Updated ASX Guidance on continuous disclosure

Introduction

As a follow up to the snippet on Morning Report this morning Morning Report, the ASX has just released the latest revision of its extensive Guidance Note 8: Continuous Disclosure. This follows consultation earlier this year about expanding the guidance on earnings surprises, publication of analyst forecasts and consensus estimates, and investor briefings.

ASX guidance on continuous disclosure is relevant to the New Zealand listed market not just only because of the number of dual-listed companies but also because of the direct comparability of the approach of the ASX on this topic (and the much more detailed guidance that the ASX has provided as a result of deeper market experience).

Earnings surprises

ASX prefaces the phrase “earnings surprises” with “market sensitive” to limit it to those situations where an entity’s reported earnings differ so significantly from market expectations that a reasonable person would expect information about its reported earnings to have a material effect on the price or value of its securities.

The guidance notes that market expectations of earnings can be set by guidance given by the issuer itself, analyst forecasts or (typically for smaller issuers) by the earnings results for the prior corresponding period.

The guidance suggests that an expected variation in earnings will be “material” (requiring updated disclosure) when it differs from published guidance or expectations by 10% or more. A judgement call is required for variations of 5% – 10%. And variations of less than 5% are presumed not to be material.

The guidance also deals with situations where it may be appropriate to seek to correct market expectations if the issuer becomes aware that earnings for the current reporting period are likely to differ so significantly from market expectations that information about that difference is “market sensitive”.

Analyst / investor briefings

The guidance notes that an issuer should not be disclosing at an analyst or investor briefing any market sensitive information, unless and until it has first been disclosed to the market (via continuous disclosure).

It also refers to the “prudent practice” of ensuring that any new presentation to be given, or printed materials to be handed out at, an analyst or investor briefing are first given to ASX and published on the market announcements platform before the briefing, and thereafter on the issuer’s website.

Further information

If you would like more information about any of the matters discussed in this note, please contact me.