Draft Changes to Policy Statement to Regulation 52-112 respecting Non-GAAP and Other Financial Measures Disclosure

CHANGES TO POLICY STATEMENT TO REGULATION 52-112 RESPECTING NON￾GAAP AND OTHER FINANCIAL MEASURES DISCLOSURE

1. The part entitled “Introduction” of Policy Statement to Regulation 52-112 respecting Non-GAAP and Other Financial Measures Disclosure is amended: (1) in the first paragraph: (a) by inserting the following after the first sentence: “In addition, the Regulation sets out specific disclosure requirements for additional subtotals, as defined in the Regulation.”; (b) by inserting, in the second to last sentence and after “specified financial measures”, “and additional subtotals”; (2) by inserting, in the paragraph under the subtitle “Document” and after the first sentence, the following: “The disclosures for specified financial measures or additional subtotals required by the Regulation must be made in documents other than the financial statements, although information contained in notes to the financial statements may, in certain circumstances, be incorporated by reference.”; (3) by replacing “Disclosed”, in the title of the subtitle “Specified Financial Measures Disclosed by an Issuer and Financial Statements of an Entity”, by “or Additional Subtotals Disclosed”; (4) in the subtitle “Specified Financial Measures Disclosed by an Issuer and Financial Statements of an Entity”: (a) by inserting, in the first paragraph and after all occurrences of “specified financial measures”, “or an additional subtotal”; (b) by inserting, after the last bullet point, the following paragraph: “Issuers should ensure they use the same label when disclosing a financial measure both inside and outside of the financial statements.”; (5) by inserting, , in the first paragraph under the subtitle “Financial Measures” and after all occurrences of “specified financial measure”, “or an additional subtotal”; (6) by replacing “IFRS”, in the first paragraph under the subtitle “Financial Reporting Framework, Accounting Principles, and Accounting Policies”, by “IFRS® Accounting Standards”;

• 2 - (7) by inserting, in the paragraph under the subtitle “Misleading disclosure still prohibited” and after “specified financial measure”, “or an additional subtotal”.

2. The Policy Statement is amended by inserting, after the paragraph under the subtitle “Misleading disclosure still prohibited”, the following: “Section 1 – Definition of additional subtotal The Regulation defines an additional subtotal as a subtotal disclosed in the primary financial statements of an entity, that is not a financial measure defined or listed in the accounting principles applied to the preparation of the entity’s financial statements, that is not a financial measure the composition of which is set out in those accounting principles, and that is not a specified financial measure. Although the presentation of an additional subtotal may be required by IFRS Accounting Standards, such as paragraph 24 of IFRS 18 Presentation and Disclosure in Financial Statements (IFRS 18), when the composition of the subtotal is defined by management or where the composition of the subtotal may vary, and may not necessarily be comparable with measures sharing similar labels or descriptions provided by other entities, that particular subtotal would be an additional subtotal. Examples of subtotals disclosed in the primary financial statements of the entity which are defined or listed in IFRS Accounting Standards or the composition of which is set out in IFRS Accounting Standards include but are not limited to the totals and subtotals that the entity must present in the statement of profit or loss (e.g., “operating profit or loss”, “profit or loss before financing and income taxes”, and “profit or loss”) and subtotals of income or expenses listed in paragraph 118 of IFRS 18 (e.g., “gross profit or loss”). These subtotals would not be “additional subtotals” under the Regulation. “Section 1 – Definition of management-defined performance measure The Regulation defines a “management-defined performance measure” to be consistent with the definition of this term in the accounting principles applied to the preparation of an entity’s financial statements, for example, as defined by IFRS Accounting Standards. Accordingly, issuers should consider the associated definition and the related authoritative application guidance in IFRS 18.”.
3. The part entitled “Section 1 – Definition of a non-GAAP financial measure” of the Policy Statement is amended: (1) by replacing “Definition”, in the title, by “Paragraph (b) of the definition”; (2) by inserting, after the last paragraph under the subtitle “Non-Financial Information”, the following:

• 3 - “Anti-avoidance An issuer should not disclose or refer to a financial measure in the notes to the financial statements for the purpose of avoiding application of the Regulation. Although accounting standards may permit an issuer to provide additional information in the notes to the financial statements if an issuer believes such information to be useful for users of the financial statements, we expect that an issuer will apply the requirements of the Regulation pertaining to non-GAAP financial measures to a financial measure disclosed or referred to for such purpose in the notes to the financial statements if the other conditions set out in the definition of non-GAAP financial measure apply to such measure.”.

4. The Policy Statement is amended by inserting, after the last bullet item under the subtitle “Financial Ratios” under the title “Section 1 – Definition of a supplementary financial measure”, the following: “Subsection 1(2) – Accounting terms The Regulation uses accounting terms that are defined or used in the accounting principles applied to the preparation of the entity’s financial statements. In certain cases, some of those terms are defined differently in securities legislation. In deciding which meaning applies, you should consider that Regulation 14-101 respecting Definitions provides that a term used in the Regulation and defined in the securities statute of a local jurisdiction has the meaning given to it in the statute unless: (a) the definition in that statute is restricted to a specific portion of the statute that does not govern continuous disclosure; or (b) the context otherwise requires.”.
5. The part entitled “Section 2 – Application to reporting issuers” of the Policy Statement is amended, under the subtitle “Websites and Social Media”: (1) by replacing “of its disclosure, on a website and social media, of a specified financial measure”, in the first paragraph, by “of its disclosure in a document, including on a website and social media, of a specified financial measure or an additional subtotal”; (2) by replacing “A”, at the beginning of the second paragraph, by “For example, a”.
6. The part entitled “Section 3 – Application to issuers that are not reporting issuers” of the Policy Statement is amended by inserting, after “specified financial measure”, “or an additional subtotal”.
7. The part entitled “Subparagraphs 4(1)(c)(i) and (ii) – Mineral Projects” of the Policy Statement is amended: (1) by replacing “Dispositions”, in the French text of the title, by “Sous￾paragraphes”;

• 4 - (2) by replacing “capital and operating costs, and annual cash flow”, in the first paragraph, by “capital and operating costs estimates, and forecast annual cash flow”; (3) by inserting, in the second paragraph and after “specified financial measure”, “or an additional subtotal”, and replacing “is within the scope” by “may be within the scope”.

8. The part entitled “Subparagraph 4(1)(d)(i) – Reports prepared by a person other than the issuer or entity that is the subject of the specified financial measure” of the Policy Statement is amended: (1) by inserting, in the title and after “specified financial measure”, “or the additional subtotal”; (2) by inserting, in the first paragraph and after “specified financial measure”, “or the additional subtotal”; (3) by replacing the last paragraph by the following: “However, when an issuer discloses a specified financial measure or an additional subtotal that has been taken from such a report prepared by a person other than the issuer, this specified financial measure or additional subtotal is within the scope of the Regulation.”.
9. The part entitled “Paragraph 4(1)(e) – Financial measures required under law or by an SRO” of the Policy Statement is amended: (1) by replacing “Financial measures”, in the title, by “Specified financial measures or additional subtotals”; (2) by replacing “financial measures”, in the first paragraph, by “specified financial measures or additional subtotals”; (3) by replacing “financial measure”, in the second paragraph, by “specified financial measure or additional subtotal”; (4) by replacing the third paragraph by the following: “If an issuer discloses a specified financial measure or additional subtotal that is prepared in accordance with voluntary guidance published by a government, governmental authority or SRO that is applicable to the issuer, then the financial measure is subject to the requirements of this Regulation, unless the exception in subsection 4(3) applies.”.
10. The part entitled “Paragraph 4(1)(f) – Specified financial measure where its calculation is derived from a financial covenant in a written agreement” of the Policy Statement is amended:

• 5 - (1) by inserting, in the title and after “Specified financial measure”, “or additional subtotal”; (2) by inserting, in the paragraph and after “disclosure of a specified financial measure”, “or an additional subtotal”.

11. The part entitled “Paragraph 4(1)(g) – Specified financial measure disclosed in a document by a registered firm that is intended to be, or is reasonably likely to be, made available to a client or a prospective client of the registered firm” of the Policy Statement is amended: (1) by inserting, in the title and after “Specified financial measure”, “or additional subtotal”; (2) by inserting, in the first sentence of the paragraph, after “specified financial measure”, “or an additional subtotal”.
12. The Policy Statement is amended by inserting the following under the subtitle “Subsection 4(2) – Statement of Executive Compensation”: “Subsection 4(3) – Financial institutions The Regulation includes an exemption for certain financial institutions that were exempt from the Regulation under local blanket orders and Rule 52-503 in Ontario. This exemption does not apply in British Columbia. British Columbia’s existing blanket order, BC Instrument 52-513, continues to apply, ensuring uniformity in the application of the exemption across Canada.”.
13. The Policy Statement is amended by replacing the part entitled “Section 5 – Incorporation by reference” by the following: “Section 5 – Incorporating information by reference Subsection 5(1) – Incorporation by reference to the issuer’s MD&A The Regulation allows an issuer to incorporate by reference certain disclosure, when the MD&A includes the information required under the provisions referenced in paragraphs 5(1)(a) to (f), and if the reference is to the issuer’s MD&A. Subsection 5(1.1) – Incorporation by reference to the notes to the financial statements of the entity to which the measure relates An issuer may incorporate by reference the information required under subparagraph 6(1)(e)(ii) if the reference is to the notes to the financial statements of the entity to which the measure relates and if the financial measure is a management-defined performance

• 6 - measure (see definition of management-defined performance measure in section 1 of the Regulation). When incorporating by reference, the notes to the financial statement should therefore include, for each management-defined performance measure, all of the information required under subparagraph 6(1)(e)(ii). IFRS 18 outlines that management-defined performance measures relate to the same reporting period as the financial statements. Accordingly, when using the incorporation by reference provision in subsection 5(1.1), the reference to the notes to the financial statements of the entity to which this management-defined performance measure relates is for the same reporting period. Subsection 5(2) – Required statements with the use of the incorporation by reference provisions in subsection 5(1) or (1.1) To meet the requirement that the MD&A or the financial statements be available on SEDAR+ under paragraph 5(2)(c) of the Regulation, the MD&A or the financial statements must be filed on SEDAR+ before, or simultaneously with the document, in order for this MD&A or the financial statements to be used to incorporate any information by reference into the document. For example, if an issuer is filing an annual information form that includes a specified financial measure and the issuer is incorporating certain information in the MD&A by reference to satisfy the disclosure requirements of the Regulation, that MD&A would have to be filed on SEDAR+ before or simultaneously with the filing of the annual information form. Paragraph 5(2)(b) requires the identification of the specific location of the required information in the MD&A or the financial statements. To comply with this requirement, identify where the required information is specifically located within the MD&A or the exact note to the financial statements (e.g., identify the specific MD&A including a reference to the date of the MD&A, its reporting period, and the specific section or page reference within the MD&A) or provide a hyperlink to the specific section or page within the MD&A or the financial statements where the information is located. Issuers would not satisfy this requirement with a general hyperlink to the relevant MD&A or the financial statements. Subsection 5(4) – Quantitative reconciliation requirements in an earnings release The Regulation allows an issuer to incorporate by reference certain required disclosure in a news release; however, subsections 5(1) and (1.1) do not apply to the quantitative reconciliation requirements under clause 6(1)(e)(ii)(C), paragraph 7(2)(d) or 9(c), or clause 10(1)(b)(ii)(C) if the document that contains the specified financial measure is an earnings release filed by the issuer under section 11.4 of Regulation 51-102.”.

14. The part entitled “Paragraphs 6(1)(e), 7(2)(d), 8(c), 9(c), 10(1)(b), 11(b) – Proximity to the first instance” of the Policy Statement is amended:

• 7 - (1) by inserting, in the title and after “11(b)”, “and subparagraphs 4(1)(e)(ii) and 4(3)(c)(ii)”; (2) by inserting, in the first and second paragraphs and after “11(b)”, “and subparagraphs 4(1)(e)(ii) and 4(3)(c)(ii)”.

15. The part entitled “Clause 6(1)(e)(ii)(C) and subsection 6(2) – Reconciliation of a non￾GAAP financial measure” of the Policy Statement is amended: (1) by replacing “Sous-disposition C de la disposition ii”, in the French text of the title, by “Sous-paragraphe C du sous-paragraphe ii”; (2) by adding the following after the last paragraph under the subtitle “Presentation in the Form of a Primary Financial Statement”: “Presentation of a ‘two-step’ reconciliation An issuer may present a quantitative reconciliation in a ‘two-step’ format – i.e., reconcile a specified financial measure to a total or subtotal that is not presented in the primary financial statements of the entity, if that total or subtotal is then reconciled to the most directly comparable financial measure disclosed in the primary financial statements of the entity to which the financial measure relates that is not a management-defined performance measure.”.
16. The part entitled “Section 9 – Disclosure of total of segments measures” of the Policy Statement is amended by replacing “the Policy Statement”, in the fifth paragraph, by “this Policy Statement”.
17. The part entitled “Section 10 – Disclosure of capital management measures” of the Policy Statement is amended: (1) by replacing “in IFRS under IAS 1 Presentation of Financial Statements”, in the first paragraph, by “in IFRS Accounting Standards under IFRS 18”; (2) by replacing “the Policy Statement”, in the third paragraph, by “this Policy Statement”.
18. Appendix A of the Policy Statement is amended by replacing the flowchart with the following: