developments related to the various accounting frameworks. This presentation is bringing

clarity to an IFRS world and IFRS quarterly technical update.

I’m am Jon Kligman, your host this webcast and I am joined by others from our National

Office. As you are aware, this webcast has been prerecorded. It could be accessed at

any time at www.deloitte.com/ca/update. So, please let your colleagues know of its availability.

Now, onto our agenda. First, you will hear from Julia Suk who will

discuss the Canadian securities administrators’ continuous disclosure review program. After

Julia, Clair Grindley will provide an update on IFRS 15 Revenue from Contracts with Customers,

discuss the exposure draft on IAS 19 and IFRIC 14, and then provide an update on upcoming

IASB projects. I would like to remind our viewers that our

comments on this webcast represent our own personal views and do not constitute official

interpretive accounting guidance from Deloitte. Before taking any action on any of these issues,

it is always a good idea to check with a qualified advisor.

I would now like to welcome our speakers. Julia Suk is a Senior Manager with National

Assurance and Advisory Services of Deloitte Canada. In this role, Julia is responsible

for monitoring quality standards for Deloitte’s public company client filings. Julia also

provides consultative advice to attest and non-attest clients on general securities filings

and financial reporting matters. In the past, Julia also completed a one year secondment

to the Ontario Securities Commission, working within the office of the Chief Accountant.

Clair Grindley is a partner at Deloitte’s National Office and is a member of both the

Technical Consultations Group for the Canadian firm and Deloitte’s IFRS Leadership Team.

Subjects of focus for Clair include employee benefits, impairment and joint arrangements.

And she is also a member of the IFRS Discussion Group or IDG, a subgroup of the Canadian Accounting

Standards Board. Over to you Julia.

Thanks Jon. Hi everyone. As traditionally done in the past, the CSA has reported on

their annual staff notice on their Continuous Disclosure Review Program conducted throughout

the year. Their fiscal year ends in March and so, their report generally comes out mid-summer

and for this year, it was published July 16. The Continuous Disclosure Review Program was

established in 2004 by the staff of the CSA for which the main goal was to improve the

completeness, quality and timeliness of the continuous disclosure provided by reporting

issuers in Canada. It really aims to assess the compliance of the continuous disclosure

documents filed by the reporting issuers and to help companies understand and comply with

their obligations under the continuous disclosure rules so that the investors receive high quality

disclosure. The Staff notice 51-344 consists of the main body of the report, which contains

a summary of their findings and then in the appendices the CSA includes information about

areas where common deficiencies were noted with examples to assist companies address

the noted deficiencies and give some best practices where applicable.

The current year results are shown on the slide here. In total, Tthere were 1,058 reviews

performed in total where 580 of them were full reviews and the rest for issue-oriented

reviews or IORs. This is a 7% increase in the number of reviews compared to the prior

year where the total was 991 reviews with 221 of them being full reviews and the rest

were IORs. The bar graph at the bottom illustrates the

results from this year. The CSA Class 5, the outcomes of the reviews into five categories

as done in the past. The first one is referred to enforcement, cease-traded or on the default

list. Second is re-filings required. Third in the middle is prospective changes that

were made as a result of the reviews. Education and awareness, this is where there were enhancements

that should be considered in its next filings that were discussed with the issuers or the

staff of the local jurisdictions ended up publishing staff notices and reported on a

variety of continuous disclosure subject matter reflecting best practices and expectations,

and of course the last category being no action is required. This year 59% of the outcomes

required issuers to take some kind of action to improve or amend their disclosures in their

filings or resulted in the issuer being referred to enforcement, cease-traded or placed on

the default list. The result in the last year was 60%, which is comparable, although as

you can tell from the graph, the distribution is somewhat different with more re-filings

being required this year than last. Just as a reminder, re-filings are significant events

that should be clearly and broadly disclosed to the marketplace in a timely manner. This

appears to not always have happened and when discussed, some issuers indicated that the

delay was due to the fact there were no scheduled audit committee meetings or board meetings

where the news release could be approved and then waited for the next scheduled meeting.

The CSA staff states in the report that this is not an appropriate reason and the news

release filings cannot be delayed for such reasons. They refer back to the requirements

in NI 51-102, Section 11.5, which requires that if there is issuer decides, it will refile

a document under 51-102 and the information in the refiled document or restated financial

information will defer materially from the information originally filed, the issuer must

immediately issue and file a news released authorized by an executive officer disclosing

the nature and substance of the change or proposed changes. This may involve audit committee

approval or board member approval prior to their next scheduled meeting, and this is

required because they need to provide timely news release as required.

The CSA when performing their full reviews applies a risk-based approach for selecting

reporting issuers. A full review is broader in scope than an IOR and covers many different

types of disclosures including selected issuers most recent annual and interim financial statements,

the management discussion and analysis file before the start of the review. For all other

continuous disclosure documents, the review covers a period of approximately 12 to 15

months. In certain cases, the scope of the review may be extended in order to cover prior

periods. The issuers continues to disclose documents or monitors until the review is

completed. A full review also includes an issuer’s technical disclosures such as technical

reports for oil and gas, and mining issuers, AIFs, annual reports, information circulars,

news releases, material change reports, BARs, corporate websites, certifying officers’

certifications and material contracts. The selection for the IORs or issue-oriented

reviews are based on targeted objective or subject matter of the review. An IOR focused

on a specific accounting, legal or regulatory issue, and may focus on emerging issues, implementation

of recent rules or on matters where the staff believe there may be heightened risk of investor

harm. During this year, a total of 74% of all continuous disclosure reviews completed

were IORs compared to 78% last year. The category shown on the graph to the right in the slide

are some of the IORs conducted by one or more jurisdictions. The other category accounting

for 16% of the total IORs this year related to non-financial topics, which are MD&A topics,

material change reports, redistributions, complaints, referrals and other regulatory

requirements. For the MD&A related findings, you can see

on the slide here for the six main areas. The securities rules pertaining to the MD&A

disclosures are given in National Instrument 51-102, Form 1 (F1). Findings on liquidity

and capital resources from the reviews related to issuers, failures and providing sufficient

analysis. For example, issuers often reproduce information in their MD&A that was already

provided in the financial statements like a repeat of cash flow balances that come from

operating, investing and financial activities. Rather the regulators are expecting to see

much more focus on an issuer’s ability to generate sufficient liquidity in the short-

and long-term in order to find a plan growth, development activities and expenditures necessary

to maintain the capacity. Also they are expecting to see an analysis of capital resources including

the amount, nature and purpose of the commitments and expected sources of funds to meet these

commitments. The CSA staff emphasize this information is even more critical when issuers

have negative cash flows from operations, negative working capital position or deteriorating

financial position because this disclosure is intended to help the users to assess how

the issuer will meet its long- and short-term obligations and objectives. For discussion

relating to results of operations, the observation was that some issuers just provided a boilerplate

disclosure and repeated the financial statement information and disclosure. The discussion

of the year over year change of balances should really provide sufficient detail to discuss

key drivers and reasons contributing to the change for the period. Trends, commitments,

risks and uncertainties that will impact company should be discussed. Forward-looking information,

non-GAAP measures as in the past couple of years, failures of such disclosures in this

area came up again as a hot button for the CSA staff and the reviews. It seems that companies

that use forward looking information and non-GAAP measures and their continuous disclosure documents

have not clearly identified them as such and/or included the appropriate disclosures that

go with this type of information. The concern from the staff here is that the users may

be misled if the disclosures are not provided as required by the rules in National Instrument

51-102 as well as CSA Staff Notice 52 306. Redistribution is came up as a hot button

this year as it was noted that some reach to clear distributions, which exceed the cash

they generate from their operations, but do not provide the relevant disclosures in the

MD&A and AIF. The disclosure is required to signal to the investor that excess distributions

have occurred during the period as well, as information on how they were financed and

that they represented a return of capital amongst other things. The CSA emphasized that

this is important to alert the investor so that they are not misled in such circumstances.

In their review of related party transactions, they observe that some issuers provided a

boilerplate disclosure, which is not useful to the users rather they remind issuers that

the discussion should really provide both qualitative and quantitative information that

is necessary for the readers to understand the business purpose and economic substance

of such transaction. I will go through the last point presented here relating to the

staff’s findings relating to management certifications on the next slide.

The staff this year discussed in some great detail the certification disclosures and their

findings. The requirement around certification disclosures are included in NI 52-109 and

requires issuers to file certificates of annual and interim filing signed by an issuer CEO

and CFO. Non-venture issuers are required to design or have caused to be designed, DC&P,

which is disclosure controls and procedures, and ICFR, internal controls over financial

reporting on an annual basis and on an annual basis evaluated or caused to be evaluated

under their supervision, the effectiveness of DC&P and ICFR. The issuer is also required

to disclose in its annual MD&A, the CEO and CFO’s conclusion about the effectiveness

of DC&P and ICFR. When the certifying officers determine that there is a material weakness

relating to the design or operations of ICFR, or when there has been a limitation on the

scope of the design, issuers must include certain information as dictated by form requirements

in National Instrument 52-109 in their certification as well as including disclosure in the MD&A

describing the material weakness or summary financial information relating to the entities

subject to the scope limitation. Upon their CD reviews, they have identified three common

areas of deficiencies. First they found out there were inconsistencies between the certificate

and the MD&A disclosure. For example, where they have indicated on the certificate that

there was a material weakness, there was no discussion in the MD&A of the material weakness.

Secondly, material weakness disclosure. For instance, some issuers did not describe the

material weakness in sufficient detail. Rather it was vague and gave little insight about

the impact of the issuers financial reporting. It was also noted that certain issuers reported

material weakness for a number of consecutive years and during that time had experienced

significant growth in their operations. Other remediation of an identified material weakness

is not required under the rules. It would be useful to an investor if the issuer discussed

whether they have committed or will commit to a plan to remediate the material weakness

and whether there are any mitigating procedures that reduced the risks that have not been

addressed as a result of identified material weakness. There is further discussion of such

in the Companion Policy 52-109, Section 9.7, so issuers are reminded to refer to the policy

when this is applicable. They also remind issuers that a meaningful discussion of an

unremediated material weakness should be updated in each MD&A to ensure that the impact of

the material weakness continues to be properly reflected as the company grows or goes through

other changes in their operation. This will be further discussed using an example in the

next slide. Thirdly, they found that the limitation or scope of design relating to an acquired

business was not disclosed sufficiently. Staff noted that certain issuers had a scope limitation

relating to two or more unrelated entities, but presented combined financial information

instead of disclosing information for each entity separately. They encourage issuers

to refer to Section 14.2 of 52-109 CP, which permits presenting of combined financial information

only when the businesses are related. As discussed on the previous slide, this is

an example of a deficient disclosure relating to a material weakness. I will not read off

the entire slide for you, but the illustration is given to reemphasize some deficiencies

relating to the description of the material weakness, the impact of the material weakness

on the issuers financial reporting and its ICFR and whether the issuers plans if any,

to remediate. More specifically in this example, there is a reference to more than one internal

control deficiencies in one place, but in the actual discussion of the deficiency, they

only described one, a lack of segregation of duties, and there is also a lack of a clear

identification that this is a material weakness. Also, in this example, they referred to financial

matters, but the meaning of such term used in the description of the deficiency relating

to segregation of duties is unclear and insufficient. Findings from the CSA’s continuous disclosure

reviews included other regulatory disclosure deficiencies. These were the five that is

pointed out here on the bubbles on the slide with material contracts going from left to

right, the staff mainly reminds issuers that there is a list of contracts given in National

Instrument 51-102 that must be filed even if the contracts are entered in the ordinary