• What are the number of unitholders or potential shareholders
in an offering? The greater the number, the more difficult it is
to argue that there is not a broad group of outsiders.
• What are the purpose of preparing the financial statements?
Who are the users and how will they be using the financial
statements? Are the financial statements prepared to meet
the common financial information needs of a wide range of
users or the financial information needs of specific users?
• Whether the substantial majority of stakeholders depend
primarily on the annual financial statement for external
reporting? Do they have other means of accessing financial
information? What are the expectations of the financial
This type of assessment will need to be made by private
companies who are considering the merits of raising capital by an
offering memorandum or perhaps through one of new crowdfunded
or business start- up rules. In Ontario, the OSC’s new crowdfunding
rules require private entities follow IFRS. The Alberta Securities
Commission proposal for new business start-up business rules
would allow a start-up issuer to use ASPE with a big warning
across the front if the financial statement. This is bound to have
some sticking points for issuers and their auditors regarding which
accounting framework to use.
So where can you go for more guidance? CPA Canada’s
IFRS Discussion Group noted in its March 2010 meeting that
these questions relate primarily to whether a particular entity
meets criterion (ii) of the definition (i.e., whether it “holds assets in
a fiduciary capacity for a broad group of outsiders as one of its
primary businesses”). The Group members also noted that there are
many questions about what constitutes a broad group of outsiders.
CPA Canada observed that there are bound to be grey areas
requiring judgment in determining whether a particular entity meets
the definition. The IFRS Discussion Group members noted that
the definition in the CPA Canada handbook had been developed
from the IASB’s definition of public accountability (found in the
IFRS for Small and Medium-sized Entities) and recommended that
stakeholders be made aware of the training modules developed by
the International Accounting Standards Committee Foundation on
the IFRS for Small and Medium-sized Entities.
In summary, it’s not always black and white that a private
entity will be required to follow IFRS or ASPE. Plan early and
consult your stakeholders and auditors. It’s not required that they
have turned grey but they do have to be adept at seeing it.
For more information contact:
Results from January 1, 1995, to January 16, 2006, are those of a pool of individually-syndicated mortgages managed by the manager of Romspen Mortgage Investment Fund (the “Fund”). The indicated rates
of return are historical returns calculated on a cash-on-cash basis, after fees, and the annual compounded net returns assume a monthly reinvestment of distributions. Returns do not take into account income
taxes, changes in unit values, third-party expenses or redemption charges that would have reduced returns. This is not an offer to sell or a solicitation of an offer to buy units of the Fund, which are offered to
investors who meet eligibility requirements under applicable securities laws. Fund units are offered only by offering memorandum, which contains important information about the Fund’s fees, objectives, and risk
factors, and which should be read before investing. Consult your financial advisor. The Fund’s returns are not guaranteed, unit values may change, and past performance may not be repeated.
With a 49-year history of capital preservation and consistent
returns, our commercial mortgage fund is ideal for pension
funds, foundations and endowments seeking to improve
fixed income returns without significantly increasing risk.
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Romspen Mortgage Investment Fund