NIN 92/29 - Accounting for Performance Shares [NIN - Rescinded]

Published Date:	1992-11-13
Effective Date:	1992-11-06

Local Policy Statement 3-07 of the British Columbia Securities Commission (the "Commission") and Listings Policy Statement 18 of the Vancouver Stock Exchange (the "Exchange") provide for the issuance of performance shares to principals of an issuer in specified situations. Reference should be made to these Policy Statements for information on performance shares, including the basis of the calculation of the number of shares available to be issued and the means by which these shares can be released from escrow.

A lack of consistency has been noted in the manner in which issuers have been accounting for the issuance and subsequent release from escrow of performance shares. This Notice is being issued, after consultation with professional accountants and market participants, to assist issuers and their advisors in the preparation of financial statements to be filed with the Commission or the Exchange where the issuer has or had performance shares outstanding.

Accounting for Performance Shares On Issue

Performance shares are issued for nominal consideration (generally $0.01 per share), are required to be held in escrow pending the satisfaction of certain pre-determined tests and do not represent contingent consideration as contemplated in section 1580 of the Handbook of the Canadian Institute of Chartered Accountants ("CICA Handbook"). At the time of issue, performance shares should be recorded at the fair value of the consideration received. In substantially all situations, this will be the $0.01 per share cash issuance price that is set out in Local Policy Statement 3-07.

Where the performance shares have been issued for non-cash consideration, the performance shares should be recorded at a nominal value unless a valuation opinion acceptable to the Commission has been prepared that indicates that the fair value of the non-cash consideration is other than a nominal value.

The ascribing of a nominal value to performance shares reflects the uncertainty associated with the ultimate release of these shares from escrow.

Accounting for Performance Shares On Release

The value ascribed to performance shares at the time of their issuance should not be adjusted when the shares are released or become releasable from escrow.

Revised Financial Statements

It is essential that financial statements filed with the Commission or the Exchange fairly present an issuer's financial position, results of operations and changes in financial position. Where an issuer's previously issued financial statements do not reflect the issuance or release of performance shares in accordance with generally accepted accounting principles and this Notice, and the difference is material, the issuer must amend its next interim or annual financial statements, that are filed with the Commission or the Exchange and delivered to its security holders, on a retroactive basis.

Where the required change in accounting practice materially affects its financial position, an issuer should consider whether its previously issued financial statements complied with generally accepted accounting principles at the time the statements were prepared. If they did not, the issuer should consider the need to, and the Commission may require it to, retract the previously released financial statements and reissue them with appropriate amendments. See sections 1506 and 5405 of the CICA Handbook for guidance in situations where financial statements must be restated or retracted.

Where corrections to financial statements constitute a material change in the affairs of the issuer, the issuer must file a material change report and issue a news release under section 67 of the Securities Act, S.B.C. 1985, c.83 detailing the corrections and noting their financial impact on the issuer.


DATED at Vancouver, British Columbia, on November 6, 1992.