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With the initial changeover date from Canadian Generally Accepted Accounting Principles (“Canadian GAAP”) to International Financial Reporting Standards (“IFRS”) having passed, and the deadline to file the first IFRS interim statements fast approaching, the Canadian Securities Administrators (“CSA”) recognizes the challenges companies will be facing over the next few months. As a result, the CSA has revised its rules to provide some transitional relief to companies in the year of adoption of IFRS.
In addition, the Ontario Securities Commission (“OSC”) has released an Issuer Guide to provide public companies with tips on filing their first IFRS interim financial report. The Issuer Guide focuses on the following:
Depending on an issuer’s year-end and timelines for adoption of IFRS, publicly released financial information in 2011 may be presented using alternative frameworks other than IFRS. It is crucial for issuers to clearly communicate the accounting principles used to prepare all publicly released financial information in order to avoid potential investor confusion.
If the Company chooses to engage their external auditor to review the interim report, all financial statements and notes presented are subject to that review, including the opening IFRS statement of financial position and all IFRS 1 First-time adoption of IFRS reconciliations. The Company should consider the added time requirements for the auditor to review the additional information.
As a transitional relief, the filing deadline for an issuer’s first IFRS interim financial report has been extended by an additional 30 days. The extension only applies to Q1 interim filings, meaning that issuers must be sure to plan sufficiently in advance to avoid late filings of subsequent quarters.
In order to protect investors, a cease trade order may be issued for issuers failing to meet the appropriate deadline, which prohibits trading of securities of the issuer.
As financial statement presentation under IFRS is different than Canadian GAAP, continuous disclosure rules have been revised to ensure consistency. Additional requirements under IFRS include: presentation of the transition date statements of financial position in the IFRS Q1 interim financial report; disclosure of both presentation currency and function currency; presentation of a year-to-date cash flow statement; and retrospective application of accounting policies.
As the Company’s last annual financial statements will have been prepared under Canadian GAAP, the first IFRS interim financial report should exceed minimum disclosure requirements to enable investors to understand how the transition to IFRS affected previously reported results.
IFRS requires Canadian GAAP to IFRS reconciliations and disclosures to explain the transitional impact on the Company’s reported financial position, financial performance and cash flows. The reconciliation must include sufficient detail for investors to understand material adjustments.
As IFRS transition disclosure will become increasingly robust and complete, it is important to investors that the Company provides timely transition disclosure, and communicates the potential impact of IFRS in its 2010 annual MD&A. More detailed disclosure of the Company’s changeover plan and policy choices under IFRS 1, and the expected effects of these on the Company’s financial statements, are expected in their year-end filing.
CEO/CFO certification requirements have remained unchanged for the most part. Having noted that, an issuer should consider the need to modify existing, or establish specific internal controls over financial reporting and disclosure controls and procedures in order to prepare IFRS compliant financial information.
IFRS related revisions have been made to the general prospectus requirements to maintain consistency with the continuous disclosure requirements. Companies should note that any changes noted above are equally applicable to financial statements and MD&A included in a prospectus.
Issuer preparedness and disclosure should be a key area of focus, while clear, continuous and timely communications with investors and stakeholders will aid in a smooth IFRS transition.
For guidance on your individual situation, we recommend you consult your
local Public Companies advisor or
Jason Kingshott, CA National IFRS Leader at 1.877.500.0792
This article is intended to provide general information on the relief and guidance of a Company’s regulatory filing requirements. This article does not constitute professional advice.
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