Overview of SIX’s Directive on the Use of Alternative Performance Measures

For many companies listed on the SIX Swiss Exchange Ltd (SIX), the use of alternative performance measures (APMs) has become a regular tool for communicating the business and financial performance of a company to investors. In light of the widespread use of APMs, their diverse application and the increasing risk of investors being misled, SIX Swiss Exchange Regulation Ltd has issued a new Directive on the Use of Alternative Performance Measures (the Directive). This article provides a brief introduction to the Directive and its application to issuers listed on SIX.

By Deirdre Ní Annracháin (Reference: CapLaw-2018-47)


On 20 March 2018, SIX Exchange Regulation issued a new directive on the use of alternative performance measures (the Directive) by issuers in their financial reporting. The aim of the Directive is to promote the clear and transparent use of alternative performance measures (APMs) (article 1).

1) Definition of APMs

The Directive defines an APM as “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 recognised accounting standards” (article 3 para.1). It cites the following as examples of APMs:

  • operating earnings;
  • cash earnings;
  • earnings before non-recurring expenses;
  • earnings before interest, tax, depreciation and amortisation (EBITDA);
  • net debt;
  • organic growth; and
  • similar terms designating adjustments to line items of income statements and statements of comprehensive income, balance sheets or cash flow statements.

(article 3 para. 2)

Within this (non-exhaustive) list of APMs, EBITDA (and related measures, such as Adjusted EBITDA) may be one of the most widely used by issuers. As a non-IFRS/Swiss GAAP measure, the way in which it is calculated may vary from company to company. The adjustments made in calculating Adjusted EBITDA are another source of potential discrepancy as such adjustments reflect a range of management judgements that are often unique to each company.

Specifically excluded from the definition of an APM are physical measures, such as number of tonnes (often used, for example, by issuers operating in food-related industries), and other non-financial performance measures. Such other non-financial performance measures could include, for example, number of subscribers or average revenue per user (ARPU) often reported by telecom companies. Performance measures which are defined by other regulations that are applicable to issuers, such as solvency, are also excluded. As a result of this exclusion, it is likely that capital adequacy metrics which banking and financial institutions are required to report under Swiss and European financial regulations, such as regulatory capital ratios (e.g. Common Equity Tier 1 capital ratios), will not be deemed APMs.

2) Application of the Directive

The Directive applies to all issuers whose registered offices are in Switzerland and have equity securities listed on SIX Swiss Exchange Ltd (SIX), as well as issuers who do not have a registered office in Switzerland, but whose equity securities are listed on SIX and not on the stock exchange of their home country (article 2).

The requirements of the Directive, which are set out further below, apply to information disclosed by issuers periodically or for a specific event for the purpose of maintaining listing which contains APMs that are not included in the issuer’s financial statements as prepared in accordance with applicable accounting standards (e.g. Swiss GAAP or IFRS). Such information includes, inter alia, annual reports, management commentaries and press releases relating to periodic financial reporting (article 4 para. 1).

The Directive explicitly states that it does not apply to prospectuses relating to the listing of securities and investor presentations (article 4 para. 2). However, best practice in Switzerland suggests that the level of financial disclosure provided by an issuer in a prospectus or presentation material to investors should generally be maintained in future financial reporting, such as annual reports etc. Therefore, where an APM is introduced for the first time in a prospectus or investor presentation, and the issuer intends to maintain the same level of disclosure in future financial reports (as is best practice), then the requirements of the Directive will apply indirectly and by extension to such prospectus or presentation.

The Directive enters into force on 1 January 2019, and is applicable for the first time to annual statements for all financial years commencing on or after that date (article 10).

3) Requirements of the Directive

The Directive sets out five requirements for the presentation of APMs by issuers.

The first is that APMs must be meaningfully labelled and explained using clear and comprehensible definitions. The label of the APM must not be misleading under the circumstances, and should reflect the manner in which the APM was calculated (article 5).

The second is that where an APM is based on or derived from a measure included in financial statements prepared in accordance with recognised accounting standards, and has been adjusted by adding or omitting specific items, then a reconciliation statement to a comparable measure in the financial statements must be disclosed, along with an explanation of significant reconciliation items. For example, EBITDA financial figures are usually accompanied by a reconciliation to net income or similarly titled line items from an issuer’s financial statements. An exception to this rule is that if the APM is directly apparent from the financial statements prepared according to recognised accounting standards (e.g., if it is a subtotal indicated in the financial statements), then no reconciliation is required (article 6).

Third, issuers may not present APMs more prominently than measures that are defined in financial statements prepared in accordance with recognised accounting standards. Issuers are required to ensure that there is a “balance” between APMs used and the performance measures defined or specified in the applicable accounting standards (article 7). This is likely to be of particular relevance to issuers who have historically given significant prominence to EBITDA and other related measures, as it may be necessary to reduce the emphasis on such figures in favour of measures that are consistent with recognized accounting standards, such as revenue and profit.

Fourth, APMs must be presented consistently. Comparative information for previous periods must be disclosed, and the definition and method of calculation for the APM must be used consistently over time. Any inconsistency must be disclosed, along with a description of the change, and comparative information must be adjusted accordingly (or, failing this, an explanation as to why an adjustment was not made must be given under the “comply or explain” principle) (article 8).

Finally, in providing the information required by the Directive, issuers may refer to other documents, such as an appendix to the annual report or a central document on a web page. However, any such documents referred to must be publicly accessible at the time the relevant disclosure is made (article 9).

Deirdre Ní Annracháin (deirdre.niannrachain@nkf.ch)