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17 February 2014

ESMA consults on Guidelines for issuers' performance measures

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ESMA has launched a consultation on Guidelines on Alternative Performance Measures (APMs). The aim of the guidelines is to encourage European issuers to publish transparent, unbiased and comparable information on their financial performance. The closing date for responses is 14 May, 2014.

The Consultation Paper follows on from ESMA’s decision to review and replace the 2005 CESR Recommendation on APMs with Guidelines under Article 16 of the ESMA Regulation to tackle concerns about APMs used by issuers. Those relate mainly to APMs being used in such a manner as to present a confusing or optimistic picture of their performance by removing certain negative aspects, or even where this is not the case, APMs can be misleading if they are inconsistently calculated or presented. 

The proposed guidelines set out the principles that issuers must follow when presenting APMs, and are based on the requirements applicable to financial statements, as required by the IAS Regulation, mainly referring to their labelling, calculation, presentation and comparability.

The key requirements of the proposed guidelines are:

  • Issuers should define the APM used and its components as well as the basis of calculation adopted.
  • APMs should be given meaningful labels reflecting their methodology and basis of calculation in order to avoid conveying misleading messages to users.
  • Issuers should disclose all APMs used and their definition in an appendix to the publication.
  • APMs should be reconciled to the most relevant amount presented in the financial statements, separately identifying and explaining each reconciling item.
  • Issuers should explain the context of any APM disclosed so that users can understand what information the APM concerned is meant to provide them with.
  • APMs that are presented outside financial statements should be displayed with less prominence, emphasis or authority than measures directly stemming from financial statements prepared in accordance with the applicable financial reporting framework.
  • When an issuer chooses to present APMs, it should also provide comparatives for corresponding previous periods. 
  • The definition and calculation of the APM should be consistent over time. If that is not the case, an issuer should explain the reasons why the definition and/or calculation of the APM has changed.
  • If an APM is redefined, a prior period is corrected, or the calculation of the APM changes, an issuer should provide additional information to explain those changes, the effect of the change compared to the former APM and restated comparative figures.
  • If an APM ceases to be used, the issuer should explain its removal and the reasons for which any newly defined APM replacing the previous one provides more reliable and relevant information on the financial performance compared with the previous one.

Steven Maijoor, ESMA Chair, said: “The proposed guidelines aim to improve the transparency and comparability of financial information published by issuers. APMs presented in an appropriate way may reduce information asymmetry among the users of financial statements. These guidelines will ensure that APMs are used and presented in a coherent fashion across the EU, which will in turn contribute to restoring confidence in the accuracy and usefulness of financial information and improve investor protection.”

The proposed guidelines would apply to issuers with securities traded on regulated markets and all competent authorities and other bodies in the EU that undertake enforcement activities under the Transparency Directive. The proposed guidelines are aligned with other regulations and guidance issued by securities regulators in the United States, Australia and Canada on this matter. 

The closing date for responses is 14 May, 2014.

Press release

Consultation paper


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