Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption granted from the requirement that financial statements be prepared in accordance with Canadian GAAP -- the issuer recently became a reporting issuer; the issuer has not previously prepared financial statements in accordance with Canadian GAAP; the issuer has assessed the readiness of its staff, board, audit committee, auditors and investors.
Applicable Legislative Provisions
National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency.
Citation: Storm Resources Ltd., Re, 2010 ABASC 492
October 21, 2010
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA AND ONTARIO
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
STORM RESOURCES LTD.
The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting the Filer from the requirement in section 3.1 of National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency (NI 52-107) that financial statements be prepared in accordance with Canadian GAAP (the Exemption Sought), in order that the Filer may prepare financial statements in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IFRS-IASB).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:
(a) the Alberta Securities Commission is the principal regulator for this application;
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador; and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
1. The Filer was incorporated in Alberta on June 8, 2010, its head office is located in Calgary, Alberta and its registered office is at Suite 3300, 421 -- 7th Avenue S.W., Calgary, Alberta, T2P 4K9.
2. The Filer is a reporting issuer under the securities legislation of each of the provinces of Canada.
3. The Filer is an oil and gas exploration company with assets in Alberta and British Columbia.
4. The Filer does not have any operating revenue as it is still in the exploration phase.
5. The Filer's common shares are listed on the TSX Venture Exchange (TSX-V) under the symbol "SRX".
6. The Filer became a reporting issuer in the provinces of Canada pursuant to a plan of arrangement involving Storm Exploration Inc. (Storm), ARC Energy Trust, ARC Resources Ltd. (ARC Resources) and the Filer (the Arrangement) completed on August 17, 2010.
7. Under the Arrangement, the Filer was spun out of Storm. An aggregate of 16,631,241 common shares and 6,653,161 warrants to purchase common shares of the Filer were issued to Storm shareholders and 884,174 common shares of the Filer were issued to ARC Resources.
8. Pursuant to the Arrangement, certain resource properties consisting of approximately 117,200 net acres located in the Horn River Basin, Cabin/Kotcho/Junior and Umbach areas in north eastern British Columbia plus undeveloped land in the Red Earth area of Alberta, cash, a portfolio of listed securities and a 22% ownership position in a private company (collectively, the Assets) were transferred to the Filer from Storm.
9. The Filer will record the acquisition of the Assets as the acquisition of a group of assets and, therefore, will allocate the cost of the acquisition among the individual identifiable assets and liabilities in the group based on the relative fair value at the acquisition date.
10. The Filer prepared a statement of financial position prepared in accordance with IFRS (which was also compliant with Canadian GAAP) as at June 8, 2010 for inclusion in the Storm Notice of Special Meeting and Information Circular (the Circular) mailed to Storm shareholders in connection with the Arrangement. The Circular has been filed on SEDAR under the Filer's and Storm's SEDAR profiles.
11. The Filer is currently, and has been since August 30, 2010 (the Default Date), in default of securities legislation due to the filing of financial statements which disclose that they were prepared in accordance with IFRS.
12. Except for the default noted above, the Filer is not in default of securities legislation of any province of Canada.
13. The Filer acknowledges that any right of action, remedy, penalty or sanction available to any person or company or to a securities regulatory authority against the Filer from the Default Date until the date of this decision document are not terminated or altered as a result of this decision.
14. The Canadian Accounting Standards Board has confirmed that publicly accountable enterprises will be required to prepare their financial statements in accordance with IFRS for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011.
15. The Filer's financial year-end is December 31.
16. NI 52-107 sets out acceptable accounting principles for financial reporting under the Legislation by domestic issuers, foreign issuers, registrants and other market participants; under NI 52-107, a domestic issuer must use Canadian GAAP with the exception that an SEC registrant may use US GAAP; under NI 52-107, only foreign issuers may use IFRS.
17. In CSA Staff Notice 52-321 Early Adoption of International Financial Reporting Standards, Use of US GAAP and Reference to IFRS-IASB, staff of the Canadian Securities Administrators recognized that some issuers may wish to prepare their financial statements in accordance with IFRS-IASB for periods beginning prior to January 1, 2011 and indicated that staff were prepared to recommend exemptive relief on a case by case basis to permit a domestic issuer to do so, despite section 3.1 of NI 52-107.
18. The Filer has evaluated its overall readiness to transition to IFRS, including the readiness of its staff, Board of Directors and Audit Committee, and has concluded that it is adequately prepared for adoption of IFRS effective immediately.
19. The Filer has considered the implications of adopting IFRS on its obligations under securities legislation including but not limited to, those relating to CEO and CFO certifications, business acquisition reports and offering documents.
20. For the Filer, because it is in a start-up position, the main areas of accounting focus are exploration, issuance of share capital, stock based compensation and accounting for cash and investments, all of which have very few or no significant differences under the two accounting frameworks.
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that:
(a) the Filer prepares its financial statements for annual and interim periods beginning on or after January 1, 2010 in accordance with IFRS-IASB;
(b) if the Filer presents the components of profit or loss in a separate income statement, the separate income statement is displayed immediately before the statement of comprehensive income;
(c) the Filer's annual IFRS-IASB financial statements disclose an explicit and unreserved statement of compliance with IFRS; and
(a) the Filer's IFRS-IASB interim financial statements disclose compliance with International Accounting Standard 34 Interim Financial Reporting.