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Low level of compliance by European issuers with alternative performance measures (APM) requirements – ESMA thematic report

The European Securities and Markets Authority (‘ESMA’) has published its thematic report on the implementation of ESMA’s Guidelines on Alternative Performance Measures (ESMA APM Guidelines).

The report provides an overview of the use of APMs by European issuers and their compliance with the ESMA APM Guidelines.

During 2019 European accounting enforcers, through ESMA, conducted a study to:

·         gather evidence on the use of APMs in order to provide informed input into the work of the International Accounting Standards Board (IASB); and

·         assess how EU issuers have applied the APM guidelines since they became effective.

IAASA was one of the European accounting enforcers to participate in the study.

The report covers a sample of 123 issuers’ management reports.

ESMA notes that full compliance with the ESMA APM Guidelines requires issuers to comply with all principles of the ESMA APM Guidelines in relation to all APMs disclosed. Out of the 123 issuers’ management reports, only 16 complied in full with the ESMA APM Guidelines.

When analysing the compliance with the ESMA APM Guidelines by category of principles, overall a high level of compliance was observed in relation to comparatives, consistency and neutrality of the measures reported. However, shortcomings were identified in relation to principles regarding explanations, reconciliations and definitions.

IAASA has engaged with a number of issuers in Ireland on APMs in the past and has received undertakings for improvements from those issuers.  This area remains an area of focus for IAASA for 2019 year ends – see Observations document).

IAASA has also published the results of its survey’s on the use of APMs by Irish equity issuers in three papers, namely:

The report on the implementation of ESMA’s APM Guidelines can be found here.