Headnote National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions - application for relief from the requirement in subsection 4.2(1) of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards that financial statements be prepared in accordance with Canadian GAAP - issuer wants to prepare its financial statements in accordance with International Financial Reporting Standards - issuer has implemented a comprehensive changeover plan, has assessed readiness of key persons, and has considered implications of adopting International Financial Reporting Standards - exemption granted, subject to conditions. Applicable Legislative Provisions National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, ss. 4.2(1).
February 22, 2011
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
RED CRESCENT RESOURCES LIMITED
(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 requirements of Part 4 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107) (the Exemption Sought) including the requirement that financial statements be prepared in accordance with generally accepted accounting principles determined with reference to Part V of the Handbook (the Handbook) of the Canadian Institute of Chartered Accountants applicable to public enterprises (Old Canadian GAAP), in order that the Filer may prepare its financial statements for the fiscal year ended December 31, 2010 in accordance with generally accepted accounting principles determined with reference to Part I of the Handbook applicable to accountable enterprises, that is International Financial Reporting Standards (IFRS) 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 the Provinces of Alberta and British Columbia (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
The decision is based on the following facts represented by the Filer:
The Filer is a corporation incorporated under the Business Corporations Act (Ontario) on June 17, 2005. The registered and head office of the Filer is located at 2 Bloor Street West, Suite 1803, Toronto, Ontario M4W 3E2.
The Filer is a reporting issuer in the Jurisdiction and in 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 provinces of the Passport Jurisdictions.
The Filer’s common shares are listed on Toronto Stock Exchange (TSX) under the symbol “RCB”.
The Filer is a development stage company, which is principally engaged, through its recently acquired direct and indirect subsidiaries, in the exploration and acquisition of mineral properties in the Republic of Turkey.
On November 5, 2010 (the RTO Closing Date), pursuant to a securities exchange agreement dated September 7, 2010, the Filer acquired (the RTO) all of the issued and outstanding securities of Red Crescent Resources (Barbados) Ltd. (the RTO Acquirer), a Barbados based private holding company incorporated on April 15, 2010. The principal assets of the RTO Acquirer are the issued and outstanding shares of Red Crescent Resources Holding Anonim Şirketi (RCR Turkey), a Turkey based private development stage company formed on October 27, 2008, whose business is to acquire, explore and develop mineral properties in the Republic of Turkey.
Pursuant to the RTO, the former shareholders of the RTO Acquirer acquired approximately 90% of the issued and outstanding common shares of the Filer upon completion of the RTO. This transaction constituted a Reverse Take-Over of the Filer within the meaning of the policies of TSX Venture Exchange (TSXV). In accordance with TSXV policies, the Filer prepared and filed on SEDAR a Filing Statement dated October 26, 2010 (the Filing Statement) in connection with the RTO.
In connection with the RTO, the Filer applied for and obtained listing of its common shares on TSX and delisted from TSXV; the common shares of the Filer commenced trading on TSX on November 11, 2010.
The Filer has a year end of December 31 and currently prepares its financial statements in accordance with Canadian GAAP.
The RTO Acquirer and RCR Turkey, which became the Filer’s material direct and indirect subsidiaries after the completion of the RTO, have a year end of December 31 and have historically prepared and currently continue to prepare financial statements in accordance with IFRS-IASB. The unaudited consolidated financial statements of the RTO Acquirer for the interim period ended September 30, 2010 have been filed on SEDAR and the audited consolidated financial statements of the RTO Acquirer for the interim period ended June 30, 2010 and the year ended December 31, 2009 are included in the Filing Statement filed on SEDAR.
As a result of the RTO, the financial statements of the Filer are now those of the RTO Acquirer.
Absent an exemption, subsection 4.2(1) of NI 52-107 would require that the Filer’s financial statements relating to financial years beginning before (or prior to) January 1, 2011, other than acquisition statements, be prepared in accordance with Old Canadian GAAP.
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 financial statements relating to financial years beginning on or after January 1, 2011.
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.
Subject to obtaining the Exemption Sought, the Filer intends to use IFRS-IASB for its financial statements for periods ending after the RTO Closing Date, including the fiscal year ended December 31, 2010.
The Filer believes that the use of IFRS-IASB will avoid potential confusion for the users of its financial statements as all financial statements reporting on the business of the RTO Acquirer will have been prepared using the same accounting standards.
Since the RTO Acquirer currently prepares its financial statements under IFRS-IASB, it has assessed the readiness of the staff, board of directors, audit committee, auditors, investors and other market participants of the Filer for the adoption of IFRS-IASB for the Filer and believes such persons are adequately prepared for such adoption.
The Filer has considered the implication of adopting IFRS-IASB for financial periods ending after the completion of the RTO 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.
The Filer included relevant information about the RTO and its transition to IFRS-IASB in the Filer’s previously filed management's discussion and analysis, including in respect of the interim period ended September 30, 2010.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that the Filer:
prepares its annual financial statements for years ending after the RTO Closing Date in accordance with IFRS-IASB;
complies with Part 3 of NI 52-107 for financial statements, financial information, operation statements and pro forma financial statements for years ending after the RTO Closing Date;
complies with the IFRS-related amendments to National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) that came into force on January 1, 2011 and that apply to documents required to be prepared, filed, delivered, or sent under NI 51-102 for years ending after the RTO Closing Date;
complies with the IFRS-related amendments to National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings that came into force on January 1, 2011 and that apply to annual filings and interim filings for years ending after the RTO Closing Date; and
complies with the IFRS-related amendments to National Instrument 52-110 Audit Committees that came into force on January 1, 2011 and that apply to periods relating to financial years after the RTO Closing Date.
“Michael Brown”
Michael Brown, Assistant Manager
Corporate Finance Branch