Securities watchdog warns companies to fully disclose COVID-19 impact and assistance

‘(M)eaningful disclosures about the business impacts and potential uncertainties regarding COVID-19 are needed for investors to make informed investment decisions’

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Canadian regulators are warning companies to be sure they disclose to investors — in detail — government financial support related to the pandemic.

“(M)eaningful disclosures about the business impacts and potential uncertainties regarding COVID-19 are needed for investors to make informed investment decisions,” the Canadian Securities Administrators said in a statement Thursday, following a sweep of company financial statements and disclosures.

The review by the national umbrella group for Canada’s provincial and territorial market regulators found that more than half of the companies reviewed disclosed COVID-19 related government grants in their financial disclosures, including wage and rent subsidies. However, some “did not disclose the impacts that government assistance attributable to COVID-19 had on their performance, operations and cash flows.”

Meanwhile, some firms disclosed that they received government grants for pandemic expenses without identifying the amount received, naming the specific assistance program, or disclosing the accounting policy for recognizing government grants.

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Only some issuers included separate note disclosure in their financial statements in connection with the COVID-19-related government grants.

The CSA said companies regulated by its members are required to include a number of details in their disclosures, including the accounting policy adopted for government grants and the method of presentation adopted for financial statements. For example, it must be disclosed whether such grants are offset against expenses or presented as a separate financial statement line item.

“An understanding of the amounts of government assistance received and where such funding is recorded in the financial statements may be necessary to understand historical results and future trends, when material,” the regulatory body said.

“Issuers are reminded to provide balanced disclosure of both the positive and adverse impacts to operations, financial condition and cash flows.”

The CSA also reminded companies that receive government loans with forgiveness options that they must disclose the terms and conditions of the government assistance.

Financial Post

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