On 20 December 2019, the European Securities and Markets Authority (ESMA) published a report on EU issuers’ use of alternative performance measures (APMs) and their compliance with the ESMA APM guidelines.

The report highlights that the use of APMs is widespread in all sectors and within all regulated documents. Significant diversity exists in the number and type of APMs used, as well as in their labels and definitions.

ESMA calls on issuers to improve their disclosures regarding APMs. In particular, issuers should enhance their reconciliations, definitions and explanations in relation to all APMs used. ESMA also warns that ratios and subtotals included inside financial statements may also fall within the definition of an APM and therefore comply with the APM guidelines.

ESMA expects issuers to consider the findings of this report when preparing management reports, ad-hoc disclosures and prospectuses. To facilitate this process, a set of recommendations is included at the end of the report. With regard to the use of APMs, ESMA will leverage on the report when it responds to the International Accounting Standards Board’s current work on Primary Financial Statements.