Search Results for “Do U.S. companies have to disclose scope 3 emissions?”

Q: Do U.S. companies have to disclose scope 3 emissions?

A: U.S. companies are required to disclose their Scope 3 emissions if those emissions are material or if the company has set a GHG emissions reduction target or goal that includes Scope 3 emissions. When disclosing Scope 3 emissions, companies must provide the data separately from Scope 1 and Scope 2 emissions and identify the categories of upstream or downstream activities included in the calculation. If any category of Scope 3 emissions is significant, it must be identified, and the emissions data for that category must be provided separately along with the total Scope 3 emissions. Smaller reporting companies are exempt from this requirement.

Form 51-107B Climate-Related Strategy, Risk Management and Metrics and Targets Disclosure (Proposed)

Item 4

GHG Emissions

(a) Disclose:

(i) the issuer’s Scope 1 GHG emissions and the related risks, or the issuer’s reasons for not disclosing this information,

(ii) the issuer’s Scope 2 GHG emissions and the related risks, or the issuer’s reasons for not disclosing this information, and

(iii) the issuer’s Scope 3 GHG emissions and the related risks, or the issuer’s reasons for not disclosing this information.*

(b) disclose the reporting standard used by the issuer to calculate and disclose the GHG emissions referred to in (a).

(c) If the reporting standard referred to in (b) is not the GHG Protocol, disclose how the reporting standard used by the issuer is comparable with the GHG Protocol.

As an alternative, the CSA is also consulting on requiring issuers to disclose Scope 1 GHG emissions either a) when that information is material, or b) in all cases. Under this alternative, disclosure of Scope 2 and Scope 3 GHG emissions would not be mandatory. Issuers would have to disclose either their Scope 2 and 3 GHG emissions and the related risks, or the issuer’s reasons for not disclosing this information. Text reflecting this alternative disclosure requirement for Scope 1 GHG emissions in all cases is set out below.

GHG Emissions

(a) Disclose:

(i) the issuer’s Scope 1 GHG emissions and the related risks,

(ii) the issuer’s Scope 2 GHG emissions and the related risks, or the issuer’s reasons for not disclosing this information, and

(iii) the issuer’s Scope 3 GHG emissions and the related risks, or the issuer’s reasons for not disclosing this information.

(b) disclose the reporting standard used by the issuer to calculate and disclose the GHG emissions referred to in (a).

(c) If the reporting standard referred to in (b) is not the GHG Protocol, disclose how the reporting standard used by the issuer is comparable with the GHG Protocol.

* Lexata note: the disclosures required under (a)(i)-(iii) above are similar to the Recommendations of the Task-Force on Climate-Related Financial Disclosures (TCFD). The main difference is that, under the TCFD recommendations, companies do not have the option of explaining their reasons for not disclosing emissions as a substitute for actually disclosing emissions.

Part 2 TCFD Recommendations

Proposed Companion Policy 51-107CP Disclosure of Climate-Related Matters

Section 5

Greenhouse Gas Emissions Disclosure

(1) Item 4(a) of Form 51-107B requires an issuer to disclose each of its Scope 1, Scope 2 and Scope 3 GHG emissions or explain why it has not done so. Accordingly, where an issuer has disclosed its Scope 1 and Scope 2 GHG emissions but has elected to not disclose its Scope 3 GHG emissions, the issuer would be required to disclose its reasons for not providing its Scope 3 GHG emissions. Where an issuer has elected to not disclose any GHG emissions, the issuer may provide its reasons for not doing so in respect of GHG emissions as a whole, as opposed to a separate explanation for each scope.

(2) Certain issuers are already required to disclose GHG emissions under existing reporting programs, including for example, on a per facility basis under the federal Greenhouse Gas Reporting Program. The securities regulatory authorities expect issuers that are subject to an existing GHG emissions reporting program to disclose Scope 1 GHG emissions under the Instrument. However, should they elect to not disclose Scope 1 GHG emissions under the Instrument, they should clearly explain their election in light of such pre-existing reporting obligations.

(3) Subsection 4(2) of the Instrument requires an issuer to use a GHG emissions reporting standard to calculate and report its GHG emissions. A GHG emissions reporting standard is the GHG Protocol, or a reporting standard for calculating and reporting GHG emissions if it is comparable with the GHG Protocol. Accordingly, pursuant to item 4(c) of Form 51-107B, issuers who disclose GHG emissions using a reporting standard that is not the GHG Protocol must disclose how such standard is comparable with the GHG Protocol.

(4) Form 51-107B permits an issuer to incorporate GHG disclosure by reference to another document. If doing so, the issuer must clearly identify the reference document or any excerpt of it that the issuer incorporates into the disclosure provided under Item 4 of Form 51-107B. Unless the issuer has already filed the reference document or excerpt under its SEDAR profile, the issuer must file it at the same time as it files the document containing the disclosure required under Form 51-107B.

Proposed Companion Policy 51-107CP Disclosure of Climate-Related Matters

Part 2 TCFD Recommendations

Section 2

TCFD Recommendations

(1) The disclosure requirements of the Instrument are set out in Form 51-107A and Form 51-107B and, subject to certain modifications, are consistent with the recommendations (the “TCFD recommendations”) developed by the Task Force on Climate-related Financial Disclosures (the “TCFD”) and published in their report entitled Recommendations of the Task Force on Climate-related Financial Disclosures dated June 2017 (the “TCFD Final Report”)

[Lexata note: the TCFD’s 2021 document Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures supercedes the 2017 equivalent implementation document].

Notably, the Instrument does not require issuers to disclose a scenario analysis, which is the TCFD recommended disclosure that describes the resilience of an issuer’s strategy, taking into consideration different climate-related scenarios. In addition, issuers may elect to not provide the TCFD recommended disclosure respecting greenhouse gas (“GHG”) emissions and their related risks, provided they instead disclose their reasons for not including this disclosure. [FN 1]

FN 1 As an alternative, the CSA is also consulting on requiring issuers to disclose Scope 1 GHG emissions. Under this alternative, disclosure of Scope 2 and Scope 3 GHG emissions would not be mandatory. Issuers would have to disclose either their Scope 2 and 3 GHG emissions and the related risks or the issuer”s reasons for not disclosing this information.

(2) The TCFD recommendations are summarized in Figure 4 of Section C of the TCFD Final Report and are reproduced in Table 1 below. Table 1 also illustrates the modifications to the TCFD recommended disclosures required by the Instrument:

Table 1: TCFD Recommendations and disclosure required by the Instrument

TCFD Recommendations	TCFD Recommended Disclosures	Disclosure required by the Instrument
Governance Disclose the organization’s governance around climate-related risks and opportunities.	a) Describe the board’s oversight of climate-related risks and opportunities. b) Describe management’s role in assessing and managing climate-related risks and opportunities.	a) Same as TCFD Recommended Disclosures. b) Same as TCFD Recommended Disclosures.
Strategy Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material.	a) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term. b) Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning. c) Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.	a) Same as TCFD Recommended Disclosures. b) Same as TCFD Recommended Disclosures. c) Not required.
Risk management Disclose how the organization identifies, assesses, and manages climate-related risks.	a) Describe the organization’s processes for identifying and assessing climate-related risks. b) Describe the organization’s processes for managing climate-related risks. c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management.	a) Same as TCFD Recommended Disclosures. b) Same as TCFD Recommended Disclosures. c) Same as TCFD Recommended
Metrics and targets Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.	a) Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process. b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks. c) Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.	a) Same as TCFD Recommended Disclosures. b) Not mandatory. An issuer must disclose its GHG emissions and the related risks or the issuer’s reasons for not disclosing this information. c) Same as TCFD Recommended Disclosures.

(3) Consistent with the TCFD recommendations and with disclosure requirements respecting corporate governance matters under National Instrument 58-101 Disclosure of Corporate Governance Practices, the disclosure required by the Instrument relating to the TCFD recommendation “Governance” and “Risk management” in Table 1 above are not subject to a materiality assessment. Accordingly, issuers must provide this disclosure in the applicable continuous disclosure document as required by the Instrument.

Disclosure under the headings “Strategy” and “Metrics and targets” is only required where such information is material. Information is likely material if a reasonable investor’s decision whether to buy, sell or hold securities in an issuer would likely be influenced or changed if the information in question was omitted or misstated.

An issuer must disclose its GHG emissions and the related risks or the issuer’s reasons for not disclosing this information. As an alternative, the CSA is also consulting on requiring issuers to disclose Scope 1 GHG emissions either a) when that information is material, or b) in all cases. Under this alternative, disclosure of Scope 2 and Scope 3 GHG emissions would not be mandatory. Issuers would have to disclose either their Scope 2 and 3 GHG emissions and the related risks, or the issuer’s reasons for not disclosing this information. If necessary, the final form of Policy will be modified to reflect the alternative chosen.

UK Climate Disclosure Rules

Companies Act 2006

Part 15 Accounts and reports

Chapter 4A Strategic Report

EXPLANATORY NOTE

(This note is not part of the Regulations.)

These Regulations require certain companies to provide climate-related financial disclosures in their strategic report.

The requirement applies to a traded company, a banking company, an authorised insurance company and a company carrying on insurance business which in each case satisfy various conditions, including that of having more than 500 employees.

The companies are listed in section 414CA(1) of the Companies Act 2006 and the requirement for more than 500 employees is set out in section 414CA(4) as applied by section 414CA(1B).

In addition, these Regulations require two further types of company, with more than 500 employees, to make climate-related financial disclosures. These are a company which has securities admitted to trading on the Alternative Investment Market and a high turnover company which is a company which does not fall within another category but which has a turnover of more than £500 million (see regulation 3).

National Policy 51-201 Disclosure Standards

Part IV Materiality

Section 4.4

External Political, Economic and Social Developments

Companies are not generally required to interpret the impact of external political, economic and social developments on their affairs. However, if an external development will have or has had a direct effect on the business and affairs of a company that is both material and uncharacteristic of the effect generally experienced by other companies engaged in the same business or industry, the company is urged to explain, where practical, the particular impact on them. For example, a change in government policy that affects most companies in a particular industry does not require an announcement, but if it affects only one or a few companies in a material way, such companies should make an announcement.

UK Climate Disclosure Rules

Companies Act 2006

Part 15 Accounts and reports

Chapter 4A Strategic Report

Section 414CB(4A)

Contents of non-financial and sustainability information statement – Exception from Disclosure Requirement

Where the directors of a company reasonably believe that, having regard to the nature of the company’s business, and the manner in which it is carried on, the whole or a part of a climate-related financial disclosure required by subsection (2A)(e), (f), (g) or (h) is not necessary for an understanding of the company’s business, the directors may omit the whole or (as the case requires) the relevant part of that climate-related financial disclosure.

UK Climate Disclosure Rules

Companies Act 2006

Part 15 Accounts and reports

Chapter 4A Strategic Report

Section 414CB(A1)

Contents of non-financial and sustainability information statement

The non-financial and sustainability information statement must contain the climate-related financial disclosures of the company.

Chapter 4A Strategic Report

UK Climate Disclosure Rules

Companies Act 2006

Part 15 Accounts and reports

Section 414CB(4B)

Contents of non-financial and sustainability information statement – Explanation of Omission

Where the directors omit the whole or part of a climate-related financial disclosure in reliance on subsection (4A) the non-financial and sustainability information statement must provide a clear and reasoned explanation of the directors’ reasonable belief mentioned in that subsection.

National Policy 51-201 Disclosure Standards

Part VI Best Disclosure Practices

Section 6.1

General

(1) There are some practical measures that companies can adopt to help ensure good disclosure practices. The consistent application of “best practices” in the disclosure of material information will enhance a company’s credibility with analysts and investors, contribute to the fairness and efficiency of the capital markets and investor confidence in those markets, and minimize the risk of non-compliance with securities legislation.

(2) The measures recommended in this policy statement are not intended to be prescriptive. We recognize that many large listed companies have specialist investor relations staff and devote considerable resources to disclosure, while in smaller companies this is often just one of the many roles of senior officers. We encourage companies to adopt the measures suggested in this policy statement, but they should be implemented flexibly and sensibly to fit the situation of each individual company.

National Policy 51-201 Disclosure Standards

Part III Overview of the Statutory Prohibitions Against Selective Disclosure

Section 3.5

Generally Disclosed

(1) The tipping prohibition does not require a company to release all material information to the marketplace. [FN 20] Instead, it prohibits a company from disclosing nonpublic material information to anyone (other than in the “necessary course of business”) before the company generally discloses the information to the marketplace.

(2) Securities legislation does not define the term “generally disclosed”. Insider trading court decisions state that information has been generally disclosed if:

(a) the information has been disseminated in a manner calculated to effectively reach the marketplace; and

(b) public investors have been given a reasonable amount of time to analyze the information. [FN 21]

(3) Except for “material changes,” which must be disclosed by news release, securities legislation does not generally require a particular method of disclosure to satisfy the “generally disclosed” requirement. In determining whether material information has been generally disclosed, we will consider all of the relevant facts and circumstances, including the company’s traditional practices for publicly disclosing information and how broadly investors and the investment community follow the company. We recognize that the effectiveness of disclosure methods varies between companies. Whatever disclosure method is used to release information, we encourage consistency in a company’s disclosure practices. [FN 22]

(4) Companies may satisfy the “generally disclosed” requirement by using one or a combination of the following disclosure methods:

(a) News releases distributed through a widely circulated news or wire service. [FN 23]

(b) Announcements made through press conferences or conference calls that interested members of the public may attend or listen to either in person, by telephone, or by other electronic transmission (including the Internet). A company needs to provide the public with appropriate notice of the conference or call by news release.[FN 24] The notice should include the date and time of the conference or call, a general description of what is to be discussed, and the means of accessing the conference or call. [FN 25] The notice should also indicate for how long the company will make a transcript or replay of the call available over its Web site.

(5) We recognize that many companies prefer news release disclosure as the safest means of satisfying the “generally disclosed” requirement. In section 6.6 of the Policy, we recommend as a “best practice” a disclosure model centred around news release disclosure of material information, followed by an open and accessible conference call to discuss the information contained in the news release. However, we believe that alternative methods may also be appropriate. We believe it is important to preserve for companies the flexibility to develop a disclosure model that suits their circumstances and disseminates material information in the manner best calculated to effectively reach the marketplace.

(6) Posting information to a company’s Web site will not, by itself, be likely to satisfy the “generally disclosed” requirement. Investors’ access to the Internet is not yet sufficiently widespread such that a Web site posting alone would be a means of dissemination “calculated to effectively reach the marketplace.” Further, effective dissemination involves the “pushing out” of information into the marketplace. Notwithstanding the ability of some issuers’ Web sites to alert interested parties to new postings, Web sites by and large do not push information out into the marketplace. Instead, investors would be required to seek out this information from a company’s Web site. Active and effective dissemination of information is central to satisfying the “generally disclosed” requirement.

(7) We support the use of technology in the disclosure process and believe that companies’ Web sites can be an important and useful tool in improving communications to the marketplace. As technology evolves and as more investors gain access to the Internet, it may be that postings to certain companies’ Web sites alone could satisfy the “generally disclosed” requirement. At such time, we will revisit this policy statement and reconsider the guidance provided on this issue. In the meantime, we strongly encourage companies to utilize their Web sites to improve investor access to corporate information. [FN 26]

FN 20 See, however, section 2.1 regarding an issuer’s timely disclosure obligations.

FN 21 Green v. Charterhouse Group Can. Ltd. (1976), 12 O.R. (2d) 280. In the Matter of Harold P. Connor et al. (1976) Volume II OSCB 149. Existing case law does not establish a firm rule as to what would be a reasonable amount of time for investors to be given to analyze information. The time period will depend on a number of factors including the circumstances in which the event arises, the nature and complexity of the information, the nature of the market for the company’s securities, and the manner used to release the information. We recognize that the case law is dated in this respect and that, if the courts were to revisit these decisions today, they may not find the time parameters set out in the decisions appropriate for modern technology.

FN 22 A sudden change from the usual method of generally disclosing material information may attract regulatory attention in certain circumstances; for example, a last minute webcast of poor quarterly results without advance notice when positive quarterly results are generally released in advance of a subsequently scheduled discussion of the results.

FN 23 We encourage companies to file their news releases on SEDAR. Filing a news release on SEDAR alone will not constitute “general disclosure”.

FN 24 This is based on guidance provided by the U.S. Securities and Exchange Commission (the “SEC”) in the adopting release to Regulation FD.

FN 25 This might include a Web site link to any software that is necessary to access the webcast.

FN 26 See also The Toronto Stock Exchange’s Electronic Communications Disclosure Guidelines.

National Policy 51-201 Disclosure Standards

Part V Risks Associated With Certain Disclosures

Section 5.5

Selective Disclosure Violations Can Occur in a Variety of Settings

Selective disclosure most often occurs in one-on-one discussions (like analyst meetings) and in industry conferences and other types of private meetings and break-out sessions. But it can occur elsewhere. For example, a company should not disclose material nonpublic information at its annual shareholders meeting unless all interested members of the public may attend the meeting and the company has given adequate public notice of the meeting (including a description of what will be discussed at the meeting). Alternatively, a company can issue a news release at or before the time of the meeting.

National Policy 51-201 Disclosure Standards

Part III Overview of the Statutory Prohibitions Against Selective Disclosure

Section 3.6

Unintentional Disclosure

Securities legislation does not provide a safe harbour which allows companies to correct an unintentional selective disclosure of material information. If a company makes an unintentional selective disclosure it should take immediate steps to ensure that a full public announcement is made. This includes contacting the relevant stock exchange and requesting that trading be halted pending the issuance of a news release. Pending the public release of the material information, the company should also tell those parties who have knowledge of the information that the information is material and that it has not been generally disclosed.

Chapter 4A Strategic Report

UK Climate Disclosure Rules

Companies Act 2006

Part 15 Accounts and reports

Section 414CB(2A)

Contents of non-financial and sustainability information statement – Meaning of “climate-related financial disclosures”

In this section, “climate-related financial disclosures” mean

(a) a description of the company’s governance arrangements in relation to assessing and managing climate-related risks and opportunities;

(b) a description of how the company identifies, assesses, and manages climate-related risks and opportunities;

(c) a description of how processes for identifying, assessing, and managing climate-related risks are integrated into the company’s overall risk management process;

(d) a description of

(i) the principal climate-related risks and opportunities arising in connection with the company’s operations, and

(ii) the time periods by reference to which those risks and opportunities are assessed;

(e) a description of the actual and potential impacts of the principal climate-related risks and opportunities on the company’s business model and strategy;

(f) an analysis of the resilience of the company’s business model and strategy, taking into consideration different climate-related scenarios;

(g) a description of the targets used by the company to manage climate-related risks and to realise climate-related opportunities and of performance against those targets; and

(h) a description of the key performance indicators used to assess progress against targets used to manage climate-related risks and realise climate-related opportunities and of the calculations on which those key performance indicators are based.

National Policy 51-201 Disclosure Standards

Part VI Best Disclosure Practices

Section 6.3

Overseeing and Coordinating Disclosure

Establish a committee of company personnel or assign a senior officer to be responsible for:

(a) developing and implementing your disclosure policy;

(b) monitoring the effectiveness of and compliance with your disclosure policy;

(d) reviewing and authorizing disclosure (including electronic, written and oral disclosure) in advance of its public release; and

(e) monitoring your Web site.

National Policy 51-201 Disclosure Standards

Part VI Best Disclosure Practices

Section 6.6

Recommended Disclosure Model

(1) You should consider using the following disclosure model when making a planned disclosure of material corporate information, such as a scheduled earnings release:

(a) issue a news release containing the information (for example, your quarterly financial results) through a widely circulated news or wire service;

(b) provide advance public notice by news release of the date and time of a conference call to discuss the information, the subject matter of the call and the means for accessing it;

(c) hold the conference call in an open manner, permitting investors and others to listen either by telephone or through Internet webcasting; and

(d) provide dial-in and/or web replay or make transcripts of the call available for a reasonable period of time after the analyst conference call. [FN 42]

(2) The combination of news release disclosure of the material information and an open and accessible conference call to subsequently discuss the information should help to ensure that the information is disseminated in a manner calculated to effectively reach the marketplace and minimize the risk of an inadvertent selective disclosure during the follow-up call.

FN 42 This model disclosure policy was recommended by the SEC in the adopting release to Regulation FD.

Companion Policy 51-102CP Continuous Disclosure Obligations

Part 1 Introduction and Definitions

Section 1.3

Corporate Law Requirements

Reporting issuers are reminded that they may be subject to requirements of corporate law that address matters similar to those addressed by the Instrument, and which may impose additional or more onerous requirements. For example, applicable corporate law may require the delivery of annual financial statements to shareholders or may require the board of directors to approve interim financial reports.

Form 51-102F1 Management's Discussion & Analysis

Part 1 General Provisions

Section e

Focus on Material Information

Focus your MD&A on material information. You do not need to disclose information that is not material. Exercise your judgment when determining whether information is material.

National Policy 51-201 Disclosure Standards

Part VI Best Disclosure Practices

Section 6.12

Chat Rooms, Bulletin Boards and e-mails

Do not participate in, host or link to chat rooms or bulletin boards. Your disclosure policy should prohibit your employees from discussing corporate matters in these forums. This will help to protect your company from the liability that could arise from the well-intentioned, but sporadic, efforts of employees to correct rumours or defend the company. You should consider requiring employees to report to a designated company official any discussion pertaining to your company which they find on the Internet. If your Web site allows viewers to send you e-mail messages, remember the risk of selective disclosure when responding.

Form 51-102F1 Management's Discussion & Analysis

Part 1 General Provisions

Section j

Resource Issuers

If your company has mineral projects, your disclosure must comply with National Instrument 43-101 Standards of Disclosure for Mineral Projects, including the requirement that all scientific and technical disclosure be based on a technical report or other information prepared by or under the supervision of a qualified person. If your company has oil and gas activities, your disclosure must comply with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.

MD&A

SEC Rules

Regulation S-K

Item 303(b)

Full Fiscal Years

The discussion of financial condition, changes in financial condition and results of operations must provide information as specified in paragraphs (b)(1) through (3) of this section and such other information that the registrant believes to be necessary to an understanding of its financial condition, changes in financial condition and results of operations. Where the financial statements reflect material changes from period-to-period in one or more line items, including where material changes within a line item offset one another, describe the underlying reasons for these material changes in quantitative and qualitative terms. Where in the registrant’s judgment a discussion of segment information and/or of other subdivisions (e.g., geographic areas, product lines) of the registrant’s business would be necessary to an understanding of such business, the discussion must focus on each relevant reportable segment and/or other subdivision of the business and on the registrant as a whole.

(1) Liquidity and capital resources. Analyze the registrant’s ability to generate and obtain adequate amounts of cash to meet its requirements and its plans for cash in the short-term (i.e., the next 12 months from the most recent fiscal period end required to be presented) and separately in the long-term (i.e., beyond the next 12 months). The discussion should analyze material cash requirements from known contractual and other obligations. Such disclosures must specify the type of obligation and the relevant time period for the related cash requirements. As part of this analysis, provide the information in paragraphs (b)(1)(i) and (ii) of this section.

(i) Liquidity. Identify any known trends or any known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the registrant’s liquidity increasing or decreasing in any material way. If a material deficiency is identified, indicate the course of action that the registrant has taken or proposes to take to remedy the deficiency. Also identify and separately describe internal and external sources of liquidity, and briefly discuss any material unused sources of liquid assets.

(ii) Capital resources.

(A) Describe the registrant’s material cash requirements, including commitments for capital expenditures, as of the end of the latest fiscal period, the anticipated source of funds needed to satisfy such cash requirements and the general purpose of such requirements.

(B) Describe any known material trends, favorable or unfavorable, in the registrant’s capital resources. Indicate any reasonably likely material changes in the mix and relative cost of such resources. The discussion must consider changes among equity, debt, and any off-balance sheet financing arrangements.

(2) Results of operations.

(i) Describe any unusual or infrequent events or transactions or any significant economic changes that materially affected the amount of reported income from continuing operations and, in each case, indicate the extent to which income was so affected. In addition, describe any other significant components of revenues or expenses that, in the registrant’s judgment, would be material to an understanding of the registrant’s results of operations.

(ii) Describe any known trends or uncertainties that have had or that are reasonably likely to have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations. If the registrant knows of events that are reasonably likely to cause a material change in the relationship between costs and revenues (such as known or reasonably likely future increases in costs of labor or materials or price increases or inventory adjustments), the change in the relationship must be disclosed.

(iii) If the statement of comprehensive income presents material changes from period to period in net sales or revenue, if applicable, describe the extent to which such changes are attributable to changes in prices or to changes in the volume or amount of goods or services being sold or to the introduction of new products or services.

(3) Critical accounting estimates. Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant. Provide qualitative and quantitative information necessary to understand the estimation uncertainty and the impact the critical accounting estimate has had or is reasonably likely to have on financial condition or results of operations to the extent the information is material and reasonably available. This information should include why each critical accounting estimate is subject to uncertainty and, to the extent the information is material and reasonably available, how much each estimate and/or assumption has changed over a relevant period, and the sensitivity of the reported amount to the methods, assumptions and estimates underlying its calculation.

Instructions to paragraph (b): 1. Generally, the discussion must cover the periods covered by the financial statements included in the filing and the registrant may use any presentation that in the registrant’s judgment enhances a reader’s understanding. A smaller reporting company’s discussion must cover the two-year period required in Section 210.8-01 through 210.8-08 of this chapter (Article 8 of Regulation S-X) and may use any presentation that in the registrant’s judgment enhances a reader’s understanding. For registrants providing financial statements covering three years in a filing, discussion about the earliest of the three years may be omitted if such discussion was already included in the registrant’s prior filings on EDGAR that required disclosure in compliance with Section 229.303 (Item 303 of Regulation S-K), provided that registrants electing not to include a discussion of the earliest year must include a statement that identifies the location in the prior filing where the omitted discussion may be found. An emerging growth company, as defined in Section 230.405 of this chapter (Rule 405 of the Securities Act) or Section 240.12b-2 of this chapter (Rule 12b-2 of the Exchange Act), may provide the discussion required in paragraph (b) of this section for its two most recent fiscal years if, pursuant to Section 7(a) of the Securities Act of 1933 (15 U.S.C. 77g(a)), it provides audited financial statements for two years in a Securities Act registration statement for the initial public offering of the emerging growth company’s common equity securities.

2. If the reasons underlying a material change in one line item in the financial statements also relate to other line items, no repetition of such reasons in the discussion is required and a line-by-line analysis of the financial statements as a whole is neither required nor generally appropriate. Registrants need not recite the amounts of changes from period to period if they are readily computable from the financial statements. The discussion must not merely repeat numerical data contained in the financial statements.

3. Provide the analysis in a format that facilitates easy understanding and that supplements, and does not duplicate, disclosure already provided in the filing. For critical accounting estimates, this disclosure must supplement, but not duplicate, the description of accounting policies or other disclosures in the notes to the financial statements.

4. For the liquidity and capital resources disclosure, discussion of material cash requirements from known contractual obligations may include, for example, lease obligations, purchase obligations, or other liabilities reflected on the registrant’s balance sheet. Except where it is otherwise clear from the discussion, the registrant must discuss those balance sheet conditions or income or cash flow items which the registrant believes may be indicators of its liquidity condition.

5. Where financial statements presented or incorporated by reference in the registration statement are required by Section 210.4-08(e)(3) of this chapter (Rule 4-08(e)(3) of Regulation S-X) to include disclosure of restrictions on the ability of both consolidated and unconsolidated subsidiaries to transfer funds to the registrant in the form of cash dividends, loans or advances, the discussion of liquidity must include a discussion of the nature and extent of such restrictions and the impact such restrictions have had or are reasonably likely to have on the ability of the parent company to meet its cash obligations.

6. Any forward-looking information supplied is expressly covered by the safe harbor rule for projections. See 17 CFR 230.175 [Rule 175 under the Securities Act], 17 CFR 240.3b-6 [Rule 3b-6 under the Exchange Act], and Securities Act Release No. 6084 (June 25, 1979).

7. All references to the registrant in the discussion and in this section mean the registrant and its subsidiaries consolidated.

8. Discussion of commitments or obligations, including contingent obligations, arising from arrangements with unconsolidated entities or persons that have or are reasonably likely to have a material current or future effect on a registrant’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources must be provided even when the arrangement results in no obligations being reported in the registrant’s consolidated balance sheets. Such off-balance sheet arrangements may include: Guarantees; retained or contingent interests in assets transferred; contractual arrangements that support the credit, liquidity or market risk for transferred assets; obligations that arise or could arise from variable interests held in an unconsolidated entity; or obligations related to derivative instruments that are both indexed to and classified in a registrant’s own equity under U.S. GAAP.

9. If the registrant is a foreign private issuer, briefly discuss any pertinent governmental economic, fiscal, monetary, or political policies or factors that have materially affected or could materially affect, directly or indirectly, its operations or investments by United States nationals. The discussion must also consider the impact of hyperinflation if hyperinflation has occurred in any of the periods for which audited financial statements or unaudited interim financial statements are filed. See Section 210.3-20(c) of this chapter (Rule 3-20(c) of Regulation S-X) for a discussion of cumulative inflation rates that may trigger the requirement in this instruction 9 to this paragraph (b).

10. If the registrant is a foreign private issuer, the discussion must focus on the primary financial statements presented in the registration statement or report. The foreign private issuer must refer to the reconciliation to United States generally accepted accounting principles and discuss any aspects of the difference between foreign and United States generally accepted accounting principles, not discussed in the reconciliation, that the registrant believes are necessary for an understanding of the financial statements as a whole, if applicable.

11. The term statement of comprehensive income is as defined in section 210.1-02 of this chapter (Rule 1-02 of Regulation S-X).

National Policy 51-201 Disclosure Standards

Part III Overview of the Statutory Prohibitions Against Selective Disclosure

Section 3.7

Administrative Proceedings

(1) We may consider any number of mitigating factors in a selective disclosure enforcement proceeding including:

(a) whether and to what extent a company has implemented, maintained and followed reasonable policies and procedures to prevent contraventions of the tipping provisions;

(b) whether any selective disclosure was unintentional; and

(c) what steps were taken to disseminate information that had been unintentionally disclosed (including how quickly the information was disclosed)

If a company’s disclosure record shows a pattern of “unintentional selective disclosures”, it will be harder to show that a particular selective disclosure was truly unintentional.

(2) Nothing in this policy statement limits our discretion to request information relating to a possible selective disclosure violation or to take enforcement proceedings within our jurisdiction where there has been a breach of the tipping provisions.