In this post I’ll outline why I think Chinese stocks listed on TSX and TSXV are potentially very interesting for international investors. I might also follow up this post with some more specific examples of interesting features I’ve found whilst looking through these companies.
The businesses are obviously interesting in themselves, but at this moment there is a more encompassing reason to look at Canada-listed VIEs, namely that the accounting standards are transitioning from Canadian GAAP to IFRS.
As I’ve stated in a previous post, finding a VIE under IFRS is significantly harder than under, say US GAAP. This is because VIEs have to be declared under US and Canadian GAAP, but can be counted as a “Subsidiary” under IFRS without any further clarification. What’s interesting now is to see how the change in accounting standards in Canada will affect the disclosures of VIEs.
It has to be said that the disclosures in Canada are not quite up to par with their US equivalents, even at this stage. For instance the risk sections are nowhere near as exhaustive, and the details of the VIE agreements are non-existent in many cases.
This switch will give investors a good way to understand how disclosures differ between the systems in regards to VIEs, and as such perhaps provide some insight into what to look for to find VIEs under IFRS. At the very least it might provide incentives to push for more disclosure on the matter under IFRS, perhaps similar to what we saw on the Lashou IPO filings.