The use of non-statutory performance measures by ASX 200 companies is on the rise. A new global push would being better transparency and disclosure.

The virus is also likely to be behind the increased prevalence of redundancy and/or restructuring costs in 2020; 31 per cent of companies reported these, up from 21 the prior year.
The use of non-statutory earnings measures is designed to help investors understand how a company is really travelling once you strip out one-off items and other things that the company decides obscure the performance of the underlying business.
But sometimes these measures make life harder, rather than easier. Following the August reporting season, this column compared the underlying profits reported by the ASX 200 to their statutory earnings and found their statutory net profits were 76.5 per cent, or $28.6 billion, lower than the underlying profits they also trumpeted.
Some blue chip companies including Qantas, Boral, Santos and Woodside Petroleum reported statutory losses of well over $1 billion but also said they were profitable on an underlying basis.
The growing use of earnings before interest, tax, depreciation and amortisation was also clear in my research.
And there were some pretty funky variations on this theme, including tech company Appen, which this year reported not one, but two, underlying EBITDA measures, the second of which remarkably excluded investment sales as well as marketing and engineering costs.
The KPMG report provides a very good reason that this matters to investors some 88 per cent of companies used non-statutory performance measures when determining executive remuneration, mostly on short-term incentive plans.
KPMG said the most commonly used metric was a form of earnings before interest and tax, which is a little strange given interest and tax would typically be considered in the dividends that companies are paid.
KPMG audit partner Zuzana Paulech says that for a decade Australias corporate watchdog has provided strong regulatory guidance and active surveillance on the use of non-statutory measures, to ensure they are well explained and consistently applied although often they appear outside the statutory accounts, meaning they are not subject to separate audit or review.
But a global push has been launched by the International Accounting Standards Board to strengthen the transparency around the use of non-statutory metrics by requiring information on why and how they are used to be included in the notes to a companys financial accounts.
This would make them subject to audit and review, and generally ensure that there is a more standardised approach to disclosure on these metrics.
The IASB has released an exposure draft on the proposal, and will then take feedback, so we are some way away from seeing any changes in the accounts of ASX companies.
But more transparency and better disclosure is always better for investors reaching the end of their ROPE with this stuff.