Archived Notices, Instruments, Rules and Policies

CSA Staff Notice 81-320 (Revised) Update on International Financial Reporting Standards for Investment Funds First published October 8, 2010, revised March 23, 2011 Purpose This notice updates investment funds and their advisers on the adoption of International Financial Reporting Standards (IFRS) by investment funds in Canada. The Handbook of the Canadian Institute of Chartered Accountants (Handbook) refers to “investment companies”, the majority of which are “investment funds” for the purposes of securities legislation. This notice applies only to those investment companies that are investment funds as defined in securities legislation and are subject to National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106). 1 The Canadian Securities Administrators (CSA) previously published proposals relating to the adoption of IFRS by investment funds on October 16, 2009. 2 These proposals were based on the Canadian Accounting Standards Board (AcSB) decision to transition financial reporting for Canadian publicly accountable enterprises to IFRS as issued by the International Accounting Standards Board (IASB) for financial years beginning on or after January 1, 2011. The AcSB published amendments to the Handbook on October 1, 2010 that provided a one-year deferral of the transition to IFRS for investment companies. However, the AcSB issued subsequent amendments to the Handbook in March 2011, providing a two-year deferral of the changeover date to January 1, 2013. 3 Background Under International Accounting Standard 27 Consolidated and Separate Financial Statements (IAS 27), an entity is required to consolidate investments that it controls. As part of a project on consolidation, the IASB announced that it will propose that investment companies be exempt from consolidation and instead account for controlling interests in other entities at fair value. 4 Based on the IASB’s proposed work plan (as at February 1, 2011), while an exposure draft is expected to be published in Q2 2011, it appears that the IASB has not yet indicated when a final standard for investment companies will be available. Following the IASB announcement, the AcSB amended Part I of the Handbook to require investment companies, as defined in and applying Accounting Guideline 18 Investment Companies, to adopt IFRS 1 The IFRS-related amendments to CSA rules for issuers that are not investment funds came into force on January 1, 2011. 2 These proposals were published in French on March 12, 2010 by the Autorité des marchés financiers and the New Brunswick Securities Commission. 3 The AcSB Decision Summary regarding the subsequent deferral is at www.acsbcanada.org/decision- summaries/2011/item46514.aspx. 4 The IASB work plan and projected timetable for this project can be found in the Standards Development section of the IASB/IFRS website (www.ifrs.org/Current+Projects/IASB+Projects/IASB+Work+Plan.htm).

as issued by the IASB for annual periods beginning on or after January 1, 2013, with earlier adoption permitted. The deferral of the mandatory changeover from January 1, 2011 to January 1, 2013 is intended to allow the IASB’s proposed exemption from consolidation for investment companies to be in place prior to the adoption of IFRS by investment companies in Canada. Move to IFRS by investment funds CSA staff are also of the view that it would be preferable for the IASB’s proposed consolidation exemption to be in place when IFRS is adopted by investment funds in Canada. Accordingly, we will be reviewing and revising the proposed amendments to NI 81-106, and related consequential amendments, previously published for comment in light of the recent developments at both the IASB and AcSB. The CSA comment period for the proposed amendments ended on January 14, 2010, and the majority of the comments related to the implications of IAS 27 to Canadian investment funds. Given the proposed exemption that the IASB is now considering, the issues raised by commenters relating to consolidation may no longer exist for the majority of investment funds. As a result, CSA staff anticipate that the proposed amendments to NI 81-106 related to the consolidation requirement may no longer be required. In order to have more certainty about the scope and impact of the anticipated exemption from consolidation for investment companies that the IASB is considering, CSA staff will take additional time before seeking approval in each CSA jurisdiction to either republish or finalize IFRS-related amendments to NI 81-106 and other instruments related to investment funds, with the goal of having the necessary IFRS-related amendments for investment funds in force by January 1, 2013. Prior to the mandatory changeover to IFRS set out in the Handbook, CSA staff consider the standards in Part V of the Handbook to be Canadian generally accepted accounting principles (Canadian GAAP) as applicable to public enterprises for securities legislation purposes. CSA staff recognize that some investment funds may want to prepare their financial statements in accordance with IFRS as issued by the IASB for annual periods beginning prior to January 1, 2013. Therefore, an investment fund that wants to use IFRS for interim and annual financial statements relating to annual periods beginning prior to January 1, 2013 must apply for exemptive relief from the current requirement to prepare its financial statements in accordance with Canadian GAAP as applicable to public enterprises. 5 Investment funds filing applications for exemptive relief from NI 81-106 should also identify any issues that early adoption may create with respect to their financial disclosure. CSA Staff Notice 52-320 Disclosure of Expected Changes in Accounting Policies Relating to Changeover to International Financial Reporting Standards 6 set out the CSA’s views on the disclosure that investment funds should be providing in advance of the changeover to IFRS. Investment funds should continue to provide appropriate disclosure about the expected impacts of the changeover to IFRS in accordance with the guidance in CSA Staff Notice 52-320 in their annual and interim filings in advance of the January 1, 2013 changeover date. 5 This requirement is found in section 2.6 of NI 81-106. 6 This CSA Staff Notice was published May 9, 2008.

Questions Please refer your questions to any of: Stacey Barker Vera Nunes Senior Accountant, Investment Funds Assistant Manager, Investment Funds Ontario Securities Commission Ontario Securities Commission 416-593-2391 416-593-2311 sbarker@osc.gov.on.ca vnunes@osc.gov.on.ca Suzanne Boucher Mathieu Simard Analyste, Service des fonds d’investissement Chef de service, Service des fonds d’investissement Autorité des marchés financiers Autorité des marchés financiers 514-395-0337, ext. 4477 514-395-0337, ext. 4471 or 1-877-525-0337, ext. 4477 or 1-877-525-0337, ext. 4471 suzanne.boucher@lautorite.qc.ca mathieu.simard@lautorite.qc.ca Manny Albrino Christopher Birchall Associate Chief Accountant Senior Securities Analyst British Columbia Securities Commission British Columbia Securities Commission 604-899-6641 or 1-800-373-6393 604-899-6722 or 1-800-373-6393 malbrino@bcsc.bc.ca cbirchall@bcsc.bc.ca Wayne Bridgeman Ian G. Kerr Senior Analyst, Corporate Finance Senior Legal Counsel Manitoba Securities Commission Alberta Securities Commission 204-945-4905 403-297-4225 wayne.bridgeman@gov.mb.ca ian.kerr@asc.ca Pierre Thibodeau Acting Chief Financial Officer/Senior Securities Analyst New Brunswick Securities Commission 506-643‐7751 pierre.thibodeau@nbsc-cvmnb.ca March 23, 2011