Statutory profits almost doubled among Australia’s largest 50 companies in the year to 30 June 2017, a KPMG study of annual reports has shown.
The large increase in profits, up by $61.3bn to $120.8bn, included a large surge in profits for the mining sector, up $27.7bn. Performance across the ASX50 was mixed but positive overall.
Profits were also boosted by a $23.3bn fall in impairment charges. In the previous year, reductions in commodity prices had led to large write-downs, but this year the largest impairments involved the oil and gas assets in the energy and utilities sector.
The sector summary of the 2017 results were:
The survey also shows 42 of the ASX50 companies using ‘alternative’ measures of earnings in addition to statutory profits in their annual reports – which includes measures reported internally for decision making purposes. But the gap between the two sets of figures was much closer than in 2016 – down from $35bn to $9.7bn, meaning that, overall, alternative profit figures were just 7 percent higher than statutory profits, compared with 61 percent in 2016.
Julian McPherson, KPMG Audit Partner said: “The practice of reporting earnings using alternative measures to accounting standards has become a well-established part of market communications by corporates. The gap between statutory and alternative profit measures goes up and down but has decreased noticeably by 59 percent this time compared to a year ago, which reflects the reduction in impairment charges and other significant items recorded outside of the alternative profit measure – such as costs related to restructuring, cost saving strategies and transformation programs.”
KPMG also notes that in future periods, the results could well be affected by three new accounting standards which have the potential to materially impact some of the metrics included in this report. The new revenue and financial instruments standards will apply for periods starting from 1 January 2018 and the new leases standard from 1 January 2019.
Julian McPherson said: “ASIC has warned companies that AASB 15 (revenue), together with AASB 16 (leases) and AASB 9 (financial instruments), represent the most significant change to financial reporting since IFRS adoption in 2005.
“Approximately half of the companies have disclosed that they do not expect a significant impact from the revenue and financial instruments changes. But only 14 percent of companies have made a similar statement for leases.
“Very few of the ASX50 companies have so far provided detailed guidance on the quantitative impacts of the new accounting standards although many have included detailed qualitative disclosures that describe potentially material impacts. The disclosures suggest that many companies are still working through their implementation projects.”
T: 02 9335 7765 / 0400 818 891
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 155 countries and have 162,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
©2020 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation.
Liability limited by a scheme approved under Professional Standards Legislation.
For more detail about the structure of the KPMG global organisation please visit https://home.kpmg/governance.