Audited Financial Statements - Agency Activities

Notes to the Financial Statements - Agency Activities

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 revenues and expenses, which are managed by the Agency, utilized in running the organization and in most part, financed by parliamentary appropriations. The financial statements - Administered Activities include those revenues and expenses which are administered for someone other than the Agency, such as the federal government, a province or territory, or another group or organization. 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. The accounting principles used are consistent with Canadian generally accepted accounting principles for the public sector. A summary of significant accounting policies follows:

(a) Parliamentary appropriations

The Agency is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to the Agency do not parallel financial reporting according to Canadian generally accepted accounting principles, as they are based in large part on cash flow requirements. Consequently, items recognized in the Statement of Operations and the Statement of Financial Position may be different in value from the same items recognized on a government funding basis.

(b) Expense recognition

All expenses are recognized when goods and services are received.

(c) Revenue recognition

Non-tax revenue is recognized when the services are rendered by the Agency. Non-tax revenue reported in this statement excludes administered revenues such as interest and penalties collected under the authority of the Income Tax Act, the Excise Act, the Excise Tax Act, or other similar legislation.

(d) Consumable supplies

Consumable supplies consist of forms and publications. The cost of consumable supplies is charged to operations in the period in which the items are used.

(e) Property and equipment

All costs of $10,000 or more incurred by the Agency to acquire and develop property and equipment (including leasehold improvements) are capitalized and amortized over the useful lives of the assets. Similar items under $10,000 are expensed and are disclosed as equipment purchases in Note 6. The capitalization of software and leasehold improvements has been done on a prospective basis from April 1, 2001. Amortization of property and equipment 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.

(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:

(i) accommodation provided by Public Works and Government Services Canada;

(ii) employer's contributions to the health insurance plan and employee benefit plan provided by Treasury Board;

(iii) legal services provided by Justice Canada;

(iv) audit services provided by the Office of the Auditor General of Canada;

(v) workers' compensation benefits provided by Human Resources and Skills Development Canada; and

(vi) 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) Vacation pay and compensatory leave

Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment. 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. Vacation pay liabilities payable on cessation of employment are Agency obligations that are normally funded through future years' appropriations.

(j) Employee future benefits

(i) Pension benefits

All eligible employees participate in the Public Service Pension Plan administered by the Government of Canada. The Agency's contributions reflect the full cost as employer. This amount is currently based on a multiple of an employee's required contributions and may change over time depending on the experience of the Plan. The Agency's contributions are expensed during the year in which the services are rendered and represent the total pension obligation of the Agency. The Agency is not currently required to make contributions with respect to any actuarial deficiencies of the Public Service Pension Plan.

(ii) Severance benefits

Employees are entitled to severance benefits, as provided for under labour contracts and conditions of employment. The cost of these benefits is accrued as employees render the services necessary to earn them. The cost of the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

(k) Employee benefit plan

The Government of Canada 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 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 property and equipment are the most significant items where estimates are used. Actual results could differ from the current estimates. The estimates are reviewed periodically and, as adjustments become necessary, they are reported in the Statement of Operations in the period in which they become known.

Date modified:

2005-10-26