Fairly Presented Certification
The "Fairly Presents" Representation
The CEO and CFO will be required to certify that their issuer's financial statements and other financial information (e.g., the MD&A) "fairly present" the issuer's financial "condition," results of operations and cash flows for the relevant time period.
The certification of fair presentation is not limited to a representation that the financial information disclosed in the interim and annual filings has been presented in accordance with the issuer's generally accepted accounting principles. Instead, this certification is intended to provide assurance that the financial information disclosed in the interim and annual filings, when viewed in their entirety, meets a standard of overall material accuracy and completeness that is broader than financial reporting under the requirements of GAAP, but not defined in the instrument.
Furthermore, the CEO and CFO certification requires a representation on "financial condition" rather than on "financial position," as used in the auditors' report. The concept of financial condition is broader than that of financial position, and further guidance can be found in the CICA MD&A Guidelines and National Instrument 51-102 Continuous Disclosure Obligations.
In essence, the "fairly presents" assessment consists of answering three fundamental questions:
- Are the financial statements, including note disclosure, prepared in accordance with GAAP?
- Are the MD&A and the AIF in annual filings (including all documents incorporated by reference), prepared in accordance with the relevant regulations (e.g., OSC, SEC) and guidance (e.g., CICA guidance, reports by regulators on deficiencies etc.)?
- Do the financial statements and the MD&A (and AIF in annual filings), taken together, meet an overall standard of material accuracy and fair presentation?
To help answer these questions, many CEOs and CFOs who are already required to provide similar certifications to the SEC have put into place sub-certification processes, which require other members of senior management to answer these questions with respect to the information pertaining to their area of responsibility that is included in the interim and annual filings comprising: the financial statements (e.g., segmented information), the MD&A and the AIF (and all documents incorporated by reference).
Lastly, if an issuer takes the view that its GAAP-based financial statements limit the fair presentation of the issuer's financial condition, the issuer must provide additional disclosure in its MD&A necessary to provide a materially accurate and complete picture of the issuer's financial condition, results of operations and cash flows.