The Canadian Securities Administrators (CSA) recently published National Instrument 52-112 – Non-GAAP and Other Financial Measures Disclosure and Companion Policy  (together, "NI 52-112"). NI 52-112 establishes binding disclosure requirements for non-GAAP financial measures and other financial measures outside of financial statements and generally incorporates, expands upon and replaces guidance contained in CSA Staff Notice 52-306 (Revised) – Non-GAAP Financial Measures ("SN 52-306").

The new rules will have the force of law and provide the CSA with a much stronger tool to take appropriate regulatory or enforcement action against issuers, boards and management teams if a company's disclosure of non-GAAP measures does not comply with the rules.

NI 52-112 will apply to documents filed by reporting issuers for a financial year ending on or after October 15, 2021, and to non-reporting issuers beginning January 1, 2022. Reporting issuers with a December 31 year-end will have to comply with the new rules for any filings after January 1, 2022.


Reporting and Non-Reporting Issuers

Unless a specific exception applies, NI 52-112 will apply to all reporting issuers that disclose specified financial measures in documents that are intended to be, or are reasonably likely to be, made available to the public. This includes all written (including electronic) communications, such as press releases, management discussions and analysis (MD&A), investor presentations, websites and social media posts.

NI 52-112 also applies to disclosures of specified financial measures in a document made available to the public by a non-reporting issuer if the document is subject to Canadian prospectus requirements, is filed with a regulator in connection with a distribution under the "offering memorandum" prospectus exemption, or is submitted to a recognized stock exchange in connection with certain transactions.


NI 52-112 contains exceptions for certain disclosure, including for externally prepared reports, transcripts of oral statements (including earnings calls), disclosure required by law or self-regulatory organizations, calculations derived from a financial covenant in a written agreement, certain disclosure by registrants, certain mineral and oil and gas disclosure, and certain executive compensation disclosure.

Additionally, the new rule does not apply to certain types of reporting issuers (i.e., investment funds, designated foreign issuers and SEC foreign issuers).


Specified Financial Measures

NI 52-112 applies to the following five categories of financial disclosure not disclosed in the financial statements:

  • Non-GAAP Financial Measures – Financial measures, other than ratios, that depict historical or expected future financial performance, and either exclude an amount that is included in or include an amount that is excluded from, the composition of the most comparable financial measure presented in the primary financial statements (e.g., "Adjusted EBITDA").
  • Non-GAAP Ratio  – A ratio that uses a non-GAAP financial measure as one or more of its components (e.g., "constant dollar same-store sales per square foot").
  • Supplementary Financial Measure  – A measure that is, or is intended to be, disclosed on a periodic basis to depict the historical or expected future financial performance, financial position or cash flow and is not a non-GAAP financial measure or non-GAAP ratio (e.g., "same store sales").
  • Total of Segments Measure  – A measure that is a subtotal or total of two or more reportable segments, is not a component of a line item disclosed in the primary financial statements, and is disclosed in the notes to the financial statements (e.g., "segment operating income").
  • Capital Management Measure – A measure intended to enable an individual to evaluate the issuer's objectives, policies and processes for managing the issuer's capital, is not a component of a line item disclosed in the primary financial statements, and is disclosed in the notes to the financial statements (e.g., "normalized debt").

General Disclosure Requirements

The above specified financial measures are subject to the following general disclosure requirements of NI 52-112:

  • Labelling  – Specified financial measures (subject to certain exceptions for capital management measures, total of segments measures and non-GAAP ratios) must be labelled appropriately and distinctly from items presented in the financial statements. A non-GAAP financial measure that is forward-looking information must be labelled using the same label used for the equivalent historical non-GAAP financial measure.
  • Prominence – Specified financial measures (subject to certain exceptions) must be presented with no more prominence than the most directly comparable financial measure presented in the primary financial statements. The CSA provides examples of the type of disclosure that would contravene this requirement.
  • Comparative Period Disclosure – If a specified financial measure is disclosed in an issuer's MD&A or an earnings release, the same financial measure must be presented, using the same composition, for the comparative period (except, in respect of certain specific financial measures, where it is impracticable to do so; or in respect of non-GAAP ratios, where such ratio is forward-looking information). Where this disclosure is made, the issuer must include a reconciliation to the most directly comparable measure for that previous period.
  • Explanation and Reconciliation – The first time a non-GAAP financial measure appears in a document, an issuer must, in proximity to its first appearance in the document, provide certain disclosure to explain the measure's composition and why it is used. For some specified financial measures, issuers must also provide a quantitative reconciliation for the most directly comparable financial measure presented in the issuer's primary financial statements.

Key Components of NI 52-112

While consistent in principle with the existing guidance in SN 52-306, NI 52-112 includes the following additional notable elements.

Incorporation by Reference

NI 52-112 permits incorporation by reference of certain disclosure where: (a) the reference is to the issuer's most recent MD&A; (b) the MD&A has been filed on SEDAR before, or simultaneously with, the document in question; and (c) the issuer provides certain disclosure about the information and MD&A.

NI 52-112 allows an issuer to incorporate by reference certain required disclosure in a news release, but this does not apply to the quantitative reconciliation requirements if the document that contains the specified financial measure is an earnings release.

Social Media

Issuers should not disclose specified financial measures on social media if character limits or other restrictions would preclude the issuer from including or incorporating by reference all required disclosure.

Forward-Looking Information

If a non-GAAP financial measure that is forward-looking information is disclosed by an issuer (other than a SEC issuer), the document must include an equivalent historical non-GAAP financial measure and 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. The CSA provides guidance on how to determine the applicable historical period.

Issuers, their counsel and auditors should review NI 52-112 carefully to prepare for these new disclosure requirements.

Please contact any member of our  Corporate Finance and Securities Group to discuss how the implementation of NI 52-112 will impact your disclosure obligations.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.