52-101CP - Future-Oriented Financial Information [CP Proposed - Lapsed]
| Published Date: | 1997-07-18 |
|---|
TO NATIONAL INSTRUMENT 52-101
FUTURE-ORIENTED FINANCIAL INFORMATION
TABLE OF CONTENTS
PARTTITLEPAGE
PART 1 GENERAL GUIDELINES FOR THE PREPARATION
OF FOFI1
1.1 Deciding Whether to Prepare FOFI 1
1.2 Materiality 1
1.3 Use of Forecasts and Projections 1
1.4 Period to be Covered by FOFI 2
1.5 Real Estate and Natural Resource Issuers 2
1.2 Materiality 1
1.3 Use of Forecasts and Projections 1
1.4 Period to be Covered by FOFI 2
1.5 Real Estate and Natural Resource Issuers 2
PART 2 GENERAL GUIDELINES FOR THE PREPARATION OF
PROJECTIONS 2
2.1 Hypotheses 2
PART 3 COMPARISON OF FOFI WITH ACTUAL RESULTS 3
3.1 Review and Comparison 3
PART 4 PRE-CLEARANCE OF FOFI 3
4.1 Questions and Pre-Clearance 3
COMPANION POLICY 52-101CP
TO
NATIONAL INSTRUMENT 52-101
FUTURE-ORIENTED FINANCIAL INFORMATION
TO
NATIONAL INSTRUMENT 52-101
FUTURE-ORIENTED FINANCIAL INFORMATION
PART 1 GENERAL GUIDELINES FOR THE PREPARATION OF FOFI
1.1 Deciding Whether to Prepare FOFI
(1) The decision whether to prepare FOFI to form part of a general purpose document and the responsibility for that FOFI rests with the issuer in respect of which the FOFI is prepared.
(2) In the view of the Canadian securities regulatory authorities, factors that should be considered in making the decision referred to in subsection (1) include the issuer's history of operations and experience, if any, in preparing FOFI, including the degree of variance between any previously prepared FOFI and actual results.
(2) In the view of the Canadian securities regulatory authorities, factors that should be considered in making the decision referred to in subsection (1) include the issuer's history of operations and experience, if any, in preparing FOFI, including the degree of variance between any previously prepared FOFI and actual results.
1.2Materiality -Section 1.2 of the National Instrument (the "Instrument") requires that the terms "material" and "materiality" be interpreted in accordance with paragraph 1000.17 of the Handbook. Under paragraph 1000.17 of the Handbook, an item is material if it is probable that its omission or misstatement would influence or change a decision of a user of the financial information. This concept of materiality is broader than that contained in the definition of "material change" set out in Canadian securities legislation.
1.3 Use of Forecasts and Projections
(1) Despite subsection 3.2(1) of the Instrument, issuers that are not start-up issuers may, in certain limited circumstances, be permitted to prepare FOFI in the form of a projection under an exemption granted under section 8.1 of the Instrument.
(2) As an example, an exemption may be granted under section 8.1 of the Instrument from the requirements of subsection 3.2(1) of the Instrument if there is to be a substantial change in the use of a property to be acquired by an issuer that is not a start-up issuer, such as an upgrade from an economy hotel to a luxury hotel, given that the prior business conducted at the property may not be relevant to the new usage.
(2) As an example, an exemption may be granted under section 8.1 of the Instrument from the requirements of subsection 3.2(1) of the Instrument if there is to be a substantial change in the use of a property to be acquired by an issuer that is not a start-up issuer, such as an upgrade from an economy hotel to a luxury hotel, given that the prior business conducted at the property may not be relevant to the new usage.
1.4 Period to be Covered by FOFI
(1) Paragraph 4250.15 of the Handbook requires that the period covered by FOFI should not extend beyond the period for which the FOFI can be reasonably estimated. Section 3.1 of the Instrument requires that FOFI be prepared in accordance with Canadian GAAP, which is determined with reference to the Handbook. Accordingly, while section 3.3 of the Instrument provides that the period covered by FOFI shall not exceed the period of 24 months immediately after the date of the general purpose document of which the FOFI forms part, it will not always be appropriate to prepare FOFI covering a period of 24 months.
(2) In certain circumstances, an exemption may be granted from the requirement of section 3.3 of the Instrument if there is reasonable assurance as to an issuer's forecast operations in a FOFI period exceeding 24 months.
(3) As examples of the circumstances referred to in subsection (2), an exemption may be granted in connection with existing real estate projects for which FOFI could be prepared up to the date of the mortgage renewal, or in connection with long-term contracts for which FOFI could be prepared up to the expiry date of such contracts, provided in either case that all revenues and expenses can be reasonably estimated based on supportable assumptions, and not merely hypotheses, for the extended FOFI period.
(2) In certain circumstances, an exemption may be granted from the requirement of section 3.3 of the Instrument if there is reasonable assurance as to an issuer's forecast operations in a FOFI period exceeding 24 months.
(3) As examples of the circumstances referred to in subsection (2), an exemption may be granted in connection with existing real estate projects for which FOFI could be prepared up to the date of the mortgage renewal, or in connection with long-term contracts for which FOFI could be prepared up to the expiry date of such contracts, provided in either case that all revenues and expenses can be reasonably estimated based on supportable assumptions, and not merely hypotheses, for the extended FOFI period.
1.5 Real Estate and Natural Resource Issuers -In preparing FOFI, real estate and natural resource issuers should consider including forecast or projected cash flow information, as appropriate, in addition to the minimum disclosure recommended by Canadian GAAP.
PART 2 GENERAL GUIDELINES FOR THE PREPARATION OF PROJECTIONS
2.1 Hypotheses
(1) The requirement contained in subsection 4.2(1) of the Instrument reflects the view of the Canadian securities regulatory authorities that the use of many hypotheses as a basis for a projection makes the projection less reliable.
(2) In determining whether a projection is based to a greater extent on reasonable and supportable assumptions than on hypotheses for the purposes of subsection 4.2(1) of the Instrument, the securities regulatory authority will consider the relative impact of those assumptions and hypotheses on significant line items presented in the FOFI, such as revenues and net income.
(2) In determining whether a projection is based to a greater extent on reasonable and supportable assumptions than on hypotheses for the purposes of subsection 4.2(1) of the Instrument, the securities regulatory authority will consider the relative impact of those assumptions and hypotheses on significant line items presented in the FOFI, such as revenues and net income.
PART 3 COMPARISON OF FOFI WITH ACTUAL RESULTS
3.1 Review and Comparison
(1) For the purpose of conducting the review required by subsection 5.1(1) of the Instrument, the Canadian securities regulatory authorities are of the view that comparisons usually should address each material individual item, including each assumption, that is included in the FOFI.
(2) For example, if the actual dollar amount of sales approximates the amount forecasted or projected but the sales mix or sales volume differs materially from the mix or volume predicted, generally it would be appropriate to explain this fact.
(2) For example, if the actual dollar amount of sales approximates the amount forecasted or projected but the sales mix or sales volume differs materially from the mix or volume predicted, generally it would be appropriate to explain this fact.
PART 4 PRE-CLEARANCE OF FOFI
4.1 Questions and Pre-Clearance -The Canadian securities regulatory authorities encourage issuers that have specific questions concerning FOFI and its preparation to contact staff of the securities regulatory authority prior to including FOFI in a general purpose document.