Companion Policy 51-102CP Continuous Disclosure Obligations
Part 8 Business Acquisition Reports
Section 8.1

Obligations to File a Business Acquisition Report

(1) Filing of a Material Change Report – The requirement in the Instrument for a reporting issuer to file a business acquisition report is in addition to the reporting issuer’s obligation to file a material change report, if the significant acquisition constitutes a material change.

(2) Filing of a Business Acquisition Report by SEC Issuers – If a document or a series of documents that an SEC issuer files with or furnishes to the SEC in connection with a business acquisition contains all of the information, including financial statements, required to be included in a business acquisition report under the Instrument, the SEC issuer may file a copy of the documents as its business acquisition report.

(3) Financial Statement Disclosure of Significant Acquisitions – Reporting issuers are reminded that National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards prescribes the accounting principles and auditing standards that must be used to prepare and audit the financial statements required by Part 8 of the Instrument.

(4) Acquisition of a Business – A reporting issuer that has made a significant acquisition must include in its business acquisition report certain financial statements of each business acquired. The term business” should be evaluated in light of the facts and circumstances involved. We generally consider that a separate entity


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 8 Business Acquisition Reports
Section 8.2

Significance Tests

(1) Application of Significance TestsSubsection 8.3(2) of the Instrument sets out the required significance tests for determining whether an acquisition of a business by a reporting issuer is a significant acquisition”. The application of the significance tests depends on the status of the reporting issuer such that:

(a) if the reporting issuer is not a venture issuer


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 8 Business Acquisition Reports
Section 8.3

Optional Significance Tests

(1) Optional Significance Tests – Decrease in Significance – If an acquisition is determined under subsection 8.3(2) of the Instrument to be significant, a reporting issuer has the option under subsections 8.3(3) and (4) of the Instrument of applying optional significance tests using more recent financial statements than those used for the required significance tests in subsection 8.3(2). The optional significance tests under subsections 8.3(3) and (4) have been included to recognize the possible growth of a reporting issuer between the date of its most recently completed year-end and the date of filing a business acquisition report and the corresponding potential decline in significance of the acquisition to the reporting issuer.

(2) Availability of the Optional Significance Tests – The optional significance tests permitted under subsections 8.3(4) and (6) of the Instrument are available to all reporting issuers. However, depending on how or when a reporting issuer integrates the acquired business into its existing operations and the nature of post-acquisition financial records it maintains for the acquired business, it may not be possible for a reporting issuer to apply the optional significance test under subsection 8.3(6).

(3) Optional Investment Test – For the purpose of applying the optional investment test under paragraph 8.3(4)(b) of the Instrument, the reporting issuer’s investments in and advances to the business should be as at the acquisition date and not as at the date of the reporting issuer’s financial statements used to determine its consolidated assets for the optional investment test.

(4) Optional Profit or Loss Test based on Pro Forma Information – A reporting issuer may apply the optional profit or loss test in subsection 8.3(11.1) of the Instrument based on more recent pro forma consolidated specified profit or loss. By permitting reporting issuers to base the optional profit or loss test on pro forma consolidated specified profit or loss, this test recognizes the possible growth of a reporting issuer as a result of acquisitions completed between its most recently completed year end and the date of filing a business acquisition report and the corresponding potential decline in significance of the acquisition to the reporting issuer.


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 8 Business Acquisition Reports
Section 8.4

Financial Statements of Related Businesses

Subsection 8.4(8) of the Instrument requires that if a reporting issuer includes in its business acquisition report financial statements for more than one related business, separate financial statements must be presented for each business except for the periods during which the businesses were under common control or management, in which case the reporting issuer may present the financial statements on a combined basis. Although one or more of the related businesses may be insignificant relative to the others, separate financial statements of each business for the same number of periods required must be presented. Relief from the requirement to include financial statements of the least significant related business or businesses may be granted depending on the facts and circumstances.


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 8 Business Acquisition Reports
Section 8.5

Application of the Significance Tests for Multiple Investments in the Same Business

Subsection 8.3(11) of the Instrument explains how the significance test should be applied when the reporting issuer has made multiple investments in the same business. If the reporting issuer acquired an interest in the business in a previous year and that interest is reflected in the most recent audited annual financial statements of the reporting issuer filed, then the issuer should determine the significance of only the incremental investment in the business which is not reflected in the reporting issuer’s most recent audited annual financial statements filed.


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 8 Business Acquisition Reports
Section 8.6

Preparation of Divisional and Carve-out Financial Statements

(1) Interpretations – In this section of this Policy, unless otherwise stated,

(a) a reference to a business” includes a division or some lesser component of another business acquired by a reporting issuer that constitutes a significant acquisition; and

(b) the term “parent” refers to the vendor from whom the reporting issuer purchased a business.

(2) Acquisition of a Division – As discussed in subsection 8.1(4) of this Policy


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 8 Business Acquisition Reports
Section 8.7.1

Financial Year End Changed

If the transition year of the acquired business is less than 9 months, the issuer may be required to include financial statements for the transition year of the acquired business in addition to financial statements for the two financial years required by subsection 8.4(1) of the Instrument. The transition year may or may not be audited, but at minimum, the most recently completed financial year must be audited in accordance with subsection 8.4(2).


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 8 Business Acquisition Reports
Section 8.8

Relief from the Requirement to Audit Operating Statements of an Oil and Gas Property

The securities regulatory authority or regulator may exempt a reporting issuer from the requirement to audit the operating statements referred to in section 8.10 of the Instrument if, during the 12 months preceding the acquisition date, the average daily production of the property is less than 20 percent of the total average daily production of the vendor for the same or similar periods, and

(a) the reporting issuer provides written submissions prior to the deadline for filing the business acquisition report which establishes to the satisfaction of the appropriate regulator, that despite reasonable efforts during the purchase negotiations, the reporting issuer was prohibited from including in the purchase agreement the rights to obtain an audited operating statement of the property;

(b) the purchase agreement includes representations and warranties by the vendor that the amounts presented in the operating statement agree to the vendor’s books and records; and

(c) the reporting issuer discloses in the business acquisition report its inability to obtain an audited operating statement, the reasons therefor, the fact that the representations and warranties referred to in paragraph (b) have been obtained, and a statement that the results presented in the operating statement may have been materially different if the statement had been audited.

For the purpose of determining average daily production when production includes both oil and natural gas, production may be expressed in barrels of oil equivalent using the conversion ratio of 6000 cubic feet of gas to one barrel of oil.


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 8 Business Acquisition Reports
Section 8.9

Exemptions From Requirement for Financial Statements in a Business Acquisition Report

(1) Exemptions – We are of the view that relief from the financial statement requirements of Part 8 of the Instrument should be granted only in unusual circumstances and generally not related solely to cost or the time involved in preparing and auditing the financial statements. Reporting issuers seeking relief from the financial statement or audit requirements of Part 8 must apply for the relief before the filing deadline for the business acquisition report and before the closing date of the transaction, if applicable. Reporting issuers are reminded that many securities regulatory authorities and regulators do not have the power to grant retroactive relief.

(2) Conditions to Exemptions – If relief is granted from the requirements of Part 8 of the Instrument to include audited annual financial statements of an acquired business or related businesses, conditions will likely be imposed, such as a requirement to include audited divisional or partial statements of comprehensive income or divisional statements of cash flows, or an audited statement of operations.

(3) Exemption from Comparatives if Financial Statements Not Previously PreparedSection 8.9 of the Instrument provides that a reporting issuer does not have to provide comparative financial information for an acquired business in a business acquisition report if it complies with specific requirements. This exemption may, for example, apply to an acquired business that was, before the acquisition, a private entity and that the reporting issuer is unable to prepare the comparative financial information for because it is impracticable to do so.

(4) Relief may be granted from the requirement to include certain financial statements of an acquired business or related businesses in a business acquisition report in some situations that may include the following:

(a) the business’s historical accounting records have been destroyed and cannot be reconstructed. In this case, as a condition of granting the exemption, the reporting issuer may be requested by the securities regulatory authority or regulator to

(i) represent in writing to the securities regulatory authority or regulator, no later than the time the business acquisition report is required to be filed, that the reporting issuer made every reasonable effort to obtain copies of, or reconstruct the historical accounting records necessary to prepare and audit the financial statements, but such efforts were unsuccessful; and

(ii) disclose in the business acquisition report the fact that the historical accounting records have been destroyed and cannot be reconstructed; or

(b) the business has recently emerged from bankruptcy and current management of the business and the reporting issuer is denied access to the historical accounting records necessary to audit the financial statements. In this case, as a condition of granting the exemption, the reporting issuer may be requested by the securities regulatory authority or regulator to

(i) represent in writing to the securities regulatory authority or regulator, no later than the time the business acquisition report is required to be filed that the reporting issuer has made every reasonable effort to obtain access to, or copies of, the historical accounting records necessary to prepare and audit the financial statements but that such efforts were unsuccessful; and

(ii) disclose in the business acquisition report the fact that the business has recently emerged from bankruptcy and current management of the business and the reporting issuer are denied access to the historical accounting records.


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 8 Business Acquisition Reports
Section 8.10

Audits and Auditor Review of Financial Statements of an Acquired Business

(1) Unaudited Comparatives in Annual Financial Statements of an Acquired BusinessSubsection 8.4(1) requires a reporting issuer to include comparative financial information of the business in the business acquisition report. This comparative financial information may be unaudited.

(2) Auditor Review of an Interim Financial Report of an Acquired Business – An issuer does not have to engage an auditor to review the interim financial report of an acquired business included in a business acquisition report. However, if the issuer later incorporates the business acquisition report into a prospectus, the interim financial report will have to be reviewed in accordance with the requirements relating to financial statements included in a prospectus.