Headnote
Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107), s. 5.1 – the Filers request relief from the requirements under section 3.2 of NI 52-107 that financial statements be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises to permit the Filers to prepare their financial statements in accordance with U.S. GAAP.
Applicable Legislative Provisions
National Instrument 52-107 Acceptable Accounting Principles and Auditing Standard, s. 5.1
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 Fortis Inc. (Fortis), on behalf of itself and FortisBC Holdings Inc., FortisBC Energy Inc., FortisBC Inc., FortisAlberta Inc., Newfoundland Power Inc. and Caribbean Utilities Company, Ltd. (collectively, the Filers)
DECISION
Background
The principal regulator in the Jurisdiction (the Principal Regulator) has received an application from Fortis on behalf of itself and the other Filers for a decision under the securities legislation of the Jurisdiction (the Legislation) seeking an exemption (the Exemption Sought) from the requirements of section 3.2 of National Instrument 52-107 – Acceptable Accounting Principles and Auditing Standards (NI 52-107) that financial statements (a) be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises and (b) disclose an unreserved statement of compliance with IFRS in the case of annual financial statements and an unreserved statement of compliance with IAS 34 in the case of an interim financial report.
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;
(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 – Passport System (MI 11-102) is intended to be relied upon in each of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, the Yukon Territory, the Northwest Territories and Nunavut (the Passport Jurisdictions); and
(c) the decision is the decision of the Principal Regulator and automatically results in an equivalent decision in the Passport Jurisdictions.
Interpretation
In this decision:
(a) unless otherwise defined herein, terms defined in National Instrument 14-101 – Definitions, MI 11-102 and NI 52-107 have the same meaning; and
(b) "activities subject to rate regulation" has the meaning ascribed in the Handbook.
Representations
This decision is based on the following facts represented by the Filers:
Fortis Inc.
Fortis is principally a diversified utility holding company and was continued under the Corporations Act (Newfoundland and Labrador) on August 28, 1987. The head office of Fortis is in St. John's, Newfoundland and Labrador.
Fortis is a reporting issuer or equivalent in the Jurisdiction and each of the Passport Jurisdictions other than the Yukon Territory, the Northwest Territories and Nunavut and, to its knowledge, is not in default of securities legislation in any jurisdiction in Canada.
FortisBC Holdings Inc.
FortisBC Holdings Inc. (FHI) is a utility holding company incorporated under the laws of British Columbia. The head office of FHI is in Vancouver, British Columbia.
FHI is a reporting issuer or equivalent in the Jurisdiction and each of the Passport Jurisdictions and, to its knowledge, is not in default of securities legislation in any jurisdiction in Canada.
FortisBC Energy Inc.
FortisBC Energy Inc. (FEI) is a gas distribution company incorporated under the laws of British Columbia. The head office of FEI is in Vancouver, British Columbia.
FEI is a reporting issuer or equivalent in the Jurisdiction and each of the Passport Jurisdictions and, to its knowledge, is not in default of securities legislation in any jurisdiction in Canada.
FortisBC Inc.
FortisBC Inc. (FBC) is an integrated electric utility incorporated under the laws of British Columbia. The head office of FBC is in Kelowna, British Columbia.
FBC is a reporting issuer or equivalent in the Jurisdiction and each of the Passport Jurisdictions other than the Yukon Territory, the Northwest Territories and Nunavut and, to its knowledge, is not in default of securities legislation in any jurisdiction in Canada.
FortisAlberta Inc.
FortisAlberta Inc. (FAB) is an electricity distribution company incorporated under the laws of Alberta. The head office of FAB is in Calgary, Alberta.
FAB is a reporting issuer or equivalent in the Jurisdiction and each of the Passport Jurisdictions other than the Yukon Territory, the Northwest Territories and Nunavut and, to its knowledge, is not in default of securities legislation in any jurisdiction in Canada.
Newfoundland Power Inc.
Newfoundland Power Inc. (NPI) is an integrated electric utility incorporated under the laws of Newfoundland and Labrador. The head office of NPI is located in St. John's, Newfoundland and Labrador.
NPI is a reporting issuer or equivalent in the Jurisdiction and each of the Passport Jurisdictions other than the Yukon Territory, the Northwest Territories and Nunavut and, to its knowledge, is not in default of securities legislation in any jurisdiction in Canada.
Caribbean Utilities Company, Ltd.
Caribbean Utilities Company, Ltd. (CUC) is an integrated electric utility incorporated under the laws of the Cayman Islands. The head office of CUC is located in Grand Cayman, Cayman Islands.
CUC is a reporting issuer or equivalent in the Jurisdiction and each of the Passport Jurisdictions other than the Yukon Territory, the Northwest Territories and Nunavut and, to its knowledge, is not in default of securities legislation in any jurisdiction in Canada.
General
Each of FHI, FEI, FBC, FAB, NPI and CUC are subsidiaries of Fortis and the financial results of such subsidiaries are reflected in the consolidated financial statements prepared and filed by Fortis.
Each of the Filers has activities subject to rate regulation.
None of the Filers is an SEC issuer.
Were any of the Filers SEC issuers, they would be permitted by section 3.7 of NI 52-107 to file their financial statements prepared in accordance with U.S. GAAP.
By an order cited as Re Fortis Inc., on behalf of itself and FortisBC Holdings Inc., FortisBC Energy Inc., FortisBC Inc., FortisAlberta Inc., Newfoundland Power Inc. and Caribbean Utilities Company, Ltd., (2011) 34 OSCB 6705, each of the Filers has been granted relief substantially similar to the Exemption Sought (the Existing Relief).
The Existing Relief will expire not later than 1 January 2015.
The International Accounting Standards Board (IASB) continues to work on a project focusing on accounting specific to activities subject to rate regulation. It is not yet known when this project will be completed or whether IFRS will include a specific standard that is mandatory for entities with activities subject to rate regulation.
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:
(a) the Existing Relief is revoked;
(b) the Exemption Sought is granted to each Filer in respect of the Filer's financial statements required to be filed on or after the date of this order, provided that the Filer prepares those financial statements in accordance with U.S. GAAP; and
(c) the Exemption Sought will terminate in respect of a Filer on the earliest of the following:
(i) 1 January 2019;
(ii) if that Filer ceases to have activities subject to rate regulation, the first day of the Filer's financial year that commences after the Filer ceases to have activities subject to rate regulation; and
(iii) the effective date prescribed by the IASB for the mandatory application of a standard within IFRS specific to entities with activities subject to rate regulation.
“Cameron McInnis”
Cameron McInnis
Chief Accountant
Ontario Securities Commission