Guidelines for Requests for Consultations with the Office of the Chief Accountant
As part of its on-going efforts to promote high quality financial reporting, the Office of the Chief Accountant (OCA) communicates with reporting issuers and their auditors and other stakeholders by providing consultations, in advance of filing financial statements with the OSC, on unusual or complex technical accounting issues, and financial statement disclosures. While the OCA’s response is not binding on the issuer, nor is the OSC precluded from undertaking further review of the issuer’s ongoing continuous disclosure record at any time, we have developed the following guidelines to assist reporting issuers in understanding the OCA’s external consultation process.
B. Organisation & Function of the OCA
The OCA supports the OSC in creating and promoting a high-quality framework for financial reporting by market participants. OCA staff advise the OSC on financial reporting, auditing and related policy issues. The OCA works with other OSC branches, external committees, public companies, registrants, auditors, legal advisors and others to promote compliance with financial reporting requirements of securities laws.
OCA staff also initiate or recommend policy projects that seek to improve the integrity and transparency of financial reporting by public companies and other reporting issuers.
This document outlines our expectations of reporting issuers who initiate advance consultations with the OCA regarding unusual or technical accounting issues, and financial statement disclosures and includes guidance with respect to the form and content of correspondence. This protocol does not replace and is not a substitute for the existing process for pre-filings and applications made under National Instrument 11-203 - Process for Exemptive Relief Applications in Multiple Jurisdictions.
D. Expectations of Reporting Issuers who Consult with the OCA
Based on our experience, the Staff of the OCA can more quickly address a reporting issuer’s questions, when certain actions have been taken by the issuer to facilitate discussions with the OCA. As such, the Staff of the OCA ask that:
- Appropriate research and analysis should be conducted and documented by the issuer prior to contacting the OCA;
- The reporting issuer should consult with their auditor or advisor (if applicable) on the matter in question prior to contacting the OCA;
- Requests for consultations and all related supporting documents are to be copied to the reporting issuer’s auditor
- Requests for consultations should be from individuals within the company that have an appropriate level of authority and oversight for financial reporting matters;
- If the reporting issuer has an active or pending continuous disclosure review, requests for consultations should be made through the relevant Staff of Corporate Finance Branch of the OSC; and
- Reporting issuer must be principally regulated by the OSC.
E. Content of Correspondence
Any information that is considered to be confidential should be clearly marked as such. The OSC will maintain this information in confidence to the fullest extent permitted by law (although it may be subject to request under the Freedom of Information and Protection of Privacy Act (Ontario)).
In order to facilitate timely resolution of inquires, requests for consultations should be made in writing and should generally outline factual details, accounting and reporting considerations, and information with respect to disclosures. In urgent circumstances, requests for consultations may be initiated by telephone, provided that such communication is subsequently addressed through a written request. Written requests should specifically include the following information:
- An overview of the nature of the reporting issuer’s business and operations;
- A complete and clear description of the facts underlying the issue that is the subject of the request, and the purpose for which assistance from the OCA is sought;
- Articulation of the specific question(s) being raised to the OCA or clarification(s) being sought;
- A comprehensive analysis of the alternatives considered, with detailed reference to the relevant accounting standards including, where appropriate, the quantitative impact;
- Identification of accounting treatment of similar transactions made by other entities;
- Identification and description of any industry specific matters;
- A summary of pertinent financial information;
- A description of any current or previous discussions or correspondence with any OSC branches or other regulatory bodies on the matter;
- Conclusions reached by the reporting issuer (on the particular matter) and the basis for such conclusions;
- Conclusions reached by the reporting issuer’s auditor or advisor (if applicable);
- Specific financial statement treatment and disclosures intended to be made (if applicable;
- Any other documents that may be relevant to our understanding of the issue
It is important to note that requests which do not provide sufficient information may require a longer time for us to provide a response.
F. Consultation Process
The process employed by OCA staff to address requests for consultation will vary depending on the complexity of the issue, available resources, and reporting issuer time constraints. Generally, the OCA will undertake the following steps with respect to each consultation.
Receipt of Request for Consultation by OCA: Once a request for consultation (including the relevant supporting documents) is received by the OCA, it will be reviewed and assigned to an OCA Staff member. This Staff member will be the point of contact for all discussions with the OCA related to the reporting issuers request. Depending on the complexity and time sensitivity of the issue, multiple Staff members may be assigned to the consultation request; however, one point of contact will still be designated. The OCA will strive to contact the reporting issuer within 3 business days to acknowledge receipt of the consultation request.
Review of Request for Consultation by OCA: The OCA Staff assigned to the matter will review the reporting issuer’s consultation request and related documents in their entirety.
If determined appropriate by the OCA, the OCA Staff may also consult with other staff within the OSC, or more broadly, the CSA or other regulatory bodies. During any such consultations by the OCA, confidentiality of the reporting issuer and the transaction or issue being discussed will be maintained by the OCA.
Communication with Reporting Issuer: Upon review of the issue and other relevant literature, the OCA will determine if there are further questions for the reporting issuer and its auditors or advisors (if applicable). The OCA will typically set up a conference call to discuss the questions and solicit any further clarifications about the reporting issuer’s specific facts and circumstances. In some instances, it may be requested by the OCA that the reporting issuer’s auditor or advisor be present for the conference call. Having the auditor present can help to facilitate a comprehensive discussion and enhance the understanding of the technical issue.
During the conference call, the OCA Staff will ask the reporting issuer to give a brief introduction of the matter. At this point, the OCA will ask any specific questions, the responses to which may be central to our analysis and to reaching a conclusion. The reporting issuer will also be given an opportunity to further elaborate its recommended treatment of the matter. As a result of the conference call, there may be additional written correspondence that the reporting issuer will be requested to prepare, – for example, to provide written responses to any additional questions raised (depending on the complexity of the response), or to submit additional documents.
Closing the Request: Once the OCA has formulated its views regarding the issue, the OCA will verbally communicate those views and the supporting rationale to the reporting issuer. The OCA’s response is not binding on the issuer, nor is the OSC precluded from undertaking further review of the issuer’s ongoing continuous disclosure record at any time.
The OCA will not issue written correspondence to close the matter. A reporting issuer, however, may wish to prepare and send the OCA Staff a memorandum describing its understanding of the OCA’s position.
G. Form of Delivery
The OCA will accept requests for consultation through e-mail. Reporting issuers may email their requests to [email protected]