"I feel like a fugitive from the law of averages." – William H. Mauldin

In June, the Canadian Securities Administrators issued their annual report on the results of their continuous disclosure review program for their year ended March 31, 2012. Not only does it provide the CSA's views on Canada's crossover to IFRS last year, it also assesses the quality of the country's ongoing IFRS accounting, Mangement Discussion and Analysis and other reporting such as executive compensation details. The report thus isn't merely a memorial to a transition exercise that no one cares about anymore, but rather one that is actually relevant to your future reporting. Here are the principal findings:

  • Canada's transition to IFRS. "Generally positive" (though about five percent of issuers were required to restate financial statements).
  • Financial statement presentation. Debt too often is being shown as longterm when it's current, at least under IFRS.
  • Accounting policies. Too much boilerplate and vague disclosure. Also, a failure to disclose all policies that are relevant to understanding the financial statements (e.g., companies that issue flow through shares not disclosing their accounting for these arrangements).
  • Business combinations. Frequent failure to make all IFRS-required disclosures.
  • MDA. Often insufficient and less than incisive analysis (e.g., for revenue, not quantifying volume and price changes and their reasons, including the impact of competition; for liquidity not being sufficiently forthcoming about commitments, events or uncertainties – remember, the MDA is supposed to complement the financial statements, not just duplicate them). Companies in specialized industries, the high-tech sector for example, beware! The CSA has fingered reporting in these industries as being especially problematic.
  • Other areas. Spotty compliance with statutory disclosure requirements for mining projects and oil and gas activities, the statement of executive compensation, and corporate governance practices.

The report's overarching observation is that companies should be focusing on providing "entity specific" disclosures, in both their financial statements and the MDA. For this year's reviews, impairment, business combinations and judgments and estimation uncertainty disclosures are particular priorities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.