03 November 2005

CESR recommendations on Alternative Performance Measures

CESR published its final Recommendations on the use by listed firms of Alternative Performance Measures and a feedback statement. Responses to the consultation highlighted a number of issues which were clarified in the final version. In particular, the final recommendation has been amended to clarify that Alternative Performance Measures are non-GAAP measures, i.e. financial data that are not included in audited financial statements in view of providing a true and fair view. The Recommendation shall ensure that investors are not misled through the use of alternative performance measures. It does not intend to determine which the appropriate or relevant Alternative Performance Measures are, nor does it provide definitions for such measures.

The main recommendations include:

In the preparation of alternative performance measures, companies should respect the IFRS principles for financial statements for all types of financial information.

Issuers should define the terminology used and the basis of calculation adopted.

Where possible issuers should present alternative performance measures only in combination with defined GAAP measures.

Issuers shall highlight the defined performance measures with greater prominence than alternative performance measures derived from audited financial statements and which resemble defined performance but do actually not have the characteristics of the defined measures.

Issuers may internally use alternative performance measures for measuring and controlling the company’s output. CESR recommends that issuers give an explanation of the internal use of alternative performance measures in order to make investors understand the relevance of this information.

The issuer should disclose whether the alternative performance measures have been subject to separate auditor’s review and, if so, indicate the nature of such a review and its conclusion.

Press release
Recommendation
Feedback statement

© CESR - Committee of European Securities Regulators