Respect par les émetteurs des Orientations de l’AEMF (ESMA) relatives aux indicateurs alternatifs de performance et de la circulaire CSSF 16/636 (uniquement en anglais)

The CSSF has issued on 21 June 2016 Circular CSSF 16/636 whose purpose is to implement the “ESMA Guidelines on Alternative Performance Measures” (Ref. ESMA/2015/1415) (hereafter the “Guidelines”), published on 5 October 2015 by the European Securities and Markets Authority (ESMA), into Luxembourg regulations.

The Guidelines apply in relation to Alternative Performance Measures (hereafter “APMs”) disclosed by issuers or persons responsible for the prospectus when publishing regulated information or prospectuses for securities.

This circular as well as ESMA Guidelines have entered into force on 3 July 2016.

In the context of the publication of the 2016 half-yearly financial reports by issuers of securities under the law of 11 January 2008 on transparency requirements for issuers, as amended (hereafter the “Transparency Law”), the CSSF has carried out an examination of those interim financial reports for a selection of issuers to ensure that the Guidelines have been complied with.

With respect to information published for the 2016 half-year period, the Guidelines, not applying to measures that are defined under accounting standards and presented in the financial statements¹, essentially cover APMs disclosed in documents such as management reports issued to the market in accordance with the Transparency Law, or disclosures contained in information published under the requirements of Article 17 of the Market Abuse Regulation, such as adhoc disclosures including financial earnings results.

According to the Guidelines, issuers or the persons responsible for the prospectus, when they use APMs, should notably:

•  define the APMs used and their components as well as the basis of calculation adopted;
• disclose the definitions of all APMs used, in a clear and readable way;
• disclose a reconciliation of the APMs to the most directly reconcilable line item, subtotal or total presented in the financial statements of the corresponding period, separately identifying and explaining the material reconciling items;
• explain the use of APMs in order to allow users to understand their relevance and reliability;
• explain why they believe that an APM provides useful information regarding the financial position, cash-flows or financial performance as well as the purposes for which the specific APM is used;
• provide comparatives for the corresponding previous periods. In situations where APMs relate to forecasts or estimations, the comparatives should be in relation to the last historical information available.

However, during the above-mentioned examination performed by the CSSF on the 2016 half-yearly financial reports, misstatements and omissions have been identified. In particular, a lack of information has been noted regarding:

definitions of APMs used (paragraph 21 of the Guidelines): while some issuers did not provide any definitions at all, others only disclosed definitions for specific APMs (such as APMs referred to “adjusted measures” or considered as less common) whereas the Guidelines require definitions to be provided for all APMs used;

• reconciliations of APMs to the most directly reconcilable line item, subtotal or total presented in the financial statements (paragraph 26 of the Guidelines): while some issuers did not provide any reconciliation at all, others provided only reconciliations for some APMs used. In this context, the CSSF recalls that if the reconciliation is disclosed in another document, compliance with the Guidelines requirements could be done by reference to this document;
• explanations on the use of APMs (Paragraphs 33 and 34 of the Guidelines): the CSSF has noted many omissions and boilerplate or incomplete information regarding this requirement of the Guidelines. In this context, the CSSF reminds issuers that they should explain why they believe that an APM provides useful information as well as the purposes for which this specific APM is used. Explanations as to their relevance and reliability should be provided for all APMs used.

In view of the above-exposed findings, the CSSF reminds issuers to assess for each measure used, when preparing future financial information, in particular the financial report for year-end 2016, whether this measure is an APM or not and if the Guidelines are applicable for this APM. Issuers should notably base their assessment on paragraphs 4, 17, 18 and 19 of the Guidelines. In the case where the Guidelines are applicable, the issuers should comply with all requirements for each and every APM used.

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.