(March 22 – 12:25 ET) – The Ontario Securities Commission has published two proposed Rules and Companion Policies designed to improve public company disclosure of financial information . The changes require greater disclosure and better information be provided in quarterly reports.
“Clearly defined and effective corporate governance principles can make Canadian companies more accountable and more competitive. In fact, the quality of corporate governance is becoming a valuable asset in global competition for capital,” says OSC Chairman, David Brown.
Proposed Rule 52-501, Financial Statements, introduces a new requirement for all public companies to include in interim financial statements an income statement and a cash flow statement for the current quarter, in addition to the currently required year to date information.
Companies will also be required for the first time to provide an interim balance sheet and explanatory notes to the interim financial statements. Under the proposed rule, a company’s board of directors and its audit committee will be required to review the interim financial statements before they are filed with the Commission and distributed to shareholders. The proposed Companion Policy urges boards to consider retaining external auditors to review the statements.
Proposed Rule 51-501 reformulates existing OSC Policy 5.10 and introduces a new requirement for management to provide a narrative discussion and analysis of interim financial results with the interim financial statements. This will facilitate better understanding of past corporate performance and future prospects on a more timely basis. The proposed Rule will replace OSC Policy 5.10 and give the Commission greater ability to enforce compliance with annual and interim MD&A content requirements.
“These new rules strengthen significantly the current requirements relating to the content of quarterly reports”, says Chief Accountant, John Carchrae. “Acting in combination with current proposals on interim financial statements issued by the CICA’s Accounting Standards Board, the rules will enhance greatly the information available to the public for purposes of making investment decisions.”
In addition to the proposed Rules, the Commission intends to continue to consider other steps that might be taken to enhance the quality and reliability of public company financial reporting. Matters under consideration include; the role and responsibilities of audit committees generally, the qualifications of audit committee members, to what extent the audit committee should be mandated and to what extent external auditors should be involved in interim reports.
The OSC is seeking industry comment. To be considered comments must be sent to the OSC by June 9, 2000.
-IE Staff