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:
- Identify the relevant APMs for users that are also eligible for external communication
- Design and