FRC calls on companies to improve use of alternative performance measures in reports

The Financial Reporting Council has published the findings of its thematic review of the use of alternative performance measures by 20 listed companies in their June 2016 interim statements.


When EU-listed companies publish figures which are not based on IFRS or GAAP measures (e.g. EBITDA, free cash flow, sales per square metre, underlying profit or net debt), these are known as alternative performance measures. APMs include any numerical measure of historical, current or future financial performance, which relates to the financial position, comprehensive income or cash flows, other than a measure defined by the applicable financial reporting framework (such as IFRS).

The review was prompted by concerns expressed by a number of stakeholders, and the FRC, on companies' APM disclosures, together with the coming into force of ESMA's APM Guidelines on 3 July 2016.


The FRC found that companies' explanations for the use of APMs were generally cursory or boilerplate. It also questioned some of the definitions used for adjusted profit and expressed concern about the exclusion of certain items, such as share-based payment and restructuring costs.

The FRC will take account of the findings of the thematic review in its review of reports and accounts for years ending 31 December 2016 onwards. In particular, it will question companies where:

  • good explanations for the use of APMs and for any changes made in the APMs used are not provided;
  • good explanations as to why items have been excluded from adjusted measures of profit are not provided and, in particular, where an item is excluded from adjusted profit that the FRC has not seen others exclude;
  • a description such as non-recurring is used but does not appear to apply in the circumstances;
  • there is no discussion of either the IFRS results themselves or of the adjustments made to those results to arrive at adjusted profit; and
  • the IFRS results are not highlighted at an early point in the narrative.

The FRC's review can be found here. Click here for ESMA's Guidelines on APMs.