In the Matter of Gerdau Ameristeel Corporation, 2009 CanLII 48530

Headnote

NP 11-203 – decision exempting the Filer from the requirement in s. 3.1 of NI 52-107 that financial statements be prepared in accordance with Canadian GAAP for so long as the Filer prepares its financial statements in accordance with IFRS-IASB for financial periods ending on or after September 30, 2009 – Filer must provide specified disclosure regarding change to IFRS-IASB – if the Filer files interim financial statements prepared in accordance with Canadian GAAP in the year that the Filer adopts IFRS-IASB, those interim financial statements must be restated using IFRS-IASB – Filer wishes to change to IFRS-IASB to align the bases of accounting under which the Filer and its majority holder prepare their financial statements

Applicable Legislative Provisions

National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency, s. 3.1.

In the Matter of

the Securities Legislation of

Ontario (the Jurisdiction)

and

In the Matter of

the Process for Exemptive Relief Applications in Multiple Jurisdictions

and

In the Matter of

Gerdau Ameristeel Corporation (the Filer)

Decision

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Filer from the requirement in section 3.1 of National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency (NI 52-107) that financial statements be prepared in accordance with Canadian GAAP for financial periods ending on or after September 30, 2009 (the Exemption Sought), for so long as the Filer prepares its financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS-IASB).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, the Northwest Territories, Yukon and the Nunavut Territory (the Passport Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning

if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer was incorporated under the laws of the Province of Ontario by letters patent dated September 10, 1970 and was continued under the Canada Business Corporations Act pursuant to articles of continuance dated May 24, 2006. The registered office of the Filer is located at 1801 Hopkins Street South, Whitby, Ontario, L1N 5T1.

2. The Filer is a reporting issuer or equivalent in the Jurisdiction and each of the Passport Jurisdictions. The Filer is not, to its knowledge, in default of its reporting issuer obligations under the Legislation or the securities legislation of the Passport Jurisdictions.

3. The Filer is also a registrant with the United States Securities and Exchange Commission (SEC) and a foreign private issuer in the United States.

4. The Filer’s securities are listed on the Toronto Stock Exchange and the New York Stock Exchange.

5. The Filer is the second largest mini-mill steel producer in North America with an annual manufacturing capacity of approximately 12 million tons of mill finished steel products. Through a vertically integrated network of 19 mini-mills (including one 50%-owned mini-mill), 23 scrap recycling facilities and 60 downstream operations (including nine majority owned joint venture fabrication facilities), the Filer primarily serves customers throughout the United States and Canada.

6. Gerdau S.A., the main holding company of the Gerdau Group, beneficially owned approximately 66.4% of the Filer’s outstanding common shares as of June 30, 2009. Gerdau S.A. is engaged in the production and sale of steel products in general from plants located in Brazil, Argentina, Chile, Colombia, Guatemala, Mexico, Peru, Dominican Republic, Uruguay, Venezuela, United States, Canada, Spain and India. Gerdau S.A. prepares its financial statements in accordance with IFRS-IASB.

7. NI 52-107 sets out acceptable accounting principles for financial reporting under the Legislation by domestic issuers, foreign issuers, registrants and other market participants. Under NI 52-107, a domestic issuer must use Canadian GAAP with the exception, found in section 4.1 of NI 52-107, that an SEC registrant may use U.S. GAAP. Under NI 52-107, only foreign issuers may use IFRS-IASB.

8. The Filer currently relies on section 4.1 of NI 52-107 to prepare its financial statements in accordance with U.S. GAAP.

9. The Filer has not previously prepared financial statements that contain an explicit and unreserved statement of compliance with IFRS-IASB.

10. The Canadian Accounting Standards Board has confirmed that publicly accountable enterprises will be required to prepare their financial statements in accordance with IFRS-IASB for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011.

11. In CSA Staff Notice 52-321 Early Adoption of International Financial Reporting Standards, Use of US GAAP and Reference to IFRS-IASB, staff of the Canadian Securities Administrators recognized that some issuers may wish to prepare their financial statements in accordance with IFRS-IASB for periods beginning prior to January 1, 2011 and indicated that staff were prepared to recommend exemptive relief on a case by case basis to permit a domestic issuer to do so, despite section 3.1 of NI 52-107.

12. Subject to obtaining the Exemption Sought, the Filer intends to adopt IFRS-IASB for its financial statements for periods beginning on and after January 1, 2009.

13. The Filer believes that the adoption of IFRS-IASB for financial periods beginning on or after January 1, 2009 is in the best interests of the Filer and the users of its financial information because the adoption of IFRS-IASB will (i) align the bases of accounting under which the Filer and its majority owner, Gerdau S.A., prepare their financial statements; and (ii) increase the comparability of the Filer’s financial statements to those of a number of global issuers, including competitors within the steel industry, who already prepare, or will soon be required to prepare, financial statements in accordance with IFRS-IASB.

14. The Filer has implemented a comprehensive IFRS-IASB conversion plan.

15. The Filer has carefully assessed the readiness of its employees, board of directors, audit committee, auditors and investors and other market participants for the adoption by the Filer of IFRS-IASB for financial periods beginning on or after January 1, 2009 and has concluded that they will be adequately prepared for the Filer’s adoption of IFRS-IASB for periods beginning on or after January 1, 2009.

16. The Filer has considered the implications of adopting IFRS-IASB before January 1, 2011 on its obligations under securities legislation including, but not limited to, those relating to CEO and CFO certifications, business acquisition reports, offering documents, and previously released material forward looking information.

17. The Filer will disseminate a news release not more than seven days after the date of this decision disclosing relevant information about its conversion to IFRS-IASB as contemplated by CSA Staff Notice 52-320 Disclosure of Expected Changes in Accounting Policies Relating to Changeover to International Financial Reporting Standards, including:

(a) its preparations for its conversion to IFRS-IASB, including the key elements and timing of its conversion plan;

(b) its decisions in respect of the exemptions made available under IFRS 1 First-time Adoption of International Financial Reporting Standards;

(c) the accounting policy and implementation decisions it has made or will have to make;

(d) major identified differences between its current accounting policies and those it is required or expects to apply in preparing financial statements in accordance with IFRS-IASB; and

(e) the expected impact of adopting IFRS-IASB on the key line items presented in its interim and annual financial statements.

18. The Filer will update the information set out in the news release in its management’s discussion and analysis for the interim period ending June 30, 2009 including, to the extent known, quantitative information regarding the impact of adopting IFRS-IASB on key line items in the Filer’s financial statements for the interim period ending June 30, 2009.

Decision

1. The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

2. The decision of the principal regulator under the Legislation is that the Exemption Sought is granted, subject to the following conditions:

(a) for so long as the Filer prepares its financial statements for financial periods ending on or after September 30, 2009 in accordance with IFRS-IASB;

(b) provided that the Filer provides all of the communication and information as described and in the manner set out in paragraphs 17 and 18 respectively;

(c) provided that if the Filer files interim financial statements prepared in accordance with U.S. GAAP for one or more interim periods in the year that the Filer adopts IFRS-IASB, the Filer will restate and refile those interim financial statements originally prepared in accordance with U.S. GAAP in accordance with IFRS-IASB together with the related restated interim management’s discussion and analysis as well as the certificates required by National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings; and

(d) provided that if the Filer files its first IFRS-IASB financial statements in an interim period, those interim financial statements will present all financial statements with equal prominence, including the opening statement of financial position at the date of transition to IFRS-IASB.

DATED this 15th day of September, 2009.

“Jo-Anne Matear”

Assistant Manager Corporate Finance Branch