The International Federation of Accountants’ Professional Accountants in Business Committee has issued guidance on developing and reporting supplementary financial measures that fall outside of GAAP.

The guidance provides recommendations for the use of supplementary financial measures as part of high-quality financial reporting in organizations. Since such measures fall outside of GAAP, the Professional Accountants in Business Committee noted, they may lack transparency, comparability and consistency, which are essential qualities for investors and other stakeholders who wish to assess financial performance.

To address this challenge, the PAIB Committee’s guidance establishes a set of principles that allows accountants to develop and report useful measures in accordance with the qualitative characteristics of financial information.

“Supplementary financial measures can provide stakeholders with a greater understanding of an organization’s financial performance, helping them make more informed financial decisions,” said PAIB Committee chair Charles Tilley, who also is also chief executive of the Chartered Institute of Management Accountants. “Because supplementary financial measures are widely used, and can contribute to the overall picture of an organization, our aim is to improve their quality and usefulness.”

The guidance builds on several characteristics of useful financial reporting, including relevant and faithful representation, along with comparability, verifiability, timeliness and understandability.

“All measures in a financial report, whether they are prescribed by GAAP or are supplementary, should be clearly defined to provide comprehensive understanding of an organization’s financial performance,” said Karyn Brooks, chair of the PAIB Committee’s Business Reporting Advisory Group, in a statement. “This guidance will serve as a reference for the development, implementation, location, and disclosure of supplementary financial measures.”

The guidance aims to reinforce accountants’ ability to produce high-quality reports that enable sound decision making about organizations.

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