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Canadian report on interim reporting

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18 Mar 2014

Chartered Professional Accountants Canada (CPA Canada) and the Canadian Investor Relations Institute (CIRI) have published a draft 'discussion brief' on interim reporting strategies. The report takes the view that choices involved in interim reporting should be considered as a strategic matter, designed to maximise the credibility of interim communications, and stakeholder confidence in those communications.

The draft discussion brief is based on a review of quarterly and annual financial statements of various listed Canadian companies, and was focused on developing observations for management and directors to consider in discussing and review interim financial reports, rather than compliance with reporting requirements such as IAS 34 Interim Financial Reporting and Canadian continuous disclosure rules.

The report notes that the requirements for interim reporting are not extensive as those applying to annual reporting and so leave room for judgement, both in financial statements and management discussion and analysis (MD&A). The report outlines some of these areas of judgement, including:

  • The nature of the entity's operations assisting in determining the level of detail and amount of repetition from previous interim reports, e.g. development stage entities may provide greater detail period to period than stable industrial entities with predictable operating cycles
  • Some entities may benefit from including comparative information in relation to the income statement items against the immediately preceding period in addition to information required by IAS 34 (corresponding periods in the preceding year). Similarly, the report recommends that some entities strongly consider providing a statement of cash flows for the current and comparative quarter
  • Although not required by IAS 34 or regulatory requirements, entities may consider issuing separate fourth-quarter financial reports, or increasing the prominence and completeness of fourth-quarter information that is included in annual reports

The report suggests that choices and judgements made extend to quarterly earnings conference calls, considerations about the confidentiality of information, and whether supplementary information should be provided. The need for well-articulated policy frameworks and sufficient communication of the approach taken to the preparation and presentation of interim financial information is also discussed.

In terms of the MD&A, the report focuses on three additional considerations: user expectations for an "outlook" section, the need for discussion of progress against the organisation's strategy, and the issues surrounding supplementary performance measures such as 'EBITDA' and 'interest coverage'.

The report concludes by considering the impact of materiality assessments on information disclosed, considerations around external auditor reviews of interim information, and the need for a continual assessment of the optimal choices in interim reporting.

The draft discussion brief is open for comment until 30 April 2014. Click for access to the report (link to CPA Canada website).

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