ACCA AAA ^INT Syllabus F. Other Assignments - Key performance indicators - Notes ^{2 / 3}

Many companies now publish some key performance indicators (KPIs) in the FS

The increased tendency to disclose such data is often in response to shareholder expectations

Types

1. Financial
   such as ratios based on the financial statements

2. Non-financial
   such as targets on social and environmental matters

The Assurance approach

1. Definition

2. Calculation method

3. Reporting Purpose

4. Evidence available

Problems for the Assurance Provider

• Getting precise definitions of KPI targets

• Poor KPI data capturing systems

• Manipulation of results / spin

However, an assurance report provided on the KPIs should add credibility to the published data if sufficient evidence is available

Examples of Environmental / Social KPIs

1. Noise?

   Number of noise complaints each year

2. Employee care?

   Number of injuries sustained at work each year

3. Environment?

   Quantity of C02 emitted each year

In practice it is often difficult to generate appropriate KPls.

One key reason for this is that social and environmental effects may be impossible to quantify.

For example, job satisfaction is difficult to measure.

It is possible to gather statistical information on this, but is it useful / reliable enough?

Systems for gathering information on these KPls may also not be established enough