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CSA Provides Guidance on Compliance with Non-GAAP Financial Measures Rule

November 10, 2022

On November 3, 2022, the Canadian Securities Administrators (CSA) published CSA Staff Notice 51-364 (the Report) to summarize the results of continuous disclosure reviews conducted by CSA staff over the two years ending March 31, 2022. In particular, the Report appended a summary resulting from the CSA’s review of approximately 85 issuers to assess compliance with certain aspects of National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure (NI 52-112).

NI 52-112 and its companion policy (the Companion Policy) came into effect on August 25, 2021 (see our June 2021 Blakes Bulletin: CSA Publishes Final Non-GAAP and Other Financial Measures Rule) to codify new requirements for the disclosure of non-GAAP (generally accepted accounting principles) and other financial measures.

The Report identified the following common deficiencies across the continuous disclosure documents and investor presentations:


The CSA notes in the Report that some reviewed issuers improperly purported to incorporate quantitative reconciliations by reference into earnings press releases. While NI 52-112 generally permits issuers to incorporate by reference certain required disclosures concerning non-GAAP and other covered financial measures from an issuer’s management’s discussion and analysis, earnings press releases are an exception and must include the applicable quantitative reconciliations within the press release itself.

The Report also indicates that some reviewed issuers failed to adhere to the requirements in NI 52-112 for certain specified financial measures (e.g., a non-GAAP financial measure) to only be presented with no more prominence in a document relative to other measures (e.g., the most directly comparable financial measure from the issuer’s primary financial statements). For guidance on the topic of "prominence," the CSA reminds issuers to refer to the Companion Policy.


Pursuant to applicable securities laws, issuers are required to provide disclosure of the material factors that could impact on, and the material assumptions underlying, material forward-looking information.  However, the Report clarifies that disclosure of such factors and assumptions will not satisfy the requirement in NI 52-112 for issuers to describe significant differences between any disclosed forward-looking non-GAAP financial measures and their equivalent historical non-GAAP financial measures.


A “total of segments measure” is defined in NI 52-112 as, among other things, having been disclosed in the notes to an issuer’s financial statements. However, the CSA found that some reviewed issuers did not appropriately identify a total of segments measure and consequently, did not include the required disclosures. The Report provides that the CSA may request the removal of purported total of segments disclosure in an issuer’s financial statement notes (e.g., in the reportable segment note) if it is viewed as being included in a manner that is inconsistent with the core principle of IFRS 8 Operating Segments. In such cases, the financial measure disclosed outside the financial statements would then be considered to be a non-GAAP financial measure. NI 52-112 has different disclosure requirements for "total of segment measures" and "non-GAAP financial measures," making understanding this classification critical for issuers to ensure compliance.


NI 52-112 requires issuers to label supplementary financial measures using terminology that accurately describes the information presented. In this respect, the Report also provides that it would be confusing if a measure’s composition was inconsistent with well-established expectations as to that term’s composition. One example of potentially unclear nomenclature highlighted in the Report was the use of “Backlog”. The CSA notes that “Backlog” has been generally understood to represent an issuer’s firm purchase orders, so any disclosure of measure that includes other orders such as letters of interest or proposals outstanding should be named something different. Reporting issuers need to be thoughtful when labelling supplementary financial measures to ensure that investors are not unintentionally misled.


The CSA has observed that investor presentations of some issuers are purporting to incorporate by reference disclosures from an MD&A that has not yet been filed or does not possess information about the specific financial measures disclosed in the investor presentations. The Report also reminds issuers that NI 52-112 requires issuers to specify the location of the information being incorporated by reference from an MD&A (e.g., the reference should identify the financial reporting period of the MD&A, as well as the specific section or page reference within the MD&A or provide a hyperlink).


The Report also notes that other common areas of deficiencies from the CSA reviews include a failure to provide required comparative information, such as a quantitative reconciliation, for all comparative periods presented and a failure to disclose each non-GAAP financial measure that is used as a component of the non-GAAP ratio (including non-GAAP ratios that contain forward-looking information).


While 52-112 is a short rule in length and straight-forward in appearance, its application can frequently be difficult, making complete compliance a challenge for issuers. Any guidance from the CSA, such as that provided in the Report, should be reviewed carefully by issuers and their advisors. 

For further information, please contact:

Matthew Merkley         +1-416-863-3328
Gabe Gutfrajnd            +1-416-863-2513

or any other member of our Capital Markets group.