AMF calls for improved financial reporting

The quality of financial reporting in Quebec has improved over the past few years, according to the province’s regulator of financial institutions, the Autorit des marches financiers (AMF), but there is still work to do particularly when it comes to filing Management’s Discussion and Analysis (MD&A) reports and financial statements.
“This year, once again, we issued close to 1,000 recommendations to the 195 issuers selected,” the AMF reported in a release on its Web site.
“Improving the quality of the continuous disclosure records of reporting issuers is indeed the mission of the CDR Program. However, despite sustained efforts over recent years, we still find too many deficiencies.
“Our objective is not to reach 1,000 recommendations annually, but rather to be able to conclude that the documents being reviewed are improving. Certainly, we have noted improvements over the years, as our follow-up activities have confirmed.
“Nonetheless, certain documents still require careful attention by issuers, particularly the MD&A. Indeed, nearly one third of deficiencies noted for the reporting period in question related to MD&As.”
The AMF went on to note that 20% of the issuers selected under the Continuous Disclosure Review (CDR) program were required to restate disclosure documents (including, primarily, venture issuers).
According to the AMF, some of the more common mistakes made in MD&As include:
Failure to discuss the effects of significant acquisitions or discontinued operations.
Failure to quantify the factors causing changes in revenues.
Repeating figures presented in the financial statements. (In addition to the presentation of figures in the financial statements, the issuer must explain the causes of changes to gross profit.)
Failure to discuss the issuer’s liquidity position and needs in the short term and long term.
The presentation of non-GAAP financial measures without complying with CSA Staff Notice 52-306, Non-GAAP Financial Measures (“Notice 52-306”).
The MD&A does not state the chief executive officer’s and the chief financial officer’s conclusions about the effectiveness of the disclosure controls and procedures.