National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- application for relief from the requirement in subsection 4.2(1) of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards that financial statements be prepared in accordance with Canadian GAAP -- issuer wants to prepare its financial statements in accordance with International Financial Reporting Standards -- issuer has implemented a comprehensive changeover plan, has assessed readiness of key persons, and has considered implications of adopting International Financial Reporting Standards -- exemption granted, subject to conditions.
Applicable Legislative Provisions
National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, s. 4.2(1).
April 29, 2011
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
NESSCAP ENERGY INC.
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the Filer from the requirements of Part 4 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (the Instrument)(the Exemption Sought) including the requirement that financial statements be prepared in accordance with generally accepted accounting principles determined with reference to Part V of the Handbook of the Canadian Institute of Chartered Accountants (the Handbook) applicable to public enterprises (Old Canadian GAAP), in order that the Filer may prepare financial statements for periods relating to the fiscal year ended December 31, 2010 in accordance with generally accepted accounting principles determined with reference to Part I of the Handbook applicable to publicly accountable enterprises, that is 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 (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(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 and Alberta (the Passport Jurisdictions).
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
The decision is based on the following facts represented by the Filer:
1. The Filer is a corporation incorporated under the laws of Ontario. The registered office of the Filer is located at 200 Bay Street, Suite 3800, Toronto, ON M5J 2Z4.
2. The Filer is a reporting issuer in the Jurisdiction and the Passport Jurisdictions. The Filer is not in default of its reporting issuer obligations under the Legislation or the legislation of the Passport Jurisdictions.
3. The Filer's securities are listed on the TSX Venture Exchange (TSXV).
4. The Filer was a capital pool company listed on the TSXV under the name Asian Resource Global Strategies Inc. (Asian Resource). On January 21, 2011, the Filer completed its qualifying transaction under TSXV Policy 2.4 - Capital Pool Companies (the Qualifying Transaction) with Nesscap Inc. (the RTO Acquiror).
5. Upon completion of the Qualifying Transaction, the RTO Acquirer became a subsidiary of the Filer and the Filer continued to carry on its business through the RTO Acquiror and changed its name to "Nesscap Energy Inc.".
6. The RTO Acquiror has been preparing its financial statements in accordance with IFRS since its incorporation. The financial statements of the RTO Acquiror for its 2009 financial year were prepared in accordance with IFRS and were audited in such form. All interim financial reports prepared by the RTO Acquiror have been prepared in accordance with the international accounting standard on interim financial reporting as issued under IFRS-IASB.
7. The Qualifying Transaction is a reverse takeover transaction. Although for legal purposes Asian Resource is the acquiror, for accounting purposes the RTO Acquiror is the acquiror. Accordingly, the financial statements of the Filer are those the RTO Acquiror.
8. Asian Resource has not previously prepared financial statements that contain an explicit and unreserved statement of compliance with IFRS.
9. The Canadian Accounting Standards Board has confirmed that publicly accountable enterprises will be required to prepare their financial statements in accordance with IFRS-IASB for fiscal years beginning on or after January 1, 2011.
10. The Instrument sets out acceptable accounting principles for financial reporting under the Legislation by domestic issuers, foreign issuers, registrants and other market participants Absent granting of the Exemption Sought, subsection 4.2(1) of the Instrument would require that the Filer's financial statements relating to financial years beginning before (or prior to) January 1, 2011, other than acquisition statements, be prepared in accordance with Old Canadian GAAP.
11. 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-ASB 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 the Instrument.
12. Subject to obtaining the Exemption Sought, the Filer intends to use IFRS-IASB for its financial statements for the fiscal year ended December 31, 2010.
13. The Filer believes that the use of IFRS-IASB would eliminate complexity and cost from the Filer's financial statement preparation process and will avoid potential confusion for the users of its financial statements.
14. The RTO Acquiror has historically prepared its financial statements in accordance with IFRS and as a result, there is no conversion plan necessary.
15. The Filer has carefully assessed the readiness of its staff, board of directors, audit committee, auditors, investors and other market participants for the adoption by the Filer of IFRS-IASB concurrent with the completion of the Qualifying Transaction and has concluded that they are adequately prepared for the Filer's adoption of IFRS-IASB concurrent with the completion of the Qualifying Transaction.
16. The Filer has considered the implications of adopting IFRS-IASB for periods relating to the fiscal year ended December 31, 2010 on its obligations under securities legislation including, but not limited to, those relating to CEO and CFO certifications, business acquisition reports, offering documents, and previously released material forward-looking information.
17. The Filer will state in its management's discussion and analysis for the fiscal year ended December 31, 2010, all relevant information about its transition to IFRS-IASB, including:
(a) the key elements and timing of the Filer's changeover plan;
(b) an explanation that the Qualifying Transaction is a reverse acquisition;
(c) the Filer's accounting will be a continuation of the RTO Acquiror's accounting which has been IFRS since inception; and
(d) the RTO Acquiror will account for the Filer as a reverse asset acquisition and present consolidated financial statements.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that the Filer:
(a) prepares its financial statements to be filed for periods relating to the fiscal year ended December 31, 2010 in accordance with IFRS-IASB;
(b) complies with the IFRS-related amendments to National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) that came into force on January 1, 2011 and that apply to documents required to be prepared, filed, delivered, or sent under NI 51-102 for periods relating to financial years beginning on or after January 1, 2010;
(c) complies with the IFRS-related amendments to National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings that came into force on January 1, 2011 and that apply to annual filings and interim filings for periods relating to financial years beginning on or after January 1, 2010;
(d) complies with the IFRS-related amendments to National Instrument 52-110 Audit Committees that came into force on January 1, 2011 and that apply to periods relating to financial years beginning on or after January 1, 2010; and
(e) the Filer provides the communication set out in paragraph 17.