FRC: FAQs on ESMA APM Guidelines

27 May 2016 12:11 PM

The Financial Reporting Council (FRC) has recently responded to some Frequently Asked Questions on the application of the European Securities and Markets Authority’s Guidelines on Alternative Performance Measures (‘the Guidelines’) which were issued in October 2015. 

The Guidelines are to be applied from 3 July 2016 by companies with listed shares or debt when presenting APMs outside the financial statements in Annual Reports, Half-yearly reports or preliminary announcements.  They are also to be applied in other ad-hoc communications, such as RNS announcements and press releases, which are subject to the Transparency Directive or the Market Abuse Regulation and in the preparation of prospectuses.

When APMs are presented in an Annual Report, compliance with the Guidelines will help ensure that, taken as a whole, it is fair, balanced, comprehensive and understandable.  The FRC’s Corporate Reporting Review team will take material inconsistencies with the Guidelines into account when deciding whether the strategic report is fair, balanced and comprehensive and, as a result, whether enforcement action is required.  For example, a failure to properly explain how an APM is calculated or to highlight any changes in its calculation year on year may prompt further enquiries. 

Paul George, Executive Director, said:

“There has recently been wide public debate on the use of APMs and the role they can play in communicating to investors relevant information on a company’s performance, position and cash flows.  Compliance with the Guidelines will help ensure that investors have a clear and comprehensive understanding of the APMs presented.  Our Financial Reporting Lab will consider the benefit of instigating a project in 2017, bringing together investors and preparers to further improve the quality of APM disclosures.”

Notes to editors

  1. The FRC is responsible for promoting high quality corporate governance and reporting to foster investment.  We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work.  We represent UK interests in international standard-setting.  We also monitor and take action to promote the quality of corporate reporting and auditing.  We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
  2. The European Securities and Markets Authority (ESMA) issued guidelines on the presentation of Alternative Performance Measures APMs in October 2015 which are applicable to relevant information released on or after 3 July 2016.  These Guidelines are addressed to:
  1. The ESMA APM Guidelines are available athttps://www.esma.europa.eu/press-news/esma-news/esma-publishes-final-guidelines-alternative-performance-measures.
  2. For the purpose of the ESMA APM Guidelines an APM is understood as a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework.
  3. The Financial Conduct Authority (FCA) and the Financial Reporting Council (FRC) are the UK Competent Authorities responsible for monitoring the compliance with the Guidelines.  The FRC’s Corporate Reporting Review team reviews the reports and accounts of public and large private companies for compliance with the law.  The FRC will consider the Guidelines when reviewing listed company reports and accounts in assessing whether they are fair, balanced and comprehensive.
  4. All Press enquiries should be directed to:

Related Resources

FAQs: ESMA Guidelines on Alternative Performance Measures