The Canadian Securities Administrators yesterday released a staff notice summarizing the results of the CSA's continuous disclosure review program for fiscal 2012. Beyond identifying disclosure deficiencies, the notice also provides guidance intended to assist issuers in addressing common issues.
Of the approximately 4,200 issuers in Canada (other than investment funds), the CSA completed 1,351 full or issue-oriented reviews. Ultimately, 56% of review outcomes required issuers to take action to improve disclosure, which was a decrease from the 70% required to take action in fiscal 2011. The most common outcome involved an issuer being informed of changes or enhancements required in its next filing.
Issue-oriented reviews
Common deficiencies in the CSA's IFRS issue-oriented review included not clearly labeling and identifying the accounting principles used when presenting a mix of financial information in accordance with pre-changeover Canadian GAAP and IFRS in the MD&A. Issuers also commonly neglected to include a statement of changes in equity for the comparative interim periods.
With respect to issuers engaged in oil and gas activities, deficiencies were identified with respect to disclosure of significant factors and uncertainties in Form 51-101F1 and the use of proper terminology set out in the Canadian Oil and Gas Evaluation Handbook.
Full reviews
Meanwhile, with respect to full reviews, the CSA noted a number of deficiencies, including with respect to liability classification under IFRS. On that issue, the notice reminded issuers that liabilities may only be classified as current when the issuer expects to settle the liability in its normal operating cycle, holds the liability primarily for the purpose of trading, or the liability is due to be settled within 12 months after the reporting period or the issuer does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
The CSA also set out a number of compliance issues with respect to the significant new disclosure requirements concerning business acquisitions under IFRS. The CSA specifically noted omissions in information respecting the qualitative description of the factors that make up the goodwill recognized, such as expected synergies from combining operations of the acquiree and the acquirer, intangible assets that do not qualify for separate recognition or other factors.
Executive compensation disclosure was an additional topic of concern. Among other things, the report noted that some issuers did not disclose the full grant date fair value of multi-year share-based awards and option-based awards up front in the summary compensation table.
For fiscal 2013, the CSA stated that they will focus on the first annual IFRS report. Topics that may receive greater attention were also identified, namely judgments and sources of estimation uncertainty disclosure, asset impairments and business combinations. For more information, see CSA Staff Notice 51-337.
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