Quebec’s Autorité des marchés financiers Wednesday released a report detailing the results of its Continuous Disclosure Review Program for the past year, finding deficiencies with issuers and investment funds’ reporting.

The report for the fiscal year ended March 31, sets out the results of the reviews conducted on the continuous disclosure filings of the 100-odd companies and investment funds headquartered in Quebec. In light of the credit crisis, the AMF focused its reviews during the past fiscal year on companies with high indebtedness and companies in the financial services sector, emphasizing transparency and completeness of disclosures in financial statements and management discussion and analysis.

The report notes that reporting issuers’ disclosure records were high quality overall, but that deficiencies were identified in the application of accounting requirements, particularly with respect to financial instrument disclosure. Most companies selected for review were required to make prospective changes or restatements, it says, adding that requests for changes arose primarily as a result of non-compliance with the financial instrument disclosure requirements.

“Moreover, many companies failed to provide sufficient analysis in their MD&As,” the report notes, and it says that disclosure regarding audit committees and corporate governance practices continued to be deficient.

In the coming fiscal year, the AMF says that it will place greater emphasis on certain regulatory provisions and recent accounting requirements, including: valuation of goodwill, intangibles and asset impairments; going concern issues; disclosure relating to executive compensation; and, disclosure of changeover plans to International Financial Reporting Standards; among other items.

As for the investment funds it reviewed, the AMF said that it conducted issue-oriented reviews on: money market mutual funds; independent review committee reports; and, presentation of policies and procedures for valuing portfolio assets.

“Requests for changes in connection with full reviews mainly concerned the notes to the financial statements, namely, the disclosure of accounting policies on the valuation of portfolio securities, the description of risks and the related sensitivity analysis. A number of comments were issued with respect to fund performance presented in the management report of fund performance, particularly in the results of operations, financial highlights and past performance sections,” it reports.

Finally, the AMF calls on issuers to rigorously apply all GAAP and to pay special attention to new accounting requirements; and for fund managers and officers to improve the information provided in MD&As and management reports on fund performance, “by presenting a full and balanced analysis of results of operations, financial condition and cash flows, in particular, liquidity requirements and sources of financing.”

“I urge officers and investment fund managers to read the report and take into account the outcomes of our reviews. This report will help them to enhance the quality of the information provided to investors. They should also pay particular attention to the section on IFRS, as the changeover will represent a sizeable challenge for issuers,” said Louis Morisset, superintendent, Securities Markets.

IE