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Performance metrics – how to improve reporting

Nov 09, 2018
The Financial Reporting Lab (The Lab) has published guidance for companies on the presentation of performance metrics in their reporting following calls for clarity from investors.

Performance Metrics – Principles and Practice includes examples of how companies can apply the principles outlined in the Lab's earlier project report, Performance Metrics – An Investor Perspective, published in June 2018. That report found that investors wanted performance metrics to be aligned to strategy, transparent, in context, reliable and consistent. Alongside those principles it included a set of questions for companies and their boards to consider when deciding on how they report their performance.

While some examples of better reporting have been identified, investors continue to emphasise the importance of applying the principles when companies are preparing their metrics. Companies are, in many cases, addressing the expectations of the principles but do not always report on this clearly.

Phil Fitz-Gerald, Director of the Financial Reporting Lab, said: "The Lab's report highlights the importance of presenting performance metrics that are aligned to strategy, transparent, in context, reliable and consistent. It provides practical guidance and examples of how this can be achieved and how reporting of performance metrics can better meet investors' needs."

Source: Financial Reporting Council.