Financial statements, March 31, 2015
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 Canadian generally accepted accounting principles because.
- The liabilities for employee termination benefits and severance liability and are based on management's best estimate rather than actuarial valuations; and
- The services received without charge from other government departments and agencies are not reported as expenses.
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 and employee termination benefit appropriation
Operations are funded primarily from a permanent authority from Parliament (Revolving Fund) where the Canadian Grain Commission is allowed to spend fees collected. Some of the operations of the Grain Quality Research Program and Internal Audit are funded by ongoing Parliamentary appropriation through their annual votes. Special appropriations were also received to cover affected employees' termination benefits. These appropriations have been recorded as revenue of the Fund.
f. 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.
g. 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 they are put into service, 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 (terms of the leases)
The costs for assets under construction are capitalized as incurred with amortization commencing in the month after they are put into service.
h. Vacation, overtime and compensatory leave
Vacation, overtime and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
i. 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.
j. Employee termination benefits
Employees affected by the amendments to the Canada Grain Act are entitled to termination benefits, calculated based on salary levels in effect at the time of termination as stipulated in their collective agreements. The obligation is calculated using information derived from management’s estimate of the liability.
k. 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 CGC to make contributions for any actuarial deficiencies of the Public Service Superannuation account.
l. 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. No amount has been accrued in these financial statements and payments of sick leave benefits are included in current operations as incurred.
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