Canada: OSC Provides Guidance To Improve Forward-Looking Information Disclosure

Following a review to assess the overall quality of forward-looking information ("FLI") of 60 Ontario reporting issuers, the Ontario Securities Commission ("OSC") released Staff Notice 51-721 Forward-Looking Information Disclosure on June 13, 2013 (the "Staff Notice"). The Staff Notice clarifies the disclosure requirements related to FLI, provides disclosure examples and highlights common areas of non-compliance.

The OSC's review noted four common areas where improvement of FLI disclosure is required:

a. identifying FLI clearly;

b. disclosing the material factors or assumptions used to develop FLI;

c. updating previously disclosed FLI; and

d. comparing actual results to future oriented financial information ("FOFI") or financial outlook previously disclosed.

Forward-looking Information

FLI is disclosure about possible events, conditions or financial performance that is based on assumptions about future economic conditions and courses of action. FLI includes both FOFI and financial outlook. The Staff Notice breaks down the disclosure requirements related to FLI into two main parts: (a) requirements relating to the initial disclosure of FLI; and (b) requirements relating to the ongoing obligations to update, compare to actual results and, if appropriate, withdraw previously disclosed FLI.

Clear Identification of FLI

Section 4A.3 of NI 51-102 requires reporting issuers to clearly identify material FLI. The Staff Notice stresses that generic or boilerplate disclosure that identifies FLI by words such as "believes", "may", "likely", "plans", or similar words, are frequent examples of non-compliant disclosure.

The OSC indicates that disclosure of FLI should be entity-specific. The Staff Notice suggests that specific sections of the MD&A which contain FLI be identified in the disclosure.

The Staff Notice also advises that specific events, activities or developments the company anticipates may occur in the future be clearly identified in the disclosure. An example of entity-specific disclosure is, "This MD&A includes, but is not limited to, forward-looking statements regarding: the ability to meet its working capital needs for the twelve-month period ending December 31, 2013...". Here, the FLI is clearly identified so the information is understood not to be historical.

Disclosure of Material Facts or Assumptions used to Develop FLI

According to the Staff Notice, specific relevant factors or assumptions including material risk factors underlying the FLI should be disclosed. These underlying assumptions should be carefully analyzed, and they should be reasonable, supportable, entity specific and tied to FLI. Assumptions should also be quantified.

The Staff Notice notes that blanket statements such as, "In fiscal 2013, the Company anticipates meeting the following target: Total sales to increase by 5.0% to 6.0%", is a common example of non-compliant disclosure.

The Staff Notice suggests including a description of key specific risk factors and assumptions that the expectation is based upon. A suggested improvement to the above target is, "In fiscal 2013, the Company anticipates meeting the following target: Total sales to increase by 5.0% to 6.0%. This expectation is based on same-store sales growth of between 3% and 4% and the introduction of new brands to our city centre store".

The Staff Notice also suggests using a table format to clearly identify FLI statements and disclose relevant and specific material risk factors and assumptions. For example, the table can include the FLI statement, assumptions and risk factors, each in separate columns for easy identification.

Updating Previously Disclosed FLI

Section 5.8 NI 51-102 requires reporting issuers to discuss in the company's MD&A or in a press release events and circumstances that are reasonably likely to cause actual results to differ materially from previously disclosed FLI. Reporting issuers must also disclose expected differences from targets. Events can include economic and market events that may cause actual results to differ materially from previous targets. Issuers should also include a quantified discussion.

The Staff Notice cautions against updating previously disclosed FLI without also disclosing events or circumstances that occurred during the period and how that impacted the target. For example, instead of providing a boilerplate update such as, "Gold production target for 2013 has been increased to 70,000 to 80,000 gold ounces", the reporting issuer should include a discussion of the event that occurred and the impact it had on the original target. Updated risks and assumptions should also be included.

The Staff Notice notes that tables can be an effective strategy to clearly communicate FLI and update the information.

Comparison of Actual Results vs. FOFI and Financial Outlook in MD&A

Subsection 5.8(4) of NI 51-102 requires reporting issuers to provide a comparison of actual results to previously disclosed FOFI and financial outlook if actual amounts differ materially. The discussion should be comprehensive, entity-specific and include both qualitative and quantitative explanations of the material differences.

For instance, instead of simply providing the results such as, "ABC Company achieved sales growth of 10.5% in 2012", the disclosure should provide a comprehensive discussion comparing actual results to those previously disclosed.

Practice Points

The Staff Notice provides the following practice points to assist in promoting clear, transparent disclosure for FLI:

a. Quality of assumptions: Assumptions should be reasonable and specific to the reporting issuer. Qualitative and quantitative assumptions should be provided;

b. Timely updating of ongoing progress: Affirmation of targets, disclosure of affected material differences, and updates on trends likely to impact future performance should be updated on a timely basis;

c. Key Performance Indicators ("KPIs") - financial and non-financial: KPIs should be disclosed, as they can help investors understand how well an issuer is progressing towards their objectives. Examples of KPIs include: customer retention, capital expenditures, same store sales, and exploration success rate;

d. Separate Presentation: A separate section of FLI, set out in a table that identifies objectives, key specific assumptions and risks will enable investors to easily identify the information that constitutes material FLI, as well as clarify the relationship between the underlying key components and the FLI; and,

e. Role of the Audit Committee and Board of Directors: The audit committee and board of directors should consider reviewing and approving all FLI disclosure before it is publicly disclosed

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 Mondaq.com.

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

Authors
Alyssa Gebert
Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions