NOTICE

Audited financial reports for pension plans whose fiscal year ends after 30 December 2011

Date : Decembre 2011

In 2010, the Canadian Institute of Chartered Accountants (CICA) revised its CICA Manual – Accounting to present different accounting standards for different categories of entities. The Canadian Auditing Standards, which came into effect in December 2010, affect in particular, how reports by independent auditors are presented.

In March 2011, the Régie des rentes du Québec published, in conjunction with the Ordre des comptables agréés du Québec (OCAQ), their joint position further to having made the Régie's requirements more stringent. The position resulted from regular discussions between the OCAQ, various parties from accounting firms, and the Régie. At the time, the Régie was concerned with obtaining reliable data and making audited financial statements accessible to the parties provided for under the Supplemental Pension Plans Act. This led to the conclusion that it was necessary to present standard financial statements, prepared in accordance with Canadian generally accepted accounting principles (GAAP), for pension plans. Since, under these principles, pension obligations are not taken into account, their omission led auditors to form adverse opinions on the financial statements.

On 12 May 2011, the OCAQ established the Committee for CAs Working with Pension Plans. The committee, which is comprised of members from accounting firms, actuary firms, para-public organizations and plan administrators, as well as a representative from the Régie, began meeting in November 2011. The members have discussed the challenges stemming from the March 2011 changes. Their conclusion is that standard financial statements that do not take into account pension obligations, accompanied with an independent auditor's report having no restriction on distribution, could also meet the financial information needs of those using the financial statements under the Act, while still ensuring the reliability of the information. Auditors would not, therefore, be required to form adverse opinions on these financial statements since one of the two accepted accounting frameworks would allow for such an exclusion.

The Régie will revise the 2011 edition of the Guide to the Annual Information Returnso that it specifies the accounting frameworks that apply to fiscal years ending on or after 31 December 2011.

Applicable accounting framework and the auditor's report

Pension Plan administrators will have two choices for producing the financial reports referred to in section 161 of the Act.

I – Framework with no pension obligations (special purpose)

Financial reports
Section 161 of the Act contains the requirements for preparing annual financial statements for pension plans. It does not require that benefit commitments be presented, since, under the Act, they are determined in the actuarial valuation. Section 161 is, therefore, a special purpose framework.

The Guide to the Annual Information Return will list the requirements. The following is an excerpt of the details contained in the Guide:

• Pension Plan administrators can have a financial report for the plan prepared in accordance with the accounting standards for pension plans in Part IV of the CICA Handbook - Accounting, with the exception of elements pertaining solely to pension obligations:
  • The plan's financial situation excludes pension obligations and any related surplus or deficit.
  • The statement of changes in pension obligations is not presented.
  • The information to be provided concerning pension obligations is not presented.

The financial report must be entitled Financial Report for the Plan and include the following statement in the notes: "This financial report was prepared in accordance with the accounting standards for that purpose indicated in the 2011 edition of the Guide to the Annual Information Return, published by the Régie des rentes du Québec.".

Auditors' reports
The Régie will accept reports from independent auditors on financial reports for plans that have been prepared in accordance with the above. Auditors' reports must not include a restriction on distribution.

II – Framework with pension obligations (general purpose)

Financial statements
Pension plan administrators wishing to continue presenting elements related to pension obligations can also have financial statements for the plan prepared in accordance with accounting standards for pension plans in Part IV of the CICA Handbook - Accounting.

Auditors' reports
The Régie will accept reports from independent auditors on financial statements for plans that have been prepared in accordance with the accounting standards for pension plans in Part IV of the CICA Handbook - Accounting.

For further information on the auditor's report, plan administrators and independent auditors should consult the Inf@CA newsletter on the OCAQ Web site.