I had the pleasure recently of attending McCarthy Tétrault’s 8th annual disclosure and governance seminar. (See documents and presentations from last year’s seminar here.) It was a pleasure to look out on Toronto from the 53rd floor of the TD Centre, and I enjoyed a lovely lunch. Listening to lawyers talk for hours, on the other hand, in a jargon that sometimes sounds like another language, well…
When I entered Mies van der Rohe’s monolithic modern masterpiece, I expected to be guided on an exhilarating ride through the thrill-a-minute world of lawyering—I mean, governance disclosure sure sounds intriguing, and the TD towers are pretty sexy—but I’ve got to say: it’s time to reassess my confidence in the way movies depict reality.
But seriously, the more I learn about law, the more I sympathize with small and medium-sized businesses. Organizations bear heavy legal obligations, as well as the expenses of counsel and compliance.
This year’s seminar offered a look at governance disclosure issues of 2010, proxy advisory firms, new proxy access rules and shareholder engagement, disclosure of environmental issues, and a review of current disclosure topics. I’ll be discussing these topics over the coming weeks and months. But since it won’t be 2010 for much longer, I’ll point out some recent governance disclosure issues now.
The presenters outlined two Canadian Securities Administrators (CSA) reviews, the IFRS Transition Disclosure Review (CSA staff notice 52-326) and the Certification Compliance Update (CSA staff notice 52-327).
According to the documents:
- 95 percent of issuers reviewed disclosed their IFRS changeover plan—a significant improvement over the prior year.
- 60 percent of issuers described milestones and anticipated timelines associated with each of the key elements of their IFRS changeover plan. The CSA recommends issuers focus on enhancing disclosure in this area so that investors can readily assess whether the project is progressing in accordance with the IFRS changeover plan.
- 82 percent of issuers identified significant accounting policy differences between Canadian GAAP and IFRS.
- 80 percent of issuers provided an update of IFRS transition information from disclosure made in their 2008 annual management’s discussion and analysis (MD&A) and 2009 interim MD&A. This improvement over the prior year suggests that issuers are generally providing investors with timely information, reflecting the issuer’s IFRS transition efforts.
- 12 percent of issuers were asked to re-file their 2009 MD&A and certificates due to inconsistencies with the representations contained in the annual certificates or incomplete information.
- 10 percent of issuers were asked to re-file their 2009 certificates because of material amendments to the wording of the certificates and certificate content that was inconsistent with related MD&A disclosure.
As a result of the reviews, the CSA made the following recommendations:
- Issuers should provide an in-depth discussion of all key elements assessed as part of their changeover plan.
- Issuers should improve their discussion of accounting differences to enhance investors’ understanding of the impact on the issuer of adopting IFRS.
- Specifically, disclosure should link accounting differences to various financial statement categories in the balance sheet or the income statement. This would provide a basis for discussing the quantified effects of IFRS conversion in future MD&A filings.
If you qualify as a reporting issuer, you (or whomever you charge with disclosure) might want to take a look at the CSA reviews, and make sure your reporting efforts make the grade.
First Reference Human Resources and Compliance Editor
Finance & Accounting PolicyPro (FAPP) and our other publications exist to reduce expenses associated with legal compliance by offering easy-to-use, plain language guides, manuals and sample policies.
The Finance Volume of FAPP features accounting and reporting, including specific topics from Generally Accepted Accounting Principles and accounting controls to International Financial Reporting Standards and financial disclosure. The governance volume includes chapters on governance and internal controls, among other important topics.