Consolidation |
6 Months Ended |
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Jun. 30, 2023 | |
Text Block [Abstract] | |
Consolidation | 3. Consolidation The Company consolidates entities in which it has a controlling financial interest by evaluating whether the entity is a voting interest entity (“VOE”) or a variable interest entity (“VIE”). As a part of the TSX listing, the Company reorganized its ownership in subsidiaries to segregate the Company’s Canadian cannabis operations from its operations in the United States and amended its share structure at TerrAscend (the "Reorganization"). After the Reorganization, the Company owns 95% of its Canadian business. The Company continues to consolidate both its Canadian and its U.S. cannabis operation under two different consolidation models. Subsequent to the Reorganization, all operations in the United States have a functional currency of USD. Canadian operations continue to have a functional currency of CAD. Voting Interest Entities
A VOE is an entity in which (1) the total equity investment at risk is deemed sufficient to absorb the expected losses of the entity, (2) the at-risk equity holders, as a group, have all of the characteristics of a controlling financial interest and (3) the entity is structured with substantive voting rights. The Company consolidates the Canadian operations under a VOE model based on the controlling financial interest obtained through common shares with substantive voting rights. Variable Interest Entities
A VIE is an entity that lacks one or more characteristics of a controlling financial interest defined under the voting interest model. The Company consolidates VIE when it has a variable interest that provide it with (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance (power) and (2) the obligation to absorb losses of the VIE that potentially could be significant to the VIE or the right to receive benefits from the VIE that potentially could be significant to the VIE (benefits).
As a result of the Company's TSX listing effort, TerrAscend Growth Corp., a wholly owned subsidiary of the Company, issued $1 million of Class A shares to an investor. See Note 10 for accounting treatment of Class A shares. The Company’s ownership in Class B shares, representing 100% of the issued and outstanding shares of TerrAscend Growth Corp., were exchanged for non-voting, non-participating exchangeable shares of TerrAscend Growth Corp. Simultaneously, the Company entered into a protection agreement with TerrAscend Growth Corp. that contains certain negative covenants that are designed to preserve the value of the non-voting shares until such time as they are converted into common shares. The Company determined TerrAscend Growth Corp. is a VIE as all the Company’s US activities continue to be conducted on behalf of the Company which has disproportionately few voting rights. After conducting an analysis of the following VIE factors; purpose and design of the VIE, the protection agreement in place, the board structure of TerrAscend Growth Corp., and substantive kick-out rights of the Class A shareholders, it was determined that the Company has the power to direct the activities of TerrAscend Growth Corp. In addition, given the structure of the Class A shares where all of the losses and substantially all of the benefits of TerrAscend Growth Corp. are absorbed by the Company, the Company consolidates as the primary beneficiary in accordance with Accounting Standards Codification ("ASC") 810 Consolidation. Management has applied significant judgment on the decision to consolidate its VIE's based on the facts and circumstances noted above.
The Company's U.S. operations are consolidated through the VIE model. Therefore, substantially all of the Company's current assets, non-current assets, current liabilities and non-current liabilities are consolidated through the VIE model. The Company's assets and liabilities that are not consolidated through the VIE model include convertible debt, derivative liability and assets and liabilities from discontinued operations. The Company also consolidates a minimal amount of assets and liabilities within Canada, see Note 21 for more information. |