Non-IFRS earnings information in financial highlights of annual reports

Abstract

Based on a sample of the top 200 Australian firms, we find that companies rely on non-IFRS earnings to supplement IFRS earnings in the highlights section of firms' annual reports. At the same time, firms are more likely to present non-IFRS earnings in the highlights section that beat earnings benchmarks, suggesting that they might be motivated to present their performance in a better light through non-IFRS earnings. We also show that non-IFRS earnings presented in the highlights section are more likely to be taken from the audited sections of the annual report, potentially indicating their credibility as key performance measures. Our findings add to the ongoing controversial debate on the informativeness of non-IFRS earnings with a specific focus on those reported in the highlights section of the annual report.