CFA Level I · CFA Level I Exam · Financial Reporting Quality
A company reports a non-IFRS measure in its earnings release. Which of the following disclosures would most likely improve the quality of that measure for investors?
A reconciliation to the nearest IFRS measure most improves quality. It lets investors see every adjustment between reported and adjusted figures, judge whether items are truly non-recurring, and compare the measure across periods and with other companies.
- AA reconciliation to the nearest IFRS measureCorrect
- BA statement that the measure is audited
- CA policy of changing the adjustments each period
Explanation
Regulators and standard setters expect a reconciliation of a non-IFRS measure to the most comparable IFRS measure, allowing users to see each adjustment. Changing adjustments each period reduces comparability. Such measures are typically unaudited, so claiming otherwise would not be a sound disclosure.
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