The first quarter of 2018 introduced a number of changes and amendments to financial reporting requirements for public companies in Canada, including key International Financial Reporting Standards (IFRS) decisions, updated CSA guidance and revisions to required disclosures.
BDO's recent Public Company Financial Reporting webinar offered a detailed overview of the top issues that may affect your organization, including these eight important updates.
For more detailed insights and advice to help your company meet its continuous disclosure obligations, view our Q1 2018 webinar on demand, and sign up for upcoming webinars in our Public Company Financial Reporting Quarterly Update series.
1. Annual Improvements to IFRS 2015-2017 Cycle
Narrow-scope amendments to IFRS have been approved, which are effective for periods beginning on or after January 1, 2019. These amendments are:
- IFRS 3, Business Combinations and IFRS 11, Joint Arrangements: Clarifies the accounting treatment when an entity increases its interest in a joint operation that meets the definition of a business.
- IAS 12, Income Taxes: Clarifies the accounting for income tax consequences of dividend payments.
- IAS 23: Clarifies which borrowing costs are eligible for capitalization.
New IFRS standards are disrupting business across multiple industries in a myriad of ways. To prepare for the ways these changes will impact your company, watch our video to learn more.
2. IFRS Discussion Group Update
The IFRS Discussion Group is a panel that discusses topics and application issues related to IFRS implementation in Canada. During its January 2018 meeting, the group covered a variety of topics, including:
Accounting for cryptocurrencies:
- Cloud computing arrangements and the interaction between IFRS 16 and IAS 3
- Various topics concerning scope interaction between IFRS 9 and 15
- Modifications or exchanges of financial liabilities that do not result in derecognition under IFRS 9
- Various IFRS 16 implementation topics including fixed and variable payments, future payments, discount rate determination and lease incentives
Our Q1 2018 webinar provides in-depth details related to a number of the above topics, including specific examples covered during the discussion group's meeting.
Watch the Webinar On Demand
3. IFRS Interpretation Committee Agenda Decisions
Key outcomes from the IFRS Interpretation Committee's May 2017 meeting include:
- IFRS 3: Transaction price allocation in acquisitions of groups of assets
- IAS 28: Contributing PP&E to an associate
- IFRS 15: Revenue recognition in a real estate contract
- IFRS 15: Revenue recognition in a real estate contract that includes transfer of land
- IFRS 15: Right to payment for performance completed to date
- IAS 1: Presentation of interest revenue for particular financial instruments
The activities of the IFRS Interpretation Committee highlighted a number of specific revenue recognition issues in the construction and real estate industry, which may be significant changes in practice compared to existing policy.
4. BCSC Considering Gender Diversity Disclosure Requirements
Participating jurisdictions are considering amendments to the gender diversity disclosure requirements, including whether governance guidelines should supplement the existing “comply or explain” disclosure model. The BCSC sought written comments on the requirements, with the comment period closing on April 1, 2018.
5. TSX Listed Issuers and Posting Key Corporate Documents to Websites by April 1, 2018
A reminder that effective April 1, 2018, recent amendments to the TSX Company Manual will require that current, effective versions of constating documents and certain other corporate governance policies must be made available on the issuer's website. Key documents include articles of incorporation, amalgamation, and continuation, as well as any other constating or establishing document of the issuer.
6. CSA Staff Notice 51-352 Revised
The Canadian Securities Administrators (CSA) released revised guidance on February 8, 2018 to confirm its disclosure-based approach to reporting issuers with interests in the U.S. cannabis industry, as well as set out additional required disclosures.
CSA Staff Notice 51-352 (Revised) sets out clear disclosure expectations for all reporting issuers with existing or planned cannabis-related interests in U.S. states where cannabis activities are authorized by state law. Among the new and revised requirements, issuers must disclose any statements by U.S. federal authorities or prosecutors regarding the risk of enforcement action in any state where the issuer conducts cannabis-related activities. Issuers must also now quantify their balance sheet and operating statement exposure to U.S. cannabis-related activities.
The Canadian Depository for Securities (CDS) has entered into a memorandum of understanding (MOU) with TSX Inc., TSX Venture Exchange Inc., CNSX Markets Inc. and Aequitas NEO Exchange Inc., confirming that it relies on such exchanges to review the conduct of listed issuers. The MOU notes that securities regulation requires that the rules of each of the exchanges must not be contrary to the public interest and must have been approved by the securities regulators. Pursuant to the MOU, CDS will not ban accepting deposits of—or transactions for—clearing and settlement of securities of issuers with cannabis-related activities in the U.S.
7. NI 45-106 Prospectus Exemptions and NI 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations
The CSA published for comment proposed changes to substantially harmonize the regulatory framework for syndicated mortgages in Canada and to enhance investors' ability to make informed decisions when purchasing these investments. Under the proposed amendments, prospectus and registration exemptions that currently apply to syndicated mortgages in certain jurisdictions would be removed. As a result, investors would benefit from the potential involvement of a registrant.
Additionally, the amendments would introduce changes to certain existing prospectus exemptions to address specific concerns with syndicated mortgages. These changes include revisions to the offering memorandum exemption to provide heightened disclosure for investors. Under this proposal, issuers would be required to deliver property appraisals prepared by an independent, qualified appraiser.
The proposed amendments exclude syndicated mortgages from the private issuer exemption, so that they will be offered under exemptions that may be more appropriate for this type of security. These alternative prospectus exemptions generally have reporting requirements, which will help in monitoring this segment of the market.
The proposed amendments and CSA Notice and Request for comment can be found on the websites of CSA members. Comments should be submitted in writing by June 6, 2018.
8. Reducing Regulatory Burden in Public Companies
The Canadian Securities Administrators (CSA) published CSA Staff Notice 51-353 Update on CSA Consultation Paper 51-404 Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers. The publication outlines the CSA's plan to pursue policy projects to examine specific prospectus requirements, revisit certain continuous disclosure requirements and enhance electronic delivery of documents.
Specific initiatives the CSA intends to pursue include:
- Removing or modifying the criteria for reporting issuers to file a business acquisition report
- Facilitating at-the-market offerings
- Revisiting the primary business requirements to provide greater clarity to issuers preparing an IPO prospectus
- Considering a potential alternative prospectus model
- Reducing or streamlining certain continuous disclosure requirements
- Enhancing electronic document distribution for investors
Selection of these projects follows a consultation initiated by the CSA in 2017 on reducing regulatory burden in the public markets. Subsequently, CSA staff received a number of comment letters and certain jurisdictions held in-person consultations on the topic. The chosen initiatives reflect input from a diverse range of stakeholders, including reporting issuers, investor advocates and industry groups.
For Further Information
We hope this summary of our Q1 2018 regulatory activities has been helpful. For more in-depth insights, view our Q1 2018 webinar.
If you have any additional questions or would like to discuss any potential impacts to your company, we encourage you to reach out to a member of our Public Company Service team or to your BDO Advisor.