22 ALRAQABA . ISSUE 20 (2) Disclosure of Management-defined Performance Measures (MPMs): IFRS 18 places a strong emphasis on the need to disclose Management-defined Performance Measures (MPMs). Such disclosures would enable entities to provide useful information that helps users of financial statements have a better understanding of the following: a) Management-defined Performance Measures (MPMs), e.g.: • Adjusted profit or loss. • Adjusted operating profit. • Adjusted earnings before interest, tax, depreciation, and amortization (Adjusted EBITDA). b) IFRS-specified Performance Measures, e.g.: • Operating profit. • Operating profit before depreciation, amortization, and specified impairments. c) Other measures that are not subtotals of income/expenses (Non-MPMs): • Free cash flow. • Return on equity. • Net debt. d) Non-financial performance measures (Non-MPMs): • Number of subscribers. • Customer satisfaction score. With respect to MPMs, the following requirements should be considered: • The measures used shall present useful information for investors and require a high level of transparency and objectivity. • A statement that the MPM reflects the management’s view of the entity’s financial performance as a whole and is not necessarily comparable to the measures used by other entities. • An explanation of why MPMs are used and how they are calculated. • A reconciliation between the MPM and the IFRS-specified subtotal, including the income tax effect and the effect on non-controlling interests for each reconciliation item. • An explanation of any new changes, e.g., changes to how measures are calculated or any newly introduced MPM. What is an MPM? A total or subtotal of income and expenses Used in public communications outside of the financial statements Reflects management’s view of an entity’s financial performance Financial Standards Audit &
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