This newsletter provides a summary of the findings included in OSC Staff Notice 51-716 Environmental Reporting.
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Summary | The Staff notice outlines the results of a targeted review of compliance with requirements for reporting issuers to disclose information about environmental matters in their continuous disclosure documents.
A full copy of the Notice can be found on the OSC website:
Staff Notice 51-716 Environmental Reporting
The sections below summarize the views expressed by the OSC Staff as a result of their findings. |
| Environmental Liabilities - Estimates Reflected in Financial Statements | An issuer should quantify the accounting estimate where quantitative information is reasonably available and would provide material information to investors. The issuer should also identify and explain that the estimate was highly uncertain at the time it was made and provide a detailed discussion of the estimate, which may include a sensitivity analysis or disclosure of the upper and lower ends of the range of estimates from which the recorded estimate was selected.
Boilerplate disclosure is considered insufficient because it does not specify how the estimate relates to that issuer, and does not provide meaningful insight to investors. |
| Potential Environmental Liabilities not Reflected in Financial Statements | Many issuers only discussed potential environmental liabilities in their MD&A if they had included these potential liabilities in their financial statements. In certain circumstances potential liabilities may not be reflected in the financial statements because their long-term or contingent nature can make them difficult to quantify.
A discussion of material contingent environmental liabilities should be included in an issuer's MD&A and/or AIF whether or not the liability has been accrued in the financial statements or disclosed in the notes to the financial statements. |
| Asset Retirement Obligations (ARO) | If an ARO is material to the issuer, in addition to providing the required financial statement disclosures, the issuer should strive to enhance a reader's understanding by providing supplemental disclosure in the MD&A. The MD&A should include a comprehensive discussion of material commitments, events or uncertainties, including AROs, that are reasonably likely to have an effect on the issuer's business.
Issuers should also evaluate whether AROs are material long-term obligations. If so, issuers should include these in the summary of contractual obligations table in their MD&A. |
| Financial and Operational Effects of Environmental Protection Requirements | When available, the Annual Information Form (AIF) should include quantification of costs associated with environmental protection requirements, and the impact or potential impact of these costs on financial and operational results. Boilerplate disclosure is considered insufficient. |
| Environmental Policies Fundamental to Operations | When discussing environmental policies fundamental to operations within the AIF, issuers should evaluate and describe the impact or potential impact these policies may have on their operations. This discussion may include a quantification of the costs associated with these environmental policies, where quantitative information is reasonably available and would provide meaningful information to investors. Boilerplate disclosure is insufficient. |
| Environmental Risks | If any risks relating to environmental laws are material to an issuer's operations, whether national or international, the issuer should include a detailed discussion of these laws in their continuous disclosure documents. This discussion should provide meaningful information to investors. For example, it may include whether or not the issuer is in compliance with these laws and any costs of compliance. Boilerplate disclosure is insufficient. |
| Certification and Audit Committee Responsibilities | Meaningful discussion of material environmental matters is important to achieve fair presentation of the issuer's financial condition in all material respects. Certifying officers should consider this when preparing certifications under MI 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings.
An audit committee must be satisfied that adequate procedures are in place for the review of an issuer's public disclosure of financial information. The audit committee's oversight of financial reporting related to material environmental matters is an important aspect of meeting these responsibilities. |
