Headnote National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – National Instrument 52-107, s. 5.1 Acceptable Accounting Principles and Auditing Standards - A reporting issuer wants to early adopt IFRS for purposes of preparing its financial statements - The issuer has assessed the readiness of its staff, board, audit committee, auditors and investors.
Applicable Legislative Provisions
National Instrument 52-107, s. 5.1
March 9, 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 RATTLESNAKE VENTURES INC. (the Filer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision (the Exemption Sought) under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the Filer from the requirements of Part 4 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (the Instrument) including the requirement that financial statements be prepared in accordance with generally accepted accounting principles determined with reference to Part V of the Handbook of the Canadian Institute of Chartered Accountants (the Handbook) applicable to public enterprises (Old Canadian GAAP), in order that the Filer may prepare financial statements for periods relating to financial years beginning on or after April 1, 2010 in accordance with generally accepted accounting principles determined with reference to Part I of the Handbook applicable to publicly 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 (OSC) 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 and Alberta (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:
The Filer is a corporation incorporated on October 11, 2007 under the Business Corporations Act (Ontario).
The registered head office of the Filer is located at 10463 Guelph Line, Campbellville, Ontario L0P 1B0 and the executive office is located at 2305 Wyecroft Road, 2nd Floor, Oakville, Ontario L6L 6R2.
The Filer is a "reporting issuer" or its equivalent in Ontario, British Columbia and Alberta. The Filer is not in default of its reporting issuer obligations under the legislation in those jurisdictions.
The Filer's common shares are listed on the NEX board of the TSX Venture Exchange (the TSXV) under the symbol "RVI.H".
The Filer is a Capital Pool Company (CPC) as that term is defined in Policy 2.4 of the TSXV. The Filer is pursuing a Qualifying Transaction under Policy 2.4 of the TSXV (the Qualifying Transaction).
The Filer currently prepares its financial statements in accordance with Old Canadian GAAP.
The financial year end of the Filer is March 31.
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.
Absent an exemption, section 4.2(1) of the Instrument requires, among other things, that the Filer's financial statements for periods 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 Filer has entered into a Letter of Intent to acquire all of the outstanding ordinary shares of Minsud Resources Inc. (Minsud), a Canadian company in exchange for the issuance by the Filer of its common shares. Prior to the completion of this transaction, Minsud will become the majority shareholder of an Argentinean company, Minera Sud Argentina (Minsud SA), which holds certain gold and silver exploration rights in Argentina. This transaction is intended to be the Filer's Qualifying Transaction.
Completion of the Qualifying Transaction is expected to take place in early 2011 and is subject to, among other things, the approval of the TSXV.
In accordance with the policies of the TSXV, and applicable laws, the Filer intends to submit a Filing Statement (the Filing Statement) to the TSXV as soon as is practicable in connection with its Qualifying Transaction and this Filing Statement will be filed on SEDAR concurrently with its submission to the TSXV.
As required by the policies of the TSXV and applicable laws, the Filer will include financial statements of the Filer, Minsud and Minsud S.A in the Filing Statement. In particular, the Filing Statement will include the audited financial statements of the Filer for the year ended March 31, 2010 together with the notes thereto and the auditors' report thereon. The Filing Statement will also include the unaudited interim financial statements of the Filer for the three and nine-month periods ended December 31, 2010.
In addition, the Filing Statement will include (i) financial statements of Minsud for the period from August 12, 2010 (its date of incorporation) to January 31, 2011 together with the notes thereto and the auditors' report thereon; and (ii) financial statements of Minsud SA for the year ended December 31, 2010 together with the notes thereto and the auditors' report thereon; in each case prepared in accordance with IFRS-IASB and audited in accordance with Canadian generally accepted auditing standards.
The Filing Statement will also include unaudited pro forma financial statements of the Filer as at December 31, 2010 together with the notes thereon. Subsection 4.14 of NI 52-107 provides that pro forma financial statements must be prepared in accordance with the issuer's GAAP.
In anticipation of the ongoing financial reporting obligations of the Filer, in recognition of the work that has already been done by each of Minsud and Minsud S.A. and their auditors in preparation for the Qualifying Transaction and to simplify the preparation of the unaudited pro forma financial statements to be included in the Filing Statement an exemption is requested to permit the Filer to adopt IFRS-IASB effective April 1, 2010.
In CSA Staff Notice 52-321 – Early Adoption of International Financial Reporting Standards, Use of US GAAP and Reference to IFRS-IASB (SN 52-321) the Canadian Securities Administrators noted that some issuers may wish to prepare their financial statements in accordance with IFRS-IASB for periods prior to the mandatory conversion date, which would be the financial year commencing April 1, 2011 in the case of the Filer. SN 52-321 provides that staff would be prepared to recommend exemptive relief on a case by case basis to permit a domestic issuer to early adopt IFRS-IASB notwithstanding the requirements of Part 4 of NI 52-107. SN 52-321 also contemplated that such an application could be made during a fiscal year provided that the issuer filed revised interim financial statements prepared in accordance with IFRS-IASB, revised management's discussion and analysis and new interim certificates for periods where such information had already been prepared under Old Canadian GAAP and filed.
The Filer has carefully assessed the readiness of its staff, board of directors, audit committee, auditors, investors and other market participants for its adoption of IFRS-IASB for financial periods commencing April 1, 2010 and has concluded that they are adequately prepared for the Filer's adoption of IFRS-IASB.
The Filer has considered the implication of adopting IFRS-IASB for its financial period commencing April 1, 2010 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 including forward looking information.
Subject to obtaining the Exemption Sought, the Filer intends to prepare and file its financial statements for the financial year ended March 31, 2011 in accordance with IFRS-IASB.
The Filer recognizes that it will be necessary to prepare, and file on SEDAR, interim financial statements prepared using IFRS-IASB for the three month period ended June 30, 2010, for the three and six-month periods ended September 30, 2010 and for the three and nine-month periods ended December 31, 2010. Management's discussion and analysis and the CEO and CFO certifications for those periods will also have to be re-filed on SEDAR.
The Filer has disclosed 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 in its management's discussion and analysis for the interim period ended December 31, 2010, including the key elements and timing of the Filer's changeover plan.
The Filer is a CPC and has very few or no significant differences between IFRS-IASB and Old Canadian GAAP.
The Filer will include in the Filing Statement clear disclosure as to the basis of presentation of the Filer's financial statements, and those of Minsud and Minsud S.A., and the basis of the audit reports thereon.
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 restates and re-files (collectively, the Restated and Refiled Interim Filings) interim financial statements for interim periods beginning on or after April 1, 2010 in accordance with IFRS-IASB on or before the time of filing its first IFRS-IASB financial statements 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 (NI 52-109); and
the Restated and Refiled Interim Filings, the Filer's annual financial statements, annual management's discussion and analysis and the certificates required by NI 52-109 for the year ended March 31, 2011 and the pro forma financial statements referred to in paragraph 15:
(i) are prepared in accordance with IFRS-IASB;
(ii) comply with Part 3 of the Instrument that came into force on January 1, 2011;
(iii) comply with the IFRS-related amendments to National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) that came into force on January 1, 2011;
(iv) comply with the IFRS-related amendments to NI 52-109 that came into force on January 1, 2011; and
(v) comply with the IFRS-related amendments to National Instrument 52-110 Audit Committees that came into force on January 1, 2011.
"Jo-Anne Matear"
Jo-Anne Matear, Assistant Manger
Ontario Securities Commission