Canadian Securities Administrators Looking for Feedback on Revised Non-GAAP Financial Measures Securities Law

Published on: Feb 14, 2020

Views from Deloitte’s Securities Centre of Excellence

On February 13, 2020, the Canadian Securities Administrators (CSA) published a revised version of Proposed National Instrument 52-112 Non-GAAP Financial Measures Disclosures (Proposed NI 52-112) for a second 90-day comment period. 

As a reminder, the impetus for drafting a new securities law to replace the current guidance[1] was to increase the regulators’ abilities to ensure compliance and take enforcement action when necessary.  More and more non-GAAP financial measures are being used, more negative press around some uses of these measures and a number of stakeholders are expressing concern.  This led to the initial publication of Proposed NI 52-112 on September 6, 2018.

This initial publication maintained much of what is in current securities regulation[1], including requiring a reconciliation back to GAAP and considerations around appropriate naming conventions and prominence considerations.  However, it also added some new requirements. It applied to all issuers and all documents and added specific requirements related to segment measures, capital management measures, supplementary financial measures, and ratios.

Forty-two detailed comment letters were sent to the CSA in response.  After consideration of all feedback received, the CSA made a number of revisions and took the rare step of publishing the Revised NI for a second comment period.

The most significant concerns raised and the resulting changes to Proposed NI 52-112 are as follows:

  • The scope was revised to include only reporting issuers and those non-reporting issuers filing offering documents. It no longer would apply to investment funds.
  • Specific disclosure requirements still exist for the measures included in the initial publication (including ratios, segment and capital management measures when used outside of the financial statements, and forward-looking non-GAAP financial information). However, the requirements themselves have been clarified and scaled back.
  • Cross-referencing, not allowed in the original publication for comment, is now permitted as long as some required disclosures are made and the required reference document is the Management Discussion & Analysis (MD&A).
  • Transcripts of oral statement, initially captured in the scope have now been excluded.

In addition to the above concerns, many respondents found that the original publication was not written in plain language, a number of the definitions were difficult to understand, it was inconsistent with U.S. standards and seemed counter the publicly stated goal of reducing regulatory burden.  While the wording is still quote “legalistic”, the regulators have clarified the definitions, improved the language and included guidance in the form of a Companion Policy.  In addition, they have improved the alignment with SEC regulation.

There is no question that the revised publication is an improvement and there is now another opportunity to provide your views.  However, absent new information, it is likely that the regulators will be reluctant to entertain any further significant changes.  The decision of the regulators to move ahead with this new National Instrument given the significant comments raised and amid increasing pressure to reduce the regulatory burden on public companies, indicates that non-GAAP financial measures will be an ongoing focus area in regulatory reviews.   Once effective, you can be certain that Canadian regulators will use the enhanced compliance and enforcement powers in their toolkit.

Once Proposed NI 52-112 is effective, you will need to ensure that any information that is disseminated in writing complies with the new requirements.  Ensure you have documentation outlining the informational value and composition for each measure used.  Keep in mind that there are now requirements for a broader scope of measures than existed in the past.  

Non-GAAP measures play a valuable role in corporate communication.  Stakeholders want access to additional information in order to evaluate a company’s performance and future potential.  Non-GAAP measures, when used appropriately, help management tell their company’s story through their eyes.  Non-GAAP measures can provide additional insights into the company’s operations along with portraying key measures that management themselves use to oversee and run the company.  However, with this renewed focus and attention on non-GAAP measures, companies should review their disclosures to ensure both compliance with the revised NI 52-112 as well as effective use of these measures to tell the company’s story.

Please let us know if you have questions on the potential impact of this Proposed NI on your corporate reporting.

[1] CSA Staff Notice 52-306 Non-GAAP Financial Measures



Lara Gaede

Lara Gaede

Deloitte Securities Centre of Excellence provides expert securities advice, thought leadership and quality deliverables to our teams and clients on all securities matters. 

Lara co-leads Deloitte’s Securities Centre of Excellence.  Prior to joining Deloitte, she spent 20 years with the Canadian Securities Administrators (CSA), in both Corporate Finance and the Office of the Chief Accountant. For the past 10 years, she was part of the executive team at the Alberta Securities Commission, as Chief Accountant, and for the past 5 years was also CFO. While at the ASC, Ms. Gaede led a number of key CSA projects including the recent non-GAAP Financial Measures draft national instrument and has Chaired the CSA Chief Accountants Committee. In addition, Ms. Gaede spent two terms on the Canadian Accounting Standards Board and has her CFA and ICD.d designations in addition to being named a Fellow of the Chartered Professional Accountants.


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