Canada: Securities And Capital Markets Bulletin - January 2012

Last Updated: January 19 2012
Article by David Surat, Dolores Di Felice and Paul G. Findlay

Most Read Contributor in Canada, September 2016


Each year we are asked what has changed to the continuous disclosure requirements for Canadian public companies. The purpose of this Bulletin is to answer that question. We should, however, caution those officers of reporting issuers responsible for continuous disclosure matters that they should not just update last year's continuous disclosure documents. You should always refer to the source of the obligations to ensure that you are complying with all of the requirements. For example, changes to the circumstances of a reporting issuer could give rise to the obligation to respond to an item of required disclosure that was inapplicable last year.

We expect that the transition to International Financial Reporting Standards will continue to be the primary focus for the Canadian securities regulators' continuous disclosure review program for the coming year. In addition, changes to the executive compensation disclosure requirements are now in force.

The Canadian Securities Administrators (the CSA) have provided guidance regarding the results of their continuous disclosure reviews in CSA Staff Notice 51-334 Continuous Disclosure Review Program Activities for the fiscal year ended March 31, 2011 (the CSA Notice). Similarly, the Alberta Securities Commission has published its annual Corporate Finance Disclosure Report and the Authorité des Marché Financiers has published an Activity Report for the Continuous Disclosure Review Program (the ASC Report and AMF Report respectively and, together with the CSA Notice, the Reports), which provide further guidance. Although this guidance does not change the continuous disclosure requirements, it does elaborate on the expectations of the regulators and/or the interpretation of the requirements.

Guidance and common deficiencies from the Reports are identified using the following symbols:

CSA Notice ♦

ASC Report ♠

AMF Report ♣


Executive Compensation Amendments

Form 51-102F6 Statement of Executive Compensation (the Compensation Form) has been amended in respect of financial years ended on or after October 31, 2011. The Compensation Form sets out the requirements for disclosure in an issuer's management information circular (or annual information form for issuers that do not send information circulars) relating to executive compensation. The bulk of the changes are to the Compensation Discussion and Analysis (CD&A), Summary Compensation Table and Pension Plan Benefits sections of the Compensation Form. An overview of the changes which will require your attention is set out below.

Compensation Discussion and Analysis

  • The Compensation Form provides for an exemption from the requirement to disclose specific performance goals or similar conditions in the CD&A if that disclosure would seriously prejudice the interests of the company. Companies relying on this exemption are now required to explicitly state that they are relying on the exemption and explain why disclosing the relevant performance goals or similar conditions would seriously prejudice the company's interests.
  • Consistent with rules adopted by the U.S. Securities and Exchange Commission, companies are now required to disclose whether the board of directors, or a committee of the board, considered the implications of the risks associated with the company's compensation policies and practices. If the company has completed a risk analysis, the company is required to disclose:
  • the nature and extent of the board's role in the risk oversight of compensation policies and practices;
  • any practices used to identify and mitigate compensation policies and practices that could potentially encourage a named executive officer or individual at a principal business unit or division to take inappropriate or excessive risks; and
  • the identified risks arising from the policies and practices that are reasonably likely to have a material adverse effect on the company.
  • The commentary to the Compensation Form lists examples of situations that could potentially encourage the taking of inappropriate or excessive risks, including:
  • policies at a unit or subsidiary of the company or for certain executive officers that are structured significantly differently from others within the company;
  • policies that do not include effective risk management and regulatory compliance as part of the performance metrics;
  • policies where the compensation expense to executive officers is a significant percentage of the company's revenue;
  • policies that vary significantly from the overall compensation structure of the company;
  • policies where incentive plan awards are awarded on the accomplishment of a task, while the risk to the company from that task extends over a significantly longer period of time;
  • policies that contain performance goals or similar conditions that are heavily weighted to short-term rather than long-term objectives; and
  • incentive plan awards that do not provide a maximum benefit or payout limit to executive officers.
  • Companies are required to disclose whether any named executive officer or director is permitted to purchase financial instruments that are designed to hedge or offset a decrease in the market value of equity securities granted as compensation or held, directly or indirectly, by the named executive officer or director.
  • The requirements to disclose information about compensation advisors retained by a company, including a description of the advisor's mandate and other work performed for the company, have been expanded to include a requirement to disclose a breakdown of all fees paid to compensation advisors for each service provided. The disclosure requirements relating to compensation governance in National Instrument 58-101 Corporate Governance Disclosure are now included in new section 2.4 of the Compensation Form, requiring disclosure in the CD&A of the process by which the board determines compensation for the company's directors and officers. Consequential amendments to Form 58-101F1 and 58-101F2 clarify that companies may satisfy the disclosure requirements regarding compensation practices by incorporating the CD&A disclosure by reference.
  • Additional disclosure requirements include disclosure of whether each member of the compensation committee is independent, and a description of the skills and experience of each member that enable the committee to make decisions on the suitability of the company's compensation policies and practices.
  • The commentary now lists disclosure of whether the company will be making any significant changes to its compensation policies and practices in the next financial year as an example of an item that may be a significant element of compensation disclosure.

Summary Compensation Table

  • The Compensation Form has been amended to clarify that the presentation of the Summary Compensation Table must not be altered by adding columns or other information. Companies may choose to add another table and other information, but the additional information must not detract from the Summary Compensation Table as prescribed.
  • Companies are required to disclose the methodology used to calculate grant date fair value of all equity-based awards, including key assumptions and estimates used for each calculation and must explain why the company chose that methodology, regardless of whether there are any differences with the accounting fair value.

Incentive Plan Awards

  • If a company has granted options in a different currency from that reported in the incentive plan awards table, the company must include a footnote describing the currency and the exercise or base price.
  • A new column has been added to the table for share-based awards requiring disclosure of the aggregate market value or payout value of vested share-based awards that have not yet been paid out or distributed.

Pension Plan Benefits

  • For purposes of calculating the annual lifetime benefit payable at the end of the most recently completed financial year for defined benefits plans, the company must now assume that the named executive officer is eligible to receive payments or benefits at year end. Companies may calculate the annual lifetime benefit payable in accordance with the formula included as commentary in the Compensation Form, or in accordance with another formula if the company reasonably believes that the other formula produces a more meaningful calculation of the annual lifetime benefit payable at year end.
  • The requirement to disclose in the defined contribution plans table non-compensatory amounts, including employee contributions and regular investment earnings on employer and employee contributions, for defined contribution plans has now been removed. Any company contribution made on behalf of the named executive officer to a personal savings plan such as an RRSP should be reported in the Summary Compensation Table, under the "all other compensation" column.


  • Where an external management company provides services to the company as well as another company, disclosure of the entire compensation the external management company paid to a named executive officer or a director for services provided to the company, the parent or a subsidiary of the company must be disclosed.
  • Disclosure under the Compensation Form must now be presented in plain language to provide a reasonable person an understanding of how decisions about compensation for named executive officers and directors are made, and how specific named executive officer and director compensation relates to the overall stewardship and governance of the company.

Common Executive Compensation Disclosure Deficiencies

The AMF Report noted that there continue to be common deficiencies in the required disclosure, including:

  • boilerplate analysis;
  • not disclosing performance goals;
  • not clearly disclosing discretionary annual bonuses;
  • not using grant date fair value for options in the summary compensation table;
  • not providing complete disclosure of assumptions used to calculate fair value;
  • omitting share-based or option-based compensation for directors; and
  • not disclosing other compensation that is not specifically required under the form.


Transition to IFRS

The Alberta Report outlines staff's expectations for the first annual IFRS filings.

Equal Prominence of all Financial Statements

IFRS 1 requires the presentation of an opening statement of financial position as part of the financial statements. This statement must be presented as a primary financial statement and not as part of the notes to the annual financial statements.

Accounting Policy Disclosure

Several issuers included boilerplate accounting policy disclosure in connection with their first interim IFRS statements. Complete, clear and entity-specific accounting policy disclosure is expected for the annual statements.


IFRS 1 requires reconciliations for the transition to IFRS. Staff expect these reconciliations to use the figures reported under Canadian GAAP as the starting point and to distinguish the correction of any errors from changes in accounting policies. Quantitative and qualitative disclosure is expected in the explanatory notes. The impact of each adjustment should be shown separately, not just on an aggregate basis.

Disclosure of Judgments and Estimation Uncertainty

IAS 1 requires the disclosure of judgments made in applying the issuer's accounting policies, such as the determination of control or significant influence. This requirement is in addition to the disclosure regarding assumptions made about the future and other sources of estimation uncertainty.

Common Financial Statement Deficiencies

The Reports identify several areas of common deficiencies in the financial statements, including the following:


  • Issuers generally comply with the measurement requirements but frequently do not provide all of the required disclosure. For example, if a write-down of inventories is reversed, the circumstances or events that led to the reversal must be disclosed.♦♣
  • The amount of inventories or a write-down of inventories, recognized as an expense must be disclosed.♣

Related Party Transactions

Issuers tend to be too generic in their disclosure of related party transactions. Details such as the specific nature of the transaction and the relationship with the related party are required. In addition, staff note that issuers may be required to revisit their related party disclosure under IFRS since the definition of related party is broader under IFRS than under old Canadian GAAP and disclosure regarding executive compensation arrangements is required.♦

Decommissioning and Restoration Provision

  • Issuers conducting activities that would give rise to decommissioning and restoration liabilities are generally required to recognise a provision under IAS 37.♠
  • In the rare circumstances where such a provision is not required, staff expect the issuer to disclose the liability as a contingent liability.♠
  • ASC staff also noted insufficient disclosure regarding the estimates and assumptions used in measuring these provisions.♠


  • Issuers are expected to clearly disclose events and circumstances that led to the recognition of impairment losses.♠

Financial Instruments

  • Obligations to issue shares for a price that is not fixed in the issuer's functional currency is generally classified as a derivative liability and measured at fair value, with changes recognised in the statement of net income and comprehensive income in accordance with IAS 39.♠
  • Issuers commonly provide incomplete disclosure of the categories of their financial instruments. The methods and assumptions used to determine the fair value of each category of financial asset or financial liability should be disclosed.♠♣
  • Risk disclosure should be complete and sufficiently entity-specific to enable the evaluation of the nature and extent of the risks arising from financial instruments.♠
  • A sensitivity analysis for each type of market risk related to financial instruments, including the methods and assumptions, should be disclosed.♠♣

Asset vs. Business Acquisitions

  • IFRS 3 may capture a wider range of transactions in the scope of business combination than was the case under Canadian GAAP. Inappropriately accounting or a business combination as an asset acquisition may impact the measurement of the acquisition.♠

Functional Currency

  • Each entity within a group is required to determine its functional currency in accordance with IAS 21.♠
  • Disclosure required by IAS 21 must be provided, including the reason for using a different presentation currency and the judgments made to determine the most reasonable functional currency.♠

Additional / Non-GAAP Measures

  • Issuers should not include non-GAAP measures in their financial statements.♠
  • It is not appropriate to include untitled subtotals in the financial statements and refer to such subtotals, with a name, in the MD&A.♠

Stock Based Compensation and Other Stock Based Payments

  • Complete descriptions of plans and vesting requirements should be disclosed.♣
  • The number and weighted average exercise prices of options should be disclosed.♣
  • The weighted average grant-date fair value of options granted should be disclosed.♣

Segment Disclosures

  • Information regarding geographic areas should be provided.♣
  • Information about major customers should be provided and not aggregated.♣

Revenue Recognition

  • A complete description of the revenue recognition policy should be provided.♣
  • The method for attributing revenue from each product or service should be disclosed.♣


Form of Certificate

The form of certificates required for an issuer's filings under IFRS are different from those filed under old Canadian GAAP. Issuers should ensure that the appropriate form of certificate is used.

Common Certification Deficiencies

  • Issuers must not amend the wording of the form of certificates under NI 52-109.♦♣
  • Issuers must include the correct dates of the financial periods covered by certificates.♣


There are no changes of substance to the MD&A form from last year; however, the form has been updated to use IFRS terminology.

Common MD&A Deficiencies

The Reports provide guidance on the following common MD&A deficiencies:

Changes in Accounting Policies

  • Complete disclosure about milestones and timelines associated with the key elements of the transition to IFRS should be disclosed for those issuers that have not completed the transition.♣
  • Significant differences between Canadian GAAP and IFRS must be disclosed.♣

Discussion of Operations

  • Complete analysis of operations, with a balanced comparison to the prior financial year that quantifies all material variances, is expected.♦♣
  • Discussion of immaterial information should be avoided.♦
  • Meaningful analysis of gross profit should be disclosed.♣
  • Analysis of significant projects that have not yet generated revenue should be provided.♣

Fourth Quarter and Quarterly Discussion

  • Issuers must discuss and analyse items that had a material impact on the fourth quarter as well as the year as a whole.♦
  • If a separate MD&A is provided for the fourth quarter, it must be properly referred to in the annual MD&A.♦


  • Any known or expected fluctuations and trends in liquidity should be discussed with a complete analysis.♦♣
  • The discussion of liquidity fluctuations is particularly important for issuers with negative cash flows or that have breached their debt covenants.♦

Related Party Transactions

  • The business purpose of the transaction and the identity of the related parties must be disclosed.♣

Non-GAAP Financial Measures

  • An explanation of why the non-GAAP financial measure is meaningful to investors and any additional purpose for which management uses the non-GAAP financial measure should be provided.♦
  • Additional GAAP measures must be both relevant and appropriate. Exclusions and adjustments for specific items that affect comparability of such measures should be considered in assessing relevance and appropriateness.♠
  • Disclosure expectations regarding non-GAAP measures outside the financial statements have not changed as a result of the broader range of GAAP measures available under IFRS.♠
  • Non-GAAP financial measures, such as "free cash flow", must be identified as such and presented with the most directly comparable GAAP measure.♣
  • A clear quantitative reconciliation to the most directly comparable GAAP measure must be presented.♦

Forward Looking Information

  • Boilerplate disclosure should be avoided.♦♠
  • The risk factors and material factors and assumptions used to develop forward looking information must be disclosed.♦♠
  • Forward looking information must be based on the GAAP the issuer expects to use for the period covered by the information.♦

Venture Issuer Disclosure

  • Venture issuers without significant revenue must provide a breakdown of material components of capitalized or expensed expenditures.♦♠
  • For mining issuers, the analysis must be presented on a property-by-property basis.♦♠

Environmental Disclosures

  • Issuers should disclose environmental risks in a meaningful way and avoid boilerplate disclosures.♠
  • Issuers should integrate the role of committees related to environmental matters with the financial reporting function.♠
  • Venture issuers that do not file an AIF must disclose environmental risks in their MD&A.♠

Certification Disclosure

  • Issuers must fully disclose, the certifying officers' conclusions about the effectiveness of internal control over financial reporting (ICFR) or disclosure controls and procedures (DC&P) in their MD&A without qualifications.♦♣
  • Venture issuers that filed basic certificates who voluntarily discussed ICFR or DC&P in their MD&A, must include the cautionary language discussed in section 15.3 of Companion Policy NI 52-109CP.♦♣


There are no changes of substance to the Annual Information Form from last year; however, the form has been updated to use IFRS terminology.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.