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EFRAG draft comment letter on the ESMA consultation on alternative performance measures

  • EFRAG (European Financial Reporting Advisory Group) (dk green) Image

27 Mar 2014

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on the European Securities and Markets Authority (ESMA) consultation on 'Guidelines on Alternative Performance Measures'.

In the draft comment letter on the proposed guidelines, EFRAG comments that alternative performance measures (APMs) "can provide useful information to users when properly used and presented, and assist investors in gaining a better understanding of a company's financial performance". Therefore, EFRAG supports the idea of clearly defined and explained APMs that are presented consistently over time. However, EFRAG believes that the proposed definition of an APM is overly broad and does not work very well in the context of IFRS financial reporting.

EFRAG also believes that the scope of the proposed guidelines is much broader than appropriate and that the reference to 'all documents containing regulated information made publicly available' lacks a clear underlying principle. EFRAG especially recommends to keep prospectuses and part of prospectuses out of the scope as was the case with the CESR Recommendation the new ESMA guidelines are intended to replace.

Generally, EFRAG observes that ESMA "has not provided clear evidence on why the existing CESR Recommendation is no longer considered to provide adequate guidance and is in need of replacement". In some cases EFRAG even believes that the proposed guidelines could have negative effects. EFRAG states for example that the 'prominence' requirement regarding the presentation of APMs as currently drafted in the guidelines could result in imposing a form of 'ceiling' on the amount of voluntary information that an entity is allowed to disclose regardless of whether such information is beneficial to user. EFRAG also believes that ESMA is partly in danger of introducing requirements that may inadvertently result in clutter and boilerplate disclosures.

Comments on the EFRAG draft comment letter invited by 25 April 2014.

Please click for the following information on the EFRAG website:

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