IFRS transition disclosure review published
On February 5, the Ontario Securities Commission published OSC Staff Notice 52-718 IFRS Transition Disclosure Review (the Notice), which summarizes the results of a review conducted by the OSC of the "extent and quality of International Financial Reporting Standards (IFRS) transition disclosures made by issuers" in light of guidance previously provided by the CSA. The review focused on IFRS transition disclosure provided in 2008 annual, and 2009 interim, MD&A. Staff of the OSC provide additional guidance under the Notice regarding expectations for future MD&A filings.
In summarizing the results of the OSC's review, the Notice states that 40% of reporting issuers reviewed did not provide IFRS transition disclosure. Of the 60% of issuers that did discuss an IFRS changeover plan in MD&A disclosure, half provided a generic description without direct application to the issuer's own circumstances. Ultimately, the OSC found that "reporting issuers are not adequately discussing, in MD&A, the key elements of their IFRS changeover plan or their progress towards achieving this plan."
In respect of future MD&A filings, the Notice states that staff expect issuers to provide more detailed information about the expected effects of IFRS as the changeover date approaches. Specifically, an issuer's 2009 annual MD&A disclosures should provide a progress update on their conversion plan, along with a description of the major identified accounting differences between the issuer's current accounting policies and those the issuer expects to apply when preparing its IFRS financial statements. In 2010, OSC staff expect issuers to provide significant details of their changeover plans and information about key decisions on policy choices under IFRS 1 First-time Adoption of International Financial Reporting Standards. Further, if an issuer has quantified information about the impact of IFRS on key financial statement line items when it prepares MD&A in 2010, the issuer should include this information in its MD&A.
Citing the importance that investors be properly informed during the transition to IFRS, OSC staff state that they will conduct reviews of selected 2009 and 2010 annual and interim MD&A filings and follow up on commitments made by issuers to improve future disclosure. According to the Notice, OSC staff may also consider other regulatory action as circumstances warrant.
