NIRI Sets Guidelines for Disclosure in Earnings Releases

The National Investor Relations Institute (NIRI) has adopted guidelines for quarterly earnings releases. The guidelines urge companies to consider expanding their releases to add information that would help investors with their analysis of financial statements.

Key suggestions:

  1. Include a complete income statement and a complete balance sheet with comparisons to prior periods so investors can determine free cash flows.
  2. Help investors understand what is included or excluded in pro forma earnings. To avoid confusion, use only GAAP earnings (earnings prepared according to generally accepted accounting principles) in the headlines of a release. Mention GAAP earnings first, before pro forma results, then reconcile pro forma with GAAP earnings through words or the use of a table.
  3. Include summary-level disclosures ordinarily incorporated in the management discussion and analysis (MD&A) portion of reports filed with the Securities and Exchange Commission.

Specific types of items that might be added under the third guideline include: a brief description of the company's business that clarifies how it makes money; the primary factors or trends, both short- and long-term, causing revenues to increase, decrease or remain flat; a brief discussion of what drives other key line items on financial statements; a brief discussion of liquidity and capital resources, including debt levels, key ratios, capital expenditures and the adequacy of cash resources; key measures specific to its industry that a company uses to evaluate performance; any material changes in accounting practices adopted during the quarter; and the company's current expectations for sales and earnings, if the company provides this guidance.


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