A survey of large and listed New Zealand companies has found they used a total of 250 ways to measure profit in their annual reports.

Results of the 2012 Deloitte New Zealand Financial Reporting Survey, which has followed the financial reporting practices of 100 companies since 2009, show 89 referred to alternative profit measures in addition to bottom-line statutory profit in their 2011 annual reports.

The sample of reporting measures such as "ebitda", "ebitdaf", "normalised profit" or "underlying profit" has also increased since 2010, when 87 companies provided 214 alternative profit measures.

Concerns about the use of alternative performance measures led the Financial Markets Authority to issue a draft guidance note in May on disclosure of financial information.

Deloitte partner Denise Hodgkins said the survey results suggest  the disclosure of alternative profit measures may need some revision, particularly with the FMA issuing a final guidance note next month.

"Explaining a company's performance and, in particular, its sustainable earnings to investors can be a real challenge," Hodgkins said in a media statement.

"The FMA's proposed guidance sets out the key principles that underpin how and why such information should be presented."

With more than half of the companies providing three or more alternative measures of profit, she said, companies may need to look at which key measures best represented the performance of the company.

"Contrary to the FMA's proposed guidance, the survey also found that 27 companies discuss their underlying profit more prominently than their statutory profit in the annual report so some changes will be needed in this respect," Hodgkins said.

Further clarity could be provided for investors by explaining the reason for using the alternative measures, particularly since 86 per cent of measures showed an improved result.

"As the FMA finalises its guidance, we urge directors to reconsider how best to communicate the performance of the company to investors, and to draft an internal policy on how this information will be presented in annual reports and other investor communications."

Elaine Campbell, the FMA's head of compliance monitoring, said in May it was important for both issuers and investors to have greater clarity on the use of non-GAAP (generally accepted accounting practice) financial information. It would help to increase confidence in the country's markets, she said.

"These measures can provide useful information to investors, but they also have the potential to be misleading if used to mask bad news," Campbell said. 

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