Canadian Public Company Financial Reporting Update Q4 2016

Transcription

1 Canadian Public Company Financial Reporting Update Q

2 Presenters Armand Capisciolto, CPA, CA CPA (Michigan) Partner BDO Canada Janet Stockton, FCPA, FCA Partner BDO Canada Pamela Campagnoni, CPA, CA CPA (Illinois) Principal CPA Canada 2

3 Agenda The following topics will be addressed in today s session: Regulatory Update Accounting Reminders 3

4 Slide 4 Future of the public company market in Canada

5 REGULATORY UPDATE 5

6 Regulatory Update AGENDA Survey on women on boards and in executive officer positions OSC Financial Reporting Bulletin Whistleblower update 6

7 Regulatory Update DISCLOSURE OF CORPORATE GOVERNANCE PRACTICES CSA Multilateral Staff Notice Staff Review of Women on Boards and in Executive Officer Positions 7

8 Regulatory Update DISCLOSURE OF CORPORATE GOVERNANCE PRACTICES NATIONAL INSTRUMENT Summary of required disclosures Number and percentage of women on the issuer's board of directors and in executive officer positions; Director term limits or other mechanisms of board renewal; Policies relating to the identification and nomination of women directors; Consideration of the representation of women in the director identification and selection process and in executive officer appointments; and Targets for women on boards and in executive officer positions. Explanation if a non-venture issuer has not adopted the above mechanisms, policies, or targets or does not consider the representation of women 8

9 Regulatory Update DISCLOSURE OF CORPORATE GOVERNANCE PRACTICES First survey conducted in 2015 Covered 722 non-venture issuers having year-ends between Dec 31, 2014, and Mar 31, 2015 that released disclosure on corporate governance by July 31, 2015 Follow up survey conducted in 2016 Covered 677 non-venture issuers having year-ends between Dec 31, 2015, and Mar 31, 2016 that released disclosure on corporate governance by July 31,

10 Regulatory Update DISCLOSURE OF CORPORATE GOVERNANCE PRACTICES Women on boards The number of women on boards has increased in all size categories of issuers, with large issuers still leading the way Total board seats occupied by women 11% 12% Issuers with at least one woman on the board 49% 55% Over $10 billion market capitalization 21% 23% From $2-10 billion market capitalization 17% 18% Source: CSA Multilateral Staff Notice

11 Regulatory Update DISCLOSURE OF CORPORATE GOVERNANCE PRACTICES Women in executive positions Source: CSA Multilateral Staff Notice

12 Regulatory Update DISCLOSURE OF CORPORATE GOVERNANCE PRACTICES Director term limits and other board renewal mechanisms 2015 Survey 19% of issuers have director term limits 56% have other mechanisms, usually some form of annual board assessment 23% with no terms or mechanisms < 3% did not disclose 2016 Survey 20% of issuers have director term limits 48% have age limits 23% have tenure limits 29% have both < 3% did not disclose 12

13 Regulatory Update DISCLOSURE OF CORPORATE GOVERNANCE PRACTICES Explanations for why there are no director term limits Issuer regularly assesses board members effectiveness Director term limits are arbitrary mechanisms Director term limits reduce continuity and experience on the board Annual elections are sufficient Director term limits force valuable, experienced and knowledgeable directors to leave 13

14 Regulatory Update DISCLOSURE OF CORPORATE GOVERNANCE PRACTICES Policies relating to the identification and nomination of women directors Issuers with a policy related to identification and nomination of women directors 15% 21% Issuers reporting a target for the representation of women 7% 9% 14

15 Regulatory Update OSC FINANCIAL REPORTING BULLETIN OSC Staff Notice Office of the Chief Accountant Financial Reporting Bulletin 15

16 Regulatory Update OSC FINANCIAL REPORTING BULLETIN Areas of focus Disclosure effectiveness Going concern Non-GAAP financial measures Fair value measurements Considerations for implementation of: IFRS 9 Financial Instruments IFRS 15 Revenue from Contracts with Customers IFRS 16 Leases 16

17 Regulatory Update OSC FINANCIAL REPORTING BULLETIN Disclosure effectiveness Consider and assess: Are the financial reports providing insights into the business? Is the information clear and concise? Is the information entity-specific? Is information carried forward from prior year financial reports still relevant and necessary for compliance with IFRS? Is relevant information being obscured by a large amount of irrelevant and immaterial information? Source OSC Staff Notice

18 Regulatory Update OSC FINANCIAL REPORTING BULLETIN Going concern Good disclosures provided Detailed information about the uncertainties relating to operations, funding, cash flows and how each is mitigated Poor disclosures provided Boilerplate information Limited information about management s plans to mitigate any material uncertainties Disclosure of significant judgement on close call situations 18

19 Regulatory Update OSC FINANCIAL REPORTING BULLETIN Going concern Consider and assess: Are investors receiving adequate level of information about: Significant going concern risks? Relevant management judgements being exercised? Mitigating factors that are being considered by management in making these assessments? Source OSC Staff Notice

20 Regulatory Update OSC FINANCIAL REPORTING BULLETIN Non-GAAP financial measures Concerns expressed Prominence of disclosure given to non-gaap financial measures in comparison to GAAP financial measures Large number of non-gaap financial measures being used in the MD&A Non-GAAP financial measures not reconciled to the most directly comparable GAAP measures Source OSC Staff Notice

21 Regulatory Update OSC FINANCIAL REPORTING BULLETIN Non-GAAP financial measures Consider and assess: Is my GAAP measure presented first in my disclosure documents? Are too many non-gaap measures being presented such that material information is being obscured? Is my non-gaap financial measure reconciled to the most directly comparable GAAP measure? Source OSC Staff Notice

22 Regulatory Update OSC FINANCIAL REPORTING BULLETIN Fair value measurements Concerns expressed about disclosure of fair value measurements in the real estate industry Use of an independent external valuator does not reduce management s ultimate responsibility for the fair value measurements Quality of disclosures varied Disclosures for each class of assets Description of inputs used in the fair value measurement Concerns expressed about disclosures of fair value measurements in the investment fund industry Description of valuation techniques Quantitative information about significant unobservable inputs Sensitivity to changes in unobservable inputs Categorization of equity instruments within level 2 of the fair value hierarchy 22

23 Regulatory Update OSC FINANCIAL REPORTING BULLETIN Considerations for implementation of IFRS 9, 15, and 16 Consider and assess: Is a detailed implementation plan in place? Have sufficient resources been allocated to ensure implementation on a timely basis Are IT systems capable of collecting the necessary data for the new reporting requirements? How will the new standards impact the company s policies and business practices? Impact on debt covenants, capital requirements, or compensation arrangements Impact on the key operating metrics Impact on internal controls and CEO/CFO certifications Areas of significant judgement that will be required to be disclosed in the financial statements upon implementation Sufficient communication with investors on impact of new accounting standards on the company s financial performance and position. Source OSC Staff Notice

24 Regulatory Update WHISTLEBLOWER PROGRAMS Whistleblower programs announced Québec (AMF) June 20, 2016 Assure whistleblowers that they can report wrongdoing in complete confidence and will be protected against reprisals; Gather original information about violations under the laws and regulations administered by the AMF Ontario (OSC) July 14, 2016 OSC vs AMF Whistleblower program - Similar policies /rationale but with differing approaches Alberta (ASC) June 1,

25 ACCOUNTING REMINDERS AND IFRS NEWS 25

26 Accounting Reminders and IFRS News AGENDA Standards effective for December 31, 2016 year-ends IFRS Interpretation Committee agenda decisions IASB work plan 26

27 STANDARDS EFFECTIVE FOR DECEMBER 31, 2016 YEAR-ENDS 27

28 Standards Effective for December 31, 2016 AMENDMENTS Amendments to standards effective for December 31, 2016 are mostly minor and narrow scope in nature. We would like to focus primarily on amendments made to IAS 1, which form part of the IASB s recent strategy called the Disclosure Initiative. 28

29 Amendments to IAS 1 OVERVIEW Materiality Line Items Notes Accounting Policies Aggregation or disaggregation should not obscure useful information Materiality applies to each of the primary financial statements, the notes and each specific disclosure required by IFRSs. Additional guidance for line items to be presented in primary statements and new requirements regarding the use of subtotals. Determination of the order of the notes should include consideration of understandability and comparability of financial statements. It has been clarified that the order listed in IAS 1.114(c) is illustrative only. Removal of the examples in IAS in respect of income taxes and foreign exchange gains and losses. 29

30 How to improve disclosures IAS 1 AMENDMENTS Ordering by relevance Beginning of f/s denotes prominence Less relevant information towards the end Entity/industry specific Judgement area Should be consistent over reporting periods Clear structure Table of contents References to notes Formatting of referencing (font size, hyperlinks) Consistent formatting Use of diagrams to highlight effects 30

31 How to improve disclosures IAS 1 AMENDMENTS Type of language used Avoid boilerplate, meaningless notes Customize illustrative financial statement templates Avoid regurgitation of standards Use entity specific information Use plain, non-technical language Avoid duplication Grouping SAPs and notes Judgement and estimates note consider cross-referencing Formatting of referencing (font size, hyperlinks) Consistent formatting Use of diagrams to highlight effects 31

32 IFRS INTERPRETATIONS COMMITTEE Agenda decisions 32

33 IFRS IC REJECTIONS: November 2016 Meeting AGENDA DECISIONS Recent Decisions (November 2016) Expected manner of recovery of intangible assets with indefinite useful lives (IAS 12) Written put options over non-controlling interests to be settled by a variable number of the parent s shares (IAS 32) 33

34 IFRS IC REJECTIONS: November 2016 Meeting EXPECTED MANNER OF RECOVERY OF INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIVES (IAS 12) Issue The measurement of deferred tax based on tax rates that entities expect will apply to the recovery or settlement of an asset or liability (IAS 12.51). Deferred taxes on non-depreciable assets (e.g. land) shall be determined using the tax rates applicable to the sale of assets. The Interpretations Committee observed that an intangible asset with an indefinite useful life is not a non-depreciable asset as envisaged by paragraph 51B of IAS 12. Consequently, the fact that an entity does not amortise an intangible asset with an indefinite useful life does not necessarily mean that the entity will recover the carrying amount of that asset only through sale and not through use. 34

35 IFRS IC REJECTIONS: November 2016 Meeting WRITTEN PUT OPTIONS OVER NON-CONTROLLING INTERESTS TO BE SETTLED BUY A VARIABLE NUMBER OF THE PARENT S SHARES (IAS 32) Accounting for a written put option over non-controlling interests (NCI put) in its consolidated financial statements. Two views put forward: Apply IAS and recognize a financial liability for the put at the present value of the option strike price (i.e. gross liability ); or Do not apply IAS and therefore recognize a derivative liability (i.e. net liability ). The IC was also asked whether the accounting for NCI puts would differ depending on whether the parent has the choice to settle the price in either cash or a variable number of its own equity instruments at the same value. The IC noted the topics are relevant, however, they are too broad for the IC to address. This topic will likely be addressed by the IASB s project on Financial Instruments with Characteristics of Equity. 35

36 IASB WORK PLAN 36

37 IASB Work Plan RESEARCH PROJECTS 37

38 IASB Work Plan MAJOR PROJECTS 38

39 IASB Work Plan NARROW SCOPE AMENDMENTS AND IFRIC INTERPRETATIONS 39

40 CPA Canada Resources Viewpoints: Transportation Costs

41 CPA Canada Resources Viewpoints: Segment Reporting

42 CPA Canada Resources New Publication An Introduction to Blockchain

43 Thank you Armand Capisciolto, CPA, CA CPA (Michigan) Partner BDO Canada Janet Stockton, FCPA, FCA Partner BDO Canada Pamela Campagnoni, CPA, CA CPA (Illinois) Principal CPA Canada 43

44 QUESTIONS 44