How to work with APMs

Alternative performance measures (APM) have a twofold use; directors monitor the financial and economic performance through APMs, and reporting entities heavily rely on APMs to communicate results to their financial statement users. APMs should normally be consistent with the performance indicators used by directors. However, regulatory restrictions or confidentiality issues may prevent directors from disclosing all of the types of performance indicators used. Furthermore, complexity in calculation or use of non-financial information could also prevent directors from publicly disclosing certain types of APMs.

How to work with Alternative performance measures

A structured way to organize an entity’s APM process may involve the following four steps:

  1. Identify the relevant APMs for users that are also eligible for external communication
  2. Design and
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What are Alternative performance measures?

Alternative performance measures (APMs) may supplement Generally Accepted Accounting Principles (GAAP) reporting, and often represent an effective way of communicating important entity specific developments.

However, APMs need to be defined using appropriate descriptions and disclosures to avoid the risk of misleading the users of the financial reports.

Regulators in many jurisdictions have issued guidelines for the use of APMs that are helpful benchmarks when developing communication strategies and preparing financial reports. Entities can use these guidelines, both for compliance purposes and to facilitate effective communication.


Financial statements are the cornerstone of financial reporting for entities. In addition to GAAP measures, management often uses a variety of other financial measures to communicate information about an entity’s financial performance, financial position, Read more

Challenges in financial reporting

There are specific problems that affect the different bases of measurement available to financial reporting: historical cost, value to the business, fair value, realisable value and value in use. How the different bases work will be considered separately, but it will be helpful to look first at some issues that generally beset financial reporting measurement.

When applied to financial reporting the term measurement can give a misleading impression of certainty and objectivity. In daily life, measurements are typically made of the physical characteristics of physical objects – such as height, weight, temperature and so on. If accurate measurement tools are employed, information of this sort is objective and uncontroversial. The subjects of measurement in financial reporting, however, … Read more

Measurement under IFRS

The standards for which the IASB is responsible – International Financial Reporting Standards (IFRS) – are one collection of financial reporting practices. They are increasingly important because of the growing number of companies around the world (especially listed companies) that are required to comply with them, and the growing number of countries – including the UK – that model their own more general financial reporting requirements on them.

IFRS incorporates and builds on the accumulated, often inconsistent practical solutions devised by national standard-setters to deal with financial reporting problems that have emerged over many years, solutions which are in turn built on the accumulated business practices of centuries. IFRS is not a completely new and uniform approach to financial reporting, Read more

Financial reporting in change

Many different bodies of practices are used around the world for external financial reporting and these include different approaches to measurement.

  1. Different jurisdictions have developed their own financial reporting requirements, influenced by differences in the uses made of financial reporting information and in business and regulatory environments.
  2. Even within a single jurisdiction, different approaches are sometimes adopted for different entities in order to reflect variations in size, ownership and governance.
  3. Businesses undertake different types of transaction or hold different types of asset or liability. Practices develop that reflect the needs and experiences of particular types of business.

These bodies of practices are rarely systematic; they have evolved over time as collections of diverse responses to practical problems.

Historical cost remains Read more

Fair value measurement and disclosure

The following are some examples of assets and liabilities that fall within the scope of IFRS 13 for the purpose of measurement and/or disclosure.

IFRS===Financial reporting itemMeasurementDisclosure
[IAS 39]Financial instruments available-for-sale or held for trading (recurring fair value measurements) 


[IAS 39 /


Financial instruments held-to-maturity subsequent to initial recognition at amortised costs (so not part of IFRS 13.
[IFRS 1]Fair value as deemed cost by a first-time adopter of IFRS (e.g. for property, plant and equipment) in the year of adoption of IFRS 


[IFRS 3]Fair value used to initially measure non-financial assets and non-financial liabilities in
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