3. Change in accounting policies

As required by Section 88(2)(a) of the Canada Customs and Revenue Agency Act, the financial statements of the Agency must be prepared in accordance with accounting principles consistent with those applied in preparing the statements of the Government of Canada. In the 2003-2004 federal budget, the Government announced that it would change its basis of accounting from the modified accrual basis to the full accrual basis for the 2002-2003 financial statements.

In addition, in prior years, the Agency's administered activities financial statements consisted only of a statement of operations and notes to the statement of operations. The Agency's financial statements for administered activities now contain a statement of administered assets and liabilities, statement of administered revenues, statement of administered expenses, statement of administered cash flows and notes to the financial statements.

Tax revenues are now reported in the year in which the income/transaction giving rise to the taxes was earned/occurred rather than at the time of cash receipt. Tax amounts receivable and payable are now recorded as assets and liabilities, respectively, on the statement of administered assets and liabilities.

Furthermore, in prior years, the Agency reported tax revenues net of cash transfers to provinces and other Federal Government departments. This year, the Agency modified its presentation to report revenues administered for provinces and other Federal Government departments in the statement of Administered Revenues.

The Agency has reclassified the GST credit from an administered expense to a reduction of administered revenues. The GST paid by the Federal Government to its suppliers is now included in revenues administered on behalf of the Government of Canada. Previously, this was not reported in these financial statements.

Furthermore, interest revenues and interest expenses are now reported separately on the statement of Administered Revenues. Previously, only interest and penalties related to GST and excise were reported separately and other interest and penalty revenues were previously included with their respective federal tax revenue stream. Federal trust income tax has been reclassified from non-resident and other to personal income tax revenues. EI benefit recovery has been reclassified from an administered revenue to an administered recovery.

The changes in accounting principles have been applied on a retroactive basis as follows:

Date modified:

2003-10-29