Attention everyone! We're diving into a crucial topic that might just change the game for financial disclosures in Canada. The Canadian Securities Administrators (CSA) have proposed some amendments to NI 52-112, and it's time to shed some light on what this means for everyone involved.
The CSA's Proposal: A Regulatory Update
The CSA has published a 90-day comment period on proposed changes to NI 52-112, aiming to address the impact of IFRS 18 on financial statements. But here's where it gets controversial: without these amendments, certain measures could slip through the cracks, potentially removing them from regulatory oversight when used outside financial statements.
Why the Proposed Amendments?
IFRS 18 introduces "management-defined performance measures" (MPMs) that must be disclosed in a note to financial statements under specific criteria. Historically, these measures have been treated as non-GAAP financial measures when disclosed outside the statements, subject to NI 52-112. However, once MPMs appear in the financial statements, they might no longer meet the current definition of a non-GAAP financial measure, which could lead to a regulatory gap.
The CSA's proposal seeks to maintain consistency and minimize disruption by keeping these measures under NI 52-112's oversight, even when used outside the financial statements.
Key Proposals and Their Impact
- Revised Definitions: The definition of "non-GAAP financial measure" will explicitly include MPMs. Additionally, new definitions for "additional subtotal" and "management-defined performance measure" will be added.
- Incorporation by Reference: In certain circumstances, information about MPMs can be incorporated by reference from the notes to the financial statements to avoid duplication. However, earnings releases must present the quantitative reconciliation within the release.
- Additional Subtotal Disclosures: When an additional subtotal is disclosed outside the financial statements, it must be presented with equal prominence to the most comparable measure from the primary statements that is not an MPM, and it must be accompanied by that comparable measure.
- Exemptions for Financial Institutions: The proposed change will codify existing relief for certain financial institutions, with British Columbia continuing to rely on its blanket order.
- Consequential Change to MI 11-102: The proposal will add NI 52-112 to Appendix D of the Passport System, allowing applications related to NI 52-112 to be made under the passport framework.
- Companion Policy Guidance Updates: The CSA will provide guidance on anti-avoidance measures, presentation expectations, and consistent labeling inside and outside financial statements. This guidance will also extend to website and social media disclosures.
Who's Affected and How?
- Reporting Issuers: Those disclosing non-GAAP financial measures or other specified financial measures outside the financial statements will need to align their non-GAAP control frameworks with the inclusion of MPMs under NI 52-112.
- Financial Institutions: Certain financial institutions will benefit from codified exemptions under specified conditions.
- Investors: Investors will continue to receive consistent, comparable information for non-GAAP measures used outside the financial statements.
Practical Implications for Issuers:
The amendments are designed to preserve the current regulatory treatment of commonly used adjusted measures outside financial statements after IFRS 18. Issuers should ensure clear references when using incorporation by reference and maintain consistent labels for measures inside and outside financial statements.
Cost-Benefit Considerations:
The CSA expects no significant ongoing compliance costs from these amendments. The main effort will be understanding the changes and performing a gap analysis. The benefits include regulatory certainty, reduced duplicative disclosure, and continued investor protection and comparability.
Comment Period and Your Voice:
The deadline for submissions is February 11, 2026. Your comments are essential to shaping these proposed amendments. Remember, comments will be posted publicly, so be clear about who you're representing.
For more insights and to discuss how these proposed changes might impact your business, reach out to the experts at Dentons' Securities and Corporate Finance group.
How do you feel about these proposed amendments? Do you think they strike the right balance between regulatory oversight and practical implementation? We'd love to hear your thoughts in the comments below!
