Insight

US companies going public in Canada: IFRS considerations

This article explores some of the financial reporting requirements for a company deciding whether to list on a Canadian stock market.

From the IFRS Institute - August 2017

IFRS Perspectives: Update on IFRS issues in the US

Some US companies have chosen to raise capital in Canada as an alternative to US public capital markets. While SEC registrants can use their US GAAP financial statements for their initial and ongoing reporting requirements in Canada, private US companies have to adopt IFRS.

Deciding where to list is a complex decision that encompasses many factors, including liquidity, competitor listings, periodic reporting requirements and ongoing compliance costs. This article explores some of the financial reporting requirements for a company deciding whether to list on a Canadian stock market.1

The TSX and TSXV

Canada has a number of stock exchanges, but here we focus on the Toronto Stock Exchange (TSX), which is the largest exchange, and the TSX Venture Exchange (TSXV), which caters to small and early-stage companies. Since 2015, $5.5 billion of equity capital was raised on the TSX and TSXV by US companies, and 117 US companies were listed on the TSX or TSXV as of July 31, 2017 (see Figure 2).

Financial reporting requirements2

For a US company that is not an SEC registrant, the basis of preparation of the financial statements is required to be IFRS, as issued by the IASB.

IPO requirements
For companies listing on the TSX through an initial public offering, a prospectus must be filed. The audited IFRS financial statements to be included in the prospectus comprise:

  • statements of comprehensive income, statements of cash flows and statements of changes in equity for three completed financial years ending more than 90 days before the date of a TSX listing application, or 120 days for a TSXV listing application;
  • statements of financial position as at the end of the two most recently completed fiscal years; and
  • notes to the financial statements.

Although there are certain exceptions, the accompanying audit opinions need to be unqualified.

Unaudited quarterly financial statements, prepared in accordance with IAS 34, Interim Financial Reporting, are also required if the latest quarter ended more than 45 days before the date of a TSX listing application, or 60 days for a TSXV listing application.

Other required components of the prospectus include (not exhaustive):

  • the company’s corporate structure;
  • description of the company’s business;
  • use of proceeds;
  • dividends or distributions;
  • management discussion and analysis;
  • executive compensation; and
  • risk factors.

Ongoing requirements
Once a company is listed on the TSX or TSXV, it becomes a reporting issuer and is subject to ongoing reporting and disclosure obligations, which require the company to file:

  • audited annual financial statements and unaudited interim financial statements;
  • management discussion and analysis;
  • annual information form;
  • material change reports;
  • material information; and
  • business acquisition reports.

Preparing for a cross-border listing

As a result, any private US company that is contemplating a possible listing on the TSX or TSXV should plan for a potential conversion of its financial reporting from US GAAP to IFRS. An IFRS conversion can be a challenging undertaking that may affect a company’s timeline to file its prospectus.

In addition to IFRS financial statement requirements, companies considering a listing should also be aware of other prospectus reporting requirements, including risk factors, management discussion and analysis, and pro forma financial information.

To plan for a successful project, read KPMG’s article, Converting from US GAAP to IFRS. Additional resources on IPO are available on KPMG’s resource page, IPO Readiness.

 
Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates.
 
1 TSX Guide to Listing 2017, available here
2 TSX Technical Guide to Listing, available here

Related content

Subscribe to our IFRS Perspectives Newsletter

Meet the IFRS team

KPMG Executive Education

CPE seminars and customized training