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CSA Highlight Common Deficiencies in COVID-19 Disclosure

November 3, 2020

On October 29, 2020, the Canadian Securities Administrators (CSA) released CSA Staff Notice 51-361 – Continuous Disclosure Review Program Activities for the fiscal years ended March 31, 2020 and March 31, 2019 (Notice). The Notice summarizes the results of the CSA’s continuous disclosure review programs for the past two years and also includes information and guidance in respect of areas where the CSA have identified common deficiencies, with a particular focus on disclosures concerning the impact of COVID-19 on Canadian public companies. This guidance is particularly helpful for Canadian public companies crafting descriptions of the impact of COVID-19 in their continuous disclosure documents during these challenging times.


The CSA advise that, in order to support investors in making informed investment decisions, issuers provide entity-specific and transparent disclosures in their various mandated continuous disclosure filings about the impact of COVID-19 on their operating performance, financial operation, liquidity and future prospects.

Management’s Discussion and Analysis

The CSA highlight that COVID-19 disclosure in management’s discussion and analysis (MD&A) should not be boilerplate or simply repeat information available in the financial statements. Instead, such disclosure should be entity-specific and transparent, providing a detailed explanation and breakdown of the specific period over period variable impacts of COVID-19 on an issuer’s operations and financial results, including a discussion of the methodology used to determine such impact and measures the issuer has put in place to mitigate the impact of COVID-19 on its business. However, the CSA acknowledge that it may be difficult for issuers to accurately determine the quantitative impact of COVID-19 and, therefore, the Notice cautions issuers not to incorrectly attribute or generally list COVID-19 as the sole reason for any period-over-period variances or other negative news, and instead to provide information about the specific judgements and estimations made by an issuer’s management in determining the disclosed impacts.
The Notice also provides the following additional observations and considerations for issuers regarding MD&A disclosure deficiencies concerning COVID-19:

  • Forward Looking Information (FLI): Given the uncertainty caused by COVID-19, issuers should consider whether the material assumptions underlying previously announced material FLI continue to be reasonable and whether there remains a reasonable basis for achieving outstanding earnings guidance or other financial outlook. If not, issuers may be required to update or withdraw such FLI.

  • Liquidity and Capital Resources: Given the potentially significant impact of COVID-19, it may be necessary for issuers to include expanded disclosure in their MD&A regarding the current and expected effects of the pandemic on their liquidity and capital resources, including quantifying the impact where possible. The Notice provides that issuers should consider discussing, among other things, any subsidies and/or funding received from government programs, increased counterparty risk, reduced cash flow from operations as a result of decreased demand, delays in capital project plans, cost-cutting initiatives (employee layoffs, reduced hours) and their impact and changes in dividend or distribution policies.

  • COVID-19-Related Non-GAAP Financial Measures (NGM): The Notice cautions issuers about making COVID-19 adjustments to profit or loss determined under GAAP or using COVID-19-related alternative profit measures. Although it may be appropriate in certain non-recurring circumstances to make adjustments to financial measures as a result of COVID-19, the CSA warn that not all COVID-19 effects may be properly categorized as non-recurring, infrequent or unusual. This especially applies where the impact of COVID-19 crosses over multiple reporting periods or if similar costs are reasonably likely to occur within the next two years. Issuers intending to provide a COVID-19-adjusted NGM need to explain how the adjusted amount was specifically associated with COVID-19, including, among other things, disclosing how the issuer determined that any increased costs are specifically related to COVID-19 and why the NGM provides useful information for investors, as well as the additional purposes, if any, for which management of the issuer uses the NGM.

Financial Statements

The CSA acknowledge that issuers are preparing financial statements in an evolving and uncertain environment, with potentially imperfect information. Since COVID-19 impacts different issuers in different ways, new judgements or estimates may be needed in several areas, including going-concern assessments, impairment assessments, fair value calculations, government assistance, revenue recognition, and deferred tax recoverability. As a result, the CSA stress the importance of issuers providing detailed entity-specific disclosure relating to significant judgements and estimates as required by IAS 1 (International Accounting Standards), Presentation of Financial Statements. In addition, issuers are reminded to consider, as new information becomes available, whether disclosures previously included in annual financial statements need to be updated in interim financial statements.

Material Change Reports

Issuers, in the ordinary course, are not generally required to interpret and promptly disclose the impact of external political, economic and social developments on their affairs. However, the Notice highlights that if an external development, such as COVID-19 or any associated changes in governmental or regulatory policies, will have or has had a direct impact on the business and affairs of an issuer that is both material and uncharacteristic of the effect generally experienced by other companies engaged in the same business or industry, the issuer may need to issue a press release and file a material change report concerning such development. This may be the case where COVID-19 results in, among other possibilities, a significant disruption to an issuer’s workforce or operations, negative changes in markets, economies or laws, supply chain delays or disruptions that are critical to an issuer’s business, changes in credit arrangements, increased cost of goods or services, or a suspension of exports.


In addition to COVID-19 reporting considerations, the Notice also included observations and considerations from the CSA with respect to the following deficiencies, among others, in continuous disclosure filings:

  • Forward Looking Information: The CSA note that issuers must identify material FLI, disclose the material risk factors that could cause actual results to differ materially from the FLI, provide the material factors or assumptions used to develop the FLI, outline the issuer’s policies for updating FLI, and avoid providing boilerplate FLI disclosure. The Notice also recommends that issuers consider using tables and other methods of presentation that clearly link specific material risk factors and material factors and assumptions to particular FLI.

  • Related Party Transactions (RPT): The CSA have identified that some issuers fail to provide required disclosure pertaining to RPTs, including failing to provide information necessary for investors to understand the business purpose and economic substance of the transaction between related parties. This includes the failure of issuers to disclose the nature of the related party relationship as well as information about the transactions and outstanding balances, including commitments, necessary for investors to understand the potential effect of the relationship on the issuer’s financial statements.

  • Non-GAAP Financial Measures: It is the view of the CSA that more and more issuers are presenting NGMs in their continuous disclosure filings, with some issuers failing to properly label NGMs. The Notice provides that while NGMs can be used to supplement and explain financial performance, cash flows or other financial conditions, NGMs should not be presented without accompanying and appropriate explanatory disclosure and should not be given greater prominence than the most directly comparable GAAP measure. For more information, please see our February 2020 Blakes Bulletin: CSA Proposes Revised Non-GAAP and Other Financial Measures Rule.

  • Mineral Project Disclosure: The Notice points out that some issuers in the mining industry file technical reports that do not include adequate disclosure of the important criteria that a qualified person (QP) used to determine that the mineral resource has demonstrated reasonable prospects for eventual economic extraction. Additionally, some technical reports do not adequately describe the specific procedures the QP undertook in verifying the data or provide the QP’s opinion on the adequacy of the data used in the technical report. Furthermore, risk disclosure in technical reports is described by the CSA as often being boilerplate and not specific to the subject mineral project. Finally, contrary to National Instrument 43-101 – Standards of Disclosure for Mineral Projects, some issuers in the mining industry routinely improperly disclose mineral project estimates that provide standalone disclosure of tonnage rather than tonnage and grade.

  • Promotional Disclosure: The CSA are of the view that some issuers provide disclosure that is overly promotional and, in certain circumstances, either untrue or unbalanced. Disclosure by issuers should be balanced, providing the risks and contingencies associated with positive news or events, to avoid being misleading. Moreover, issuers should refrain from publishing numerous news releases that disclose no new material facts. For more information, please see our December 2018 Blakes Bulletin: CSA Warn Against Certain Problematic Promotional Activities.


The Notice also provides additional observations and considerations relating to deficient disclosure in financial statements (e.g., concerning measurement of the fair value of acquired intangible assets, annual testing of impairment of non-financial assets, and disclosure of operating segments), as well as deficiencies in insider reporting (e.g., late reporting of securities issued under compensation arrangements) and early warning report filings (e.g., providing disclosure of the filer’s intention in acquiring the securities).

For further information, please reach out to a member of our Capital Markets group or your usual Blakes contact at any time.

Please visit our COVID-19 Resource Centre to learn more about how COVID-19 may impact your business.