National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure
Part 3 Specified Financial Measure Disclosure
Section 8

Non-GAAP Ratios

An issuer must not disclose a non-GAAP ratio in a document unless all of the following apply:

(a) the non-GAAP ratio is labelled using a term that, given the non-GAAP ratio’s composition, describes the nonGAAP ratio;

(b) the non-GAAP ratio is presented with no more prominence in the document than that of similar financial measures disclosed in the primary financial statements of the entity to which the non-GAAP ratio relates;

(c) in proximity to the first instance of the non-GAAP ratio in the document, the document

(i) explains that the non-GAAP ratio is not a standardized financial measure under the financial reporting framework used to prepare the financial statements of the entity to which the non-GAAP ratio relates and might not be comparable to similar financial measures disclosed by other issuers,

(ii) discloses each non-GAAP financial measure that is used as a component of the non-GAAP ratio,

(iii) discloses, directly or by incorporating it by reference as permitted under section 5, an explanation of

(A) the composition of the non-GAAP ratio,

(B) how the non-GAAP ratio provides useful information to an investor and explains the additional
purposes, if any, for which management uses the non-GAAP ratio, and

(C) if the label or the composition of the non-GAAP ratio has changed from what was previously
disclosed, an explanation of the reason for the change;

(d) if the non-GAAP ratio is disclosed in MD&A or in an earnings release of the issuer, the non-GAAP ratio for a comparative period, determined using the same means of calculation, is disclosed in the document, unless

(i) the non-GAAP ratio is forward-looking information, or

(ii) it is impracticable to disclose the measure for the comparative period.


CSA Staff Notice 52-306 Non-GAAP Financial Measures
Part III Disclosure Accompanying Non-GAAP Financial Measures

Lexata note: As of August 25, 2021, this staff notice has been replaced by new NI 52-112, with some exceptions for annual materials in respect of 2020. See Part 5 of the new rule for transition details.

Disclosure Accompanying Non-GAAP Financial Measures

Financial statements prepared in accordance with an issuer`s GAAP provide investors with a clear basis for financial analysis and comparison among issuers. Staff recognizes that non-GAAP financial measures may provide investors with additional information to assist them in understanding critical components of an issuer’s financial performance. However, an issuer should not present a non-GAAP financial measure in a way that confuses or obscures the most directly comparable measure specified, defined or determined under the issuer`s GAAP presented in its financial statements.

Staff reminds issuers of their responsibility to ensure that information they provide to the public is not misleading. Staff also reminds certifying officers of their obligations under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings to make certifications regarding misrepresentations, fair presentation, and disclosure controls and procedures. A non-GAAP financial measure may be misleading if it includes positive components of the most directly comparable measure specified, defined or determined under the issuer`s GAAP presented in its financial statements but omits similar negative components.

In order to ensure that a non-GAAP financial measure does not mislead investors, an issuer should:

  1. state explicitly that the non-GAAP financial measure does not have any standardized meaning under the issuer`s GAAP and therefore may not be comparable to similar measures presented by other issuers;
  2. name the non-GAAP financial measure in a way that distinguishes it from disclosure items specified, defined or determined under an issuer`s GAAP and in a way that is not misleading. For example, in presenting EBITDA as a non-GAAP financial measure, it would be misleading to exclude amounts for items other than interest, taxes, depreciation and amortization;
  3. explain why the non-GAAP financial measure provides useful information to investors and the additional purposes, if any, for which management uses the non-GAAP financial measure;
  4. present with equal or greater prominence to that of the non-GAAP financial measure, the most directly comparable measure specified, defined or determined under the issuer`s GAAP presented in its financial statements;
  5. provide a clear quantitative reconciliation from the non-GAAP financial measure to the most directly comparable measure specified, defined or determined under the issuer`s GAAP and presented in its financial statements, referencing to the reconciliation when the non-GAAP financial measure first appears in the document, or in the case of content on a website, in a manner that meets this objective (for example, by providing a link to the reconciliation);
  6. ensure that the non-GAAP financial measure does not describe adjustments as non-recurring, infrequent or unusual, when a similar loss or gain is reasonably likely to occur within the next two years or occurred during the prior two years; and
  7. present the non-GAAP financial measure on a consistent basis from period to period; however, where an issuer changes the composition of the non-GAAP financial measure, explain the reason for the change and restate any comparative period presented.

Companion Policy to NI 52-112 Non-GAAP and Other Financial Measures Disclosure
Non-GAAP financial measures that are historical information
Re ss. 6(1)(a)

Labelling a non-GAAP financial measure that is historical information

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.


Companion Policy to NI 52-112 Non-GAAP and Other Financial Measures Disclosure
Non-GAAP financial measures that are historical information
Re ss. 6(1)(b)

Identification of a non-GAAP financial measure that is historical information

An issuer may satisfy the paragraph 6(1)(b) identification requirement by inserting a footnote to the non-GAAP financial measure that is disclosed in the document, with a statement similar to the following: “This is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures section of this document for more information on each non-GAAP financial measure”.

The issuer should exercise judgement in assessing whether the non-GAAP financial measure should be identified with a footnote each time the measure is disclosed in the document, considering the nature and extent of the use of this measure.


Companion Policy to NI 52-112 Non-GAAP and Other Financial Measures Disclosure
Proximity, composition and usefulness
Re ss. 6(1)(e), 7(2)(d), 8(c), 9(c), 10(1)(b), 11(b)

Proximity to the first instance

To prevent duplicative disclosure, an issuer may include the information required by paragraphs 6(1)(e), 7(2)(d), 8(c), 9(c), 10(1)(b), 11(b) of the Instrument in one section of the document, unless incorporation by reference is permitted under section 5 of the Instrument. To satisfy these requirements, when the specified financial measure first appears in the document an issuer may reference, either through a footnote or in another manner, a separate section within the same document that contains the disclosure required by these paragraphs.

There may be types of documents where it is not clear when the specified financial measure first occurs or appears, for example, websites and social media. In these instances, the “first instance” disclosure requirements may be satisfied by providing a website hyperlink to where the disclosures required by paragraphs 6(1)(e), 7(2)(d), 8(c), 9(c), 10(1)(b), 11(b) of the Instrument are found (e.g., on another section of the website) with minimal to no scrolling or navigation. Hyperlinking may only be provided within a website or within a document.


Companion Policy to NI 52-112 Non-GAAP and Other Financial Measures Disclosure
Reasons for changes
Re ss. 6(1)(e)(ii)(D) and 8(c)(iii)(C)

Explanation of the reason for the change in a non-GAAP financial measure or a non-GAAP ratio

If the label or composition of the non-GAAP financial measure or non-GAAP ratio has changed from what was previously disclosed, the requirement of clauses 6(1)(e)(ii)(D) and 8(c)(iii)(C) of the Instrument would apply.

Including additional reconciling items or excluding previously included reconciling items between the non-GAAP financial measure and the most directly comparable financial measure constitutes a change in composition. A clear explanation of the reason for this change is required under clauses 6(1)(e)(ii)(D) and 8(c)(iii)(C) of the Instrument, which would include a restatement of comparatives, when disclosed as required under paragraph 6(1)(f) or 8(d).

A change in magnitude of an individual item would not constitute a change in composition. For example, an issuer may define adjusted earnings as earnings before impairment losses and transaction costs. Transaction costs may only be incurred every three years, such that there may be no adjustment in year two to reflect transaction costs, but there should be an explanation noting that the issuer expects that it will incur transaction costs in the future. In this example, the issuer should continue to include transaction costs in the explanation of the composition under clause 6(1)(e)(ii)(A) or 8(c)(iii)(A) to maintain consistency of the non-GAAP financial measure or non-GAAP ratio.

Given that disclosure of non-GAAP financial measures and non-GAAP ratios is optional, disclosing a particular non-GAAP financial measure or non-GAAP ratio does not create an obligation to continue disclosing that measure in future periods. If, however, an issuer replaces a non-GAAP financial measure or a non-GAAP ratio with another measure or ratio, fraction or similar representation that achieves the same objectives (that is, the usefulness information provided to comply with clauses 6(1)(e)(ii)(B) and 8(c)(iii)(B) of the Instrument was consistent for both measures), the requirement of clauses 6(1)(e)(ii)(D) and 8(c)(iii)(C) of the Instrument would apply.

If the label of a non-GAAP financial measure or non-GAAP ratio has changed, while the explanation for the change may be incorporated by reference, we expect the issuer to make it clear in the document that the label has changed in the current period from that disclosed in the prior period.


National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure
Part 3 Specified Financial Measure Disclosure
Section 11

Supplementary financial measures

An issuer must not disclose a supplementary financial measure in a document unless both of the following apply:

(a) the supplementary financial measure is labelled using a term that,

(i) given the measure’s composition, describes the measure, and

(ii) distinguishes the measure from totals, subtotals and line items disclosed in the primary financial statements of the issuer;

(b) in proximity to the first instance of the supplementary financial measure in the document, the document discloses, directly or by incorporating it by reference as permitted under section 5, an explanation of the composition of the supplementary financial measure.


National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure
Part 3 Specified Financial Measure Disclosure
Section 7

Non-GAAP financial measures that are forward-looking information

(1) In this section,

“equivalent historical non-GAAP financial measure” means a non-GAAP financial measure that is historical information and has the same composition as a non-GAAP financial measure that is forward-looking information;

SEC issuer” has the meaning ascribed to it in National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards.

(2) An issuer must not disclose a non-GAAP financial measure that is forward-lookinginformation in a document unless all of the following apply:

(a) the document discloses an equivalent historical non-GAAP financial measure;

(b) the non-GAAP financial measure that is forward-looking information is labelled using the same label used for the equivalent historical non-GAAP financial measure;

(c) the non-GAAP financial measure that is forward-looking information ispresented with no more prominence in the document than that of the equivalent historical non-GAAP financial measure;

(d) in proximity to the first instance of the non-GAAP financial measure that is forward-looking information in the document, the document discloses, directly or by incorporating it by reference as permitted under section 5, a description of any significant difference between the non-GAAP financial measure that is forward-looking information and the equivalent historical non-GAAP financial measure.

(3) Subsection (2) does not apply if the disclosure is made

(a) by an SEC issuer, and

(b) in compliance with Regulation G under the 1934 Act.


National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure
Part 3 Specified Financial Measure Disclosure
Section 6

Non-GAAP financial measures that are historical information

(1) An issuer must not disclose a non-GAAP financial measure that is historical information in a document unless all of the following apply:

(a) the non-GAAP financial measure is labelled using a term that,

(i) given the measure’s composition, describes the measure, and

(ii) distinguishes the measure from totals, subtotals and line items disclosed in the primary financial statements of the entity to which the measure relates;

(b) the non-GAAP financial measure is identified as a non-GAAP financial measure;

(c) the document discloses the most directly comparable financial measure that is disclosed in the primary financial statements of the entity to which the measure relates;

(d) the non-GAAP financial measure is presented with no more prominence in the document than that of the most directly comparable financial measure referred to in paragraph (c);

(e) in proximity to the first instance of the non-GAAP financial measure in the document, the document

(i) explains that the non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare the financial statements of the entity to which the measure relates and might not be comparable to similar financial measures disclosed by other issuers,

(ii) discloses, directly or by incorporating it by reference as permitted under section 5,

(A) an explanation of the composition of the non-GAAP financial measure,

(B) an explanation of how the non-GAAP financial measure provides useful information to an investor and explains the additional purposes, if any, for which management uses the non-GAAP financial measure,

(C) a quantitative reconciliation of the non-GAAP financial measure for its current and comparative period, if disclosed under paragraph (f), to the most directly comparable financial measure referred to in paragraph (c), and that reconciliation is disclosed in the permitted format, and

(D) if the label or composition of the non-GAAP financial measure has changed from what was previously disclosed, an explanation of the reason for the change;

(f) if the non-GAAP financial measure is disclosed in MD&A or in an earnings release of the issuer, the non-GAAP financial measure for a comparative period, determined using the same composition, is disclosed in the document, unless it is impracticable to do so.

(2) For the purpose of clause (1)(e)(ii)(C), a quantitative reconciliation of the non-GAAP financial measure is in the “permitted format” if it

(a) is disaggregated quantitatively in a way that would enable a reasonable personapplying a reasonable effort to understand the reconciling items,

(b) explains each reconciling item, and

(c) does not describe a reconciling item as “non-recurring”, “infrequent”, “unusual”, or using a similar term, if a loss or gain of a similar nature is reasonably likely to occur within the entity’s 2 financial years that immediately follow the disclosure, or has occurred during the entity’s 2 financial years that immediately precede the disclosure.