Board performance

Improving board effectiveness

Board performance is vital to the success of an organisation. To ensure the board is a strategic asset, it must have the right mix of skills and knowledge as well as the ability to work effectively as a team.

Today's rapidly changing business environment also requires boards to be flexible and responsive in order to meet unexpected needs and challenges.

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Board evaluation and director appraisal

With attention on corporate governance and accountability increased by the global financial crisis, there is an expectation that the performance of boards and individual directors will be regularly evaluated.

This is reflected in Recommendation 1.6 (a) of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations 3e (2014)

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Financial reporting requirements

The Corporations Act 2001 sets out statutory requirements for financial reporting.

All companies must keep appropriate and adequate written financial records (s 286) and these records must correctly record and explain its transactions, financial performance and position and allow for ‘true and fair’ financial statements to be prepared and audited.

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What to consider before approving financial statements

Companies have a legal responsibility to keep written financial records and to regularly report to members their financial performance and position.

This duty is placed on companies,not directors. Directors, however, in effect represent the company and have a duty of care to ensure that these statements are an accurate representation of the company's financial affairs. In confirmation, a director is required to sign a declaration to this effect.

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Continuous disclosure requirements

A listed company has an obligation to continuously disclose information which may have an effect on its market price or value.

Continuous disclosure is based on the principle that all investors should have equal and timely access to information about a company. Timely disclosure of information helps to protect the investor and the reputation of the market.

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Underlying Profit

What to consider when reporting underlying profit.

Profit that is reported other than in accordance with International Financial Reporting Standards (IFRS) in annual reports, profit announcements or other company reporting can be called non-IFRS profit. Non-IFRS profit can be described in a number of ways and the most commonly used is underlying profit/earnings. Other terms include non-statutory profit, alternative earnings, alternative performance measures, cash earnings/basis (commonly used in banks), non-GAAP earnings, earnings before interest and tax (EBIT) and earnings before interest, tax, depreciation and amortisation (EBITDA). Some not-for-profit entities might disclose a surplus from operational activities as an alternative performance measure.

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