Any label or term used to describe a non-GAAP financial measure, or adjustments in a reconciliation, must be appropriate given the nature of information.
For example, the following are not in compliance with the labelling requirement in paragraph 6(1)(a) of the Instrument:
- Labels that are the same as, or confusingly similar to, those normally used under the financial reporting framework used to prepare the financial statements. For example, a measure labelled “cash flows from operations” and calculated as cash flows from operating activities before changes in non-cash working capital items is confusingly similar to the term “cash flows from operating activities” specified in IAS 7 Statement of Cash Flows;
- Labels that purport to represent “results from operating activities” or a similar title but exclude items of an operating nature, such as inventory write-downs, restructuring costs, impairment of assets used for operations and stock-based compensation;
- Labels that are overly optimistic (e.g., guaranteed profit or protected returns); and
- Labels that may cause confusion based on the financial measure’s composition. For example, in presenting EBITDA as a non-GAAP financial measure, it would be inappropriate to exclude amounts for items other than interest, taxes, depreciation and amortization.
The above list is not exhaustive.