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Canada News
Hot Topics from FEI Canada's Committee on Corporate Reporting (CCR)
CCR Provides Letter to CICA Regarding IFRS Education
On February 12, 2007, FEI Canada’s Committee on Corporate Reporting (CCR) submitted a letter to the CICA expressing its concerns surrounding the lack of IFRS education. The committee’s concerns stem from the apparent focus on those members in public practice without appropriate support for those in industry.
To read the full letter, please see here.
CCR Responds to CICA Draft Interpretive Release on Distributable Cash
On April 18, 2007, CCR submitted its response to the CICA’s Draft Interpretive Release, Distributable Cash in Income Trusts and Other Flow-Through Entities.
CCR believes it is appropriate to require trust issuers to provide the same level of disclosures that corporate issuers provide in many areas, and some disclosures relating to trusts should be extended to all entities.
To read the full Comment Letter, please see here.
CSA Exposure Draft on NI 52-109
On March 30, 2007, the Canadian Securities Administrators (CSA) released a Request for Comments on National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings. CCR will be providing comment in June 2007.
To read the full Exposure Draft, please see here.
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From the News Desk of |
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All risk is ultimately financial.
Every risk can be expressed in financial terms, and every risk can end up hitting the top and bottom line. This in itself is perhaps not news. But the major news - through an exploration of risk management practices at ten diverse organizations—is that the finance function is getting far more involved in the art—and increasingly the science—of non-financial risk management.
Why is that? For a number of reasons. For one, the finance function extends into and collects information from every part of the organization and thus has a view of the entire company. This allows and encourages the pan-organizational view central to any strong enterprise risk management approach. For another, the finance function alone has the resources and analytical ability to put non-financial risks in financial terms. Another still is that savvy finance functions understand that by attempting to identify risk, measure it, explain it, and prepare response plans, they are increasing their strategic importance—their value—to the organization.
IBM has recently completed a study in collaboration with CFO Research (of CFO Magazine/CFO.com). It explores how CFOs have begun to define and scrutinize non-financial risks. The case studies call out the risk management frameworks and tools companies are using.
Key findings include:
- Companies seek a more expansive view of risks
- There is a new, broader risk calculus that considers uncontrollable disasters along with factors linked to strategic and operating decisions
- Diminishing risk transfer options force companies to retain more risk and devise internal mitigation strategies
- The finance function is often in the best position to provide the "analytic engine" for broader initiatives
- Risk management is gradually emerging as a cross-functional and line-of-business unit discipline
- CFOs endorse close collaboration between finance and business unit management to evaluate and measure risk
Download the full report: IBM CFO Website (www.ibm.com/innovation/ca/en/cfo)
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From the News Desk of |
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CSA Announces Proposed Amendments to Executive Compensation Disclosure Requirements
On March 30, 2007, the Canadian Securities Administrators (CSA) announced that it is seeking comments regarding improvements to Proposed Form 51-102F6 Statement of Executive Compensation, (Form) designed to improve existing disclosure rules for executive compensation by all reporting issuers.
The Form will require companies to clearly define their compensation policies and objectives, and will provide the total compensation, in tabular form, for each named executive officer and director. The Form will also require companies to provide details on executive salaries, bonuses, stock and option awards, pension benefits, and termination payments.
According to CSA Chair Jean St-Gelais, the amendments "will provide investors with improved clarity and context regarding corporate compensation practices". The CSA has requested comments on the proposed forms be sent by June 30, 2007.
The proposed changes expand the disclosure requirements for executive compensation in a number of key areas, including:
- For the first time, summary compensation tables will be required to include a column showing the total compensation provided to each named executive officer. The column will represent the total of the figures disclosed in all the other columns in the table.
- A new compensation discussion and analysis section will be required in order t explain the rationale for specific executive compensation programs.
- All equity compensation in the summary compensation table is disclosed on the basis of the compensation cost of the awards over the requisite service period reflected in the company’s financial statements. Companies are currently required to disclose stocks and options according to the number of shares or other securities granted.
- Companies will be required to provide more specific disclosure of potential payments to named executive officers upon their termination from the company, including details on retirement benefits.
- The proposed executive compensation form will require expanded disclosure of director compensation, including a summary table and equity disclosure.
The proposed amended executive compensation form will require the following information:
General Provisions: The general provisions section will consist of the definitions of terms and phrases used in the proposed executive compensation form and general instructions. A number of definitions are new because they correspond to additional items in the form.
Compensation discussion and Analysis: The section on compensation and analysis will consist of discussion and analysis of the executive compensation provided to NEOs in the most recently completed financial year. The purpose of this analysis is to provide the context for the detailed compensation numbers that are set out in the tables in the proposed executive compensation form. The CSA has identified six key principles that reporting issuers must discuss, as well as a number of examples of the types of issues that they could address when explaining those principles. Companies will be asked to include a performance graph of their cumulative total shareholder return over the last five most recently completed fiscal years compared to the cumulative total return of at least one broad equity market index, specific quantitative and qualitative performance-related targets for executives, and practices related to granting options and details on whether executives are involved in determining who is awarded options.
Summary compensation tables: Consistent with current disclosure requirements, the summary compensation tables in the proposed regulations will require companies to provide disclosure information on executive compensation for the preceding three years. The disclosure will address salary and bonus payments, plan-based awards (including stocks and options), non-equity incentive plans, changes in pension value, other unrecorded compensation (including perquisites and personal benefits), and total compensation.
Equity and plan-based awards: For equity awards, reporting issuers will be asked to provide information on outstanding options, including the number of securities underlying these options, the exercise prices and expiry dates, the value of unexercised in-the-money options, and information on outstanding stock awards, including the market value of shares or other rights that have not vested as at the most recently completed financial year for each executive. For plan-based awards, issuers will be required to explain, in narrative form, the material terms of all awards, both equity and non-equity and to provide information about non-equity incentive plan awards, including information on estimated future payouts under these plans (threshold, target and maximum amounts).
Retirement plan benefits: The CSA has proposed a new table that will require disclosure of all defined benefit retirement plans, including the present value of the accumulated benefit.
Termination and change of control benefits: Companies will be required to provide detailed disclosure regarding payments made to executives that are related to their termination or any change of control of the company. This disclosure will include the material terms of any written or unwritten agreements that provide for payments to executives at termination, and estimated annual payments and benefits that would be received under various termination scenarios.
Director compensation: The proposed amendments introduce a new table for director compensation that will require companies to provide the same disclosure about equity-based and plan-based awards for directors that will be required for executives.
Companies reporting in the United States: The proposed amendments will allow companies issuing under the SEC to satisfy the requirements of executive compensation disclosure by remitting the same information to the CSA.
Future Developments
The CSA has requested general comments on the proposals and has issued a number of specific requests for comment on each section of the amendments. Comments will be accepted until June 30, 2007.
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From the News Desk of |
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Beyond Borders: Global Biotechnology Report 2007
Record-Breaking 79% Increase in Capital Raised by Canadian Biotechs in 2006 – Ernst & Young Report
Canada’s biotech industry reports best year, but challenges remain
(Montréal, April 16, 2007)—Canadian biotech companies had a banner financing year in 2006, raising $1.8 billion in capital (all figures in $US), setting a new industry record. Capital raised in 2006 topped the previous record of $1.3 billion raised in 2003, according to Beyond Borders: Global Biotechnology Report 2007, Ernst & Young LLP’s 21st- anniversary report, released today, on the biotechnology industry.
In 2006, Canadian public company revenue grew to $3.2 billion, a 22% increase over 2005. Net losses decreased by 43% as Canadian companies strive towards profitability. The report sees that 2006 marked a sizable decrease in the number of companies in imminent financial danger – 25% of public companies had less than one year of cash in 2006, down from 45% a year earlier, and half of Canadian public companies are now sustainable without needing to raise capital in the near term.
"Mature Canadian biotechs are raising record-breaking amounts of capital, growing revenues by double digit rates, while the industry is moving in the direction of aggregate profitability," said Rod Budd, author of the Canadian chapter of the global report and leader of Ernst & Young’s Life Sciences practice in Canada. "All of these successes translate into dramatic improvements in fundraising and financial performance for these companies."
And the link: http://www.ey.com/global/content.nsf/Canada/Media_-_2007_-_Global_Biotech_Report
| From the News Desk of BRENDAN MOORE |
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Exports of Intangibles – Guidance Issued on GST Zero-Rating
The 2007 federal budget proposed to amend the Excise Tax Act to allow for a full zero-rating of the export of intangible personal property ("IPP"). The amendment corrects a technical deficiency that has existed since the introduction of the GST. Prior to this, the place of supply rules taxed a supply of IPP where any of the rights that related to the property could be exercised in Canada. However, if any of these rights was supplied to a non-resident, relief from collecting GST was only available in the case of intellectual property such as patents, trademarks and copyrights, although in recent years, the CRA Rulings division had extended the zero-rating to software by administrative concession. The degree of technological change and the widespread use of the Internet for conducting business have demanded a better solution than this, however, and the budget delivered. The provision will zero-rate supplies made after March 19, 2007 to qualifying recipients and will also zero-rate supplies made before March 20, 2007 in respect of which no tax was charged or collected by the supplier. If GST was charged or collected, however, no refund is available, although if a supplier was assessed by the CRA for not collecting the GST on such supplies, the supplier has a two-year window from the date of assent to the amending legislation to apply for a refund, plus interest, from the CRA and the normal four-year limit on reassessments will not apply.
The new zero-rating provision will not relieve a supplier from collecting GST on a supply of IPP that may only be used in Canada, or that is made to an individual physically in Canada at the time of the supply. Nor does it zero-rate a supply of IPP that relates to property situated in Canada, or that relates to a service that is not zero-rated. It also excludes the supply of IPP that consists of making a telecommunications facility available for use in providing a telecommunication service. Finally, the recipient of the supply must be an unregistered non-resident for purposes of the GST. It is the registration, residence and location requirements that could prove problematic for most suppliers.
The CRA has just released Info Sheet GI-034 that provides examples of supplies of IPP that will now be eligible for zero-rating under the new provision. They include:
- subscriptions to Web sites that provide subscribers with a right to access and use digitized content on the site, such as information in a database or images, and that may also include a right to download a copy of the digitized content,
- subscriptions to interactive Web sites that provide subscribers with a right to access and use digitized content, such as games, music and videos, on the sites while they are online,
- digitized information, such as news items or stock market data, that is delivered electronically on a periodic basis to subscribers based on their personal preferences, and
- digitized products, such as music, images, and books, that are downloaded from Web sites and paid for individually.
With respect to the verification of the registration and residency status of customers, the Info Sheet states that the CRA will accept an on-line self-declaration by customers that they are not registered as proof of the customer’s registration status, a practical solution but one that may require some re-design of web sites to implement. The default rule must be that the supplier should collect tax on the supply if the customer does not attest to non-registered status, and for most registrants able to claim full recovery of GST paid, this should be no great cause for concern.
The proof of a customer’s residence status requires more attention. The CRA will generally accept an online self-declaration by customers that they are not residents of Canada, together with their complete home address, as proof of residency, provided it is supported by another satisfactory verification method of residency such as:
- if customers pay for the supplies of IPP by credit card or debit card, either a comparison of the customer’s declared home address with the billing address, or a comparison of the customer’s declared home address with the location of the financial institution that issued the card, or
- The use of software that locates customers geographically by comparison of the IP address used by a customer (referred to as geo-location software).
As noted above, the supply of IPP made to a non-resident individual will not qualify for zero-rating under the new provision if the individual is physically present in Canada when the supply is made. Suppliers must therefore verify and maintain satisfactory evidence that the individuals are physically outside Canada when the supplies are made. For these purposes, the CRA will accept the use of geo-location software as a method of verifying that the individual is physically outside Canada when the supply is made.
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From the News Desk of |
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CFO Insider: A one-on-one conversation with Nexient CFO Donna de Winter
Many financial executives have learned that taking advantage of the right tools can make them more effective in their role and provide numerous efficiency and productivity benefits to the organization. But achieving these results requires the right mix of planning and vision.
Donna de Winter, chief financial officer at Toronto-based Nexient Learning Solutions, a national corporate training company for technology and business skills, has learned how to view technology through a pragmatic business lens. de Winter provides some lessons learned and insights about how to take advantage of technology in this interview.
Q: What’s keeping you up at night?
A: Right now, the biggest business issue I face is implementing a plan that effectively leverages our current IT investments, and pushes our use of technology to the next level of performance. That’s what I’m challenged with right now.
Nexient is a sophisticated user of technology. We have a CRM package installed, as well as student registration software and a Dynamics GP accounting package. But the question is - how to tie all this together? We want to make sure that everyone at Nexient has the same view of the customer, and are working off the same information. This is all about getting the best out of our technology and, by extension, our people.
The other issue, and this one is ongoing, is to make sure we address business and IT challenges before they have a chance to take root. I’m in a good position to tackle this, because a company’s financial statements are like little windows into what’s working – and what’s not – within the organization. For example, if the days to collection on your accounts receivables are creeping up, or if more and more of your customers aren’t paying, you can clearly see this on your balance sheet. The question, then, is why? It could be that you’re not doing a good job from a collection standpoint, or maybe your business processes are not streamlined or your products and services are not meeting market expectation or your technology is not working the way it should. But I always say that financial statements are like the forensic evidence – the facts don’t lie. They’re monthly updates on the health of your organization.
Q: What software/gadget do you personally use, and which you couldn’t live without?
A: I can’t live without my BlackBerry, that’s for sure. The two biggest technologies for me are my laptop and my BlackBerry. It all boils down to being available. When you do a fair amount of travelling, which I do, any project you’re involved in and that requires your input or approval can become seriously delayed if you remove yourself for a few hours, or even a day or two. With my BlackBerry, my connection to colleagues is a lot more seamless, and I can stay involved in projects that require my input.
But one absolutely critical technology, and one I’m currently finding it difficult to live without, is performance management software. These are the tools that can help me and the organization measure ourselves against standard criteria or key performance indicators, and evaluate how we’re doing. Acquiring this for Nexient is definitely on my "next 12 month" to do list. Without it, we risk creating lags in the time it takes to get quality information and the time within which we need to make critical decisions.
This isn’t just a Nexient issue – it applies to virtually any organization. I find companies tend to do one of two things – they either make decisions too quickly based on too little information, or too slowly based on too much information, and neither scenario is good. What you want is a steady stream of useful, real-time performance numbers. Not having this slows down your smartest people, and that slows down the organization. Performance management software helps to address this.
Q: What’s the best piece of advice you’ve ever received?
A: I received this advice years ago, and I’ve lived by it ever since. You always need to hire someone smarter than you, and get as many of those people in your organization as possible. And once you’ve hired them, work hard to give them a voice and enable their ideas. If you walk into a new position saying to yourself ‘I have all the answers’, then you’re not going to do your job very effectively. You need others around you with great ideas. If you believe you’re a seven or eight on the performance scale, then you want to hire a nine. Be the enabler of intelligence in the organization.
Q: When it comes to best practices around the use of technology, what have you learned?
A: As a CFO, I make a lot of decisions related to technology, but I’m not necessarily the best person to be deciding what specific technologies we should be using. And there’s a big difference there. But overall, the trap that I’ve learned to avoid is doing things backwards – by that I mean acquiring piece of software that you like, then designing your business processes around it.
We always imagine our companies are like our children – that they’re very special and unique. But businesses actually have a lot in common. Companies have to interact with customers and partners to engage in commercial activity, provide service, collect and follow up, and there are only so many ways to do that. We’re all in the same boat.
So it’s best to learn what state your organization is in, what processes you have, and what technology will complement your environment. After you establish how you work, or how you want to work, only then should you be talking technology. In fact, you should do your entire needs analysis without ever once mentioning the name of a product or software vendor. I’ve seen too many cases where a company buys a product then starts working around it. You need to always be thinking strategically at the highest level about the role of IT in your business.
Q: What are your technology plans as you look ahead over the next five years?
A: Without a doubt, we’ll be acquiring performance management software. Business process management is also a key strategy – knowing exactly what we want to deliver to the customer, and than bringing in technology that will help us do that.
Then there are the trends specific to our industry. Learning will never entirely get away from the classroom, but we will move increasingly to more non-classroom or hybrid learning scenarios. Any technology we look at over the next five years will definitely play a big part in helping us realize that vision. We will have to continue to expand our expertise in course content delivery, regardless of whether the delivery system is elearning, podcasts or otherwise.
In our classrooms we’ll also be expecting more integrated product offerings, especially as software vendors continue to acquire each other, resulting in larger, deeper software suites appearing on the market. With the launch of Windows Vista and our introduction of Vista training courses we had to update our classroom hardware. The impact of technology and the related costs, and the impact that will have on our classroom business, always have to be considered.
Canadian Institute of Chartered Accountants (CICA)
What's New?
April 19, 2007
Standards
AASB April 10-12, 2007 Decision Summary
An executive summary of discussions and decisions with respect to projects addressed in this meeting.
April 17, 2007
Standards
AcSB Strategy — Publicly Accountable Enterprises
The AcSB is seeking expressions of interest from individuals knowledgeable in International Financial Reporting Standards and financial reporting by financial institutions, to participate as a volunteer on the IFRS Advisory Committee. This Committee assists the AcSB and staff in implementing its strategy for adopting IFRSs for publicly accountable enterprises. Expressions of interest should be sent, together with a current resumé, to Florita Dinglasan by May 7, 2007.
April 17, 2007
Standards
AcSB March 13 and April 11, 2007 Decision Summaries
An executive summary of discussions and decisions with respect to the topics addressed at these meetings: Not-for-Profit Organizations; International Activities; Publicly Accountable Enterprises Strategy; Going Concern; Materiality.
April 11, 2007
Standards
PSAB March 26-27, 2007 Decision Summary
An executive summary of discussions and decisions with respect to projects addressed in this meeting.
April 11, 2007
Standards
PSAB What it is and What it does
This brochure provides information on PSAB, its responsibilities and what it has done.
April 11, 2007
Standards
Notice of IFRS Advisory Committee Meeting
The next meeting will be held on Monday, May 3, 2007 in Toronto and is open to the public.
April 04, 2007
Standards
IFRS Convergence Strategy
A presentation that provides a broad overview of matters to be aware of leading up to Canada’s convergence with International Financial Reporting Standards for publicly accountable enterprises has been posted.
April 04, 2007
Standards
Accounting by an Investor Upon a Loss of Significant Influence (EIC-165)
An Abstract issued by the Emerging Issues Committee has been posted.
April 04, 2007
Standards
EIC Decision Summary, March 22, 2007
A summary of new Abstracts approved, existing Abstracts amended and Draft Abstracts approved for public comment by the Emerging Issues Committee.
March 30, 2007
Standards
Employee Future Benefits
The AcSB has issued an Exposure Draft proposing amendments to Section 3461, Employee Future Benefits, that recognizes the funded status of a defined benefit plan in an entity's balance sheet. Comments are requested by June 30, 2007.
March 30, 2007
Standards
Survey of Reported Canadian/US GAAP Differences
AcSB staff have prepared a summary of its survey of Canadian/US GAAP differences reported by Canadian companies in years ending in 2005.
International News
International Accounting Standards Board (IASB)
What’s New?
Technical Summaries of International Financial Reporting Standards
As of 1 January 2007
Note: These summaries cover International Financial Reporting Standards, International Accounting Standards, and Interpretations issued on or before 1 January 2007.
Framework Summary
IASB has a conceptual framework underlying its financial reporting standards and interpretations, the Framework for the Preparation and Presentation of Financial Statements (the Framework). The Framework sets out the concepts that underlie the preparation and presentation of financial statements for external users.
IFRS and IAS Summaries
IASB publishes its Standards in a series of pronouncements called International Financial Reporting Standards (IFRSs). It has also adopted the body of Standards issued by the Board of the International Accounting Standards Committee (IASC). Those pronouncements continue to be designated "International Accounting Standards" (IASs). This section provides summaries of the Standards issued as at 1 January 2007.
Framework Summary
Framework for the Preparation and Presentation of Financial Statements
Financial Accounting Standards Board (FASB)
What's New?
New—Financial Accounting Foundation Appoints Girard Miller and Jan I. Sylvis to Governmental Accounting Standards Board
(Posted: 04/26/07)
News Release
New—FASB Issues an Exposure Draft to Improve the Accounting for Financial Guarantee Insurance Contracts—Proposal Is Written in New FASB Format Designed to Enhance Understandability
(Posted: 04/18/07)
News Release
Exposure Draft
New—Financial Accounting Foundation Notice Regarding SOX Compliance Scam
(Posted: 04/16/07)
News Release
Financial Accounting Foundation Appoints Lawrence W. Smith to the FASB
(Posted: 04/09/07)
News Release
Private Company Financial Reporting Committee Announces Membership
(Posted: 03/06/07)
News Release
Tentative Guidance—Statement 133 Implementation Issues
New—Issue No. C21(Posted: 04/19/07)
(Comment Deadline: May 24, 2007)
Proposed FASB Staff Positions (FSPs) Proposed FSP FAS 154-a(Posted: 03/13/07)
(Comment Deadline: April 30, 2007)
IFRS Resource Centre
In an effort to help our members stay up-to-date on IFRS developments, and to provide them with a central reference point for information on the conversion process, FEI Canada has begun an IFRS Resource Centre.
A work in progress, this section of the FEI Canada website will include recent announcements from the IASB and the AcSB, industry-specific overviews of the impact of IFRS, tools and other resources to use in the conversion process, and analysis of the conversion process from our strategic partners and other thought leaders in the area of IFRS.
The IFRS Resource Centre will be updated as new information becomes available. We also encourage you to pass along any information you may have come across that would be of use to your colleagues.
Your feedback on the site is greatly encouraged. As it grows, we anticipate that it will change and become more dynamic.
Please click here for the IFRS Resource Centre.
Please send any comments, suggestions and/or resources to dgraham@feicanada.org.