Non-financial KPIs in annual report narratives: Australian practice
Article publication date: 7 May 2019
The purpose of this paper is to provide preliminary evidence on current practices in non-financial key performance indicator (KPI) reporting in annual reports by listed Australian companies to inform Australian legislators and accounting standard setters contemplating regulations and guidance for non-financial performance disclosure, including input into the revision of IFRS Practice Statement 1: Management Commentary (2010).
Non-financial KPIs were hand-collected from the annual report narratives of 40 listed Australian companies from five sectors in 2016. Trends in the type, quantity, comparability and range of non-financial KPIs were analysed, and the association between company characteristics and non-financial disclosure was explored.
In total, 78 per cent of the sampled companies disclose non-financial KPIs in their annual reports, reporting 11 non-financial KPIs per company on average. The most common category is Employee, followed by Environment, accounting for 68 per cent of non-financial KPIs. Provision of comparators is low, with only 28 per cent of non-financial KPIs disclosed with prior year results and 24 per cent disclosed with a target. Companies disclose across a median of two out of seven categories. Company size is shown to be associated with non-financial measures.
The study contributes initial detailed empirical Australian evidence of non-financial KPI reporting practices. A framework is established for assessing non-financial KPI disclosure, adding to voluntary disclosure studies. A data collection method is developed for collecting KPIs from annual report narratives, contributing to the methodology used in voluntary reporting content analysis.
The authors would like to thank the Institute of Chartered Accountants of Scotland (ICAS) for providing the funding for the larger project from which data have been adapted for this paper. The authors also thank Riette van Zyl for excellent research assistance.
Bayne, L. and Wee, M. (2019), "Non-financial KPIs in annual report narratives: Australian practice", Accounting Research Journal, Vol. 32 No. 1, pp. 7-19. https://doi.org/10.1108/ARJ-02-2018-0033
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