As mentioned earlier, one of the key concepts introduced by IFRS 18 is the introduction of so-called management-defined performance measures (MPMs). IFRS 18 requires entities to disclose information to help users of financial statements to understand the aspects of financial performance that are communicated by means of a MPM measure and how the MPM measure compares with the measures defined by IFRS standards.

MPMs are defined by IFRS 18 as a subtotal of income and expenses that an entity uses in public communications outside financial statements to communicate management’s view of an aspect of the financial performance of the entity as a whole to users.⁵ This definition, hence, specifically excludes subtotals required by an IFRS accounting standard, including newly to be introduced subtotals from IFRS 18 itself. It should also be noted that the scope of the MPM definition is limited to a subtotal of income and expenses, while ESMA’s APM definition also refers to the financial position and to cash flows. The introduced disclosure requirements for MPMs should be presented in a single note in the financial statements. If an entity also discloses other information in that note, the information in the note shall be labelled in a way that clearly distinguishes the required MPM-disclosures from the other information.

In the context of this study, it is relevant to understand the meaning of ‘public communications’ as described in IFRS 18.⁶ Public communication includes management commentary, press releases and investor presentations but excludes oral communications, written transcripts of oral communications and social media posts. Despite this latter exclusion, the scope can be considered broad and includes in any case the Q4 press release of results but also the investor presentation deck in which the results are often summarized. It should be noted that the public communications referenced to in IFRS 18 are not governed itself by IFRS 18. However, here the ‘soft law’ of the market authorities (AFM, ESMA, SEC) takes over and creates another layer of rules that should be adhered to if the listed companies fall under the supervision of these authorities.

As part of this study we will also include annual result press releases (the release of the Q4 results and the full reporting year) in our research and the adherence to the APM disclosure requirements in these releases. In this regard we will also investigate the period between the date of the annual result press release and the date of publication of the audited financial statements. Additionally our expectation is that the (vast) majority of the press releases include unaudited financial information which is further investigated in section 4.4 of this article.

We developed a self-constructed disclosure index to capture the quality of APM disclosures. The overall alternative performance measurement disclosure quality (APMDQ) construct is determined by the ESMA APM disclosure guidelines (Appendix 2). In this study the construct APMDQ is based on five of the seven principles of the ESMA guidance (ESMA 2015): Presentation, Reconciliations, Explanations on use, Prominence, and Comparatives. The principle consistency is excluded as this study focuses solely on the 2024 press release and financial statement (management report) information and no longitudinal information is captured. The principle compliance through reference⁸ is not captured as a separate quality indicator but if a reference to another document was made, the APMDQ assessment was based on the documents (original and referred to) together. The APMDQ construct is determined based on the following formula.

A P M D Q i = ∑ j = 1 n i ∑ k = 1 5 principle k j n i × 5

In this formula, n_i represents the number of APMs disclosed by firm i, and principle kj denotes the k-th of five disclosure quality principles (APMDQ) assessed for each APMj.

The data collection process consisted of a two-step approach. In the first step, APMs were identified based on the first page of the press releases and the first page of the management reports⁹ for each company. We considered that the first page typically highlights the most important metrics and hence captures the most important APMs. We chose to limit the scope of the APM identification process to solely financial performance measures and excluded non-financial performance measures (such as order book information or customer satisfaction scores) because we considered that several APM principles are less relevant for the non-financial performance measure categories (such as the principles Reconciliations and Prominence). Furthermore, we excluded alternative performance measures related to disaggregated financial information.¹⁰ In the second step we scored each individually identified APM against the five disclosure principles of the alternative performance measurements construct.

In this section we discuss the disclosure quality of APMs for the population divided in four subsections. Firstly, we discuss the overall quality derived from the disclosure index quality disaggregated per sector and per reporting principle (section 4.2.1). Secondly, we analyse the average number of identified APMs, nature of the APMs and use of compliance through referencing (section 4.2.2). Thirdly, we compare disclosure quality between press releases and management reports (section 4.3). Lastly, we reflect on the external auditors’ role related to press releases (section 4.4).

In line with our expectations, we observe a significant deviation in disclosure quality in press releases compared to management reports. As set forth in Table 7, an average score of 80% was realized across the five principles for APMs identified in the management report whilst only a score of 58% was realized in the press releases.¹⁸

The variation in quality between issuers was also significantly higher for the press release (standard deviation of 29%) versus the management report (standard deviation 19%). We believe this finding is troublesome because users of financial information typically rely on information in press releases as the first release of the results of the previous quarter and the reporting year. We refer to the end of section 2 of this study. In section 4.4, we provide further reflection on the external auditors’ role in the press release and the timing of the press release and the auditors’ opinion.

As evidenced in Table 7, the quality of APM disclosures in press releases is significantly lower than the quality of APM disclosures in management reports. As part of our study, we investigated whether the GAAP financial information included in the press release has been audited or unaudited or whether this information has not been disclosed at all (Table 8). We find that in almost half of the observations (47%) no information is disclosed whether the financial information is audited or not. We deem these results disappointing as this means that in almost half of the cases users of the press releases are uninformed on whether the financial figures have been subject to an external audit. In 32% of the instances companies specified the financial figures are unaudited and in only 8% of the instances it is specified that the financial figures are audited. This low percentage is likely a result of the press release being issued prior to the completion of the audit of the financial statements to which we will further reflect in the next part. In 16 instances (13%) the company explained in the press release that the audit procedures regarding the consolidated financial statements have been completed or substantially completed and that the auditor¹⁹ is in the process of issuing the audit report.²⁰ In our opinion this is an interesting statement given its inherent message that there will be no material audit differences affecting the financial statements which include differences in relation to subsequent events that could lead to an adjustment of the financial results until the date of authorization for issue of these statements.²¹

From a Dutch perspective we further refer to the NBA practice statement 1128 (NBA Handreiking 1128) which sets out the involvement of the auditor in relation to the press release. In this respect also the Dutch Corporate Governance code is relevant. The Dutch Corporate Governance Code explains that the audit committee assesses whether, and if so, how, the external auditor is involved in the content of the publication of financial reports other than the financial statements (Dutch Corporate Governance Code 2025). For the Dutch companies in the population (10 companies), Table 8 shows that 1 (10%) company discloses audited financial information in the press release, 7 (70%) disclose unaudited financial information in the press release, and 2 (20%) do not disclose whether the presented financial data have been audited. We therefore conclude that most of the companies (80%) adhere to the recommendation set forth in the NBA practice statement 1128 to inform users whether the press release included audited financial figures or not.

In order to evaluate the implication of the significant difference in disclosure quality between the press release and management report as set forth before, we have analysed the timing difference between the press release and the auditors’ report to the financial statements. Table 9 depicts the reporting gap between the Q4 press release and the auditors’ opinion accompanying the financial statements 2024. In applying the auditors’ opinion date, we assumed this is often the timing at which the financial statements are authorized for issue (or shortly after) which date should be disclosed according to IAS 10²². For almost half of the population (46%) the auditors’ opinion accompanying the 2024 financial statements was issued before or on the same date of the press release. This observation is relevant because the International Accounting Standards Board (IASB) considered in the development of IFRS 18 that in most jurisdictions entities issue the public communications (such as press releases) before or on the same day as the financial statements are authorized for issue however sometimes public communications might not be available until after the financial statements are authorized for issue.

Our observations show that in the majority (54%) of the cases the public communication has been before the auditors’ opinion. This outcome is in line with the study of Meirkulov et al. (2024) who found that 65% of the conference calls in 2024 were held before the date of the annual report with an average time gap of 20 days across a population of Dutch listed entities. In our study the average reporting gap found is 13 days across the full population and on average 26 days across the 68 companies for which a reporting gap was identified. Possibly this reporting gap is also affected by the mandatory electronic reporting requirement (European Single Electronic Format (ESEF)²³) applicable to publicly listed entities as from financial years 2021 as few issuers specifically pointed out in their press releases that the principle outstanding procedures as identified by the auditor included the receipt of the final ESEF financial statements. Interestingly, from the 68 companies for which the audit opinion accompanying the 2024 financial statements was provided after the Q4 2024 press release, 17 companies (25%) did not disclose whether the financial figures in the press release were audited or not, 36 companies (53%) disclosed the financial information was unaudited and 15 companies (22%) disclosed the audit was (substantially) completed.

We believe the publication of the press release before the issuance of the auditors’ opinion may form a potential risk that undue pressure is put on the external auditor, particularly if there is no information in the press release whether the information is audited or not. From the perspective of the users of the press release there may be over-reliance on the level of assurance provided with regard to the financial information in the press release. An interesting area for further study may be to what extent there is a difference in financial figures included in the public communication (press release) to the full year results and the financial statement audited by the external auditor.

We point out that IFRS 18 does not directly require additional disclosures in public communication (such as press releases) but does mandate the disclosure of MPMs in a single note in the financial statements.²⁴ This means that the lack of transparency identified in some press releases on APMs will not be (fully) resolved by the introduction of IFRS 18. We refer further to section 5.3 in which we provide a recommendation in this area.

In this regard, a good practice was identified in the press release of Ericsson B which auditor issued a review opinion over the interim report for the third and fourth quarter and also for the (summarized) year-end financial information published on 24 January 2025. Subsequently, the full annual report has been completed on 26 February 2025 accompanied by an auditors’ opinion. Despite this good practice, we still conclude that annual financial information is disclosed on two separate dates which adds complexity.

This study provides insights in the quality of APM disclosures in press releases and management report of listed European companies. As part our study we investigated the quality of APM disclosures through the construct of a disclosure index derived from the ESMA Guidance on APMs (ESMA 2015) for the following reporting principles: presentation, reconciliations, explanations on use, prominence, and comparatives. Our study showed that the reporting principle comparatives was adhered to the most (91%) whilst the principle explanation on the use was least adhered to (50%). Based on an average disclosure index score – covering all five investigated reporting principles – of 70%, we conclude that there is room for improvement. Furthermore, significant variation between issuers was identified as evidenced by the relatively high standard deviation found (19%).

Based on the disclosure index, we found that the quality of APM disclosures in the press release relating to the financial results (50%) is significantly lower than the quality identified in the management report (78%). The relevance of this observation is underpinned by the reporting gap identified between the date of publication of the press release related to the full year 2024 results and the date of the auditors’ report accompanying the financial statements. Our research showed that in most instances (54%) the press release covering the financial results 2024 was announced earlier than the issuance of the auditors’ opinion to the financial statements. Furthermore, for some companies (20%) a significant reporting gap of more than 30 days was identified.

As part of our study we reflect on the external auditors’ role in press releases. Almost half of the companies (46%) did not disclose whether the financial figures included in the press release to the 2024 full year results were audited or not. We find this a disappointing result. In relation to the ten Dutch companies in the population a higher score was identified. We found that 8 out of the 10 companies did disclose whether the press release included audited or unaudited information.

As a general observation, we noted significant differences in the quality of APM disclosures amongst issuers particularly in the press release. In this regard our study also identified best practice disclosures in both the press release and the management report.

By showing some good practices derived from the companies’ statements, we hope to give issuers practical examples to improve the disclosure quality of alternative performance measures in forthcoming press releases and management reports.

There are several interesting areas for further research. One area is to investigate the specific nature of non-recurring (adjusting) items and specifically assess whether APM labels are not overly optimistic or positive (as set forth in paragraph 22 of the ESMA (2015) guidance).

Another interesting area for further study is to what extent there is a difference in financial figures included in the public communication (press release) to the full year results and the financial statement audited by the external auditor.

Lastly, the transition to IFRS 18, effective as per 1 January 2027, may provide relevant research topics, especially into the nature and number of the APMs used since IFRS 18 requires subtotals of income and expenses not required or specifically exempted by IFRS (MPMs) to be included and disclosed in a single note to the financial notes which content therefore becomes part of the audited information. This area of research is also interesting given the clear message of the AFM towards auditors and advisers to strengthen their role in the wider corporate communication activities of their clients by discussing the use of APMs both for the documents in which they have an active role and for other corporate reporting activities. And it is especially the information on the (reasons for) use of APMs that shows the largest area for improvement (Table 3). A logical question that might arise within the boards of the companies is whether these APMs are really needed to inform investors properly.

Lastly, we recommend some regulatory or infrastructural actions based on our results and practical experience.

First of all, we advise to restrict the Q4 press release (if any) to the interim period itself and to only publish ‘financial information over the full reporting year in the audited financial statements and/or specific press releases containing parts of these audited financial information. This resolves the inherent complexity of presenting annual financial information on two different dates (press release date and date of publication annual report) in the context of events after the reporting period (IAS 10) and reduces a potential risk that undue pressure is put on the external auditor if audit findings and/or subsequent events require adjustment of already published financial information. Also the possible over-reliance by users on the level of assurance provided by the auditor in published press releases where references are made to the progress of the audit is mitigated. If the company likes to respond to an investor’s demand to publish annual results simultaneously with the Q4 press release, we recommend to wait until the audit is completed and audited annual figures can be released.²⁵

Another recommendation is to promote the current ‘soft law’ of the ESMA statements regarding the APMs into EU-regulations or Delegated Acts with the status of law. The level of authority of the requirements relating to the MPMs to be presented in the financial statements according to IFRS 18 could then be matched to similar authoritative statements that cover other forms of communication (like press releases) in which APMs/MPMs are presented. Also the role of the auditors in these other forms of communication could be determined such as requirement to consider the relevant forms of communication as other information²⁶ or to provide (limited) assurance on certain information elements.

In our view these recommendations contribute to the aim of protecting the integrity of financial markets and enhancing investor confidence, also in line with the Market Abuse Regulation of the European Union.²⁷