CSA STAFF NOTICE 52-327
CERTIFICATION COMPLIANCE UPDATE
CSA Staff Notice 52-327
CERTIFICATION COMPLIANCE UPDATE
October 15, 2010
Introduction
The Canadian Securities Administrators (CSA) staff (staff or we) conducted a review of the 2009
annual Management’s Discussion & Analysis (MD&A) and the annual certificates
1
for a sample of 195
reporting issuers, composed of 145 non-venture and 50 venture issuers
2
, to assess compliance with
the provisions of National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim
Filings (Certification Instrument or NI 52-109). In 2009, we conducted a review of the 2008 annual
MD&A and certificates to assess compliance with the Certification Instrument. The results of last
year’s review are summarized in CSA Staff Notice 52-325 Certification Compliance Review (CSA Staff
Notice 52-325), published on September 11, 2009. A follow-up review was conducted this year to
evaluate the level of improvement in reporting issuers’ compliance with the Certification Instrument
with respect to their 2009 annual filings and to raise awareness and educate issuers on their
certification disclosure obligations.
This year’s review focused on the following aspects:
•
Compliance of NI 52-109 related MD&A disclosure;
•
Compliance of NI 52-109 certificates;
•
Further review of issuers identified in last year’s review that did not fully comply;
•
Certificates and related MD&A disclosure of issuers that restated and re-filed 2009 interim or
annual financial statements to correct accounting errors; and
•
MD&A disclosure relating to the impact of International Financial Reporting Standards (IFRS)
on internal control over financial reporting (ICFR) and disclosure controls and procedures
(DC&P).
This notice summarizes the results of the review and provides issuers with further guidance.
3
Overall, the results of this year’s review indicate moderate improvement in the level of issuers’
compliance with NI 52-109 as compared to the results of last year’s review. In view of the high
number of refilings resulting from this year’s review, we think that issuers can further improve form
compliance and related MD&A disclosure in future filings. We recommend that issuers and their
certifying officers review the requirements outlined in the Certification Instrument and review its
1
A “certificate” or “form” is any of the forms associated with NI 52-109.
2
All but one of the venture issuers in our sample filed basic certificates.
3
Venture issuers that choose to file full certificates should consider all comments and guidance of this staff notice
addressed to non-venture issuers.
CSA STA FF NOTICE 52-327
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Companion Policy NI 52-109CP (52-109CP). Issuers and their certifying officers should also refer to the
guidance in this staff notice and in CSA Staff Notice 52-325.
Investor Impact
As noted in section 1.1 of 52-109CP, the objective of the Certification Instrument is to improve the
quality, reliability and transparency of reporting issuers' annual filings, interim filings and other
materials that issuers file or submit under securities legislation. We think this improvement in turn
helps maintain and enhance investors’ confidence in the integrity of our capital markets. In order to
provide investors with a better understanding of the non-venture issuers’ ICFR and DC&P, non-
venture issuers should fully and clearly disclose in their MD&A:
•
Their certifying officers’ conclusions about the effectiveness of the issuers’ ICFR and DC&P;
•
Any material weakness in ICFR and any weakness that is significant in DC&P; and
•
Any material change in ICFR.
Summary of Findings
The table below summarizes the results of this year’s review compared to the results of last year’s
review.
50%
45%
45%
40%
38%
35%
33%
32%
30%
25%
2010 review
20%
16%
14%
2009 review
15%
12%
10%
10%
5%
0%
Re-filed
Re-filed
Prospective
No action
MD&A and
certificates
changes
required
certificates
only
As illustrated above, the percentage of issuers that were requested to re-file their MD&A and
certificates declined as we saw a decrease in the severity of the deficiencies. We also observed some
improvement in the percentage of issuers for which no action was taken because the issuer fully or
substantively complied with the Certification Instrument. A summary of our findings is set out below.
CSA STA FF NOTICE 52-327
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A – Compliance of NI 52-109 related MD&A disclosure
We reviewed the annual MD&A disclosure to assess whether it was consistent with the
representations contained in the annual certificates. As a result of our review, 12% of issuers were
asked to re-file their 2009 annual MD&A and certificates. In instances where issuers did not disclose
the certifying officers’ conclusions about the effectiveness of ICFR or DC&P or when the disclosure
was unclear or incomplete, we asked issuers to re-file their 2009 annual MD&A and certificates.
B – Compliance of NI 52-109 certificates
We reviewed the annual certificates to determine if they were filed in the exact wording prescribed
by the required form, if the certificates were filed on the proper date and to assess whether the
representations included in the certificates were consistent with the disclosure in the related annual
MD&A. As a result of our review, 10% of issuers were asked to re-file their 2009 annual certificates
because of material amendments to the wording of the certificates and certificate content that was
inconsistent with related MD&A disclosure.
C – Further review of issuers identified in last year’s review that did not fully comply
Our review sample of 195 reporting issuers included 45 issuers (33 non-venture issuers and 12
venture issuers) identified in last year’s review as not fully compliant. We asked two issuers to re-file
their 2009 annual MD&A or certificates for the same reasons that they were asked to re-file in last
year’s review.
D – Certificates and related MD&A disclosure of issuers that restated and re-filed 2009 interim
or annual financial statements to correct accounting errors
We selected a sample of eight non-venture issuers that restated and re-filed their 2009 interim or
annual financial statements to correct accounting errors. Based on our discussion with the issuers, we
concluded that issuers did not always consider if the misstatement in the financial statements related
to a material weakness in the issuer’s ICFR. As a result, we found deficiencies in the disclosure of
material weaknesses, in the conclusions about the effectiveness of ICFR and DC&P and in the
disclosure of material changes to ICFR that were made to remediate a material weakness.
E – MD&A disclosure relating to the impact of IFRS on ICFR and DC&P
We reviewed the MD&A disclosure relating to the ICFR and DC&P components of the IFRS transition
plan of the non-venture issuers in our sample and noted the majority of these issuers provided
generic disclosure or did not discuss the impact of the transition to IFRS on ICFR and DC&P. We
reminded the issuers, in advance of their first IFRS financial statement filings, of the requirement to
disclose any material change in ICFR that may occur due to the transition to IFRS and the ongoing
preparation of financial statements in accordance with IFRS.
Findings
This section discusses the results of our review in detail. We included examples that meet disclosure
requirements and examples that do not meet disclosure requirements to highlight the common
deficiencies identified during our review. These examples are for illustrative purposes only.
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Accordingly, the examples that meet disclosure requirements may not be sufficient or appropriate for
any particular issuer depending on its circumstances and the needs of its investors. Responsibility for
making sufficient and appropriate disclosure and complying with applicable securities legislation
remains with issuers.
A – Compliance of NI 52-109 related MD&A disclosure
We reviewed the annual MD&A disclosure to assess whether it was consistent with the
representations contained in the annual certificates.
Conclusions on the effectiveness of ICFR and DC&P
Paragraph 6 of Form 52-109F1 Certification of Annual Filings - Full Certificate (Form 52-109F1)
includes representations that the issuer disclosed in its annual MD&A the certifying officers’
conclusions about the effectiveness of ICFR and DC&P at the financial year end.
Additionally, certifying officers may not qualify their assessment by stating that the issuer’s ICFR or
DC&P is effective subject to certain qualifications or exceptions unless the qualification pertains to
one of the permitted scope limitations available in section 3.3 of the Certification Instrument as
discussed in sections 9.5 and 10.1 of 52-109CP.
26% of issuers reviewed that filed full certificates did not disclose or did not fully disclose the
certifying officers’ conclusions about the effectiveness of ICFR or DC&P in their annual MD&A or
they qualified the conclusions.
Example 1 - Extract of MD&A - No conclusion on the operation of DC&P:
Does not meet disclosure requirements
Meets disclosure requirements
As at December 31, 2009, the CEO and the CFO
As at December 31, 2009, the CEO and the
evaluated the design of the Company’s DC&P.
CFO evaluated the design and operation of the
Based on that evaluation, the CEO and the CFO
Company’s DC&P. Based on that evaluation,
concluded that the design of DC&P was
the CEO and CFO concluded that the
effective as at December 31, 2009.
Company’s DC&P was effective as at
December 31, 2009.
In Example 1, the issuer has disclosed the certifying officers’ conclusion on the design of DC&P but
not its operation. Since the issuer’s DC&P may be designed effectively but may not operate as
intended, it is important for issuers to disclose the certifying officers’ conclusion about both the
design and operation of ICFR and DC&P. To cover the entirety of ICFR and DC&P, certifying officers
may simply conclude on the effectiveness of ICFR and DC&P without referring to the design and
operation separately.
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Example 2 - Extract of MD&A – Incomplete conclusion about the effectiveness of ICFR:
Does not meet disclosure requirements
Based on the evaluation of the design and
operating effectiveness of the company’s ICFR,
the CEO and the CFO concluded that the
company’s ICFR was effective to provide
reasonable assurance regarding the reliability of
financial reporting as at December 31, 2009.
In Example 2, the conclusion does not contain the exact definition of ICFR, as noted in the
Certification Instrument. Issuers are not required to include the definition of ICFR or DC&P in their
conclusion of the effectiveness. However, if issuers and their certifying officers choose to include the
definition of ICFR and DC&P in their MD&A, the definitions should be replicated in their entirety and
verbatim to avoid concluding on only a portion of ICFR or DC&P.
While the Certification Instrument does not specifically prescribe the language used to conclude on
the effectiveness of the issuer’s DC&P and ICFR, explicit disclosure as to whether the issuer’s ICFR and
DC&P are “effective” or “ineffective” at the financial year end improves transparency and avoids
ambiguity.
Example 3 - Extract of MD&A - Qualification of the conclusion regarding the effectiveness of ICFR:
Does not meet disclosure requirements
The CEO and the CFO have determined that as
at December 31, 2009, the Company’s ICFR was
effective except for a disclosable weakness with
respect to segregation of duties.
In Example 3, the certifying officers qualified their assessment by stating that the issuer’s ICFR was
effective subject to a qualification. Furthermore, the disclosure is confusing since “disclosable
weakness” is not a defined term under NI 52-109.
There is no requirement to discuss a “weakness”, “design challenge” or “deficiency” in ICFR or DC&P
if it is not significant enough to constitute a material weakness in ICFR or a weakness in DC&P that is
CSA STA FF NOTICE 52-327
Meets disclosure requirements
Based on the evaluation of the design and
operating effectiveness of the company’s ICFR,
the CEO and the CFO concluded that the
company’s ICFR was effective as at December
31, 2009.
Meets disclosure requirements – If the
“disclosable weakness” is not a material
weakness:
Based on an evaluation of the Company’s ICFR
as at December 31, 2009, the CEO and CFO
concluded that the Company’s ICFR was
effective.
Meets disclosure requirements – If the
“disclosable weakness” is a material weakness
Based on an evaluation of the Company’s
DC&P and ICFR as at December 31, 2009, the
CEO and CFO concluded that the company’s
ICFR was ineffective.
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significant. If an issuer elects to discuss such “weakness”, “design challenge” or “deficiency” in its
annual MD&A, to improve transparency and avoid ambiguity, the disclosure should clearly indicate
that these items do not constitute a material weakness or a weakness in DC&P that is significant.
Guidance on assessing the significance of deficiencies in ICFR and DC&P can be found in Part 9 and
Part 10 of 52-109CP, respectively.
In instances where issuers did not disclose the certifying officers’ conclusions about the effectiveness
of ICFR or DC&P or when the disclosure was unclear or incomplete, we asked issuers to re-file their
2009 annual MD&A and certificates.
Material weakness
As discussed in sections 9.5 and 10.1 of 52-109CP, the certifying officers cannot conclude that the
issuer’s ICFR or DC&P is effective if they identify a material weakness or a weakness in DC&P that is
significant, as in Example 4 below. Additionally, section 10.3 of 52-109CP notes that the existence of a
material weakness in the issuer’s ICFR will almost always represent a weakness that is significant in
the issuer’s DC&P given the substantial overlap between the definitions of DC&P and ICFR.
3% of issuers reviewed that filed full certificates disclosed that their certifying officers concluded
that ICFR was “effective” despite the disclosure of a material weakness in the annual MD&A.
Example 4 - Extract of MD&A - Conclusion that ICFR was effective when a material weakness exists:
Does not meet disclosure requirements
Meets disclosure requirements
As at December 31, 2009, the CEO and the CFO
As at December 31, 2009, the CEO and the
evaluated and concluded that the Company’s
CFO evaluated and concluded that the
ICFR and DC&P were effective as at December
Company’s ICFR and DC&P were ineffective as
31, 2009.
at December 31, 2009.
During their evaluation of ICFR, the CEO and the
During their evaluation of ICFR, the CEO and
CFO noted a material weakness. The Company’s
the CFO noted a material weakness. The
accounting staff has limited knowledge of
Company’s accounting staff has limited
Canadian GAAP. As such, there is a reasonable
knowledge of Canadian GAAP. As such, there
possibility that the issuer’s ICFR will fail to
is a reasonable possibility that the issuer’s
prevent or detect a material misstatement in
ICFR will fail to prevent or detect a material
the financial statements on a timely basis. To
misstatement in the financial statements on a
improve the accounting staff’s knowledge, the
timely basis. To improve the accounting staff’s
Company will seek external consultants to train
knowledge, the Company will seek external
accounting staff.
consultants to train accounting staff.
In Example 4, despite the existence of a remediation plan, the certifying officers could not conclude
that the issuer’ ICFR and DC&P were effective because the material weakness existed at year end.
CSA STA FF NOTICE 52-327
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Voluntary disclosure about DC&P and ICFR by venture issuers
If a venture issuer files Form 52-109FV1 Certification of Annual Filings – Venture Issuer Basic
Certificates (Form 52-109FV1) or Form 52-109FV2 Certification of Interim Filings – Venture Issuer
Basic Certificates (Form 52-109FV2), it is not required to discuss in the MD&A the design or operating
effectiveness of DC&P and ICFR. If an issuer chooses to discuss the design or operation of one or more
components of its DC&P and ICFR, section 15.3 of 52-109CP recommends disclosure to accompany
the issuer’s discussion about DC&P or ICFR.
35% of venture issuers that filed basic certificates voluntarily discussed DC&P or ICFR in their
annual MD&A but did not include cautionary language.
The “Note to Reader” included in Form 52-109FV1 and Form 52-109FV2 states that the certifying
officers have not made any representations relating to the establishment and maintenance of DC&P
and ICFR. By including a discussion of DC&P and ICFR in the MD&A without the language noted in
section 15.3 of 52-109CP, the “Note to Reader” conflicts with the disclosure included in the MD&A.
If the certifying officers of a venture issuer choose to establish and maintain the issuer’s DC&P and
ICFR and evaluate their operating effectiveness, as required for non-venture issuers, and wish to
provide disclosure to that effect in the MD&A, the venture issuer may consider filing full certificates
in Form 52-109F1 and Form 52-109F2 Certification of Interim Filings – Full Certificate.
B – Compliance of NI 52-109 certificates
We reviewed the issuers’ annual certificates to determine if they were filed in the exact wording
prescribed by the required form, if the certificates were filed on the proper date and to assess
whether the representations included in the certificates were consistent with the disclosure in the
related annual MD&A.
Amendments to the form
Subsections 4.1(1) and 5.1(1) of NI 52-109 require issuers to file annual and interim certificates in the
wording prescribed by the required form.
23% of issuers reviewed amended the wording prescribed by the form.
Some issuers omitted or modified the sequence of paragraphs and removed or added text. For
example, some issuers inappropriately deleted paragraphs 5.2 and 5.3 and subparagraph 6(b)(ii) of
Form 52-109F1 or did not insert “N/A” when they were not applicable. Those paragraphs relate to
material weaknesses and scope limitations. If they do not apply to the issuer, the paragraph number
must be included in the certificates to maintain the sequence of the paragraphs and certifying officers
must insert “N/A” after the paragraph number.
In instances where issuers deleted paragraphs 5.2 and 5.3 and subparagraph 6(b)(ii) of Form
52-109F1, did not insert “N/A” when they were not applicable or made major amendments to the
certificates, we asked issuers to re-file their 2009 annual certificates.
CSA STA FF NOTICE 52-327
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Other deficiencies identified
The following is a non-exhaustive list of other deficiencies identified in our review of certificates:
•
The certifying officers did not date the certificates the same date the certificates were filed;
(Section 7.1 of NI 52-109);
•
Certificates were not filed concurrently with the filing of an AIF, when the AIF was filed after the
financial statements and MD&A; (Subsection 4.1(2) of NI 52-109); and
•
The date in paragraph 7 of the Form 52-109F1 certificate was not the date immediately following
the end of the period covered by the issuer’s most recent interim filing. An issuer with a
December 31, 2009 year end should have indicated October 1, 2009 in paragraph 7 because this
was the date immediately following the end of its September 30, 2009 interim period filing.
C – Further review of issuers identified in last year’s review that did not fully comply
We conducted a further review of a sample of 45 reporting issuers (33 non-venture issuers and 12
venture issuers) that were identified in last year’s review as not fully compliant with NI 52-109
requirements. The purpose of this review was to determine whether these issuers appropriately
addressed the deficiencies that we raised in last year’s review in respect of this year’s filings. As a
result of our review, we asked two of the issuers in our sample to re-file their 2009 annual MD&A or
certificates for the same reasons they were asked to re-file in last year’ review. Many of the issues
identified in this part of our review resulted from new deficiencies and were not a continuation of
deficiencies identified in last year’s review.
At the end of every reporting period, we encourage issuers to review the Certification Instrument and
any past correspondence with CSA staff to ensure that their filings fully comply with the current
requirements. Issuers should anticipate staff requests for refiling of certificates or related MD&A in
the future if an issuer has not met its certification obligations. As well, staff may consider other
regulatory action as circumstances warrant.
D – Certificates and related MD&A disclosure of issuers that restated and re-filed 2009 interim
or annual financial statements to correct accounting errors
We selected a sample of eight non-venture issuers that restated and re-filed their 2009 interim or
annual financial statements to correct accounting errors. Section 9.4 of 52-109CP mentions that the
restatement of previously issued financial statements to reflect the correction of a material
misstatement may suggest the existence of a material weakness in ICFR. Based on our discussions
with the issuers, we concluded that issuers did not always consider if the misstatement in the
financial statements was related to a material weakness in the issuer’s ICFR. As a result, we found
deficiencies in the disclosure of material weaknesses, in the conclusions of the effectiveness of ICFR
and DC&P and in the disclosure of material changes to ICFR when a material weakness was
remediated.
MD&A disclosure of material weakness
Timely disclosure of any material weakness, whether it is related to design or operation, allows
investors to understand and assess the potential impact on the financial statements. We remind
issuers that if the certifying officers become aware of a material weakness, the MD&A for the
CSA STA FF NOTICE 52-327
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applicable period must include the disclosure required under paragraph 3.2 of NI 52-109 (the
Material Weakness Disclosure).
Until the issuer remediates the material weakness, it will continue to exist. Therefore, the issuer must
provide the Material Weakness Disclosure in the reporting period in which it is discovered and in all
subsequent reporting periods until the material weakness is remediated.
50% of issuers did not disclose a material weakness in their interim or annual MD&A.
In our review, we noted that some issuers did not disclose the material weakness relating to the
design or operation of ICFR. In Example 5 below, the issuer had a material weakness existing as at
September 30, 2009 that was not remediated until June 2010.
MD&A disclosure of remediation plan
The representation of paragraph 7 in Form 52-109F1 and paragraph 6 of Form 52-109F2 requires
issuers to disclose in their MD&A any change in ICFR that occurred during the period that has
materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
50% of issuers did not disclose the change in their ICFR that was made to address the material
weakness.
As discussed in section 11.1 of 52-109CP, a change in an issuer’s ICFR that was made to remediate a
material weakness would generally be considered a material change in an issuer’s ICFR. Although
some issuers in our sample represented that they had remediated the material weakness, these
issuers did not always disclose the change in their ICFR that was made to address the material
weakness. It is critical for issuers to disclose such changes in a timely manner so that investors can
better understand how the issuer has addressed its financial reporting risks that the deficient ICFR
component previously failed to address.
Annual conclusions on effectiveness if a material weakness in ICFR or a weakness in DC&P that
is significant exists as at the financial year end
As noted in sections 9.5 and 10.1 of 52-109CP, the certifying officers could not conclude that the
issuer’s ICFR and DC&P are “effective” if the certifying officers identify a material weakness relating to
the design or operation of ICFR or a weakness relating to the design or operation of DC&P that is
significant. In addition, as noted in section 10.3 of 52-109CP, the existence of a material weakness in
the issuer’s ICFR will almost always represent a weakness that is significant in the issuer’s DC&P given
the substantial overlap between the definitions of DC&P and ICFR.
37% of issuers did not remediate the material weakness by the end of the year but concluded that
their DC&P and ICFR were “effective” in their annual MD&A.
In Example 5 below, the issuer re-filed its September 30, 2009 interim financial statements on April
15, 2010. Given that the material weakness that related to the restatement of the previously filed
financial statements was identified subsequent to the financial year end, this suggests that the
issuer’s ICFR had a material weakness existing at the December 31, 2009 year end. As such, the non-
venture issuer in Example 5 amended and re-filed its 2009 annual MD&A to disclose that the
CSA STA FF NOTICE 52-327
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certifying officers concluded that the issuer’s ICFR was “ineffective” at the financial year end. The
amended MD&A also provides the Material Weakness Disclosure as defined above.
Example 5 - Non-venture issuer re-files 2009 interim financial statements to correct a material
misstatement:
Facts – December 31 year end:
Certification Requirements:
- Filed September 30, 2009 interim financial
- On November 14, 2009, the issuer filed
statements and MD&A on November 14, 2009.
interim certificates (Form 52-109F2).
- Filed December 31, 2009 annual financial
- On March 15, 2010, the issuer filed annual
statement and MD&A on March 15, 2010.
certificates (Form 52-109F1).
- Amended and restated the September 30,
- On April 15, 2010 the issuer:
2009 interim financial statements and MD&A on
April 15, 2010.
1)
Disclosed a material weakness relating to
design in the September 30, 2009
amended and re-filed interim MD&A.
2)
Filed Form 52-109F2R Certification of re-
filed interim filings (Form 52-109F2R) in
conjunction with the refiling of the
September 30, 2009 financial statements
and corresponding MD&A.
3)
Amended and re-filed the 2009 annual
MD&A to disclose as at December 31,
2009:
-
the material weakness relating to
design and operation of ICFR [and
likely a weakness that is significant in
DC&P]; and
-
Conclusions that ICFR [and likely
DC&P] is “ineffective”.
4)
Filed Form 52-109F1R Certification of re
filed annual filings (Form 52-109F1R) in
conjunction with the re-filed annual
MD&A.
- On August 14, 2010 the issuer:
- The material weakness related to the refiling
1)
Filed interim certificates (Form 52-109F2)
was remediated on June 30, 2010.
2)
Disclosed in the June 30, 2010 MD&A the
- Filed June 30, 2010 interim financial
changes made to ICFR during the period.
statements and MD&A on August 14, 2010.
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Other considerations
Venture issuers that re-file financial statements to correct an accounting error should be cautious if
they voluntarily discuss the design or operation of DC&P or ICFR in their re-filed MD&A. We would
expect these issuers to disclose that DC&P or ICFR are ineffective for the same reasons as noted
above.
E – MD&A disclosure relating to the impact of IFRS on ICFR and DC&P
The transition to IFRS from Canadian GAAP may have a material impact on issuers’ ICFR and DC&P
due to changes in both accounting policies and in financial reporting disclosure requirements. In this
year’s review, staff assessed the quality of issuers’ IFRS transition disclosure relating to ICFR and
DC&P. As specified in CSA Staff Notice 52-320 Disclosure of Expected Changes in Accounting Policies
Relating to Changeover to International Financial Reporting Standards (CSA Staff Notice 52-320),
investors need meaningful information about the transition to IFRS.
CSA Staff Notice 52-320 provides guidance on the requirement in Form 51-102F1 Management’s
Discussion & Analysis for an issuer’s disclosure of expected changes in accounting policies related to
the IFRS transition for the three years before the changeover to IFRS. CSA Staff Notice 52-320
indicates that an issuer’s IFRS changeover plan may address the impact of IFRS on ICFR and DC&P if it
is a key element of the IFRS transition plan. Key elements should be discussed in the issuer’s MD&A.
We reviewed MD&A disclosure relating to the IFRS transition of all non-venture issuers in our sample.
A total of 79% of non-venture issuers reviewed identified in their MD&A accounting policy
differences, including choices among policies permitted under IFRS. For those issuers we noted the
following:
•
46% did not discuss the impact of the IFRS transition on their DC&P and ICFR in their MD&A;
•
37% provided generic disclosure of the impact of the IFRS transition on their DC&P and ICFR; and
•
17% provided entity-specific disclosure of the impact of the IFRS transition on their DC&P and
ICFR.
Considerations for assessing ICFR and DC&P
Part 6 of 52-109CP directs issuers to identify the risks that could reasonably result in a material
misstatement in the financial information. To address these risks appropriately, an issuer may need to
establish specific ICFR and DC&P or modify existing ICFR and DC&P in order to prepare its financial
statements in accordance with IFRS. We suggest issuers assess whether they have appropriate
controls over the transition process and the preparation of IFRS compliant financial information.
We encourage issuers to review the adequacy of their ICFR to ensure the information on how the
transition from Canadian GAAP to IFRS affected their reported financial position, financial
performance and cash flows is reliable.
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Disclosure requirements
NI 52-109 requires non-venture issuers to establish and maintain ICFR and DC&P. Paragraph 7 of
Form 52-109F1 and paragraph 6 of Form 52-109F2 require certifying officers to certify that the issuer
disclosed in its MD&A any change in the issuer’s ICFR that occurred during the period that has
materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. Therefore, any
change in the issuer’s ICFR relating to IFRS that will materially affect, or is reasonably likely to
materially affect, the issuer’s ICFR must be disclosed in the period in which the change first impacts
the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with the issuer’s GAAP.
Future Action
While we found moderate levels of improvement in compliance with NI 52-109 since last year’s
review, further focus on the Certification Instrument by issuers and their certifying officers will help
compliance. Compliance with NI 52-109 will enhance investors’ confidence in the quality, reliability
and transparency of the annual filings, interim filings and other materials that issuers file or submit
under securities legislation.
We will continue to review issuers’ compliance with the Certification Instrument as part of our overall
continuous disclosure review program and we will take action when deficiencies are identified.
CSA STA FF NOTICE 52-327
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Questions:
Betty Adema
Shaifali Joshi
Securities Analyst, Corporate Finance
Accountant, Corporate Finance
British Columbia Securities Commission
Ontario Securities Commission
604-899-6729
416-595-8904
Toll-free 800-373-6393
sjoshi@osc.gov.on.ca
badema@bcsc.bc.ca
Jennifer Wong
Nicole Parent
Senior Securities Analyst, Corporate Finance
Analyste, Service de l'information continue
British Columbia Securities Commission
Autorité des marchés financiers
604-899-6536
514-395-0337 ext. 4455
Toll-free 800-373-6393
Toll-free 877-525-0337
jwong@bcsc.bc.ca
nicole.parent@lautorite.qc.ca
Patricia van de Sande
Normand Lacasse
Senior Securities Analyst
Analyste, Service de l'information continue
Alberta Securities Commission
Autorité des marchés financiers
403-355-4474
514-395-0337 ext. 4418
patricia.vandesande@asc.ca
Toll-free 877-525-0337
normand.lacasse@lautorite.qc.ca
Ian McIntosh
Kevin Redden
Deputy Director, Corporate Finance
Director, Corporate Finance
Saskatchewan Financial Services Commission
Nova Scotia Securities Commission
306-787-5867
902-424-5343
ian.mcintosh@gov.sk.ca
reddenkg@gov.ns.ca
Tony Herdzik
Junjie Jiang
Senior Securities Analyst, Corporate Finance
Securities Analyst, Corporate Finance
Saskatchewan Financial Services Commission
Nova Scotia Securities Commission
306-787-5849
902-424-7059
tony.herdzik@gov.sk.ca
jiangjj@gov.ns.ca
Patrick Weeks
Jeff Harriman
Analyst, Corporate Finance
Securities Analyst
Manitoba Securities Commission
New Brunswick Securities Commission
204-945-3326
(506) 643-7856
patrick.weeks@gov.mb.ca
jeff.harriman@nbsc-cvmnb.ca
Raymond Ho
Accountant, Corporate Finance
Ontario Securities Commission
416-593-8106
rho@osc.gov.on.ca
CSA STA FF NOTICE 52-327
13
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.