On October 1, 2010 the Canadian Securities Administrators (CSA) finalized amendments to National Instrument 31-103 Registration Requirements and Exemptions, along with National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards. This package of IFRS-related rules [available here] will come into effect on January 1, 2011 and, among other things, will impact Canadian registrants.
For financial years beginning on or after January 1, 2011, IFRS will be incorporated into the Handbook of the Canadian Institute of Chartered Accountants (the CICA Handbook) as Canadian Generally Accepted Accounting Principles for publicly accountable entities.
Canadian registrants will be required to file their audited annual financial statements with the applicable CSA members in accordance with IFRS, but on a non-consolidated basis. Registrants will also have to disclose that the financial statements comply with IFRS except that they have been prepared on a non-consolidated basis.
As a transition exemption, annual and interim financial statements of a registrant for a financial year beginning in 2011 that comply with IFRS may exclude comparative information for the preceding year or period. In addition, registrants will have a 15-day extension to the deadline for filing the first interim financial information and completed Form 31-103F1 that are required to be filed in the first year of adopting IFRS for the first interim financial period beginning on or after January 1, 2011.
The amendments also clarify that a registrant’s interim financial information for financial years beginning on or after January 1, 2011 may be limited to the following:
- a statement of comprehensive income for the 3-month period ending on the last day of the interim period and for the same period of the immediately preceding financial year, if any and
- a statement of financial position, signed by at least one director of the registrant, as at the end of the interim period and as at the end of the same interim period of the immediately preceding financial year, if any.
In other words, assuming a December 31 year-end, the registrant would file the following interim financial information:
- January 1 to March 31
- April 1 to June 30 and
- July 1 to September 30.
Financial statements of registrants that are not based in Canada (that is, international registrants) may be prepared in accordance with:
- U.S. Generally Accepted Accounting Principles (U.S. GAAP)
- Accounting principles that meet the disclosure requirements of the applicable foreign authority governing the registrant in its home country or
- Accounting principles that cover substantially the same core subject matter as Canadian GAAP.
However, these financial statements must be prepared and filed on a non-consolidated basis.
With respect to investment funds, on October 8, 2010 the CSA issued Staff Notice 81-320 Update on International Financial Reporting Standards for Investment Funds [available here]. This Notice explains that the Canadian Accounting Standards Board (AcSB) published amendments to the CICA Handbook on October 1, 2010 that provide a one-year deferral of the transition to IFRS for investment companies, the majority of which are “investment funds” for the purposes of securities legislation.
For this reason, the CSA are not at this time finalizing the proposed amendments to National Instrument 81-106 that were published for comment along with the above-noted instruments in October 2009.
Investment funds should expect that they must adopt IFRS for financial years beginning on or after January 1, 2012, although the CSA will permit earlier adoption.
The CSA staff acknowledge that some investment funds may wish to prepare their financial statements in accordance with IFRS for annual periods beginning prior to January 1, 2012. Therefore, an investment fund that wants to use IFRS for interim and annual financial statements relating to annual periods beginning prior to January 1, 2012 must apply for exemptive relief from the current requirement in NI 81-106 to prepare its financial statements in accordance with Canadian Generally Accepted Accounting Principles as applicable to public enterprises. Investment funds filing applications for exemptive relief from NI 81-106 must explain any issues that early adoption may create with respect to their financial disclosure.