What are management-defined performance measures (MPMs) under IFRS 18?
A core Group Accounting interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
MPMs are subtotals of income and expenses that a company uses in public communications outside the financial statements to convey management's view of performance — classic 'non-GAAP' / alternative performance measures like 'adjusted EBITDA', 'underlying operating profit', or 'EBIT before exceptionals'. Historically these were largely unregulated in the IFRS statements, leading to inconsistency and the risk of flattering, cherry-picked measures. IFRS 18 brings them inside the audited financial statements' net: it requires MPMs to be disclosed in a single note, reconciled to the most directly comparable subtotal or total specified by IFRS, explained as to why the measure provides useful information and how it's calculated, applied consistently period to period (with disclosure of changes), and identified as not necessarily comparable to other entities' measures. For group accountants this means cataloguing the MPMs management uses, building the reconciliations, and putting governance around them — they can no longer sit only in the investor presentation, unreconciled.
WHAT INTERVIEWERS LISTEN FOR
- ✓MPMs = management's public non-GAAP performance subtotals (e.g., adjusted EBITDA)
- ✓IFRS 18 requires a single note: reconcile to an IFRS subtotal, explain usefulness/calculation
- ✓Consistent application; flagged as not comparable across entities
- ✓Brings previously unregulated APMs into the audited statements
COMMON MISTAKES
- ✗Thinking MPMs stay unregulated outside the statements
- ✗No reconciliation to an IFRS subtotal
- ✗Inconsistent period-to-period definitions
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