CSSF findings related to the ESMA Guidelines on Alternative Performance Measures

As announced in its press release 17/03 dated 16 January 2017 related to the enforcement priorities of the CSSF for the 2016 financial information published by issuers subject to the law of 11 January 2008 on transparency requirements for issuers (the “Transparency Law”), the CSSF has carried out an examination of the financial communication published for the 2016 annual period focussed on the respect of the ESMA Guidelines on Alternative Performance Measures (hereafter the “Guidelines”).

If some progress has been observed since the CSSF’s first examination on the same topic, a series of misstatements and omissions have still been identified. The most significant are listed below:

Issues related to press releases

The Guidelines requirements related to Alternative Performance Measures (hereafter APMs) are not yet fully respected by a lot of issuers in their press releases accompanying the publication of annual financial statements.

The CSSF reminds issuers that the Guidelines apply to prospectuses and regulated information, including management reports disclosed to the market in accordance with the Transparency Directive¹ and disclosures issued under the requirements of article 17 of the Market Abuse Regulation², for example ad-hoc disclosures including financial earnings results (paragraph 3 of the Guidelines).

The CSSF draws the attention of issuers to the fact that, in some cases, compliance by reference is permitted for APMs used in regulated information, notably in press releases. In this case, disclosure principles set out in the Guidelines may be replaced by a direct and precise reference to other documents that are readily and easily accessible to users (paragraph 45 of the Guidelines).

Identification of APMs

Some issuers, while respecting the Guidelines requirements for common APMs, tend to disregard the same requirements for other, more specific, financial measures and fail to identify them as APMs.

Regarding this issue, the CSSF wants to remind issuers of the definition of an APM as a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework.

Other issues

As during the first examination, the CSSF identified recurring breaches regarding the definitions of APMs used, the reconciliations of APMs to the most directly reconcilable line item, subtotal or total presented in the financial statements, and explanations on the use of APMs.

In view of the above-exposed findings, the CSSF reminds issuers to assess for each measure used, when preparing future financial information, whether this measure is an APM or not and, in case it is, if the Guidelines are applicable to this APM. When the Guidelines are applicable, issuers should comply with all requirements for each and every APM used.

Accordingly, the CSSF will continue closely monitoring how issuers comply with the Guidelines in their future financial communication, in particular the 2017 half-yearly financial report and press release.

More information on inspections and findings by the CSSF within the framework of its mission under Article 22 (1) of the Transparency Law are provided on the CSSF website under Enforcement of financial information and in its annual report.