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Significance Tests for an Acquisition

Scenarios

Status of ABC

–> on the acquisition date, for completed acquisitions
–> on the prospectus date, for probable acquistions		ReportingNon-Reporting
Non-Venturesignificance testssignificance tests
Venturesignificance testssignificance tests

Use the links in the charts to scroll down to the relevant significance tests.

Significance Tests for an Acquisition: Reporting, Non-Venture Issuer

Scenario:

  1. ABC was a reporting, non-venture issuer when it acquired XYZ.
  2. Alternatively, in the case of a probable acquisition, ABC is a reporting, non-venture issuer on the date of the prospectus.

Notes:

  1. Section 8 references are to Part 8 of NI 51-102 Continuous Disclosure Obligations.
  2. Item 35 references are to Form 41-101F1 Information Required in a Prospectus.
  3. Please review the General Rules and Assumptions at the bottom of this page.

How to Test Significance:

  1. The acquisition of XYZ is significant if it crosses two (or all three) of the 30% signifiance thresholds. (Section 8.3(1)(a))
  2. ABC may, however, re-test significance using the optional significance tests instead. (Section 8.3(3)(a))
  3. In that case, the acquisition is significant if it crosses two (or all three) of the optional 30% signifiance thresholds. (Section 8.3(5)(a))
  4. XYZ should be considered ABC’s primary business under Item 32 of Form 41-101F1 if the acquisition crosses any of the significance tests at the 100% level. (Section 5.3 of CP41-101)

Significance Tests for an Acquisition: Reporting, Venture Issuer

Scenario:

  1. ABC was a reporting, venture issuer when it acquired XYZ.
  2. Alternatively, in the case of a probable acquisition, ABC is a reporting, venture issuer on the date of the prospectus.

Notes:

  1. Section 8 references are to Part 8 of NI 51-102 Continuous Disclosure Obligations.
  2. Item 35 references are to Form 41-101F1 Information Required in a Prospectus.
  3. Please review the General Rules and Assumptions at the bottom of this page.

How to Test Significance:

  1. The acquisition of XYZ is significant if it crosses either of the 100% signifiance thresholds. (Section 8.3(1)(b))
  2. ABC may, however, re-test significance using the optional significance tests. (Section 8.3(3)(b))
  3. In that case, the acquisition is significant if it crosses both of the optional 100% signifiance thresholds. (Section 8.3(5)(b))
  4. XYZ might be considered ABC’s primary business under Item 32 of Form 41-101F1 if the acquisition crosses any of the significance tests at the 100% level. (Section 5.3 of CP41-101)

Significance Tests for an Acquisition: Non-Reporting, Non-Venture Issuer

Scenario:

  1. ABC was a non-reporting, non-venture issuer when it acquired XYZ.
  2. Alternatively, in the case of a probable acquisition, ABC is a non-reporting, non-venture issuer on the date of the prospectus.

Notes:

  1. Section 8 references are to Part 8 of NI 51-102 Continuous Disclosure Obligations.
  2. Item 35 references are to Form 41-101F1 Information Required in a Prospectus.
  3. Please review the General Rules and Assumptions at the bottom of this page.

How to Test Significance:

  1. The significance tests are calculated as if ABC is a reporting issuer. (Item 35.1(4)(b))
  2. The acquisition of XYZ is significant if it crosses two (or all three) of the 30% signifiance thresholds. (Section 8.3(1)(a))
  3. ABC may, however, re-test significance using the optional significance tests. (Section 8.3(3)(a))
  4. In that case, the acquisition is significant if it crosses two (or all three) of the optional 30% signifiance thresholds. (Section 8.3(5)(a))
  5. XYZ might be considered ABC’s primary business under Item 32 of Form 41-101F1 if the acquisition crosses any of the significance tests at the 100% level. (Section 5.3 of CP41-101)

Significance Tests for an Acquisition: Non-Reporting, Venture Issuer

Scenario:

  1. ABC was a non-reporting, “but-would-have-been-venture” issuer when it acquired XYZ.
  2. Alternatively, in the case of a probable acquisition, ABC is an IPO Venture Issuer on the date of the prospectus.

The significance tests are calculated as if ABC is a reporting issuer. (Item 35.1(4)(b))

Notes:

  1. Section 8 references are to Part 8 of NI 51-102 Continuous Disclosure Obligations.
  2. Item 35 references are to Form 41-101F1 Information Required in a Prospectus.
  3. Please review the General Rules and Assumptions at the bottom of this page.

How to Test Significance:

  1. The significance tests are calculated as if ABC is a reporting, venture issuer. (Item 35.1(4)(b))
  2. The acquisition of XYZ is significant if it crosses either of the 100% signifiance thresholds. (Section 8.3(1)(b))
  3. ABC may, however, re-test significance using the optional significance tests. (Section 8.3(3)(b))
  4. In that case, the acquisition is significant if it crosses both of the optional 100% signifiance thresholds. (Section 8.3(5)(b))
  5. XYZ might be considered ABC’s primary business under Item 32 of Form 41-101F1 if the acquisition crosses any of the significance tests at the 100% level. (Section 5.3 of CP41-101)

General Rules for the Significance Tests:

  1. In calculating significance, ABC must not remeasure its previously held equity interest in XYZ. (Section 8.3(4.1))
  2. If XYZ’s financial statements for the most recently completed finanical year have not been audited, unaudited statements for XYZ are acceptable for calculating significance. (Section 8.3(14) and NI 52-107 s.3.11))
  3. If ABC has not included (and is not required to include) audited financial statements for the most recently completed financial year in the prospectus, the significance tests may be calculated using ABC’s preceding financial year. (Section 8.3(15) and Item 35.1(4)(b)(vii))
  4. ABC must test significance under each of the asset, investment and profit/lost tests. There is an optional test for each of them. (Section 8.3(1), (3) and (4))
  5. For probable rather than completed acquisitions, treat the prospectus date as the acquisition date for purposes of the significance tests. (Item 35.6(1))

Assumptions Lexata Uses:

  1. As a result of the transaction, ABC will own 100% of XYZ. As such, references in the rules to ABC’s “proportionate share of” XYZ are ignored.
  2. ABC is not acquiring any business other than XYZ. (Section 8.1(1) definition of “acquisition of related businesses” and Section 8.3(12))
  3. The transaction is not an oil and gas acquisition. (Section 8.1(1) definition of “business”)
  4. The transaction is not a reverse takeover. (Section 8.1(2))
  5. ABC and XYZ both use IFRS-IASB for their financial accounting; have the same year end; and use the same currency. (Sections 8.3(13) and 8.3(13.1)

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