The Ontario Securities Commission (OSC) granted Nova Net Lease REIT (the Filer) an exemption from the requirement to file financial statements of its primary tenant, Cloud Cannabis, prepared in accordance with International Financial Reporting Standards (IFRS). Instead, the Filer is permitted to file these statements using United States Generally Accepted Accounting Principles (US GAAP), as outlined in section 3.2 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107).
The Filer, a reporting issuer in multiple Canadian jurisdictions, does not control Cloud Cannabis and cannot legally mandate the preparation of its financial statements in IFRS. Cloud Cannabis’s financial performance is significant to the Filer’s ability to pay dividends, as the Filer’s financial results are partly dependent on Cloud Cannabis’s lease payments.
The Filer has provided an undertaking to file Cloud Cannabis’s financial statements and related management’s discussion and analysis (MD&A) in accordance with US GAAP and NI 51-102’s requirements, respectively. This arrangement will continue until Cloud Cannabis’s payments constitute less than 30% of the Filer’s annual revenue.
The OSC concluded that the exemption would not prejudice the Filer’s unitholders, as the financial statements prepared under US GAAP would not be materially different from those prepared under IFRS. The decision was made on February 24, 2022, and applies to the Filer across all Canadian jurisdictions where it is a reporting issuer.