Use of “alternative performance measures” by listed companies


CNMV warning on greater control of the use of APMs

Use of “alternative performance measures” by listed companies
May 4, 2023
  • APMs (Alternative Performance Measures) are financial indicators that measure the financial performance of a company and are not governed by accounting rules or other standards such as EBITDA, recurring operating profit or free cash flow.
  • In recent years, APMs have become a tool increasingly used by listed companies to measure their performance, but their improper use can lead to investor confusion and make it difficult to compare companies. In some cases, APMs are neither homogeneous nor comparable, which makes it difficult to understand the company’s financial situation and hinders investors’ decision-making.
  • On April 17, 2023, the CNMV warned of the need for greater control over the use of APMs in the financial information included in financial and non-financial reporting, prospectuses and results presentations of listed companies. Its objective is to improve the degree of compliance with ESMA guidelines in this regard. To this end, the CNMV recalls that:
  1. Issuers should review all financial performance measures, including those disclosed in the Non-Financial Information Statement (NFIS), and analyze whether they meet the definition of APM—and, consequently, whether they should follow the aforementioned ESMA guidelines.
  2. APMs should not be presented more prominently than measures directly stemming from financial statements, to avoid detracting attention from these traditional measures. It is understood that APMs have greater prominence when placed in a prominent and preferential informative section, or when the company’s development is mainly explained through these measures.
  3. If a measure meets the definition of APM, it is necessary to disclose the information in accordance with ESMA guidelines regarding aspects such as its definition, reconciliation, relevance of use, presentation of comparative information, and consistency.
  4. Due to their novelty, financial measures using an ESG benchmark or rating (e.g., sustainable CAPEX or green invoicing) will be considered APMs if they have not been determined in accordance with mandatory standards set out in applicable regulations (e.g., taxonomy or disclosure regulations). 

Finally, the CNMV indicates that it will exercise its sanctioning powers if it detects APMs that mislead the public or contain inaccurate or incorrect data and entail a breach of transparency regulations or market abuse prohibitions.

See our recent publications on financial and non-financial information disclosed by listed companies at: Post| CNMV report on 2021 financial reporting; Post| CNMV report on 2021 non-financial reporting; Post| The near future of non-financial reporting statements.


May 4, 2023