The disclosure of key performance indicators between "through the eyes of management" and "comparability between entities"

This research provides an analysis of Key Performance Indicator (KPI) disclosure in 2008 Italian annual reports (KPIs). KPI disclosure represents fundamental topic in the management commentary information. KPI is defined as an indicator, expressed in absolute value or as a percentage, aimed at transmitting the firm’s performance. The "true the eyes of management" principle requires firms to communicate the set of measures used by their own management. Thus, the number of KPIs and their method of calculation vary between entities. In this way, the comparability (over firms) power is weakened. On the other hand, protecting comparability, a rule-based approach specifies the indicators to discuss in the annual report and defines their method of calculation. Is it right to orient KPI disclosure towards the TEM principle as the main regulatory bodies recommend? This is our research question.