Headnote National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions - application for relief from the requirement in section 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, s. 4.2(1)
February 8, 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 TERANGA GOLD CORPORATION (the “Applicant”)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Applicant for a decision under the securities legislation of the Jurisdiction (the “Legislation”) exempting the Applicant from the requirement in section 4.2(1) of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (“NI 52-107”) (the “Exemption Sought”) 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 Applicant may prepare financial statements for periods beginning on or after July 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:
(a) the Ontario Securities Commission (the “OSC”) is the principal regulator for this application; and
(b) the Applicant 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, Nova Scotia, New Brunswick, Newfoundland and Labrador and Prince Edward Island (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 Applicant:
The Applicant was incorporated on October 1, 2010 under the Canada Business Corporations Act. Its registered and head office is located at 121 King Street West, Suite 2600, Toronto, Ontario, M5H 3T9.
The Applicant is a Canadian mining and resource company formed to continue the business of gold mining and exploration in Senegal, West Africa, which business was previously carried on by Mineral Deposits Limited, a corporation governed by the laws of Australia, which corporation is a reporting issuer or equivalent in Australia and all of the provinces of Canada, except Quebec.
In anticipation of completion of the Applicant’s initial public offering of common shares (the “Offering”), the Applicant retained Deloitte Touche Tohmatsu, Chartered Accountants, to audit the Applicant’s financial statements.
Pursuant to a pre-filing waiver application filed with the OSC on October 6, 2010, the Applicant was granted exemptive relief (as evidenced by the receipt for a (final) prospectus dated November 11, 2010 (the “Prospectus”)) from certain of the requirements set out in NI 52-107 to allow the Applicant to prepare financial statements to be included in the Prospectus (the “Prospectus Financial Statements”) in accordance with IFRS-IASB and audited in accordance with International Standards on Auditing (the “Pre-Filing Application”).
In connection with the Offering, the Applicant filed the Prospectus and was issued a receipt by the OSC for such filing on November 11, 2010.
The Applicant completed the Offering on December 7, 2010.
The Applicant’s common shares trade on the Toronto Stock Exchange and its CHESS Depository Interests trade on the Australian Stock Exchange; such securities trade under the symbol “TGZ”.
The Applicant is a reporting issuer in the province of Ontario and the Passport Jurisdictions (collectively the “Reporting Jurisdictions”) and is not in default of securities legislation in the Reporting Jurisdictions.
Absent an exemption, section 4.2(1) of NI 52-107 would require that the Applicant’s financial statements for periods relating to financial years beginning before January 1, 2011, other than acquisition statements, be prepared in accordance with Old Canadian GAAP.
The Applicant’s financial year-end is June 30.
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 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 Applicant intends to prepare and file its financial statements to be filed for periods beginning on or after July 1, 2010 in accordance with IFRS-IASB.
There are significant costs associated with preparing and auditing the Applicant’s financial statements in accordance with Old Canadian GAAP.
The Applicant has expended considerable resources in connection with the preparation and audit of the Prospectus Financial Statements in accordance with IFRS-IASB and the establishment of the necessary internal controls and procedures required of a reporting issuer. Having already expended these resources and established these controls and procedures, the Applicant believes that requiring it to prepare financial statements in accordance with Old Canadian GAAP for the periods beginning on or after July 1, 2010 to then convert these financial statements a few months later back to IFRS-IASB for the financial year commencing on July 1, 2011 would be costly and time-consuming and would create significant inefficiencies with respect to the Applicant’s financial statement preparation process as well as the establishment and maintenance of its internal controls and procedures. The Applicant also believes such a requirement would be confusing to investors.
Early adoption of IFRS-IASB eliminates the need to plan and perform a conversion from Old Canadian GAAP to IFRS-IASB, which, in any event will be applicable as of July 1, 2011.
The Applicant further believes that the preparation and filing of its financial statements to be filed for periods beginning on or after July 1, 2010 (and its related disclosure practices for its 2010 financial year) in accordance with IFRS-IASB will benefit the Applicant and its investors by offering continuity in form, presentation and public disclosure of its financial information consistent with the form, presentation and public disclosure of the Prospectus Financial Statements.
The Applicant has carefully assessed the readiness of its staff, board of directors, auditors, audit committee, investors and other market participants for the immediate adoption by the Applicant of IFRS-IASB for the presentation of the Prospectus Financial Statements in the Prospectus and for all subsequent financial periods following the Offering, and concluded that all parties are adequately prepared for the Applicant’s immediate adoption of IFRS-IASB.
The Applicant has considered the implications of early adoption of IFRS-IASB on its obligations under securities legislation after completion of the Offering, including, but not limited to, those relating to CEO and CFO certifications, business acquisition reports, offering documents and previously released material forward-looking information, to the extent applicable.
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 the Applicant prepares its financial statements to be filed for periods beginning on or after July 1, 2010 in accordance with IFRS-IASB and complies with Part 3 of NI 52-107.
“Michael Brown”
Michael Brown
Assistant Manager, Corporate Finance Branch
Ontario Securities Commission