While adjusted profit figures could provide useful information to investors, the FMA said they had the potential to mislead the public, mask bad news and lead to inaccurate comparisons between entities.
As such, the authority plans to issue guidelines on how this information should be reported and presented.
Proposals from the authority include not giving undue prominence or emphasis to adjusted information and placing restrictions on the use of it in financial statements.
Another proposal would require adjustments to be properly explained, be unbiased and not only included to disguise bad news.
A draft set of the guidelines is due out next year and will be open to public consultation.
Market commentator Arthur Lim said some companies camouflage their finances as it suits them.
He supported moves to create consistency in how financial information is presented.
"The idea of moving to standardisation makes a lot of sense because reading some of the financial reports almost requires you to have a degree in accountancy. Whereas if there is standardised reporting and presentation it would make it easier for all in the marketplace to assess how a company has been doing," Lim said.
The Institute of Chartered Accountants and Institute of Directors also gave their support for the FMA's proposed guidelines.
However, Institute of Directors chief executive Ralph Chivers said organisations should not be discouraged from releasing additional information that would be useful to investors.
"They shouldn't constrain people from providing information that goes to the heart of the underlying performance of the business. If you take the Christchurch earthquake as an example you might have a business that is otherwise healthy that has taken a hit because of [the quake] ... we think in a situation like that it's perfectly legitimate for a company to say 'these are what the results would have looked like without [the earthquake]'," he said.
Milford Asset Management's Brian Gaynor said he was hugely concerned by the way some firms were dressing up their profits. However, he said the FMA would find it difficult to decide what counted as a legitimate adjustment.
"If everyone agrees what the adjustments are going to be, then why aren't the accounting standards set up like that rather than the way they are now, which everyone is unhappy with? I think it's a good move but I can just see it being fraught with difficulties of ever coming to an outcome that everyone thinks is satisfactory," Gaynor said.
BT Funds Management chief investment officer Paul Richardson said reported earnings were often an estimate or opinion. "The same goes for costs. Asset valuations are also opinions in some respects," he said.
Watching the bottom line
Suggested proposals for dealing with information such as "adjusted" or "normalised" profits:
* Restrictions on its use on the front of financial statements.
* It should clearly be identified as not conforming with international accounting standards.
* Adjustments made should be unbiased and not just to conceal "bad news".
* An explanation for why any adjustment was made.
