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"I feel like a fugitive from the law of
averages." – William H. Mauldin
In June, the Canadian Securities Administrators issued their
annual report on the results of their continuous disclosure review
program for their year ended March 31, 2012. Not only does it
provide the CSA's views on Canada's crossover to IFRS last
year, it also assesses the quality of the country's ongoing
IFRS accounting, Mangement Discussion and Analysis and other
reporting such as executive compensation details. The report thus
isn't merely a memorial to a transition exercise that no one
cares about anymore, but rather one that is actually relevant to
your future reporting. Here are the principal findings:
Canada's transition to IFRS. "Generally positive"
(though about five percent of issuers were required to restate
financial statements).
Financial statement presentation. Debt too often is being shown
as longterm when it's current, at least under IFRS.
Accounting policies. Too much boilerplate and vague disclosure.
Also, a failure to disclose all policies that are relevant to
understanding the financial statements (e.g., companies that issue
flow through shares not disclosing their accounting for these
arrangements).
Business combinations. Frequent failure to make all
IFRS-required disclosures.
MDA. Often insufficient and less than incisive analysis (e.g.,
for revenue, not quantifying volume and price changes and their
reasons, including the impact of competition; for liquidity not
being sufficiently forthcoming about commitments, events or
uncertainties – remember, the MDA is supposed to
complement the financial statements, not just duplicate them).
Companies in specialized industries, the high-tech sector for
example, beware! The CSA has fingered reporting in these industries
as being especially problematic.
Other areas. Spotty compliance with statutory disclosure
requirements for mining projects and oil and gas activities, the
statement of executive compensation, and corporate governance
practices.
The report's overarching observation is that companies
should be focusing on providing "entity specific"
disclosures, in both their financial statements and the MDA. For
this year's reviews, impairment, business combinations and
judgments and estimation uncertainty disclosures are particular
priorities.
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.
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