Join us for EY’s latest Financial Reporting Developments Series, where we cover Canada’s latest financial reporting updates, recent technical issues and other current events for public and private companies.
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Jeff Glassford: [00:00:52] Hello, everyone, and welcome to our Fall Financial Reporting Development webcast. Thank you for joining us. We're excited to have you. We have a fairly full agenda so, maybe I'll jump right into it. I'm Jeff Glassford. For those that maybe are new to the webcast or don't know me, I will be hosting today's webcast. I'm very fortunate to have a great group of presenters along with me today. So, as is commonly the case for our Fall Financial Reporting Development webcast, we have Ritika Rohailla from the OSC doing a regulatory update. This year, we're also going to cover a sustainability piece, and we're lucky to have Janis Rod from our Climate Change and Sustainability practice. She'll cover some of that piece. And then from our national office we have Christine Evans, Juliana Mok and Janice Rath, who will cover some of our more traditional financial reporting topics. Before we get into the agenda, I'll just cover some of the housekeeping type items. I believe the deck should have been emailed to you earlier today, and so you should have a copy of the deck. There will be a survey at the end of the webcast. Highly encourage you to fill it out. Very open to your feedback. We are always looking to improve and make these webcasts better for you. CPE will be available for this webcast and it will be sent out in the coming weeks. For those that are listening on a replay, there will be a slide at the end of this webcast with instructions on how to obtain that CPE. And finally, as always, please do ask questions throughout. We are going to do our very best to get to as many of them as possible and those that we don't get to, we will reach out to directly. So, that takes me to our agenda. So, our agenda, as I said, Ritika is going to kick it off with our regulatory update. We'll have a sustainability piece after that, which will cover a bit on the regulatory landscape for sustainability as well as some of the strategy piece of ESG. And then finally, we'll get into our, as I said, our traditional topics. So, ISB updates, IFRIC updates, discussions at the Canadian IFRS discussion group. And then a general update, given our current economy and high inflation, high rising interest rates and what those mean to financial reporting. So, with that high-level agenda, I'll maybe pass it over to Ritika to start into our regulatory update. Ritika? Ritika Rohailla: [00:03:44] Great. Thanks, Jeff. It's a pleasure to be here and to be included in your annual updates. As always, we're happy to be able to communicate with stakeholders and with issuers during these challenging times. And I really think that sessions like this are a great way to do that. Today I want to cover a few of the topics that have been the focus of our regulatory agenda in the past year. So, no surprise, non-GAAP and other financial measures is on here again. I'm going to be speaking to it in the context of our new national instrument, however. We'll do a brief update on climate-related disclosures and where we are at with the CSA proposals. I also want to touch a little bit on financial reporting in our current and our challenging economic environment, and then just provide a very brief update on the status of crypto in the Canadian capital markets. And as always, the views I'm going to express today are my own and don't necessarily reflect those of the commission or its staff. So, last year, as many of you will know, we published new securities law and that was National Instrument 52-112 on non-GAAP and other financial measures. This replaced our legacy guidance and staff notice 52-306 and the new rule became effective in October of last year and the requirements for non-GAAP, they're quite similar to what was in the previous staff notice. But with the introduction of this new national instrument, we also tackled other problem areas. We observed over the years that other financial measures that didn't quite meet the definition of a non-GAAP measure could be equally problematic if they were not accompanied by appropriate disclosure. So, that includes, for example, things like segment measures and capital management measures that are presented in the statements in accordance with GAAP. But then they start to lack context when you take them out of the statements and start talking about them in the MD&A. The disclosure requirements that the new national instruments that set for these other metrics though are there scaled according to the risk. And again, the scope focuses on disclosure outside of the financial statements such as the MD&A, press releases or investor presentations, for example. So, this is a high-level table of requirements for each category. They'll just caveat that by saying you would need to refer to the actual rule. This is just to give you a flavour of what's in there. The requirements for historic non-GAAP financial measure, they're substantially the same as the legacy notice, but they are revised for clarity and they do include new simplifications, such as the ability to be able to incorporate information by reference in limited circumstances. The requirements for forward looking non-GAAP have also been simplified compared to our previous guidance, and the requirements for other financial measures are similar to non-GAAP. But again, they've been scaled accordingly to address the risks and concerns. There's lots of helpful guidance in the companion policy as well about how the rules work. So, if you do disclose non-GAAP financial measures and some of these other metrics, I do encourage you to take a look at the companion policy as well. So next, I just want to share some preliminary observations on implementation. We did review disclosures in annual MD&A and earnings releases and investor presentations for about 85 reporting issuers. Our focus in this review was primarily on things that were new or different when compared to our previous guidance. Some of the problem areas that we found as a result of that review are noted on the slide. So for example, with earnings releases, we found that some issuers failed to include the required quantitative reconciliations in the body of the earnings release itself. A reference to a quantitative req in the MD&A in this case is not permitted. Why? That's because earning releases are very important documents to investors, and we want that information front and center. And as well, the MD&A is often not available at the time of the earnings release. As well, with investor presentations, we saw instances of inappropriate incorporation of information by reference. The references were often to MD&A that was yet to be filed, making it impossible for an investor to examine the reference information or to MD&A that didn't actually include information about the measure being disclosed. For forward-looking non-GAAP measures, we observed instances where there was no description of significant differences between the forward-looking non-GAAP measure and the equivalent historic non-GAAP measure. For segment measures, we found that some people incorrectly assumed that because the measure was in the financial statement, there was no additional disclosure needed when disclosed outside of the financial statements. Okay. So, just to shift focus a little bit, you will recall in October of last year, the CSA published for comment proposed National Instrument 51-107 on climate-related disclosure. We were not going to get into the details of the proposals themselves, as I'm sure you're familiar with them. They were covered in last year's session, but I will note that they're largely consistent with the TCFD framework, with the four pillars governance: strategy, risk management and metrics and targets. Our proposals, though, did contemplate reduce disclosure compared to the TCFD, and that they didn't include a requirement for scenario analysis, and they proposed potentially less information on GHG emissions being required. So, the comment period on our proposals closed in February, we received 131 letters from a variety of stakeholders. And broadly speaking, there was support for alignment with the TCFD. But a key theme that did emerge was that stakeholders, not surprisingly, they wanted consistency with the International Sustainability Standards Board or the ISSB and the USSEC. So, while our proposals are conceptually consistent and all three of these use the TCFD as a baseline, the CSA proposals are actually less prescriptive and less detailed. Another big area where we received feedback was in relation to the venture market. So, we have a large number of smaller reporting issuers and commenters wanted more accommodations. So, some commented that they thought a longer phase-in period would be helpful or permitting a disclose or explain approach. And some went further and said that venture issuers should just be exempted. Regarding the GHG emissions specifically, so, the overwhelming majority other than public companies supported mandatory scope one and scope two. In contrast, half of public companies supported a disclose or explain model. And with respect to scope three, there was mixed views on whether this should be mandatory or whether we should allow a disclose or explain approach. With respect to scenario analysis, about half the commentators supported excluding scenario analysis from the proposed instruments. And then, as you know, since the CSA proposals were published, there have been a few key international developments. The ISSB obviously published two of their exposure drafts in March of this year, and the SEC also published proposed rules that would introduce climate-related disclosures for registrants. Again, both these proposals use the TCFD as the baseline, but they are more prescriptive than those of the CSA. So, where we're at right now with our proposals is that we are actively considering these developments, including revisiting the comments that we received directly that included feedback on the IFCC and the SEC proposals. And we're also reviewing Canadian stakeholder feedback that was submitted directly to the SEC and the ISSB. So, safe to say there will not be a final rule this year. We continue to work through our process and once that process is complete, there will be more substantive update. So, just changing focus again a little bit to the broader economic environment now. You know, we're all very well aware of the human cost associated with the Russia and the Ukraine conflict. And this is also led to challenges with respect to the financial and capital markets. And like most regulators around the world, we are closely monitoring the situation as it relates to our mandate with a specific focus on the direct and indirect effects to our capital markets. So, the CSA did issue a statement in March, but that was not focused specifically on financial reporting. It was broader in scope, and it alerted the market to economic sanctions opposed by the government. As such, sanctions can have impacts on capital markets. When we think about direct impacts on reporting issuers in Ontario, we only have a small handful of reporting issuers that have direct significant exposure by way of significant investments or operations in those countries. With all of these issuers being in the extractive industry. But aside from those direct effects, many issuers are now experiencing a multitude of indirect effects. And from a disclosure perspective, the expectation is that if those effects are material, then issuers need to provide the relevant disclosure in their disclosure documents. So, that conflict is just one of the major uncertainties that's affecting the global capital markets. There are obviously many other macroeconomic factors that are impacting issuers either directly or indirectly. Examples include supply chain challenges, ongoing impacts of COVID-19, labour shortages, inflationary pressures, rising interest rates. These are all factors that can increase economic uncertainty and can affect issuers' liquidity, their asset values, their exposure to loss and business continuity. And again, to the extent that these have a material impact on your business and operation, then we would expect such disclosure in the continuous disclosure documents. And this is obviously at top of mind for us right now. So this is something that we'll be looking for in the upcoming annual filings. So, in thinking about the roles and responsibilities of those involved in financial reporting ecosystem, you have management, the audit committee, and the auditor. These are all people that need to carefully evaluate how economic certainty and changing assumptions can affect operations and financial statements. Management needs to pay special attention to things like going concerns, subsequent events and disclosures of significant judgments, as these all tend to be areas of elevated focus and challenging times. If a going concern assessment now involves significant judgment or a close call, then issuers need to clearly disclose these judgments and the financial statements. Insurers also need to consider how a rapidly changing landscape can impact what they need to disclose in terms of subsequent events. As things could change quickly from the end of the year to the release of the financial statements. And significant judgments and estimates, these can all be impacted by these factors and affect the estimates that go into your forecasts for impairment assessments and whatnot. So, that would all need to be updated as well. Now we're clearly in a very evolving economic environment right now, and that is precisely what makes it more important than ever to let investors know what's going on and to ensure that your disclosures are robust and entity-specific. And again, as I mentioned, this transparency is going to be a top of mind for regulators. For audit committees, it's more important than ever to engage in meaningful dialogue with management and the auditor in order to discharge their oversight responsibilities and to support audit quality. And for auditors, the application of professional skepticism is even more critical in the current economic environment as they scrutinize management's going concern assessments of plans to mitigate uncertainties as they evaluate the reasonableness of assumptions and the appropriateness and completeness of disclosures. And of course, as they consider any relevant implications for the auditor's report as well, for example, with respect to key audit matters. So, circling back to non-GAAP measures for a moment here. So, in this current environment, we are reminding issuers to be mindful of the elements of reliable and informative non-GAAP measures to ensure that the metrics that they present are not misleading. So, issuers should carefully evaluate the appropriateness of an adjustment or an alternative profit measure. So, for example, there might be a limited basis for management to conclude that certain adjustments are non-recurring, infrequent or unusual in light of the current environment. And there's also a heightened risk of issuers adjusting earnings inappropriately. So, for example, presenting a hypothetical sales or profit measure. So, what profit would have been had the pandemic not impacted operations, etc.. So those types of hypothetical measures and calling them non-GAAP measures would not be appropriate. So lastly, I just want to touch base on the status of cryptocurrency in the Canadian capital markets. So, our work in the regulatory space on crypto continues to be a high priority for us. And I appreciate many of you may not be directly impacted, but we did want to make you aware of our work. So, the global cryptocurrency market is currently estimated to be approximately 1.5 trillion and Canada has one of the most active crypto markets globally. So, as of March 2022, we had about 60 reporting issuers in this space with approximately one third of those arising in the past year. We have about 26 investment funds, again with approximately half of those arising in the past year. We have ten registered exchange platforms or more specifically where they have received extensive relate to offer crypto products to investors in Ontario. And we're continuing to work with a handful of others on their path to seeking registration. So, the emergence of a new industry can create financial reporting challenges, and the accounting approach for crypto has evolved over the past few years. So, depending on the business model and type of cryptocurrency, there are various measurement models. So either fair value through profit and loss or value through OCI under the intangible standards or cost. And what we find is the majority of use issuers are using a model that results in fair value information being included in the financial statements. But a lot of stakeholders have observed that that variation is not ideal from a consistency and comparability perspective. We have requested standard setters in both Canada and globally to address these issues. And on the US front, I understand that the [INAUDIBLE] has launched a project, but unfortunately the IASB has not yet done the same. And then lastly, as a reminder to reporting issuers that do transact in the space. We did publish a staff notice that's 51-363 last year. That, amongst other things, provides guidance to assist in meeting your ongoing continuous disclosure obligations. From an accounting and auditing perspective, there's a couple of pages of good information on the specific types of disclosure that we would typically expect in certain circumstances. So, I encourage those that are interested in this topic to take a look at that staff notice. So, that was it from my perspective for the time being. So maybe I will pass it back to Jeff. Jeff Glassford: [00:22:23] Thanks Ritika, as always, really appreciate you joining us. I do have a couple of questions that have come in. Maybe one's just maybe a summary and you can confirm if you'd like. I think, could I take from what you've said that a couple of the focus areas for the coming year would be continuing on the non-GAAP, given the new standard still relatively new, and then the economic uncertainty related to disclosure, and then maybe looping back how that economic uncertainty is being considered in non-GAAP measures, Is that maybe a fair summary of a couple of areas of focus? Ritika Rohailla: [00:23:04] Yeah, that's accurate, Jeff. Jeff Glassford: [00:23:06] Perfect. And there is one question that came in. It said, could you give me more insight on labour shortages? So, I think you had a slide on the economic uncertainty-related, and one of the bullets was labour shortages. I assume what is meant by that and again, you can [INAUDIBLE] or confirm is labour shortages, how those impact the business of reporting issuer. Ritika Rohailla: [00:23:32] Yes. Jeff Glassford: [00:23:33] There are processes. It could be controls as well. Ritika Rohailla: [00:23:37] Yes. Jeff Glassford: [00:23:37] Considering those in their judgments, estimates, etc.. Ritika Rohailla: [00:23:41] Yes. And more. And the DNA, if they are experiencing significant labour shortages that are in fact impacting their operations. Jeff Glassford: [00:23:50] Right. That makes sense to me. So, again, really appreciate that, Ritika. So, our next topic and certainly if you have further questions for Ritika, we will try and include them at the end of the presentation. So, please do ask questions and as I said, ask questions throughout. But with that, we're going to jump into our sustainability piece and I'm going to pass it off to Janis. Janis Rod: [00:24:18] Great. Thank you, Jeff. Thank you. ESG, it's a moving target and it's a fast-evolving space. Regulations, framework. Stakeholder expectations are all changing at a really, really fast pace. And I'm excited about these developments because they route ESG in a structured disclosure which gives credibility. There's been some interesting discourse in the media about ESG, specifically from what is sustainable finance and the asset management investor perspective of late. A lot of that is noise, but it's important and just leaning into fundamental disclosures that are based on strategy and disclosures with data that is rigorous and can be assured really increases that credibility. And so, I'm going to talk about that for close to 10 minutes. And then my colleague, Christine, will speak specifically about the regulatory space and disclosures. I just want to reflect quickly on what we heard from Ritika on the OSC. Obviously, the update on climate-related disclosures relatively, totally related to what my team does all day and every day, but also how many of those macroeconomic factors like supply chain labour. They're all ESG issues and they all affect financials. So just quick introduction. My name is Janis Rod, as Jeff said, I lead our national ESG strategy practice in our Climate Change and Sustainability Services team. I've been a consultant in the EVS and the G space for 25 years. Originally rooted in regulatory requirements in the last decade, more strategically in ESG strategy to create long-term value. But also I see the value in that regulatory and developing that rigor around it. And so in terms of this slide, really there's two key points here. One is just reflecting quickly on how over the last few decades, ESG and sustainability has really morphed from what we used to talk about as philanthropy. It was a nice to have. It was companies like Patagonia doing things because it was part of the purpose, but we didn't see a connection to business value when we talked about it as CSR. But today, sustainability or ESG, when it's well integrated across an organization when it's embedded into corporate strategy, when it focuses on what really matters, which ESG topics really matter to the business. When it's well governed from the board and the C-suite down to the functional leads, that's when it can really create value. It's really become a fiduciary duty. Investors, other stakeholders expect ESG to be factored in and embedded into every organization in a way that makes sense for that organization. And through that, you can create long-term value for your organization, but also for society. So, again, what is ESG? We hear about it a lot. If you look at the bottom of that slide, there's multiple topics there. There's lots of different ways to splice them. But really the important aspect is not that every company has to address all the EVS and the G topics as if it were a check box. That's not it at all. Good ES & G is focusing on what matters, where your organization has influence, what is aligned with your business model. And this isn't separate from profitability, it's not separate from financial risks or opportunities. Good ESG builds value. It reduces some of the risks, including the macroeconomic factors that Ritika spoke about. But to do this and to do this well, it has to be rooted in the specific topics that most matter. Quickly, on this slide, I won't spend too much time here, but this graphic is just really helpful to remind us of how it's all about the purpose. And that's not an existential question. Every organization has a why. From EY's perspective, building a better working world, that's part of our why and our purpose. So, how does what we do all day, every day, and how we identify and manage ES & G topics fit into that purpose? And then how is that reflected in the business purpose? And this moves us from a compliance mindset to being purpose-driven. Also allows us to focus on what matters and create value with that. And again, this isn't philanthropy. It's not our grandmother's sustainability 20, 30 years ago. It is ESG. It's leveraging the value of ESG in your organization to focus on what matters. Your most material topics, report and disclose on those and demonstrate how they align with your purpose. And so, I like to just share some of the drivers. Why are we hearing about ESG all the time? So, we think of it in four different ways, which are really divided by your stakeholders. So simply put, investors are one of the key financial drivers of ESG. A lot of our clients who haven't been thinking about ESG or sustainability, even though they're doing some of it because it makes good business already, but they're getting questions from their investors. I could talk about that for a long time, but that is really one of the key driver, and the reason it is because ESG makes good business, right? So, investors, asset managers, other financial institutions, private equity are looking to ESG to minimize risks and create additional value in the long term. And part of that is identifying the topics that matter to you. And part of that is how you're going to disclose on them. And we'll talk about that more moving forward. Underneath that, standard setters, government regulators, Ritika spoke with that from the OSC perspective for climate-related disclosures. And as I mentioned, there's so many other aspects of ESG that are part of real business risk and financial risk. My colleague Christine, after will unpack in the next agenda and talk about IFRS, and SASB and the ISSB and CSA, etc.. It's the alphabet soup as we like to joke about it, but it's rapidly becoming real. The space has changed so much and the rigor is really coming there. And Christine will talk about that definitely from a regulatory reporting perspective. From my lens, looking at it from an ESG strategy perspective, it gives that credibility and it's very welcome to bring that forward. But I want to stress, it's not just about meeting the regulatory requirement or compliance mindset. It's also about understanding the why. Why are these topics via climate? Be it biodiversity, be it labour? Why are these specific topics really important to you? How do you tell your story on them? What are your metrics that you will include in your reporting? Non-financial now and eventually more mature clients are including those ESG metrics in their financial reporting. We've heard a lot about the TCFD. Ritika spoke of that in the alignment with the CSA proposal. There's another task force on nature-based financial disclosure that has been spoken about. It's coming out in the next year or so. And this will increasingly be another topic that there'll be an expectation to report on it. Where it aligns with your business, But many different organizations through their supply chain rely on biodiversity and have an impact on it. Thirdly, employees and consumers. So, this is both human capital, this is direct consumers and purchasing power, but it's also that supply chain piece. And so if you think of a mining company, there's pressures on that mining company from their manufacturing clients who buy their products. If we think of retail through their supply chain, they're putting pressure on manufacturing organizations from human rights, labour, agriculture in terms of biodiversity, water and obviously climate is a theme throughout. And lastly, wider society. And this is where it's about trust. And that can, especially if you're a forward-facing brand or or publicly traded, trust and that credibility is really important and this can be evaluated for many organizations. And EY has done that. Trust and credibility is really developed through focusing on what matters of the ES & the G topics. Managing these most material ES & G topics and then telling your story through credible disclosures. This slide gives us a view of an integrated approach, various stages to embed ESG across an organization. It starts with that understanding. So, on the left-hand side, that column. So, understanding your current state. What are you doing now? What's your current state of your peers? Both your direct peers, aspirational peers, but also organizations along your value chain. So, who do you supply from? Who do your supply in terms of your customers? That will give you a really good understanding of the current state. Allow you to benchmark against your peers and look at how mature you are. And looking at that, you can see what you're managing now, where the potential gaps are, and it'll set the stage for the next step. And this is where materiality assessment is key. If you look at the second column under assess, the top aspect is materiality assessment. From that lens, it's what is most material. If you remember that slide that had the 20 some ESG topics, which of those is really truly material to you, in terms of your organization, in terms of your sphere of influence, and also from your stakeholder's perspective? So, the ability for those topics to impact your organization, but also for those topics, for you to impact those topics from a society-wide perspective. And that's the concept of double materiality, which is now defined by the CSRD and my colleague Christine will talk about that briefly later. But really it's identifying what is your priority and through a materiality assessment, you can do that. There may be some other aspects that require disclosure, but it's really understanding what's most important to you because another aspect, when I spoke of investors, there's ESG ratings agencies who look at your sector, they look at you in terms of what you're disclosing, and we'll give you a score relative to your disclosure and how you're managing these topics, but really telling that story of what's important and why. And if some of those typical topics are not material, then explaining that as well. And then moving forward, it's really building out a multi-year roadmap and doing action planning with defined governance so that your organization is set up to manage, to monitor and to disclose on a key set of ES & G topics with associated and defined KPIs, realistic targets with a defined plan and then leading through to pre assurance and then assurance to give that credibility and that trust. And it's an integrated approach. It's a continuous journey. It's really all of your stakeholders and especially investors and those who are more sophisticated, they expect to see an improvement year on year. No one organization can go from 0 to 100 in one year, it does take time. And with this last slide, which is a bit more of a pragmatic answer to how do I get started? It's a ten-step approach. It really mirrors the logic that was on the last slide. But just to take you through it at a high level, step one and step two, it's that current state assessment again, and that benchmarking. What am I doing now? What are my peers doing and other organizations along my value chain to really understand where you are and maybe where you should go. This supports, again, that materiality assessment and ambition setting and step three and step four. That's where you're prioritizing and identifying as a team based on your purpose, where you want to go and how you can create long-term value, real financial, long-term value, and also manage risks that have real financial impacts associated with them. And then step five, that's where you're preparing that ESG roadmap. It's a transformation plan and includes that governance model. What are you going to do and when? It's meant to be multi-year at a high level, and then you really get down into the details. Step six that's about your core tools. And for ESG specifically, that's digital data enablement. Step seven and eight, that's where you're doing that reporting and you're starting to operationalize and then nine and ten is that continuous process of really leaning into operationalizing and reporting and building out your ESG strategy and implementation transformation year on year. If you remember anything from what I said in that high-level overview from an ESG strategy, it's about focusing on what matters, sharing your story that's backed by data that's credible, that can, over time be shareable, demonstrate how your organization is leaning into ESG and leverage these disclosures and the additional rigour and requirements around them from a regulatory perspective to really tell that story. And if you think of those four groups of stakeholders, that will really increase that credibility and that trust. And with that, I'm going to hand it over to my colleague, Christine Evans. She'll speak to some of these aspects, which I refer to very briefly as the alphabet soup, but from a regulatory requirement and disclosure perspective. And so with that, I'll hand it over to Christine. Christine Evans: [00:37:49] Thanks, Janis. And so, I think Janice has touched on the reporting that's kind of been happening, which has been voluntary to date. And so, there's been a move to consolidate and put together that alphabet soup and bring in regulatory requirements. And so, on this slide, we really just wanted to summarize for you the timeline on certain proposals that are outstanding and those that we think are most likely to touch Canadian entities in the proposals. The ones that were coming more quickly were the CSA and Ritika talked to that and the timing and the SEC, which as proposed would be coming into effect in 2023. That proposal is still not finalized, so I don't have a crystal ball, but I'd say it's unlikely at this point it would be finalized. But I make no promises. So, if we jump into the ISSB or the International Sustainability Standards Board, they issued their exposure drafts in March and there were two exposure drafts there, IFRS S1, which is the overarching framework and it's really building on IS1 AND IS8 as its base, as well as incorporating from the TCFD framework guidelines to be applied to any material sustainability topic where there's not yet a specific standard in place. And then when we start thinking about specific standards, there's the proposal for IFRS S2, which is specific to climate that also builds off of TCFD and it includes requirements for a company to disclose its climate scenario analysis. So, that analysis is what's the potential impact in the short, medium and long term on an entity's financial position, where its cash flows of, for example, a 1.5-degree increase in temperature, how would that impact the entity. As well within S2 our requirements for disclosures of scope one, two and three greenhouse gas emissions, as well as industry-specific disclosures which have been taken from the SASB or the Sustainability Accounting Standards Board. And so, the request for comment period ended in July. And generally, the response from all of the comments was very positive. However, preparers were really looking for additional illustrative guidance examples. Really, how could the ISSB help them in preparing these disclosures? Also, there were concerns raised around the capacity of the organizations, and so that links back to providing help through guidance or examples. So, in order to take into account those comments, the board has been meeting very regularly. They've met four times in the last two and a half months. They really want to keep pace in order to hopefully finalize the standards in early 2023, and they are considering the feedback received. And so, I mentioned one of the concerns or the feedback was around capacity building. So, as the board is re-deliberating, they're really considering scalability of their proposals because ultimately the ISSB wants to reach an ultimate global baseline, but it wants to allow entities at varying stages of maturity, the ability to ramp up to that level of disclosure. So, some of the decisions that they've taken to date have been around clarifying the definition of materiality. There was some questions in that, but really materiality in this ISSB standards is focused on investors and is aligned with the IASB definition of materiality. Additionally, they have confirmed the use of the Greenhouse gas protocol to measure emissions, and also they've indicated that scope three emissions will be required. However, they are considering some relief provisions. So that may be, for example, a later effective date or introducing a disclosure around the quality of data as scope three is throughout an entity's value chain and maybe coming from many different sources. They also clarified the requirement to use scenario analysis. This was also an area of concern, as it can be fairly complex, doing a full quantitative scenario analysis. However, they have indicated a range of disclosure depending on an entity's capacity, so that may be full quantification, if possible, down to a qualitative type analysis. So just as a reminder, these are still an exposure draft form and as yet they don't have a proposed effective date, but something to keep watch on. And then in terms of what does that mean for us in Canada, the ISSB can't mandate adoption of standards. Really, that's jurisdiction by jurisdiction. However, if they were to be mandated, that could come from the CSA. That could also come from investors or lenders requesting it from an entity. And as well, I would just note, and you may have seen there was the creation of the CSSB. So that's the Canadian Sustainability Standards Board. They expect to be up and running in April. And really its purpose is to function similar to the Accounting Standards Board we have here in Canada, which endorses the adoption of IFRS and also is responsible for private entity accounting standards. Jeff Glassford: [00:43:29] Christine, maybe before we move on, just a couple of questions. One that's come in on the ISSB stuff. Disclosure. The question is, would these disclosures be in an audited set of financial statements or outside of the statements? Christine Evans: [00:43:47] Yeah, so that's a good question, Jeff. The ISSB themselves have not indicated where those should be disclosed. So, they could be within an MD and they could be within a separate sustainability report. They would not, however, be within the financial statements and then assurance that would be dependent jurisdiction by jurisdiction if it was required, or if an entity voluntarily chose to get assurance on those disclosures. Jeff Glassford: [00:44:13] Okay, that makes sense. And maybe my own personal question. You sit on a global committee looking at the ISSB stuff, maybe could you highlight for the audience beyond what you've already mentioned? Is there anything, in particular, you have a lot of discussions about? Or maybe there's more exciting topic? Christine Evans: [00:44:35] Yeah. So, one of the items that we've been discussing recently is the greenhouse Gas protocol. So, that has been in place for about 20 years. It is a protocol. It's been used voluntarily by entities, but it's not necessarily been through the rigor of standard setting, the interpretations that may be published by accounting firms or by other entities. So, there's perhaps some concern that there's different interpretations worldwide of that protocol. Jeff Glassford: [00:45:06] Okay. Understood. So, I guess you're saying there could be a range of judgments and estimates in measuring greenhouse gases given the current standards and Intel's or F something else is developed, there might be some judgments that exist. Christine Evans: [00:45:20] Yeah, that's right. Jeff Glassford: [00:45:24] Thanks, Christy. Christine Evans: [00:45:25] Great. So, I'll move on briefly to the SEC. And really just wanted to highlight a couple of things here for our listeners. The SEC proposal is also built off of the TCFD. However, their proposal is only on climate. So, it doesn't include any other ES or G items. And they've proposed disclosures in two places. So, within, call it the front of your 10K or your 20F in the MDNA section. That would be part of amendments to the SK rules and then directly within the financial statements that would amend the SX rules. And what's interesting is the proposed requirements within the financial statements would require specific disclosure of climate-related events. So, think about flooding or hurricane or specific weather event as well as an entity's transition activities. So, is the company changing out some of its locations to be more greenhouse gas efficient or greener, if you will? And so, an entity would be required to disclose the impact by line item within the statements. So, [INAUDIBLE] of any amount greater than 1%. And this drew a lot of comments because that 1% threshold is really not how we would typically think about materiality within the context of the financial statements. As for outside of the statements, maybe I would just note here that disclosures of scope three would only be required if they're material or an entity has publicly disclosed targets. And there is a one-year delay on when that scope three disclosure would be required. Lastly, of interest, I think to our Canadian issuers, the SEC did ask for specific feedback on whether foreign private issuers could use a local framework, so such as possibly the ISSB standards. And for MJDS issuers, the possibility of using the CSA requirements. And that would be if the SEC deemed them to be sufficient for their purposes. And so, while not specifically in the proposal right now, I think the request for feedback is positive and obviously, the responses are the commenters were positive in that area. And so, I think something to stay tuned for. Lastly, just touching briefly on the EU, as many entities do have subsidiaries there, and so, those subsidiaries, if significant, based on certain criteria that we see on the slides, would be subject to the ESRS standards that the European Sustainability Reporting standards and that would be beginning in 2025 for those legal entities. In addition, as a consolidated group, an entity has significant activity in the EU, once you get to calendar 2028, entities would also be required to report on a consolidated basis their sustainability activities. So, something to watch out for and something to keep in mind that those further ESRSs for third-country reporting aren't yet developed. Lots to keep track of, lots to do. While nothing's finalized. I think it's important to keep track of those developments. And as Janice mentioned, you can get started on that sustainability reporting journey. So, with that, I'm going to pass it back to you, Jeff. Jeff Glassford: [00:48:55] Thanks, Christina. And thanks, Janis. That was a good update from a sustainability perspective. Really appreciate it. As I mentioned earlier, keep the questions coming. We'll try and continue to get to them. We'll now transition into our traditional financial reporting piece. We're going to kick it off with a discussion of the current environment. So, Ritika already touched on this, but Janice is going to talk through some of the considerations of rising interest rates in an inflationary environment, what that might mean from a measurement, disclosure, etc., perspective in financial statements. So, with that, I will pass it off to Janice. Janice Rath: [00:49:41] Thanks, Jeff. As just mentioned, the first topic we're going to touch on is the impact of the current rising interest rate environment, and that can have impacts on several aspects of financial statements. So, we won't cover all of the items highlighted here today. The impacts can be pervasive and will require careful consideration during the year-end reporting process. So firstly, there's financial fair value measurements and fair value-based measurements. So, many standards allow for or require initial or subsequent measurement at fair value. So, when you're using an income approach to estimate fair value, those rising interest rates and discount rates are going to significantly impact the determination of fair value. Similarly, impairment will be a significant consideration for many entities. So, as a reminder, rising interest rates themselves could be an indicator of impairment in accordance with IAS 36 impairment of assets. So, entities are going to need to assess specific facts and circumstances to determine whether rising interest rates are an indicator of impairment, requiring a quantitative test to be performed in the period. And further, those rising discount rates may then impact the actual recoverable amount that you're quantifying. And also, as a reminder, the cash flow projections you use in your fair value measurements need to be revised to take into account higher prices and other factors due to inflation. And we want to make sure that we're not double counting or ignoring those factors. So, if your estimates of future cash flows and discount rates need to be consistent, they need to be in one or the other, not both, but not ignored either. On this slide, we also note that both leases and provisions may also be impacted. So, something to consider. The next areas that could be impacted. Just briefly. Employee benefits that could impact your defined benefit obligation. The valuation, the interest rates could impact those. It can impact the value of your plan assets and remeasurement gains or losses. And the rising interest rates can also impact your assessment of significant financing components and revenue arrangements. So, something that may not be initially top of mind but could be impacted. And then there's things like going concern, uncertainty, and especially the impact that those interest rates could have on covenant compliance. And generally, there may be other areas of your financial statements that could be impacted in terms of disclosure or measurement. So, all of those should be considered for relevance based on your own facts and circumstances. These are the last couple of items we'll highlight. Instruments that are recorded at amortized cost. So, if you've got a floating rate instrument, those could be affected by rising interest rates as the anticipated cash flows may need to be re-estimated to reflect the current and expected conditions. So, that's going to impact your effective interest rate. Conversely, if you've got an existing fixed rate instrument, those should not be directly affected by rising interest rates unless they're modified. Expected credit losses is another topic, so ESLs, those are based on the present value of expected cash shortfalls, with the discount rate used in the ECL calculation being the effective interest rate. So, since we just said that rising interest rates could lead to a change in your effective interest rate for variable rate interest, that could impact your ECL calculation. The other way that your ECL calculation could be impacted in the current environment is that borrowers may be adversely affected. So, it could actually impact your estimate of the cash shortfalls. So, this is clearly not an exhaustive list of impacts due to the rising interest rate environment, but we did want to provide some of the most common considerations so that you're aware and can take those into account as you go through your year-end reporting process. The next topic that we're going to talk today about is the interest rate benchmark reform. So, this has been going on for a few years as there's been an overall move to reform interbank offered rates or IBORs, as they're commonly known due to declining confidence in the reliability and the robustness of the pricing of those benchmark rates. Regulators in many countries around the world have taken steps to reform IBOR and are requiring companies to transition existing contracts to alternative benchmark rates. Several LIBORs have actually ceased to be published after 2021. And in fact, the US dollar LIBOR will cease to be published in June 2023. In Canada it's been announced that CDOR, so the Canadian Dollar Offered Rate will cease to be published in June 2024. The impact is expected to be significant in Canada. There is a working group called CARR, the Canadian Alternative Reference Rate Working Group, that has begun implementation of a two-stage transition plan, as it is expected that CDOR-based contracts will be transitioned to the Canadian Overnight Repo Rate Average or CORRA. Lots of acronyms in this section too. During the first stage of this project, all market participants are expected to transition to new derivatives and securities contracts or transactions from CDOR to the overnight CORRA in arrears. During the second stage of the project market, participants will be allowed to continue to transact in CDOR-based loans, but only with robust CDOR fallbacks and to hedge CDOR-based loans with CDOR-based derivatives. During this stage, market participants could also choose to transition their loan facilities to reference CORRA, term CORRA, or any other alternative rate. And so, what does all of this mean? And in particular, what does the cessation of CDOR publication mean for financial reporting? The ISB has issued amendments to various financial instruments, insurance, and lease standards to help companies deal with the effect on financial information that would have been impacted by these changes to benchmark rates. Importantly, some of these amendments help to provide relief in areas such as continuation of hedge accounting, despite a change in the benchmark interest rate and accounting for modification of financial instruments only due to a change in benchmark rate, as well as additional guidance on disclosures required as a result of the change. Companies need to assess what their current population of instruments are that will be linked to CDOR and could be impacted by the cessation. To understand how the benchmark rate reform is going to impact individual contracts and to assess whether the modifications that have been made fall in scope of some of these amendments that the ISB has made. There are criteria that have to be evaluated. It isn't just blanket relief to continue business as usual. Given the complexities here, if you do have further questions on how a contractual change related to CDOR reform will impact your financial statements, please reach out to one of your EY contacts for additional resources. And with that, I will pass it back. Jeff Glassford: [00:57:19] Thanks, Janice. I think it's important those last two topics, certainly, there are many CDOR contracts in Canada and so that will impact many, many of those listening to this webcast. Maybe I'll just add one thing to the inflation and rising interest rate discussion. Ritika highlighted disclosures are very important. Related to that, it will impact measurement of many of the assets and liabilities. But one thing I think slides a little under the radar is the tagalong impacts on things like covenants and future covenant projections and then how those might work their way into going concern considerations, etc.. So, all things to watch in the coming year. Now transitioning back to Christine. Christine is going to cover electronic funds transfer and we covered this topic. This is an IFRIC topic that we discussed in our Spring Financial Reporting Development webcast. So, we won't go over all the details again, but there is certainly a very important update that Christine will walk us through. Christine Evans: [00:58:34] Thanks, Jeff. And so as noted, you may recall the discussion we had in the spring around the September 2021 tentative agenda decision on electronic transfers. And the issue there was really around when an entity should de-recognize a financial asset. So, in the example that was provided, a trade receivable in a situation where it was paid through electronic transfer and that transfer was initiated before period end. So let's say December 31st and cash was received after period end in the entity's bank account. So, the example was January 2nd. And so in that tentative agenda decision, the IFRIC tentatively concluded that IFRS 9 nine provided adequate basis to conclude and the trade receivable would be de-recognized when the cash was actually received by the entity for settlement. So, that would be January 2nd in the example. And so, moving forward, the IFRIC did receive a number of comments from respondents, and those really raised concerns around the unintended consequences on other fact patterns. So, flip that around and think about an entity with a trade payable. Would that mean that they would de-recognize that trade payable only when their transfer was cashed on the other side, you know, and how would that be tracked? That might be costly, complex to apply, that may disrupt long-standing accounting practices around an entity's bank reconciliation process, for example. And so, ultimately, at its June meeting the IFRIC, did finalize their agenda decision on the basis, as discussed, that IFRS 9 did provide a basis to conclude. However, they did share the concerns raised by respondents to the ISB as part of the due process. So, at its September meeting, the ISB chose not to finalize the agenda decision, and in response to that feedback, they did decide to explore some narrow scope standard setting in this area. What's interesting, I think just one day before that meeting, the IDG, sorry, the IFRS discussion group in Canada had met to discuss that agenda decision to discuss the challenges that were raised in the context of Canadian issuers, and also to think about or discuss whether preparers should actually adopt that agenda decision, though it hadn't been finalized by the board or whether they should wait for further standard setting. And so, the result of that discussion by the IDG members was really they felt a wait and see approach was most appropriate given the level of responses to the agenda decision. And so that lines up well with the ISP's decision to undertake narrow scope standard setting. So, if we continue moving along in this timeline at its October meeting, the board tentatively decided to develop an accounting policy choice to deal with this issue, specifically around de recognition of a financial liability and whether that could occur before settlement date of an electronic transfer. So, back to that example of when to de-recognize the trade payable. And so, they did outline as part of that tentative policy choice specific criteria that would need to be met in order to recognize the payable prior to the cash being received or the end of that electronic transfer. We've also included here for you a link to our IFRS developments publication that discusses that decision. And I would note that while narrow scope standard setting has been undertaken, that there's amendments being proposed, they do need to go through the normal due process, and we really don't expect those amendments will be effective in the short term. But something to keep abreast of. And until that time, we do expect there will be continued diversity in practice. On that, I'm going to throw it back to you, Jeff. Jeff Glassford: [01:02:51] Thanks, Christine. Maybe just try to summarize because this is a bit of an unusual fact pattern. So, I think what happened was there was a question put to the IFRIC. They answered that question and it related to receivables. But that answer seemed to have broader implications. And so, there was questions raised about whether it made sense to finalize that agenda decision, given it could impact things like payables and how we might think through payables in a bank rec, for instance, as you mentioned. So, despite that, the IFRIC voted to finalize the agenda decision because that's all they can do. But the IASB has decided for now not to finalize that agenda decision, which is part of the new process they put in place a few years ago. So, that agenda decision is not finalized. The IASB now has tentatively come up with a plan that would try to keep practice more consistent with the longstanding approach of how we might have thought about payables and the bank rec issue you mentioned. But that isn't finalized. And so, until that is finalized or if it becomes finalized, the historic practices which are differing across the globe are likely to continue to exist. Is that a good summary? Christine Evans: [01:04:17] Yeah, I think that's a great summary, Jeff. Jeff Glassford: [01:04:20] So, definitely one to watch for everybody. I can guess that most every entity has some sort of payables on their books. And so, this is a broad topic that everybody should follow. Moving into our next issue is non-current liabilities with covenants. Feel like this has been on the FRD agenda for many years. Every year we talk about it. It's flipped and flopped on where we're headed. At one point, I think we were concerned that all debt with covenants was going to become current debt and our balance sheets would be flipped upside down, but I think Janice is going to give us some good news here that the IASB has made some amendments that are very helpful in that regard. So Janice? Janice Rath: [01:05:09] Thanks, Jeff. Yes, this topic, the amendments to IAS 1 is the gift that keeps on giving and every time they make an amendment, it seems like it's going to have a significant impact on lots of entities. So, the good news is that earlier this year the IASB discussed the revised amendments to IAS 1, and now the amendments specify that if the right to defer settlement of a liability for at least 12 months is subject to an entity complying with conditions that are applicable after the reporting period, then those conditions do not affect whether the right to defer settlement exists at the end of the reporting period for purposes of classifying liability as current or non-current. So, that's a lot of words in one sentence but basically, if a company has a December year-end, December reporting date, and there's a covenant that applies, say, at June 30th, the existence of that covenant and the ability to comply with it will not impact your assessment of current or non-current at December 31st. However, for liabilities that do have that condition, additional presentation and disclosure requirements have been included in these amendments. So, this is also a big change. The entity shall present liability subject to such conditions separately in its statement of financial position and shall apply additional disclosure requirements which include the conditions to which the entity is required to comply. For example, what the covenant is and the future date or dates at which they must be in compliance. Whether the entity would have complied with those future conditions based on its circumstances at the reporting date. So, at December 31st, would you have been able to comply with the June 30th covenant in my example? And whether and how the entity expects to comply with the conditions after the reporting date. So, do you expect to comply at June 30th when that date comes along based on your current projections? So, these proposed amendments were issued by the ISB just last month. So, in October 2022, and entities are required to apply them for annual reporting periods ending on or after the 1st of January 2024. But earlier adoption is permitted. And so, the amendments have also resulted in some non-covenant-related implications as a result of the addition of paragraph 76 B, which was part of prior amendments to IAS 1 that were proposed. This paragraph specifically, it clarifies that financial instruments or components of financial instruments that result in settlement by the entity's own equity instruments do not affect its classification as current or non-current, but only if it's classified as equity under IAS 32. So, in turn, that also clarifies that equity-settled securities classified as liabilities are required to be assessed for classification as current or non-current. And currently, there is some diversity in practice with respect to this issue that could result in some practical issues for entities upon adoption. So, for example, the IDG worked through a convertible debt fact pattern and under the new amendments concluded that if an instrument required delivery of a variable number of shares and was classified as a liability, it would not qualify for the exemption under 76 B and would have to be assessed for classification as current or non-current. A common example that we do expect to see in Canada is also with respect to warrants where they've failed to fix for fixed requirements, for example, because they're issued in a foreign currency. If the warrants are exercisable in the next 12 months, then those would also require classification as current. And a third example, which is also common in Canada, is subsidiary exchangeable units such as those issued by REITs. Those are typically liabilities under IAS 32. And so, if there's a demand feature or if it could be exchanged within the next 12 months, then those would be classified as current. So again, a lot of impact coming through these amendments to IAS 1 that could have a significant impact on presentation and disclosure in various financial statements once these come into effect in 2024. And I'll pass it back again. Jeff Glassford: [01:09:44] Thanks for that update, Janice. Maybe on the last slide, the last two items, certainly all three very common. Mixed practice in Canada, so warrants whether those are presented as current or non-current. And certainly, the REIT issue is very mixed practice on whether exchangeable units are presented as current or non-current. And so there will be a change there for some. And maybe coming back to my earlier comment on the economic environment and impact on covenants, this is another one where it's important that you think through what it might do to any covenants you have by having to move warrants or exchangeable units or maybe it's convertible debt from non-current to current. We did have a question come in and I think I can cover this myself, but Janice, feel free to help me. The question was, aren't the covenants the same at December and June? So, wouldn't you fail at both if you failed at one? I guess maybe two things. One, covenants might not always be the same. There could be escalating covenants as maybe a lender wants to see improvement from an entity. And in addition, you might have a covenant at December that you pass, but due to forward projections, you might not pass that in the future or vice versa. I think those are the keys from what the ISB was trying to get at with their disclosures. Is that fair, Janice? Christine Evans: [01:11:22] Yeah, I would agree with that. And there's also income statement-type covenants, which might be a trailing 12 months etc. So, the numbers could be different as well. Jeff Glassford: [01:11:33] Yeah, that's a great point. It's not all covenants are point-in-time or balance sheet covenants. Okay. Next, we will move on to everybody's favourite two topics. We're going to cover, first, equity classification and the Feist Project. And then Juliana is going to run into the GloBE rules, which is an income tax, global income tax that we have discussed in the spring event but Julianna will give us an update on that. Juliana, over to you. Juliana Mok: [01:12:06] Great. Thanks, Jeff. So, the first topic that we are going to cover or that I'm going to cover is the FICE Project. And I think that many in our audience probably have come up against the challenges in applying IAS 32, the financial statement presentation standard when it comes to classifying more complex financial instruments, particularly those that have components of liabilities and equity. Now, in the past couple of years, these types of instruments have proliferated, whether it's for tax reasons or because there's a market desire for these types of instruments. But they are challenging to classify under existing IFRS standards. And so, to address some of these long-standing challenges with applying the standard, in 2018, the IASB published a discussion paper called Financial Instruments with Characteristics of Equity, which is what FICE stands for, and that discussion paper was intended to really rehaul the guidance on classification principles and provide additional clarity as to how to think about classifying an instrument as equity versus liability, as well as to help move towards consistency for issuers. Based on the feedback received on that discussion paper. However, the board ultimately decided not to rewrite the standard fundamentally, but rather just to make amendments IAS 32 to address nonpractice issues that arise as well as to try to improve the disclosure information in financial statements related to these instruments that are issued by entities. And so, a new project was started in 2020 and the board's been quite productive on this project in the past two years. Many of the components of the project have since been discussed and the board has made many tentative decisions in various areas, as we've highlighted on this slide and through this timeline. Now, there are still a couple of topics to be discussed. And so, the possible date for an issuance of a final exposure draft has yet to be set. Despite that, despite the fact that we don't have a final exposure draft today, we did want to highlight a couple of the amendments that are being proposed by the board in areas that we find that are particularly challenging for entities, given that these tentative decisions likely will retain their form in the final exposure draft. So, maybe the first area of tension physicians will want to touch on is around the fixed-for-fixed criteria that Janice did briefly mentioned when talking about current versus non-current presentation. So, as a reminder, under IAS 32, if a contract will or can be settled in equity instruments of the company, that contract is only classified as equity. If the number of equity instruments to be issued is fixed and the number of the amount of cash or other financial assets to be received in exchange is also fixed. So, our fixed or fixed criteria normally pops up when we're dealing with convertible instruments, whether that's convertible debt or convertible preferred shares as well as with derivatives like share warrants. So, in this area, the board proposed a couple of amendments and clarifications for the fixed for fixed rules, which are consistent with current practice and with consensus that has developed over time. One of the first proposed amendments is a codification of the treatment of allowable preservation adjustments or adjustments for things like capital restructuring. So, when there's an adjustment to the conversion rate for stock splits or stock consolidations or bonus rights issuances. The current practice is that these types of adjustments we would view as not failing for fixed-for-fixed, and the board's tentative decision would embed this in the standard. Another of the proposed amendments is an exception that allows for passage of time adjustments. So, this would be a case where you have, for example, a convertible debt and the conversion rate increases over time, it steps up. And so, the number of shares that may convert to will vary over time. But at any point in time, you know exactly how many shares that debt is going to convert to. So again, the proposed amendment that the board has tentatively agreed to would codify this current practice of saying that that is not a violation of fixed for fixed. Another area I want to touch on is contingent settlement provisions. So again, the board has proposed a couple of different clarifications in this area and most of those are consistent with current practice. One proposed amendment that could change current financial reporting, however, relates to contingent features that require immediate settlement if a contingent event outside of the control of the entity occurs. So, for example, if a contingent event triggers the need to convert an instrument into a variable number of shares, the board is proposing that in these situations the instrument must be on initial recognition, measured at the full amount of that potential contingent obligation, regardless of and the expectation of the likelihood or probability of that contingent event happening at inception. So, in the past there has been some diversity in practice in accounting for these types of instruments where entities do not necessarily record these as liabilities or are not recording them at their full settlement amount. Lastly, the last thing I want to touch on is obligations to redeem own equity instruments. So most recently the IASB met in September to continue discussions in this area and it does include contracts like a put option on own equity instruments like non-controlling interests. And so, in this area, the IASB tentatively proposed amendments to clarify that an obligation to purchase entities' own shares, including non-controlling interests for either cash and other financial asset or a variable number of a different type of its own equity instruments, all would give rise to a liability measured at the present value of the redemption amount. The IASB tentatively decided that the offsetting entry to that liability would be to be a reduction in equity, not an expense. And the IASB also provided some tentative guidance as to where that debit and equity would go, depending on whether the contract is required repurchase of NCI versus other own shares. So, as I said, we really want to highlight a couple of the tentative decisions that we've made so far through the FICE project. If you want to learn more, we do have a comprehensive publication on our Applying IFRS on the FICE project, which summarizes all the discussions to date and highlights where these would reflect current practice versus where they might mean a change in practice. And so, if you're wanting to learn more, if you have a lot of instruments that might be impacted by this project, definitely do want to point you to this resource. As I mentioned before, the board hasn't set a date for the issuance of an exposure draft but given all the tons of decisions have been made so far and it may not be that far out. So, just switch gears. Last topic. Actually, two topics we want to cover in today's session relate to recent tax reform developments. The first of those that we wanted to touch on is a reminder of the OECD's global anti base erosion or GloBE rules. As Jeff had mentioned, we introduced this framework for global minimum taxes at our spring FRD earlier this year. So, not proposing to go over the rules again. Instead, what we really want to do today is remind you that the GloBE rules are still in the pipeline for Canada and internationally. To give you some very up to date updates on financial reporting developments so far and to share some further technical resources that might be helpful. So, the OECD framework does create a framework for corporate minimum taxes at that minimum rate of 15%. It was developed last year, but it still needs to be incorporated into [INAUDIBLE] law, which means, practically speaking, there's still some uncertainty as to when final legislation will be adopted in all these various countries. And on the slide, we do have a timeline that illustrates some selected updates as to where some countries are in terms of adopting GloBE. For us in Canada, it was announced in the federal budget earlier this year that Canada would be implementing the GloBE rules with an expectation they'd come into effect in 2023. Earlier this month, they reaffirmed their commitment to the GloBE rules through the Economic and Fiscal Update 2022. However, we are almost in December, we haven't seen draft legislation yet and so perhaps unlikely that final legislation will be available. The draft or final legislation will be available before the end of the year and we'll have to see what happens in 2023, whether they can get through the process to get final legislation out the door. The US in the meanwhile actually introduced their Inflation Reduction Act in August of this year, which also includes a corporate alternative minimum tax of 15%. Now, this minimum tax is not, however, fully aligned with the GloBE rules. Despite this, President Biden did speak at the UN General Assembly in September, reiterating their commitment to a global minimum tax and so unsure right now where the US stands in terms of adopting GloBE but we will touch briefly on the provisions of that separate Inflation Reduction Act in a couple of slides. So, as I mentioned at our previous FRD session, we introduced some of the potential financial reporting challenges related to GloBE minimum tax rules. And the Canadian IFRS discussion group also talked about some of these complexities at their latest meeting in September. That discussion highlighted questions about the scoping the application of iOS 12, as well as the ongoing global discussions about whether GloBE taxes would need to be accounted for in deferred tax calculations and the complexities that might arise in trying to figure out deferred tax calculations for GloBE. To cut to the chase, however, the IASB has been following closely these developments and in September they had noted that they were looking into whether some urgent standard setting was required. And the most recent update from today's board meeting, earlier today actually, is that based on their recommendations from the IASB staff and the staff paper that had been released earlier this month. The board did agree to amend IAS 12, to introduce a temporary mandatory exception for accounting for deferred taxes arising from GloBE. Also, consider the staff's recommendations for additional disclosures relating to this exception and relating to the potential impacts of GloBE foreign entity so that users would still have an understanding of what those potential implications would but they're re deliberating the specifics of that proposed disclosure later this week on Thursday. The board is planning for an accelerated timeline for consultation, which means that we should be expecting a published exposure draft in January with final amendments to IAS 12 sometime in Q2 of 2023. So, this is definitely really good news for financial statement preparers that were multinational entities that could have been in scope, that may still be in scope of GloBE in terms of not having to deal with the complexities of calculating deferred taxes under the GloBE framework. Our last slide just contains some additional resources. We did issue an IFRS publications development that summarizes the GloBE rules as well as some of those financial reporting considerations. In addition, we wanted to highlight the EY tax alerts that we publish. EY tax releases these very frequently, and they give updates on what's happening or related to globe in various jurisdictions so it can be quite useful to our tax practitioners. Even though we no longer having to worry about deferred tax calculations for these rules. We still have to deal with cash tax calculations. And so definitely a good resource to keep up to date on what's been going on. Our last topic for the day. As I had mentioned briefly, we did want to touch on the US Inflation Reduction Act. And so as I had said, this was signed into law in August of this year. The ACT firstly introduces a corporate alternative minimum tax or a CAMT of 15%. Though as I had mentioned before, it is not fully in line with the mechanisms of the GloBE rules. There's also a second main provision to the Inflation Reduction Act, which is a 1% excise tax on stock repurchases made by publicly traded corporations, US corporations. Now, what does this mean for our entities that are based in Canada? Well, for multinational reporting entities like those with a parent in Canada, but operations in the US, the Inflation Reduction Act would still be applicable if two scoping criteria are met. So, the first is that that foreign parented multinational group has average adjusted financial statement income or AFSI in excess of a billion dollars. The second is that the US domestic operations have an average AFSI of a hundred million dollars. Now, from a financial reporting perspective, we really only want to touch on this at a high level, given we don't expect lots of our Canadian entities to be impacted in Canada given the scoping rules. But for those that are, the expectation is that the CAMT would be considered in scope for IAS 12, given it is a tax on profits. The 1% excise tax, on the other hand, would not be in scope of IAS 12, but would instead be captured by IFRIC 21 levies. Now, there can be some complexities to the application of IAS 12 for the act, so please do reach out to your EY contacts if you think that because of your US operations you may fall into the scope of the CAMT rules. Given that the Inflation Reduction Act was signed into law in August of this year, we would hit that trigger under IAS 12 for deferred taxes where we need to calculate our deferred taxes based on enacted or substantively enacted tax rates that will apply in the future. And so if you do think that you're going to be in scope of the CAMT and may need to pay taxes in the future, that's something you need to think about when calculating your deferred taxes for financial reporting this year. So, that's it on tax reform, I will pass it back to Jeff to wrap things up. We'll see if we have any questions. Jeff Glassford: [01:26:26] Thanks, Juliana. Appreciate it. Maybe a couple main takeaways from that. If you have instruments where there's some question mark on equity versus liability classification, certainly you should follow the FICE project. On the GloBE front, very current information, as Juliana mentioned, just this morning the IASB has tentatively decided to provide that relief, which is welcome news. It would have been extremely difficult to calculate deferred taxes. But if you are in scope of GloBE or the US amendment, there are still implications and accounting things to think through. So, important that you familiarize yourself and get started there. That brings us to the end of our formal presentation. There are some further slides that go through the IASB work plan and the discussions at the IFRS discussion group here in Canada that you're free to take a look at on your own time. There is one question that I will pose. I think this is probably best answered by Christine, and the question is what skills do you think are needed to have adequate controls in place? And to provide the assurance over both sets of data. And this is related to sustainability. Christine Evans: [01:27:52] Yeah, Thanks, Jeff. I think that's a great question and really a place where we can see climate professionals and the finance function working together. The finance function has a lot of experience and controls and processes and the climate or sustainability reporting, and an entity is likely not as mature as those finance processes. So, really a great place for teams to work together. And maybe just on your assurance question for us within EY, when we are providing assurance on those types of metrics, it really is a team effort of professionals with the assurance or accounting background and climate or sustainability professionals. Jeff Glassford: [01:28:35] Great. Thank you, Christine. We have about a minute left, so maybe I'll just wrap it up here. I'd like to thank everybody again for joining. Please do complete the survey. We're very open to any feedback and ways to improve. And further, I would highlight that we are publishing a financial reporting update publication that should be out soon. So, please do look out for that. And with that, thanks again for joining and we'll talk soon.
