Frequently Asked Questions Re NI 51-102 Continuous Disclosure Obligations (CSA Staff Notice 51-311)

Part E Business acquisition reports (BAR)

Q: The optional significance tests in subsection 8.3(4) of NI 51-102 are based on financial information relating to my most recently completed interim period or financial year. In calculating the optional significance tests, can I use financial information relating to financial statements for a completed interim period or financial year that have not yet been approved by my board of directors or audit committee, and have not yet been filed?

A: Yes. However, you would want to consider the possibility that adjustments to the financial statements from subsequent review by your external auditors, audit committee or board of directors may change the results of the calculation. For example, the acquisition may be a significant acquisition based on the adjusted financial statements, when it initially did not meet the significance thresholds, in which case you may be in default of the BAR requirements. [Amended May 4, 2007]

Q: If I am acquiring a business, there are no financial statements, and confidentiality provisions prevent disclosure of certain information about the business, how do I file a BAR?

A: Paragraph 8.1(4) of 51-102CP discusses the term “business” and indicates that whether or not the business previously prepared financial statements, an acquisition may be considered a business and trigger the requirement for financial statements in a BAR. As well, section 8.6 of 51-102CP provides guidance on the preparation of divisional and carve-out financial statements. If an issuer is considering the acquisition of a business, it must consider its obligations under NI 51-102 to file a BAR and the issuer must plan its acquisition in a manner that will ensure it can meet those obligations.

Q: Is an investment in equity securities of another company that is accounted for by the issuer using the cost method considered an acquisition of a business under subsection 8.1(1) of NI 51-102?

A: No. An investment accounted for by the cost method is not considered an acquisition of a business under subsection 8.1(1) of NI 51-102. However, investments that are consolidated or are accounted for by the equity method or by proportionate consolidation are considered acquisitions of a business as discussed in subsection 8.1(1). [Added June 18, 2004]

Q: If I acquire a business that will be accounted for by the equity method and the acquisition qualifies for the exemption in section 8.6, does my BAR have to name the auditor of the investee and indicate that the auditor of the investee has not consented?

A: Section 8.6 of the NI 51-102 does not require an issuer to name the auditor of the financial information or underlying financial statements or to include the auditor’s report on the financial information or underlying financial statements. As a result, the issuer does not have to disclose the absence of consent from the auditor of the investee.

Q: If an issuer’s subsidiary acquires shares in itself from interests outside the consolidated group, is that acquisition subject to the “step-by-step” provisions in Part 8 of NI 51-102?

A: Yes, the acquisition by the subsidiary of shares in itself increases the issuer’s proportionate interest in the subsidiary and so should be considered a step acquisition by the issuer. The provisions in section 8.11 for step-by-step acquisitions apply if the acquisition is a significant acquisition. [Added June 18, 2004]