Help with alternative performance measure disclosures

Investors are often keen to see listed businesses using Alternative Performance Measures (APMs) as well as measures stemming directly from the financial statements. The European Securities and Markets Authority (ESMA) has published guidelines which apply to APMs used in corporate reports drawn up on or after 3 July 2016 (for entities with shares listed on a regulated market in the EEA).

Below is a summary of the key messages from the FRC’s thematic review which should help companies presenting APMs comply with the ESMA guidelines.

Definitions and labels

Companies should provide complete, clearly crossed referenced definitions of all APMs and use labels that accurately describe the APM to which they are applied.

  • It should be clear whether a measure used is an APM or an International Financial Reporting Standards (IFRS) measure.
  • Good examples grouped together: the definition of the APM, the relevance to company strategy, how the company has performed against the APM and the reasons for this performance.


Companies should set out clear explanations of why they have used APMs including:

  • stating why an APM is useful, helpful or meaningful;
  • clarifying whether the APM is used internally, by whom and for what purpose;
  • avoiding cursory or boilerplate wordings; and
  • including “health warnings” eg that APMs are not intended as a substitute for IFRS measures.


The ESMA guidelines require a reconciliation to be given for each APM to the most directly reconcilable line item, subtotal or total in the financial statements, separately identifying and explaining the material reconciling items.

The thematic review showcased some good examples of the way reconciliations were presented:

  1. including one reconciliation in each relevant note (this necessitates thorough cross-referencing);
  2. collecting all the reconciliations in either the financial review section of the strategic report or under “other information” at the back of the accounts; or
  3. including all income statement-related APMs in a single tabular reconciliation.


The ESMA guidelines state that APMs should not be displayed with more prominence, emphasis or authority than measures directly stemming from the financial statements. 

  • equal prominence should be given to APMs and IFRS measures wherever APMs appear, including in the narrative sections such as the chairman’s statement or chief executive’s report;
  • APMs and the corresponding IFRS measures should be presented where the APM does not appear in the IFRS column of a multi-column income statement; and 
  • where APMs appear as line items in the income statement, the narrative in the strategic report should deal with all significant items in that statement.

Using the term non-recurring

Companies should take care with descriptions such as non-recurring, infrequent, unusual or one-off in their labelling of APMs and only use these if appropriate to the circumstances. This is unlikely to be the case when such costs affect past years and are likely to affect future periods. The FRC noted particular issues in this area in connection with restructuring costs and impairment charges.


The definitions and bases of calculation of APMs should be consistent over time. Readers of the accounts should be informed of any changes and told why they result in reliable and more relevant information. In addition, changes in labels should be identified and explained.

Adjusted measures of profit

If companies exclude items from the adjusted measure of profit they should explain why individual items have been excluded. The FRC have found that the explanations for the exclusion of some items, such as amortisation of acquired intangibles assets, do not appear to justify the exclusion and continue to challenge companies in this area.

Going forward

The thematic review indicates improvements in the use and disclosures of APMs but this will continue to be an area of scrutiny and the FRC will question companies where definitions, explanations, reconciliations, prominence of IFRS measures or reasons for excluding items from adjusted profit do not appear to be adequate.

For more information and advice on APMs please speak to your usual RSM contact.