2. Summary of significant accounting policies

For financial reporting purposes, the activities of the Agency have been divided into two sets of financial statements: Agency Activities and Administered Activities. The financial statements – Agency Activities include those operational revenue and expenses, which are controlled by the Agency and utilized in running the organization. The financial statements – Administered Activities include those revenues and expenses which are controlled by someone other than the Agency, such as the federal government, a province or territory, or another group or organization, and managed by the Agency on their behalf. The purpose of the distinction between Agency and Administered activities is to facilitate, among other things, the assessment of the administrative efficiency of the Agency in achieving its mandate.

As required by section 88(2)(a) of the Canada Customs and Revenue Agency Act, the Financial Statements – Agency Activities have been prepared using accounting principles consistent with those applied in the preparation of the financial statements of the Government of Canada. These accounting principles are based on Canadian generally accepted accounting principles. The purpose of these financial statements is to present operational non-tax revenue and expenses and assets and liabilities that are controlled by the Agency and utilized in running the organization. A summary of significant accounting policies follows:

(a) Parliamentary appropriations

The Agency is financed by the Government of Canada through funding voted annually by Parliament. This funding, referred to as appropriations, is primarily based on cash flow requirements. The financial statements are prepared in accordance with accounting principles consistent with those applied in preparing the financial statements of the Government of Canada. Items recognized in the statement of operations and the statement of financial position are not necessarily the same, or on the same basis, as those provided through appropriations from Parliament. The statement of operations does not include budgetary information.

(b) Expense recognition

All expenses are recorded on the accrual basis.

(c) Revenue recognition

Non-tax revenue reported in this statement excludes administered revenues collected under the authority of the Income Tax Act, the Customs Act, the Excise Act, the Excise Tax Act and other similar legislation. Non-tax revenue is recorded on the accrual basis.

(d) Consumable supplies

Consumable supplies consist of forms, publications and uniforms. These assets are recorded at the lower of cost (determined by using the weighted average cost method) or net realizable value. The cost of consumable supplies is charged to operations in the period in which the items are used.

(e) Capital assets

All costs of $10,000 or more incurred in acquiring and developing land, buildings, equipment, and other capital property (including leasehold improvements) are capitalized as tangible capital assets and amortized over the useful lives of the assets. Similar items under $10,000 are included in the statement of operations and are disclosed as equipment purchases in Note 5. The capitalization of software and leasehold improvements has been done on a prospective basis from April 1, 2001. Capital assets do not include intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, and museum collections. Amortization of capital assets is done on a straight-line basis over the estimated useful lives of assets as follows:

Assets under construction/development are not amortized until completed and put into operation (Note 8).

(f) Services provided without charge by other Government departments

Estimates of amounts for services provided without charge by other government departments are included in expenses. Those amounts include:

• accommodation provided by Public Works and Government Services Canada;
• employer's contributions to the health insurance plan and employee benefit plan provided by Treasury Board;
• legal services provided by Justice Canada;
• audit services provided by the Office of the Auditor General of Canada;
• workers' compensation benefits provided by Human Resources and Skills Development Canada; and
• payroll services provided by Public Works and Government Services Canada.

(g) Net cash provided by Government of Canada

The Agency operates within the Consolidated Revenue Fund (CRF). The CRF is administered by the Receiver General for Canada. All cash receipts are deposited to the CRF and all cash disbursements are paid from the CRF. The net cash provided by government is the difference between all cash receipts and all cash disbursements including transactions with departments and agencies.

(h) Due from the Consolidated Revenue Fund (CRF)

Due from the CRF represents the amount of cash that the Canada Customs and Revenue Agency is entitled to draw from the CRF without further appropriations to discharge its liabilities. These amounts have been charged to current or prior years' appropriations, but will be paid in the future and include items such as accrued employee salaries, accounts payable, and accrued liabilities.

(i) Employee severance benefits, vacation pay, and compensatory leave

Employee severance benefits, vacation pay, and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment. The employee severance benefits liability is estimated using the Government of Canada's demographic population characteristics and assumptions. The liability for vacation pay and compensatory leave is calculated at the salary levels in effect at the end of the year for all unused vacation pay and compensatory leave benefits accruing to employees. Employee severance benefits and vacation pay liabilities payable on cessation of employment are Agency obligations that are normally funded through future years' appropriations.

(j) Contributions to Public Service Superannuation Plan

Most Agency employees participate in the Public Service Superannuation Plan administered by the Government of Canada. The employees and the Agency contribute to the cost of the plan. The Agency's contributions are charged to expenses in the year incurred and represent the total Agency pension obligation to the plan. Current legislation does not require the Agency to make contributions for any actuarial deficiencies of the Public Service Superannuation Account.

(k) Employee benefit plan

The federal government sponsors an employee benefit plan (health and dental) in which the Agency participates. The Agency's contributions to the plan are recorded at cost and charged to personnel expenses in the year incurred. They represent the Agency's total obligation to the plan. Current legislation does not require the Agency to make contributions for any future unfunded liabilities of the plan.

(l) Measurement uncertainty

The preparation of these financial statements according to the accounting principles applied in preparing the financial statements of the Government of Canada requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Employee severance benefits, contingencies, and the useful life of capital assets are the most significant items where estimates are used. Actual results could differ from these current estimates. The estimates are reviewed periodically and, as adjustments become necessary, they are reported in net results of operations in the period in which they become known.

Date modified:

2004-10-28