The FMA has finalised and published guidance for issuers to help improve the financial information in equity Product Disclosure Statements (PDS).
Earlier in the year, investors provided insights on how they use information provided to them by companies offering investments. The report found the PDS to be a ‘significant improvement’ on previous disclosure methods, but identified some lingering areas for improvement; these included excessive jargon, lack of detailed risk information and the length and repetitiveness of the overall document.
The new guidance rules emphasise the importance of presenting information in a clear and accessible way, and presents various improvements to the ‘financial information’ section along with guidance on how to apply specific rules.
According to the report, the financial information section is ‘designed for issuers to disclose the financial information that is likely to be the most useful for investors, and enable them to compare the issuer’s performance, position and cash flows over time, and with other issuers.’ Guidance sets out the key information to be provided in ‘selected financial information’ tables; these include revenues, net profit after tax, total assets, total liabilities and debt, and are to be presented over a period of up to five years.
The document also explains the application of specific rules, including the addition of non-financial information that may be useful to investors, adjustments to non-Generally Accepted Accounting Practice (GAAP) financial measures and provision of pro-forma financial information.
Issuers are told to provide an outline of any changes made to their PDS documents, clear the clutter and stick to plain English commentary throughout.
Consistency is also emphasised, and issuers are encouraged to ‘cover issues in a balanced way that is consistent with the financial information on the Disclose Register.’
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