![extraordinary items accounting standards extraordinary items accounting standards](https://www.investopedia.com/thmb/4UzTi4gJZ6trRJTnBjnYUyCPZfE=/2088x756/filters:no_upscale():max_bytes(150000):strip_icc()/GENOte23saleonetimeitem-ef0a5df240b94d3c98042e62dca9b917.jpg)
As a result, users were given a clearer picture of Tesco’s longer-term debt commitments than the accounting entries under the previous standard, IAS 17, may have shown.ĭespite the many good reasons for introducing APMs, there is also increasing concern that entities may use them rather than the statutory numbers as headline figures. This figure included the present value of operating lease commitments, despite the liabilities not being recorded in the statement of financial position prior to the introduction of IFRS 16, Leases. Indeed, non-GAAP information can provide a good link between financial results and non-financial performance, and are a way for management to highlight the business’s key value drivers.Ī good example of how APMs can bring clearer information is the use of ‘total indebtedness’ by UK supermarket chain Tesco. One of the major arguments for reporting them is that they can produce a clearer picture of the underlying business than simple statutory figures are able to do. Why use APMs?įinancial statement users often appreciate these measures. But the confusion arising from the Domino’s figures was repeated numerous times, with students querying whether they should be looking at operating profit before exceptional items, statutory operating profit, EBITDA or other key metrics highlighted in the annual reports. None of this is to point the finger at Domino’s – 95% of UK FTSE 100 companies use APMs. It does, however, raise a question: is this figure more important than the statutory revenue made by Domino’s UK, which incorporates only the franchise fees and sales to the stores themselves? As the group system sales figure also incorporates sales made by franchisees, which are not part of the Domino’s group, it is perhaps questionable whether this figure should be presented with greater prominence than the revenue of the group. Now, this is clearly an important figure, as it can show the strength of the brand, and the volume of sales made under the brand compared with the previous period. The difference is that group system sales relate to all sales made by all franchised and non-franchised Domino’s stores in the UK. Still very good, but far from the headline figure given. The statutory revenue (reported 16 pages later) was actually £475m. Impressive, certainly – only it isn’t the revenue that Domino’s earned in that year. On page one of its annual report for the year ending December 2017, Domino’s UK refers to ‘group system sales’ of £1.18bn. To highlight just one of the issues, let’s take a recent example from a company’s financial statements. It wasn’t long before they started to encounter a common problem: which figures should they be focusing on? Recently at the University of Liverpool, we set final-year degree students a project to select a company and then use research tools to analyse its performance and position based on its most recent annual reports and other publicly available information. While it is certainly the case that preparers of financial statements can assume that users possess a reasonable level of business knowledge, it is increasingly difficult for even educated users to identify which figures should be used when assessing the financial performance of an entity. Their annual reports headline corporate numbers that differ from the statutory figures required from the financial statements, which can lead to confusion among users.
![extraordinary items accounting standards extraordinary items accounting standards](https://slidetodoc.com/presentation_image/c7f4c8fb0963d41d9c2dc453f76acf41/image-25.jpg)
Most of the largest companies in the world now use non-GAAP measures, often referred to as alternative performance measures (APMs) or management performance measures. While corporate reporting may seem a far cry from the bear pit that is US politics, this historically sober affair appears to increasingly favour what might be described as sexed-up financials.
![extraordinary items accounting standards extraordinary items accounting standards](https://www.business-case-analysis.com/images/accounting/16x9/income-statement-extraordinary-item.jpg)
The term ‘fake news’ has never been more popular, thrust into the limelight by a certain prominent American. This article was first published in the April 2019 international edition of Accounting and Business magazine. We'd suggest that you use this as a guide when allocating yourself CPD units. One hour of learning equates to one unit of CPD.
![extraordinary items accounting standards extraordinary items accounting standards](https://quickbooks.intuit.com/in/resources/in_qrc/uploads/2019/11/AS-5-or-Loss-for-the-Period-Prior-Period-Items-Changes-in-Accounting-Policies.jpg)
Studying this technical article and answering the related questions can count towards your verifiable CPD if you are following the unit route to CPD and the content is relevant to your learning and development needs.
Extraordinary items accounting standards professional#