On October 1, 2010, the Canadian
Securities Administrators (CSA) published the Final Materials of amended regulations to reflect the transition to International
Financial Reporting Standards (IFRS) and International Standards on Auditing.
These new regulations come into force on
January 1, 2011. accordance with a fair presentation framework.
An explicit and unreserved statement of compliance with IFRS and in the case of interim financial reports, to IAS 34,
Interim Financial Reporting, will be required.
Below is a summary of the main amendments to the regulations previously released by the CSA.
Regulation 52-107 respecting
Acceptable Accounting Principles and Auditing Standards
Canadian issuers
The Canadian issuer requirements are unchanged in the Final Materials:
The possibility for Canadian issuers registered with the SEC of using US
GAAP has been maintained in the Final
Materials. Additionally, as of January 1,
2011, Canadian issuers will no longer be required to reconcile US GAAP with the new Accounting Standards for Private
Enterprises (ASPE) for the two years following a change from ASPE to US
GAAP.
The accounting framework will be
Canadian generally accepted accounting principles (GAAP) for publicly accountable enterprises (IFRSs) and auditing standards will be the Canadian generally accepted auditing standards
(Canadian Auditing Standards or CAS) for financial statements prepared in
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Foreign issuers
Acceptable accounting principles for foreign issuers will now be IFRS, US
GAAP for an issuer also registered with the SEC, accounting principles that meet the disclosure requirements for US foreign private issuers (under certain conditions) and accounting principles that meet the foreign disclosure requirements of the designated foreign jurisdiction for a designated foreign issuer.
Annual financial statements must include a statement that the financial statements are prepared in accordance with the financial reporting framework specified in Regulation 52-107 respecting Acceptable Accounting
Principles and Auditing Standards for financial statements delivered by registrants, and must also describe that framework.
Canadian registrants
Canadian registrants generally include investment counsel and portfolio managers, limited market dealers, exchange contracts dealers, scholarship plan dealers, restricted dealers and, in Quebec, mutual fund dealers. Requirements for Canadian registrants are the following:
The definition of the accounting framework for registrants has been modified in the Final Materials. This required framework is IFRS, except that any investments in subsidiaries, jointly controlled entities and associates must be accounted for as specified for separate financial statements (i.e., not consolidated) in IAS 27, Consolidated and Separate Financial Statements.
Auditing standards shall be Canadian generally accepted auditing standards
(Canadian Auditing Standards or CAS) for financial statements prepared in accordance with a fair presentation framework;
Use of different accounting principles
The Proposed Materials provided an exemption from the requirement that financial statements be prepared in accordance with the same accounting principles for all periods presented in the financial statements. The Final Materials do not include this exemption. However, if different accounting principles apply to different periods that must be presented, the issuer may present two sets of financial statements. For example, in an investment document for a transaction subsequent to
December 31, 2011 (assuming that three annual financial statements must be presented), an issuer with a December 31 year-end could present one set of financial statements containing December 31, 2011 and 2010 prepared in accordance with
IFRS and, for the financial statements prepared in accordance with current
Canadian GAAP (Part V of the CICA
Handbook), the issuer could choose one of the following formats:
Financial statements and interim financial information for periods relating to a financial year beginning in 2011 may exclude comparative information relating to the preceding financial year; and
Present one set of financial statements for the years ended December 31, 2010 and 2009; or
Present one set of financial statements for the years ended December 31, 2009 and 2008.
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Rules applicable to acquisition statements
In the proposed regulations, the Ontario
Securities Commission (OSC) had adopted a position that differed from that of the other CSA jurisdictions regarding the possibility of using financial statements prepared in accordance with ASPE with respect to an acquisition in certain circumstances. Following specific consultation on this topic, the Final Materials contain a harmonized approach that was adopted by all jurisdictions, as follows: to reflect changes relating to acceptable accounting principles to prepare acquisition statements.
New provisions
52/53 week financial years
The Regulation includes a new provision that permits issuers and registrants that have financial year ends close to, but not on December 31, 2010 (cannot end before
December 21, 2010), the option to transition to IFRS when their new financial year begins.
Acquisition statements may be prepared in accordance with ASPE subject to specified conditions according to the nature of the issuer.
Non-venture issuers will be required to provide a reconciliation to the issuer’s
GAAP for all financial years presented and the most recent interim period and the reconciliation to the issuer’s GAAP for the most recent financial year must be audited.
Venture issuers will not be required to provide a reconciliation.
Entities with rate-regulated activities
The Regulation includes a new provision that reflects the deferral for up to one year of the transition to IFRS granted by the
AcSB for entities having activities subject to rate regulation, as defined in Part V of the Handbook.
Amendments to other regulations
There have been amendments to other regulations regarding continuous disclosure, prospectuses and certification of disclosure. These amendments result primarily from
Both venture and non-venture issuers must prepare pro forma financial statements using accounting policies that are consistent with the issuer’s GAAP.
The Policy Statement provides new guidance on the preparation of the reconciliations required for non-venture issuers and we encourage you to consult it for more details in this regard. amendments to Regulation 52-107, as previously summarized, amendments to disclosure requirements in instances where IFRS requires different financial statements than current Canadian GAAP, and changes in terminology used in IFRS.
The other main amended regulations are the following:
Additionally, guidance on significance tests in Regulation 51-102 respecting Continuous
Disclosure Obligations has been amended
31-103 respecting Registration
Requirements and Exemptions,
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41-101 respecting General Prospectus
Requirements,
45-106 respecting Prospectus and
Registration Exemptions,
51-102 respecting Continuous
Disclosure Obligations, and
52-109 respecting Certification of
Disclosure in Issuers’ Annual and
Interim Filings.
Amendments in these regulations include the following requirements, which are unchanged from the Proposed Materials:
4 When an issuer chooses to present a separate income statement, this statement must be displayed immediately before the statement of comprehensive income.
Extension of deadline to file first interim financial report in the year of adoption of IFRS
The CSA have also retained the proposal to extend the 30-day filing deadline for reporting issuers’ first interim financial report for the year of IFRS adoption. Nonventure issuers will therefore have 75 days after the end of the interim period to file their first interim financial report, while venture issues will have 90 days.
1 The reconciliations and opening statement of financial position required by IFRS 1, First-time Adoption of
International Financial Reporting
Standards, must be included in the first interim financial report of the year of transition and in the first annual financial statements.
2 The IAS 1 requirement to include a third statement of financial position at the beginning of the comparative financial year when an accounting policy is retroactively applied, financial statements items are retroactively restated, or items in annual financial statements or interim financial reports are reclassified, is specifically included in the regulation. This requirement applies to both annual financial statements and interim financial reports.
Regulation 81-106 respecting
Investment Fund Continuous
Disclosure (Regulation 81-106)
The CSA also mentioned that they support the AcSB’s deferral of mandatory adoption of IFRS by investment companies to fiscal years beginning on or after January 1, 2012.
The CSA intends to publish the final
Regulation 81-106 modified for the transition to IFRS once the IASB revised standard on consolidation for investment companies is definitive in 2011.
Please contact your Grant Thornton adviser should you wish to discuss any of the information contained in the above.
3 For interim periods, the statement of cash flows should be presented for the period from the beginning of the year and for the corresponding comparative period, but it is not required to provide the statement of cash flows for the quarter only.
This summary has been adapted from the IFRS newsletter, The Road to
Conversion —a
Raymond Chabot Grant
Thornton publication.
It has been adapted with their permission.
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