Securities regulators are seeing certain shortcomings in the financial filings of investment fund issuers as they make the transition to International Financial Reporting Standards (IFRS).

The Ontario Securities Commission (OSC) published a staff notice from its Investment Funds and Structured Products Branch that looks at the deficiencies it has seen so far in funds’ IFRS filings. Many funds filed their first financial reports in IFRS for the period ended June 30, it notes; and, it has uncovered certain common issues in those filings.

For example, the notice says that some funds did not include all of the required reconciliation disclosures. “These reconciliations are important for investors to understand the effect and implications of the transition … to IFRS,” it says.

The OSC is also seeing funds that failed to include an opening statement of financial position when they moved to IFRS; which is now required by securities law. “The opening IFRS statement of financial position is the starting point for an investment fund’s accounting under IFRS and investors need this information to understand how the transition from pre-changeover Canadian GAAP to IFRS affects the investment fund’s reported financial position, even if to show that it has had no effect,” it says.

Additionally, the OSC has seen funds that left out footnotes in fund performance reports to indicate which accounting standards apply to particular reporting periods. “This disclosure is important for investors to understand that the table may present information derived from both IFRS and pre-changeover Canadian GAAP,” it says.

“Converting from pre-changeover Canadian GAAP to IFRS represents a change to reporting standards that investment funds issuers will continue to experience as they adopt IFRS on varied timelines throughout 2014 and 2015. We will issue further releases with additional observations as our reviews continue, in order to assist investment fund issuers and their advisers with their IFRS filings,” says the OSC.

The notice also indicates that the OSC recently advised fund managers with funds that use calendar year ends that the OSC will be reviewing their first interim financial reports and interim manager performance reports. “While our reviews are ongoing, this release outlines the types of deficiencies we have identified to date and will be addressing in our comment letters to most investment fund managers,” it says.