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The new performance reporting principles

Sep 10, 2018
By Hannah Armitage

The reporting of performance continues to be of substantial interest to investors and boards. Performance reporting is central to investors’ assessments of value and to how companies demonstrate their value creation. 
Investors want to understand what is being monitored and managed internally, as this allows them to understand what management is focusing its time on. Investors are obviously trying to understand performance, but they are also assessing management credibility and trying to comprehend where the management will take the company next. The performance metrics used, and how they are reported, are inextricably linked to all of those assessments. 

Performance reporting principles

The UK’s Financial Reporting Lab (the Lab) has been speaking to investors to appreciate how they use and understand information related to a company’s performance. From these discussions, the Lab identified a set of principles for companies to consider, such as ensuring performance metrics are transparent, aligned to the strategy of the organisation, gives context to the company’s performance, and is a consistent and reliable source of performance information.

Guiding questions

The Lab also came up with a set of questions for companies and boards to ask themselves when assessing their reporting of performance metrics, such as:

  • Do our metrics clearly link to our company’s strategy and value drivers? Have we addressed all relevant financial and wider metrics?
  • Where we report non-GAAP metrics, do we explain why and how they more appropriately represent our business model and strategy? Where we make adjustments to exclude cost items do we also exclude the related gains? Do we explain why we have made specific adjustments, at least at a material level?
  • Do we explain what performance we were expecting to achieve, what we actually achieved, and why?
  • Do we provide an overview of how our metrics have been developed and monitored to allow investors to assess their reliability?
  • Are our metrics consistent year-on-year? If our metrics have changed, do we provide a clear explanation as to why the change has been made and why the new metric is better? Do we provide comparatives for a number of years?
All of these questions (there are more available here) are in line with the aforementioned principles and are key to properly assessing your performance reporting.   

Second phase

The second phase of the project is now taking place. This involves understanding the challenges companies face in meeting the expectations of the principles and identifying best practice reporting against the principles. If you are interested in participating in the project, there are still opportunities to get involved. If you would like to take part, please email the Lab at

Hannah Armitage is Project Manager in the FRC’s Financial Reporting Lab.