• Register
Return to: Home > News > Regulation > ESMA to counteract misleading APMs disclosures

ESMA to counteract misleading APMs disclosures

The European Securities and Markets Authority (ESMA) has launched a consultation aimed at bringing transparency and comparability to the disclosure of alternative performance measures (APMs) by updating the current guidelines issued in 2005 by ESMA's predecessor, the Committee of European Securities Regulator.

To that purpose, ESMA is running a public consultation on a paper where it establishes the guidelines that issuers of financial information should follow to disclose APMs, as ESMA wants to tackle concerns about APMs used by issuers in a misleading fashion.

Those concerns, according to ESMA, relate mainly to APMs being used in a way that, by removing certain negative aspects, may depict "an optimistic picture" of the issuer's performance, or even if this is not the case, to misleading interpretations when APMs are "inconsistently calculated or presented".

Part of the consultation is on the very scope of APMs, which ESMA describes as additional information which may put users of financial statements in a better position to understand the performance of a company.

The proposed guidelines apply to entities governed by private or public law, whose securities are admitted to trading on a regulated market, excluding member states and member states' regional or local authorities.

The importance of APMs, ESMA acknowledged, lies in fact that they could assist users in making investments decisions, as APMs could give a better understanding of an entity's financial statements.

Examples of APMs, said ESMA, are earnings before interest and tax (EBIT) or earnings before interest, taxes, depreciation and amortisation (EBITDA). Those can be included in documents accompanying the financial statements, press releases, markets announcements, briefings to analysts or prospectuses.

An important part of the consultation seeks feedback on the reconciliation of APMs and the information presented in annual financial statements, one which is prepared in accordance with the applicable framework and subject to audits.

In that regard, ESMA said in its consultation paper that any APM presented should be accompanied by reconciliations showing how figures in the financial statements are aggregated, subtracted or recalculated to determine APMs.

The consultation to comment on ESMA's draft guidelines on APMs ends 14 May.


Related link

The European Securities and Markets Authority: Consultation paper

Top Content

    Addressing tax challenges and the digitisation of the economy

    As the economy becomes even more globalised through digital sources, the tax systems currently in place need to be scrutinised to examine whether they are still fit for current and emerging business models. Joe Pickard reports on the OECD’s approach to this issue.

    read more

    Primary financial statements: a game changer in reporting?

    International Accounting Standards Board chair Hans Hoogervorst delivered a speech at the Seminario International sobre NIIF y NIF, organised by the Consejo Mexicano de Normas de Información Financiera in Mexico. The Accountant presents the highlights.

    read more

    FASB readies standards for the netflix generation

    The US Financial Accounting Standards Board (FASB) has updated its accounting standard for entertainment, with a specific eye on keeping up to date with how episodic content, such as television programmes, is consumed in the modern world. Jonathan Minter reports.

    read more

    Brexit: why it takes two to tango

    Former TA editor Vincent Huck, now editor of Insurance Asset Risk, looks at why Brexit might unleash geopolitical intrigue in Europe’s accounting standard-setting scene – and why IFRS 17 will be an incredible source of opportunity for firms in the coming years.

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.