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FRC issues alternative performance measures guidance

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THE FRC has issued a guidance document for listed businesses and their advisers concerned by the European Securities and Markets Authority’s (ESMA) guidelines on alternative performance measures.

It has published a set of FAQs, tackling what APMs are, compliance monitoring and the delineation of responsibility between the FRC and FCA.

The guidelines are to be applied from 3 July 2016 by companies with listed shares or debt when presenting APMs outside the financial statements in annual reports, half-yearly reports or preliminary announcements. They are also to be applied in other ad-hoc communications, such as RNS announcements and press releases, which are subject to the transparency directive or the market abuse regulation and in the preparation of prospectuses.

When APMs are presented in an annual report, compliance with the guidelines will help ensure that, taken as a whole, it is fair, balanced, comprehensive and understandable. The FRC’s corporate reporting review team will take material inconsistencies with the guidelines into account when deciding whether the strategic report is fair, balanced and comprehensive and, as a result, whether enforcement action is required.

FRC executive director Paul George said: “There has recently been wide public debate on the use of APMs and the role they can play in communicating to investors relevant information on a company’s performance, position and cash flows. Compliance with the guidelines will help ensure that investors have a clear and comprehensive understanding of the APMs presented. Our financial reporting lab will consider the benefit of instigating a project in 2017, bringing together investors and preparers to further improve the quality of APM disclosures.”

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