EUROPE: European Securities and Markets Authority (ESMA) Consults on Guidelines for Issuers Performance Measures

Thursday February 13 2014

The European Securities and Markets Authority (ESMA) have 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 in order to provide users with a better understanding of their performance. Some examples of APMs include EBIT (Earnings Before Interest & Tax), EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation), free cash flow, underlying profit or net-debt.

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.

Click on above link for further details.