2010-07-26 CSA Continuous Disclosure Review Program 2010 Report

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This Newsletter contains the Canadian Securities Administrators Continuous 2010 report on its Disclosure Review Program.

 

CSA Continuous Disclosure Review Program The Canadian Securities Administrators (CSA) has recently issued its report detailing the findings from continuous disclosure reviews completed during the 12 month period ended March 31, 2010. The report summarizes the CSA’s findings and includes a number of example disclosures and areas of focus in 2011. This Newsletter summarizes the common deficiencies noted by the CSA in their report.
Financial statement deficiencies The CSA identified four areas that continue to be sources of deficiencies in issuers’ financial statements:

Financial Instruments
Inappropriate measurement of financial instruments (e.g., appropriateness of assumptions used given current economic climate) and incomplete disclosure of:
  • Fair value measurement methods and assumptions;
  • Credit and liquidity risks;
  • Aging analysis of past due receivables; and
  • Market risk sensitivity analysis.

Revenue Recognition
Deficient disclosures of accounting policies for revenue recognition that exclude clear and concise explanations of triggers for recognition and bases for revenue from each product or service, including rights of return, credit terms or other conditions.

Goodwill
Deficient disclosures due to incomplete descriptions of the methodology used to conduct goodwill impairment testing.

Capital Disclosures
Deficient disclosures due to absent or incomplete:
  • Summary quantitative data about what the entity manages as capital; and
  • Discussion of whether or not objectives for managing capital have been met.
MDA deficiencies The CSA identified five areas where reporting issuers failed to provide meaningful analysis:

Operations
Lack of meaningful discussion of operating results, financial condition, liquidity and material movements in the income statement.

Liquidity
For issuers with working capital deficiencies, insufficient discussion of whether or not the entity’s financial resources will be sufficient to meet obligations as they come due and whether the entity will be able to cure the deficiency.

Risk
Insufficient discussion of material risks and uncertainties that could cause reported financial information to not be indicative of future operating results or financial position.

Related Parties
Lack of discussion about the business purposes and the quantitative and qualitative aspects of related party transactions.

Critical Accounting Estimates
Lack of discussion about the methodology and assumptions used in determining critical accounting estimates.
2011 areas of focus The report includes an overview of the areas on which the CSA’s issue-oriented reviews will focus in 2011. These include:
  • IFRS transition disclosure;
  • Material contracts;
  • Corporate governance; and
  • Follow-up review of certification.
Full report A copy of the full report can be obtained from the OSC website at http://www.osc.gov.on.ca/documents/en/Securities-Category5/csa_20100709_51-332_cd-review.pdf.

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