Presentation of income under IFRS: Flexibility and consistency explored

PwC has examined the use of non-GAAP measures in 2,800 financial statements across Europe and found that their use in the International Financial Reporting Standards (IFRS) environment is widespread, even on the face of the income statement. 96% of companies report operating profit or earnings before interest and tax (EBIT) on the face of their IFRS income statement, 26% report profit excluding non-recurring items and 10% report earnings before interest, tax, depreciation and amortisation (EBITDA) and similar measures. Companies, regulators, investors and others are debating which non-GAAP measures provide useful insight for investors and should be included in the financial statements.

Reporting remains very influenced by previous national practices, which will have helped investors to adjust to the major change in the underlying data that has come with IFRS. However, the current variety of non-GAAP measures and presentations will be reassessed by the market in the longer term as the information is less useful when investors cannot make direct comparisons internationally among companies in the same industry sector.