Staff of the Ontario Securities Commission (OSC) released a notice this week summarizing their findings on the adequacy of disclosures in financial statements and MD&A related to the going concern assumption. Canadian GAAP requires management to assess an issuer's ability to continue as a going concern, and where this assessment identifies material uncertainties that give rise to a going concern risk, ensure the risk is disclosed in the financial statements. Disclosure in the MD&A should then complement and expand upon the financial statement disclosure to provide a complete discussion of the uncertainties and the effect that they have on the issuers' operations, liquidity and capital. Staff's review included an assessment of the timeliness and adequacy of this required disclosure related to the going concern assumption.
The OSC reviewed the disclosure of 105 issuers with indications of financial difficulty or that had recently ceased operations. As a result, the findings provide guidance on improving the quality and sufficiency of going concern disclosure. Generally, the OSC found that issuers with indications of financial difficulty where there was some going concern disclosure needed some improvement in their MD&A discussion related to going concern risk. Staff have also advised that disclosure of going concern risks will continue to be an area of focus in the future, resulting in refilings being required in appropriate circumstances.
For more information, see OSC Staff Notice 52-719.
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