2009-05-25 Issues Related To Changeover to International Financial Reporting Standards

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This newsletter announces guidance from Canadian Securities Administrators on issues related to the changeover to IFRS.

CSA Staff Notice on changeover to IFRS The Canadian Securities Administrators (“the CSA”) have released Staff Notice 52-324, Issues relating to changeover to International Financial Reporting Standards (“IFRS”). The Notice updates the CSA’s position on the following issues:
  • Early adoption of IFRS
  • Requirements for interim financial statements in the year of IFRS adoption
  • Reference to IFRS and Canadian GAAP in interim and annual financial statements and audit reports
  • Relief from using the same set of accounting principles for all periods; and
  • Meeting filing deadlines in 2011
Early adoption of IFRS Consistent with the CSA’s earlier position, if a domestic issuer wants to adopt IFRS before it becomes mandatory under Canadian GAAP (financial years starting on or after January 1, 2011), the issuer must apply for exemptive relief from its home commission. CSA staff are prepared to recommend relief on a case by case basis. If an issuer proposes to apply IFRS in a year in which it has already filed interim financial statements, the issuer will have to file revised interim financial statements, interim MDA and new interim certificates. Interim financial statements CSA staff are proposing that:
  • An issuer must disclose in its interim financial statements that the statements are in compliance with IAS 34, Interim Financial Statements; and
  • A domestic issuer must include in its first interim IFRS financial statements, an IFRS balance sheet prepared as at the issuer’s “transition date” (e.g. January 1, 2010 for a calendar year issuer that adopts IFRS in 2011)
The transition date balance sheet would be subject to existing requirements relating to auditor review of interim financial statements. For example, if an auditor hasn’t performed an interim review, there must be a notice accompanying the interim financial statements stating that fact. IFRS and Canadian GAAP references Previously, the CSA staff preference was for IFRS financial statements and audit reports to refer to IFRS as issued by the IASB. CSA staff now are proposing to allow two options for referring to accounting principles in the notes to a domestic issuer’s IFRS financial statements and accompanying audit reports:
  • Reference only to IFRS
  • Reference to both IFRS and Canadian GAAP
Relief from using the same accounting principles CSA staff are proposing to provide relief from requiring financial statements to be prepared using the same accounting principles for all periods presented in the financial statements. If the periods straddle a domestic issuer’s adoption of IFRS, the proposed relief would allow the issuer to present financial information in certain offering and continuous disclosure documents in accordance with Canadian GAAP alongside financial information prepared in accordance with IFRS. Meeting filing deadlines CSA staff are exploring ways to assist issuers with the challenge of meeting filing deadlines for their first interim financial statements in 2011. One alternative under consideration is extending the filing deadline for these statements. Next steps Details of the proposals discussed in the Notice are expected to be published for comment later this year. CSA Staff Notice 52-324

A copy of CSA Staff Notice 52-324 can be obtained from the OSC website.