Canada: International Financial Reporting Standards Transition Disclosure Review - Ontario Securities Commission Staff Notice 52-718

Last Updated: April 12 2010
Article by Brad A. Freelan and Michael Shour

Originally published February 2009

The Ontario Securities Commission (OSC) has published Staff Notice 52-718 IFRS Transition Disclosure Review (SN 52-718), which sets out the results of its review of the extent and quality of International Financial Reporting Standards (IFRS) transition disclosure that issuers have provided in their 2008 annual and 2009 interim management's discussion and analysis (MD&A). The OSC stated that "[its] findings suggest that reporting issuers are not adequately discussing, in [their] MD&A, the key elements of their IFRS changeover plan or their progress towards achieving this plan." While the OSC did not request that issuers that were the subject of the review re-file their MD&A to improve the quality of their historical IFRS transition disclosure, SN 52-718 provided guidance regarding IFRS-related disclosure for upcoming MD&A filings.

Insufficient Disclosure

The OSC review revealed that 40% of the issuers that were reviewed did not provide any IFRS transition disclosure in either their 2008 annual or 2009 interim MD&A. Of the remaining 60% of the issuers that discussed an IFRS changeover plan, the OSC reported that only half of such issuers provided any disclosure beyond a generic or boilerplate reference to the transition.1 Further, only half of the issuers that discussed IFRS transition in their 2008 annual MD&A provided investors with quarterly progress updates in their 2009 interim MD&A documents. The OSC emphasized that, in its view, the fact that an issuer does not provide updated information on the status of its IFRS changeover plan in its interim MD&A, suggests that the issuer has not made any progress in relation to its changeover plan.

Previous Guidance

Guidance on IFRS transition disclosure was previously provided to issuers on May 9, 2008, in CSA Staff Notice 52-320 Disclosure of Expected Changes in Accounting Policies Relating to Changeover to International Financial Reporting Standards (SN 52-320). In their 2008 annual MD&A, issuers were expected to have already discussed the status of the key elements and timing of their IFRS changeover plans. To allow investors to readily assess progress of transition plans, issuers were expected to have provided updates in their 2009 interim MD&A against previously disclosed timelines.

The OSC expects that, in their 2009 annual MD&A, issuers will provide progress updates on their IFRS transition plans, along with a description of major identified accounting differences between the issuer's current accounting policies and those the issuer expects to apply when preparing its IFRS financial statements. In 2010, the OSC expects issuers to provide significant details of their changeover plans and information about key decisions on policy choices under IFRS 1 First-time Adoption of International Financial Reporting Standards.

As a general rule, and as set out in SN 52-320, the OSC views IFRS conversion as something far broader than an accounting exercise. SN 52-320 advises issuers to consider how the transition to IFRS will affect all business functions that rely on financial information and to effectively disclose such impact to investors.

Increased OSC Scrutiny Going Forward

In reporting the results of its review, the OSC emphasized that disclosure of an issuer's preparation for the IFRS changeover is important in order to enable investors to evaluate (i) the readiness of an issuer's transition plan, and (ii) the impact of IFRS on its business activities and financial reporting. As the OSC's focus in the review was raising issuer awareness and prospective improvement, it did not require any issuers to re-file their MD&A to improve historical IFRS transition disclosure. Going forward, however, the OSC noted that it will conduct reviews of selected 2009 and 2010 annual and interim MD&A filings and will also follow up on the commitments made by issuers during such review to improve future MD&A disclosure. The OSC advised issuers to anticipate staff requests for re-filings of MD&A in the future if an issuer has not met its disclosure obligations. As well, the OSC warned, staff may consider other regulatory action as circumstances warrant.


1.  The OSC provided an example of such insufficient boilerplate disclosure: "Accounting standards in Canada are to converge with International Financial Reporting Standards (IFRS). The Company is required to begin reporting under IFRS by the first quarter of 2011 with comparative data also reported under IFRS. The Company is assessing the impact on accounting policies, data systems, internal controls over financial reporting, and business activities, such as financing and compensation arrangements during the period leading up to the transition date."

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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