The Canadian Securities Administrators (CSA) have released the results of their continuous disclosure review program of public companies for the 2009 fiscal year. Under Canadian securities law, public companies (reporting issuers) must provide timely continuous disclosure about their businesses and affairs. The continuous disclosure review program was established in 2004 with the goal of improving the completeness, quality and timeliness of continuous disclosure by Canadian public companies.

Using a risk-based approach to select companies for review, 1,094 of the approximately 4,300 Canadian reporting issuers were selected for either a full review or an issue-oriented review in fiscal 2009. This represented a 28% increase from the number of reviews conducted in fiscal 2008, reflecting the CSA’s increased focus on continuous disclosure reviews in response to current market conditions.

Full Review – Common Deficiencies

CSA staff noted that generally, the deficiencies found in full reviews were either in an issuer’s MD&A or financial statements. Common deficiencies included:


  • repeating information from financial statements without providing sufficient analysis;
  • inadequate disclosure of liquidity and capital resources;
  • no or insufficient discussion about the risks and uncertainties expected to affect the issuer’s future performance given the current economic conditions;
  • insufficient discussion of critical accounting estimates and lack of disclosure of assumptions underlying the accounting estimates;
  • lack of quantitative analysis in the results of operations’ discussion;
  • no or limited disclosure of the adoption of new accounting policies;
  • inadequate related party disclosure; and
  • non-compliant disclosure of non-GAAP financial measures.

Financial Statements

  • failing to appropriately measure financial instruments in accordance with accounting standards (e.g. fair value);
  • failing to disclose the credit, liquidity and market risks associated with financial instruments;
  • lack of meaningful disclosure of issuer’s capital and how it is managed;
  • inadequate revenue recognition;
  • lack of compliance with required stock-based compensation disclosure;
  • non-compliance with segments disclosure, including failing to disclose the revenue allocation method and aggregating or omitting information about major customers; and
  • failing to properly identify and account for variable interest entities.

Issue-Oriented Reviews

In fiscal 2009, issue-oriented reviews were conducted and deficiencies noted in areas including disclosure with respect to the current market turmoil and credit crisis, asset-backed commercial paper (ABCP), defined benefit pension plans, forward-looking information and mining and oil and gas technical disclosure.


The CSA works with issuers to ensure that issues identified during the review are resolved in a timely and appropriate manner. Following the review of an issuer, the CSA (i) informs the issuer that it does not need to make any changes in its next filing; (ii) instructs the issuer to make certain changes in its next filing; (iii) alerts the issuer, based on its particular risk profile, to certain disclosure enhancements that should be considered in its next filing; (iv) instructs the issuer to amend or refile certain continuous disclosure documents; or (v) adds the issuer to a default list, issues a cease trade order or refers the issuer to the enforcement branch.

Looking Forward – Fiscal 2010

The CSA has indicated that topics which may receive greater attention for fiscal 2010 include:

  • valuation of goodwill, intangibles and asset impairments;
  • going concern issues; <
  • disclosure relating to executive compensation;
  • disclosure of IFRS changeover plans in the MD&A;
  • disclosure and valuation of restructured ABCP notes;
  • material contract requirements; and
  • certification of disclosure in issuers’ annual and interim filings.

Issuers should be mindful of the continuous disclosure deficiencies noted by the CSA and alert to those areas which will attract greater scrutiny in the future.