IFRS Non-GAAP Earnings Disclosures and Fair Value Measurement

Abstract

We investigate IFRS non-GAAP earnings adjustments for fair value remeasurements made by companies and analysts and the usefulness of these disclosures for analysts. Examining Australian listed (ASX 200) companies during 2008-2010 (576 firm-years), we find that companies disclosing non-GAAP earnings are more likely to have a higher incidence and magnitude of profit or loss items reflecting asset remeasurements and impairment in their financial statements. We find non-GAAP disclosing companies are more likely to have analyst adjustments to earnings for these items and lower forecast error and dispersion in the following year, suggesting usefulness rather than opportunism in the adjustments.

Keywords: IFRS, Non-GAAP, fair value measurement, analyst forecasts

JEL Classification: M40, M41