requirements 37825 SUNTES 2039/20 content + pomssroual + Aemsthatare + Anisuer shou “should Be consistent overtime 1+ an apn czassto be used, the sue shou defined 2em Mowever these guidlines m nthe cost of providing this information ‘outweighs the benefit obtained or te information provided may not be useful to users. {issuers wil mst ely incur both implementation costs a af the information requred by te guidelines is already elected fr internal managernen purposes but my not bein {he format needed to sas the dicloste princes SMI ofthe view thatthe cots ll ot be stgiieant because APS should general not change over parade, Therefore, ongoing ost wil felt almost exclusively to updating information fr every reporting price ESMA i ofthe view that {he application ofthese guidelines wil improve the understandably, relevance and comparability of APM. ‘Appleton ofthe guidelines wil enable users to understand the adjustments made by management to gues presented inthe frail statemenis, SRA safe opinion tal ths nformation will users to make better grounded projections and estimates of future cash flows and assist them in performing equity analysis and valuations. The these Sourced from: (eitleumasiglbecom iny/en/studetfeanrsupporrsourcesfprfesionabexams: study. (eso.rces/p2 hechorcobartices/performance-meosureshtn! SsunTes 2019/20, parte Source from: httpsif/waw ers] eufrepecfers/papers/03.1_96 pa 12.2. CURRENT REPORTING REQUIREMENTS JERS requirements SESSA ewer SESE exer pupone franc satemants meee Ae aleration Wom, other sources, for cxamele, general oramis 5 pecaton, pla ev Se eangusey and company ouleck: vents and politicar climate, vr (qafooranalandsocaimaten) sangeet tee el SES . Pn EU ane, Mau BOOS 3 ly AFRS Rat may require i iisspr 2 te is Contingent Liabilities ond Contingent Assets (Refer IAS 16.35 well) 1 Statements which requires cisciosure of facts materi) t0 2 standing. of financial statements VOLUNTARY DISCLOSURE |A. SUSTAINABILITY REPORTING a sustainability reporting enables organizations to consider thei issues, enabling ther tobe more transparent bout the ‘ Co affected by nakeral eatemnisies JA prose an of wide range of sustainabil What br organization about the a ‘A sustainabilty re Ghd demonstrates th ‘A sustainably report is a eport published by »
  • suntes2019/20 pare decison making whey sy evsntenow succes te comer fat Sethe return of eacaoral ese ae te 1 ay. Ts apprch ca halo ops ani ramp, ec crnrion tote Sot ruth KH mS eon ne nena enone to promote sustainable cconer in 7 ee ye martats to wnprve tei fot ancl spigot in be ‘oval waves ca a rf es wh ny HT “pamtors eek S06 information produced inne th paceptd recommendation’. ‘andthe ret others, nave developed guider a sta LE omer enh veto crn 2 frees pi or OP companies hols RGET TO hie SHE HESSEN ‘rows Men dese" and "The appro= ta rota ofmeasurnle pacts 2nd Her 2 orn Tees and a narrat rt 7 nate anyones bac he es eh Sha tature outlok af the ent stitution iw thot envionment ewe setmportane tat SOG relate reporSra's eer sen gpecs ofthe en. satel’ Sto aay port ipack wih are es rex companies 008 feng order toe Seg senna cee Straw the entity feels Ou en are es include «oy eyed oppertanitis Det sand changes hat rave oxeued 3) Me business model as resi see eran agers eien/t0 peste aS pense busines sand opPOTNE Te sanies who soul pubTohiratei 52S ane of Orgone arta 25008 ‘enor. For examle, 6 yy to dress negotie so Pe Poa onamental impacts ey 0 nereaaly SeeKNE er cman shoretem Fence oe er busines estos a ae cnc oem TN wong eonations ff AOE 0) vir wants to have 9 porte hae eat rset, Ties ON Ee be prides a inormavon sha a2 99 a ome wore anypoerenieame Hee wrstnow confident company rewil cea and tan chose not 1 neat Se ain nesters Aare ag ak afer an mora meas om ‘ctvely engage i ne OF ‘anndal opportunity, ever thous? aaitional Fk 0 tacts wt util eC of capital he dora crening trons tones icenay aso affect sagt te her xan assump tate SECA Towering it for sustainable PX to Row forecasts business austin panies that have specie yoy sereonine king bas. They rategies) whieh may it wes pies ar einating 99°79 eatures Tor xa Sa inaed 7 te Bass of CO foo ae conkebutin © targets, investors wil Se tats uted csdosires to eth Sts 2 oF oppotunties on whch the? tar at engabe wih COMPAS a9 suntes 2019/20 Parte ks 10 and invertors wil oe potenal business opportunities as ‘companies that adress the ris ene CPP rares at develop new beni products 2¢TEeE people and the environment 3 he business raks elated tothe SDGH vestments that may mitigate writen by 2 member ofthe SERIE BSI REPOTA EAI VELOPMENT GOALS sUNWAY COMMITTED TO SUSTAINABLE D) 3 am eta Portes tL) igteam inert Peng S C2 Penang PR Csi es aoe end ¥ 17 fornccons @ SUSTAINABLE DEVELOPMENT G&ALS 120 58R SSUNTES 2019/20 o measure environmental impacts outside the reporting Uitwhsther such measures should be included in the bank's sr company to report on its own impacts). ‘these indect measures company and there is some report the bank may sy it f0r ymental impacts is th refore complicated, and is often frustrated by difficulties oot ren Tope, environmental reporting is the production of narrative and a sctton’s environmental impact or footprint’ for the accounting er mation on an organisa sumer nfomaton ona erative information ca be used conve oP/cves ee bts re i at revs yar tres maragerer 225 scsi wail omar Tre iecanre anh ed rept on ose intat way, suchas emision or pollution ssures that can usefully and meani ily be conveyed in that way, such a pas orcvlemetran esuresconeued [prhapsKh tonnes, es) ond tise fn hectares, square metres, etc) and similar. ui a inmost counties, environmental reporting sete aunt terms of 2k ot isting rules. in itizc, however, © has become difficult to resist for large companies concerned about. thei reputations, certainty in| riesin whichlarge companies experience political visibility. Acca MEIN compare can reread tepotng at they He, ut prate, «numberof voluntary reporting famewarks have besn ‘adopted. The best known and most common of these is called ‘The GRiis a f@perting stahard in wtitiprescribesand sozciteshow teams EE EEEON sipide tangs of socal and environmental sues. arose from a numer of organisations (some no ‘Corporate) inthe US seeking to enhance their reporting in the late 1990s. Its website describes itself inthe following way: The Gla Repring Inve (GR) is 2 FORNRESEDREN shot promotes economic environmental and social sustainability. GR! provides oll companies ond organisations with a ‘comprehensive sustoinabilty reporting framework that is widely used around the world. It hos published the Environmental Standards ‘The 300 series of the GAl Standards include topic specific Standards used to report information on an ‘organization's material impacts related to environmental topics. ‘As it @VONEUVERMe, the GRI became more|infllShtial Wielding in €UrOpe and eEWHERS, until tnany large companies adopted it as 2 framework for ensuring the breadth of thelr reporting, Categories. Some companies row openly say they report thelr voluntary fnformation under GR while ‘others base their reporting an GRi guidelines without saying explicitly that they do so (perhaps wishing to adopts provisions selectively) WHERE DOES ENVIRONMENTAL REPORTING OCCUR? Environmental repoting/ganioecurinatrangeiofmediaincuding in reports, on company bsitesyinaversing oriromtionalmeds, To some exter, there hasbeen forial and environmental information in annual reports for mary years. In more recent times, however, many companies and most arg companies ~ nave produced ‘standalone report dedicated just to environmental and sometimes social, issues. These are often expensive'to produce; an 126 SUNTES 2019/20 Parte sen companies use a range of names for teseaiaenrenors offen Vole ry Cone re or competence te Wo ee evn oe {perhaps ‘sustainability. report’), others include a range ‘of social measures in addition to the {oes Ss rhs ob rene lees nthe srvonmental emer gya werangnite ie ender interest Barclays, the UK bank, refers to ‘ts ‘Citizenship report, for Texample, and GlaxoSmithkline, the ey oe semen EN ‘rners combine oharmacetes mat cal and goverane ering prosuce a S55 (arson social and governance) report. i ADVANTAGES AND PURPOSES OF IMENTAL REPORTING ecouse ofthe complex nature of business acountabis iF eat reduce the motivations for aera at raporting downto just afew main pints. Derr ‘stakeholders can benefit from 8 arms erwrenmental reporting, However, and ti #93016 ff serving the information needs of 8 ange of both internal and external stakeholders some would argue that environmental reporting (59 useful WAY © hich reporting companies can rare aacharge theteaccountabitis 1 soley and 69 PT generations (because the use of help te She prot teevnmentean aera Baro Tn addition, it may also reas igen a company’s account tots sharePONe By providing more yformation 10 spare headers, the company’s is less abe to conceal mpOrarh

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