ESMA APM Guidelines and IFRS 18: What Changes From 2027

ByOfficer

Last updated: June 2026

From 1 January 2027, every issuer that discloses alternative performance measures outside its financial statements will need to manage two overlapping sets of requirements: the ESMA APM Guidelines and the new management-defined performance measures (MPM) regime under IFRS 18. Get the overlap wrong and you end up with duplicated disclosures, inconsistent reconciliations, or enforcement actions for labels that no longer fit the underlying calculation.

On 16 February 2026, ESMA published a package specifically to address this interaction: a new Q&A (ESMA_Q&A_2775) on the relationship between the ESMA APM Guidelines and IFRS 18, plus targeted amendments to four existing Q&As (1868, 1874, 1875, and 1877). All amendments take effect from 1 January 2027. Then, on 7 May 2026, ESMA published its Report on 2025 Corporate Reporting Enforcement (ESMA32-2064178921-9413), which includes fresh APM enforcement data and explicit messaging on what issuers need to fix before IFRS 18 goes live.

This article walks through the verified primary sources, explains the practical overlap, and identifies the common errors enforcement teams are already flagging.

Related reading: ESMA ESEF Taxonomy 2025: What Changes for 2026 IFRS Filings

Who the ESMA APM Guidelines Apply To

The ESMA APM Guidelines (ESMA/2015/1415) apply to alternative performance measures disclosed by two categories of entity: issuers with securities admitted to trading on regulated markets under the Transparency Directive (2004/109/EC), and persons responsible for prospectuses under the Prospectus Regulation (Regulation (EU) 2017/1129).

The scope is narrower than many compliance teams assume. APMs disclosed inside financial statements prepared under IFRS or national GAAP are excluded from the Guidelines. The Guidelines only cover measures disclosed outside the financial statements but within regulated information or prospectuses. This means management reports, earnings releases, ad-hoc disclosures under Article 17 of MAR, and prospectuses are in scope. Internal board packs, investor presentations that are not published as regulated information, and private fund reports to limited partners generally fall outside the formal scope.

I see teams in Luxembourg regularly overclaim the reach of the APM Guidelines. A management company that is itself listed (DWS, Amundi, or similar) needs to apply the Guidelines when it publishes its own regulated information containing non-IFRS metrics. A listed SICAV or ETF admitted to trading on a regulated market is also caught. But the UCITS prospectus of an unlisted open-ended fund, governed by the UCITS Directive rather than the Prospectus Regulation, sits outside the formal APM Guidelines scope. The same applies to AIFM reporting to qualified investors under AIFMD. This does not mean those fund documents escape all scrutiny on performance metrics, but the scrutiny comes from different rules (UCITS KIID/KID requirements, CSSF circulars on marketing, IOSCO performance presentation standards), not from the ESMA APM Guidelines themselves.

The February 2026 Q&A Package: What ESMA Published

ESMA’s February 2026 package has three components. ESMA published Q&A 2775 on 16 February 2026 and the accompanying public statement on 17 February 2026, alongside targeted amendments to existing APM Q&As. Q&A 2775 sets out the interaction between the APM Guidelines and IFRS 18. The public statement is titled “Reshaping Performance: Implementation of IFRS 18 Presentation and Disclosure in Financial Statements” (ESMA32-193237008-9180). The targeted Q&A amendments cover Q&As 1868 (measures presented simultaneously inside and outside financial statements), 1874 (interim financial statements), 1875 (concept of prominence), and 1877 (definition of an APM).

All Q&A amendments take effect from 1 January 2027, aligned with the mandatory application date of IFRS 18. Because IFRS 18 applies retrospectively, the comparative period is restated, so issuers with December year-ends need IFRS 18-consistent 2026 figures ready for their first 2027 reporting. ESMA has made a deliberate choice to leave the original Q&A versions in place until that date, then switch. This means compliance teams have a defined window to update their APM policies, disclosure templates, and internal sign-off procedures.

ESMA APM Guidelines vs IFRS 18 MPMs: The Overlap Explained

The real problem starts when you try to work out which measure falls under which framework, or both. Q&A 2775 addresses this directly.

Under the APM Guidelines, an APM is 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. Under IFRS 18, a management-defined performance measure (MPM) is a subtotal of income and expenses that is used to communicate to investors management’s view of an aspect of the financial performance of the entity as a whole and is not listed in IFRS 18 or specifically required by IFRS standards.

ESMA’s Q&A 2775 confirms that MPMs generally represent a subset of APMs. This matters because it determines what disclosure applies where:

  • If a measure is an MPM but is not disclosed in regulated information documents, the IFRS 18 disclosure requirements apply inside the financial statements only.
  • If a measure is both an MPM and an APM and is disclosed in regulated information or a prospectus, both the APM Guidelines and IFRS 18 requirements apply.
  • If a measure meets the APM definition but is not an MPM (because it relates to financial position or cash flows rather than income and expenses), the APM Guidelines apply outside financial statements as before.

This is where teams usually misclassify. A net debt figure is an APM under the Guidelines but is not an MPM under IFRS 18 because it does not relate to income and expenses. An “adjusted EBITDA” used in management reports and also on the face of the income statement is likely both an MPM and an APM. The classification drives different disclosure locations and different reconciliation requirements.

What Changes in Reconciliation Requirements

The reconciliation requirements under the APM Guidelines and IFRS 18 are similar in intent but differ in detail. Q&A 2775 spells out the key differences that teams need to map.

The APM Guidelines require reconciliation between the APM and the most directly reconcilable line item, total, or subtotal in the financial statements. They do not require disclosure of the income tax effect or the effect on non-controlling interests for each reconciling item. IFRS 18 goes further: for MPMs, issuers must reconcile to the most directly comparable subtotal listed in paragraph 118 of IFRS 18 or a total/subtotal specifically required by IFRS, and must disclose the income tax effect and non-controlling interest impact of each reconciling item.

ESMA confirms in Q&A 2775 that if an issuer applies the IFRS 18 reconciliation requirements for a measure that is both an MPM and an APM, it will also comply with the APM Guidelines reconciliation requirements. This is a practical relief: you do not need two separate reconciliations for the same measure. But you do need to understand that the IFRS 18 reconciliation is the higher standard. If your current APM reconciliations omit tax and NCI effects, they need to be upgraded for any measure that also qualifies as an MPM.

I find that reconciliation gaps are one of the most common enforcement findings. The May 2026 ESMA enforcement report confirms that definitions, reconciliations, and explanations remain the top areas where enforcers take action. In 2025, enforcers performed 434 examinations of APM disclosures, with an action rate of 16%, up from 14% in 2024. The most frequent issues were missing reconciliations and inadequate definitions.

Labels and Prominence: The Amended Q&As

The amendments to Q&As 1868, 1874, 1875, and 1877 address specific areas where IFRS 18 changes the picture.

Q&A 1868 covers measures presented simultaneously inside and outside financial statements. The current version (pre-2027) exempts issuers from providing a separate reconciliation when an APM is directly identifiable from the financial statements and is also disclosed outside them. The amended version (effective 1 January 2027) updates this principle to account for MPMs: where a measure is both an MPM with IFRS 18 disclosures in the financial statements and an APM in regulated information, the issuer may use the compliance-by-reference principle to refer to the specific page or section of the financial statements where the IFRS 18 disclosures appear.

Q&A 1875 addresses prominence. The APM Guidelines require that APMs not be displayed with more prominence than measures stemming from the financial statements. IFRS 18 introduces mandatory subtotals, including operating profit and profit before financing and income taxes. These mandatory IFRS 18 subtotals are not APMs and not MPMs. The amended Q&A clarifies that issuers must assess prominence against these new mandatory subtotals as well. If an issuer leads its earnings release with “adjusted EBITDA” and buries the IFRS 18 operating profit figure in a footnote, that is a prominence violation under the APM Guidelines.

Q&A 1877 updates the definition of “result of operating activities” as an APM. Under IFRS 18, “operating profit or loss” becomes a defined subtotal. Once IFRS 18 applies, “operating profit” will no longer be an APM because it is specified in the financial reporting framework. But a modified version, such as “adjusted operating profit”, remains an APM. Teams that currently treat “operating profit” as an APM in their APM inventories will need to reclassify it from 2027 onwards.

EBITDA and the OPDAI Question

IFRS 18 does not define “EBITDA”. It does, however, list “operating profit or loss before depreciation, amortisation and impairments within the scope of IAS 36” (OPDAI) as a subtotal that does not meet the definition of an MPM. This distinction matters more than it first appears.

Whether a measure labelled “EBITDA” is an MPM turns on its calculation, not its label. Under IFRS 18, an EBITDA measure equates to OPDAI, and so falls outside the MPM definition, only where the issuer has no income or expenses in the investing or financing categories and makes no further adjustments. Where the calculation departs from OPDAI, which is the usual case, the measure is both an MPM and an APM, and full dual-framework disclosure applies.

This is where teams commonly get wrong the relationship between labels and underlying calculations. The label “EBITDA” is not determinative. What matters is whether the calculation matches a subtotal listed in IFRS 18 paragraph 118 or B123. The ESMA enforcement report reinforces this: issuers should use labels that reflect the content of the measures used, and measures labelled as EBITDA or adjusted EBITDA will, in most cases, meet the definition of an MPM.

May 2026 Enforcement Report: What Enforcers Found in 2025

The ESMA Report on 2025 Corporate Reporting Enforcement (ESMA32-2064178921-9413, published 7 May 2026) provides the most recent enforcement data on APM compliance. During 2025, enforcers conducted 434 examinations of APM disclosures, with around 77% covering all principles of the APM Guidelines. The overall examination rate was 11% of issuers (down from 12% in 2024), but the action rate increased to 16% (from 14%).

ESMA’s key messages in the enforcement report go beyond routine reminders. Three points stand out for compliance teams preparing for the IFRS 18 overlap:

First, ESMA calls on issuers to reassess the use of APMs where they depict only small variations of the same performance aspect. Multiple EBITDA measures (EBITDA, adjusted EBITDA, normalised EBITDA, pro forma EBITDA) that differ by minor adjustments create confusion and are a recurring enforcement target. With IFRS 18 requiring MPM disclosures inside financial statements, the pressure to rationalise APM inventories will increase.

Second, ESMA emphasises that qualitative APM disclosures (labels, explanations, definitions) are as important as quantitative ones (reconciliations, comparatives). Enforcers found that while quantitative disclosure improved year on year, qualitative disclosures remain weak. Labels that do not accurately describe the underlying calculation are a growing focus.

Third, ESMA notes that measures used for covenant compliance still fall within APM Guidelines scope when they are also used to explain performance to investors. Some issuers assumed that covenant-linked metrics were exempt. They are not.

Practical Impact for Listed Fund Vehicles and Management Companies

For Luxembourg-based entities in the fund industry, the APM Guidelines bite in specific situations. A listed management company (SICAV structure listed on a regulated market, or a management company whose own shares are traded) publishing annual or semi-annual reports with non-IFRS metrics is directly in scope. The same applies to ETFs and listed closed-ended funds that publish regulated information containing APMs.

Where compliance teams commonly get this wrong: they assume UCITS semi-annual reports or AIFM investor reporting fall under the APM Guidelines. They do not, unless the fund vehicle is admitted to trading on a regulated market. UCITS performance presentation is governed by the UCITS Directive, the PRIIPs KID requirements, and CSSF circulars on marketing materials, not by the ESMA APM Guidelines. AIFMD Annex IV reporting is a supervisory reporting obligation, not a regulated information disclosure under the Transparency Directive.

That said, the principles behind the APM Guidelines (define your measures, reconcile them, do not give them more prominence than GAAP measures, explain why you use them) are increasingly referenced as best practice by NCAs, including the CSSF, when reviewing marketing materials for funds. Teams that build APM-quality governance around non-standard performance metrics in fund factsheets and marketing documents position themselves ahead of enforcement trends, even where the formal obligation does not yet extend to those documents.

Implementation Checklist for January 2027

Compliance, finance, and disclosure teams at entities in scope should work through the following before 1 January 2027:

  • Build a complete inventory of all financial measures disclosed outside financial statements. Classify each measure as APM-only, MPM-only, or dual (both APM and MPM). The classification drives which disclosure requirements apply and where.
  • Map each dual-classified measure to its IFRS 18 reconciliation requirement. Determine whether your current APM reconciliation includes the income tax effect and NCI impact for each reconciling item. If not, extend the reconciliation.
  • Review labels against IFRS 18 subtotals. “Operating profit”, “profit before financing and income taxes”, and OPDAI are now defined subtotals, not APMs. Remove them from your APM inventory. Any modification to these subtotals (e.g. “adjusted operating profit”) remains an APM.
  • Assess whether any measures currently labelled as EBITDA are economically identical to OPDAI under your IFRS 18 classification structure. If so, the label may need adjustment, or the measure may need reclassification.
  • Update prominence assessments. The new IFRS 18 mandatory subtotals should appear with at least equal prominence to APMs in management reports, earnings releases, and investor presentations that form part of regulated information.
  • Review compliance-by-reference procedures. The amended Q&A 1868 allows reference to IFRS 18 disclosures inside financial statements to satisfy APM Guidelines requirements for dual-classified measures. Confirm your disclosure templates support cross-referencing to specific pages or sections of the financial statements.
  • Rationalise multiple APMs covering similar performance aspects. ESMA is explicitly flagging multiple EBITDA variants. If you disclose more than two EBITDA-type measures, document why each one is necessary and how they differ.
  • Update internal approval governance. Ensure that any new APM or MPM is reviewed by finance, compliance, and the audit committee before first disclosure. The IFRS 18 MPM disclosure note will become part of audited financial statements, raising the governance bar.

Frequently Asked Questions

Do the ESMA APM Guidelines apply to UCITS fund prospectuses?

The APM Guidelines apply to prospectuses under the Prospectus Regulation (Regulation (EU) 2017/1129). UCITS prospectuses are governed by the UCITS Directive, which is a separate regime. If a UCITS fund is also admitted to trading on a regulated market (e.g. a listed ETF), its regulated information disclosures would fall under the Transparency Directive scope of the APM Guidelines, but the UCITS prospectus itself is not within the Prospectus Regulation scope.

When does Q&A 2775 take effect?

Q&A 2775 and the amended Q&As (1868, 1874, 1875, 1877) all take effect from 1 January 2027, aligned with the mandatory application date of IFRS 18. Because IFRS 18 applies retrospectively, the comparative period is restated, so issuers with December year-ends need IFRS 18-consistent 2026 figures ready for their first 2027 reporting.

Do I need separate reconciliations for APM Guidelines and IFRS 18?

Not for measures that are both MPMs and APMs. ESMA confirms in Q&A 2775 that applying the IFRS 18 reconciliation requirements (which are more detailed, including tax and NCI effects) will also satisfy the APM Guidelines reconciliation requirements. You can use a single reconciliation for each dual-classified measure.

Is EBITDA an MPM under IFRS 18?

It depends on the calculation. IFRS 18 lists OPDAI (operating profit or loss before depreciation, amortisation and impairments within the scope of IAS 36) as a specified subtotal. If your EBITDA calculation is economically identical to OPDAI, it is not an MPM. If it differs, it is both an MPM and an APM, and full dual-framework disclosure applies.

What are the most common APM enforcement findings?

According to the ESMA 2025 enforcement report (published May 2026), the most common findings relate to definitions, reconciliations, and explanations, followed by labels. The action rate was 16% in 2025, up from 14% in 2024. Missing reconciliations and inaccurate labels are the leading causes of enforcement action.

Does net debt fall under IFRS 18 MPM requirements?

No. MPMs under IFRS 18 are subtotals of income and expenses only. Net debt relates to financial position, not to the statement of profit or loss. Net debt remains an APM under the APM Guidelines but is not affected by the IFRS 18 MPM requirements.

What should fund marketing teams take away from the APM Guidelines?

Even where the APM Guidelines do not formally apply to fund marketing materials (e.g. unlisted UCITS factsheets), the underlying principles are increasingly referenced by NCAs including the CSSF as best practice for performance metric disclosure. Defining measures clearly, reconciling to standard benchmarks, and avoiding misleading prominence are governance standards that apply across document types.

Related Articles

Key Takeaways

  • ESMA published Q&A 2775 on 16 February 2026 and the accompanying public statement on 17 February 2026, with amendments to four existing APM Q&As (1868, 1874, 1875, 1877), all effective from 1 January 2027.
  • MPMs under IFRS 18 are generally a subset of APMs under the APM Guidelines. The classification drives which disclosures apply and where they must appear.
  • For measures that are both MPMs and APMs, the IFRS 18 reconciliation (including tax and NCI effects) satisfies both frameworks. No separate APM reconciliation is needed.
  • “Operating profit” becomes a defined IFRS 18 subtotal from 2027, removing it from APM inventories. Any adjusted version remains an APM.
  • EBITDA is not defined by IFRS 18. Whether it qualifies as an MPM depends on whether it differs from the OPDAI subtotal listed in IFRS 18 paragraph 118.
  • The 2025 enforcement action rate for APMs rose to 16%, with definitions, reconciliations, and labels as the top finding areas.
  • The APM Guidelines apply to listed issuers and prospectuses under the Prospectus Regulation. They do not apply to UCITS prospectuses, unlisted fund reports, or AIFM investor communications unless the entity or vehicle is admitted to trading on a regulated market.
  • IFRS 18 applies retrospectively. December year-end issuers need IFRS 18-consistent 2026 comparatives ready for their first 2027 reporting.

Sources and References

Disclaimer: The information on RegReportingDesk.com is for educational and informational purposes only. It does not constitute legal, regulatory, tax, or compliance advice. Always consult your compliance officer, legal counsel, or the relevant supervisory authority for guidance specific to your institution.

Similar Posts