Financial statements, March 31, 2014

7.2. Notes to financial statements: Significant accounting policies

The financial statements have been prepared in accordance with accounting standards issued by the Treasury Board of Canada Secretariat and the reporting requirements of the Receiver General for Canada. The basis of accounting used in these financial statements differs from generally accepted accounting principles for the public sector because employee vacation, severance liabilities and employee termination benefits are based on management's estimate of the liabilities rather than based on actuarial valuations.

The significant accounting policies are as follows:

a) Use of estimates

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as at the date of the financial statements and the reported amounts of revenue and expenses during the periods covered by the financial statements. The principal financial statement components subject to measurement uncertainty include salaries payable related to unsettled labour contracts, the estimated useful life of capital assets and the liabilities for employee vacation, severance benefits and employee termination benefits. Actual results could differ from those estimates. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

b) Revenue recognition

Revenue is recognized in the accounting period in which it is earned through the provision of goods or services, or when an event giving rise to a claim has taken place. The majority of service fees such as inspection and weighing activities are dependent on grain volumes handled. Revenues that have been received but not yet earned are presented as deferred revenue. Deferred revenue is primarily received for licensing fees which usually covers a 12-month period.

c) Expense recognition

Unless otherwise disclosed, expenses are recorded in the period they are incurred.

d) Cash in transit

Cash in transit includes cash and cheques received prior to March 31 but not deposited until the subsequent year.

e) Parliamentary, special and employee termination benefit appropriation

The ongoing Parliamentary appropriation received for the Grain Quality Research program and Internal Audit expenditures has been recorded as revenue of the Fund.

The special appropriation received to maintain cost recovery levels has been recorded as revenue of the Fund.

f) Accumulated net charge against the Fund's authority [“ANCAFA”]

The accumulated net charge against the Fund's authority is the amount of the Revolving Fund's non-lapsing authority that has been accumulated since its inception.

g) Accounts receivable

Accounts receivable are stated at amounts expected to be ultimately realized. Allowances are established for all accounts for which interest or principal payments are 180 days past due.

h) Capital assets

Certain assets previously under the custody of the Department of Agriculture and Agri-Food Canada were assumed by the Revolving Fund on April 1, 1995. The assumed assets were considered to be contributed capital and recorded at the Crown's estimated net book value. Assets acquired subsequent to April 1, 1995 were recorded at cost. Proceeds from the disposal of capital assets are retained by the Revolving Fund.

All capital assets and leasehold improvements with a cost equal to or greater than $10,000 are capitalized at their acquisition cost.

Assets are amortized on a straight-line basis over their estimated useful lives, commencing in the month after acquisition, as follows:

  • Scientific equipment - 5 years
  • Office equipment and furniture - 5 years
  • Operational equipment - 10 years
  • Motor vehicles - 5 years
  • Computer equipment and software - 3 years
  • Leasehold improvements - 5 years [term of the lease]

i) Vacation, overtime and compensatory leave

Vacation, overtime and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.

j) Employee severance benefits

Severance benefits accrue to employees over their years of service with the Government of Canada as stipulated in their collective agreements. The Canadian Grain Commission provides for the severance entitlements earned by employees. The obligation relating to the benefits earned by employees is calculated using information derived from management's estimate of the liability.

k) Employee termination benefits

Employees affected by the amendments to the Canada Grain Act are entitled to termination benefits. The Canadian Grain Commission was committed to the continued implementation of legislative change and restructured user fees for August 1, 2013. An obligation relating to the employee termination benefits based on management’s best estimate was initially set up as a liability as of March 31, 2013 and continues to be revised as information becomes available.

l) Pension plan

Employees of the Canadian Grain Commission are covered by the Public Service Superannuation Act and the Supplementary Retirement Benefits Act. The Government of Canada's portion of the pension cost is included in the employee benefit charge assessed against the Revolving Fund. The actual payment of the pension is made from the Public Service Superannuation and Supplementary Retirement Benefits Accounts. Current legislation does not require the Canadian Grain Commission to make contributions for any actuarial deficiencies of the Public Service Superannuation account.

m) Sick leave

Employees are permitted to accumulate unused sick leave. However, such leave entitlements do not vest and may only be used in the event of illness. Unused sick leave upon employee termination is not payable to the employee. Accordingly, no amount has been accrued in these financial statements.

n) Interest on drawdown

Interest is charged to the Revolving Fund at a rate set by the Treasury Board. Interest charges are calculated monthly on the balance of the accumulated net charge against the Fund's authority. The Treasury Board does not pay interest when a surplus arises that results in no drawdown against the authority.