The Canadian Securities Administrators (CSA) is calling on issuers to ensure that they provide proper disclosure when they stray from standardized financial metrics given concerns that alternative accounting measures can confuse or deceive investors.

The CSA published a staff notice on Thursday that provides added guidance on the use of non-generally accepted accounting principles (GAAP) financial reporting, noting that it “may mislead investors” if it’s not accompanied by appropriate disclosure.

Some firms disclose non-GAAP financial measures, such as “cash earnings, “free cash flow” and “adjusted earnings” in their press releases, management’s discussion and analysis, prospectus filings, websites and marketing materials, the CSA’s notice says.

Many of these metrics may leave out certain items to present a more positive picture of financial performance, the CSA notes, adding that many of these terms also lack standard meanings.

The regulators also indicate that they’re concerned investors may be confused or misled by the use of this type of reporting and they are worried about the prominence given to these measures.

The CSA’s guidance indicates that these regulatory concerns can be addressed by providing appropriate disclosure. For example, it says that issuers should spell out that non-GAAP measures don’t have a standardized meaning and may not be comparable to reporting from other issuers.

In addition, the CSA’s notice states that firms must explain why alternative metrics provide useful information to investors; and they must provide equal, or greater, prominence to GAAP measures, among other things.

The CSA’s notice indicates it will be monitoring the disclosure accompanying non-GAAP financial measures. Furthermore, it warns issuers that “regulatory action may be taken if an issuer discloses information in a manner considered misleading and therefore potentially harmful to the public interest.”

In addition to the guidance designed to ensure that alternative reporting does not mislead investors, the notice also provides guidance on measures that are disclosed before financial statements are filed.