Canada’s CAs are providing support to help directors deal with the current asset-backed commercial paper (ABCP) liquidity crunch.

As companies consider disclosure for quarterly and yearend reporting, management needs to provide investors with a good understanding of how this situation is affecting their companies, the Canadian Institute of Chartered Accountants (CICA) says.

Board and audit committee members need to ensure that appropriate consideration has been given to the valuation of these investments and that company disclosures relating to ABCP are clear, complete and adequately describe any exposures or potential impacts. To address these concerns, the CICA is recommending that directors focus on a series of key questions when reviewing financial statements and to satisfy themselves that management is effectively managing related company exposures and risks.

“Our document walks directors through these questions to help them understand what investors want to know and the level of information needed to provide appropriate disclosure,” says Dave Pollard, vp of knowledge development for the CICA. “Investors need this information to understand and evaluate how exposures to ABCP could affect the company’s financial position, profitability and future prospects, and in order to make informed investment decisions.”

The CICA document is designed to provide guidance to directors in their oversight roles. Further analysis and clarification on the financial reporting of ABCP is expected to be released this week and posted on the Accounting Standards Board Web site.

“It is in the interest of businesses, investors and the reputation of Canada’s capital markets that all parties provide clear, accurate and complete disclosures,” said Pollard. “The CICA alert helps directors ask the right questions to provide informed governance and oversight. This includes addressing the impacts of the liquidity crunch on the debt and capital markets and what it may mean for the financing strategies of the company.”

The document, prepared by the CICA’s Risk Management and Governance Board, is the first in a series of alerts that will be developed as issues emerge. It outlines questions for directors to ask, and for financial executives to be prepared to answer and to consider in formulating their corporate investment strategy.

“The ABCP Liquidity Crunch – questions directors should ask” is available on the Institute’s web site at www.cica.ca.