In the final 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".  EFRAG supports the idea that APMs should be “clearly defined and explained by preparers and 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 keeping 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”.  Additionally, EFRAG “believes that the guidelines should not be overly prescriptive as to where the disclosures on APMs should be presented”.

The comments of EFRAG are largely consistent with those of the Association of British Insurers (ABI) who comment that the guidelines are “unnecessarily prescriptive” and would be inconsistent with initiatives such as those aiming to cut clutter and those which aim to “reduce the use of non-entity specific, generic corporate reporting”.  The ABI would like ESMA to “reissue CESR’s recommendation on alternative performance measures rather than issue new guidelines”.

Click for:

• EFRAG press release (link to EFRAG website).
• EFRAG comment letter (link to EFRAG website).
• ABI comment letter (link to ABI website).
• Our UK Accounting Plus news item on ESMA APMs.