10 Apr 2012

Auditor-General continues to watch profit reporting

1:39 pm on 10 April 2012

The Office of the Auditor-General says it will keep a watch on companies which produce what it calls alternative reporting of profits or losses.

This follows last year's statement that the office was uneasy at State-Owned Enterprises which report an underlying profit, or normalised earnings, that differ from headline figures.

The Office of the Auditor-General last year called underlying profits an alternative performance measure to profit figures which use approved financial reporting standards.

It said there was no guidance about what underlying profits are, or how they are arrived at, and they can easily overshadow information prepared in line with financial reporting standards.

The office went on to say if underlying profits are reported, they must use accepted accounting practice and not be employed to disguise bad news.

The office says subsequent research indicates companies are producing underlying earnings with some care.

But it says it will continue to watch the matter and it notes the Financial Markets Authority is conducting research into how underlying profits are arrived at.