ARCHIVED - Future-Oriented Financial Statements 2012-2013

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National Research Council Canada  - For the Year Ending March 31, 2013

Statement of Management Responsibility Including Internal Control Over Financial Reporting

The introduction of future-oriented financial statements is a Parliamentary direction for departments to provide enhanced financial information to external users. NRC has prepared a full set of future-oriented financial statements which forecast results for the 2012-13 fiscal year and update 2011-12 projections. Responsibility for the compilation, content and presentation of the future-oriented financial statements for years ending March 31, 2012 and 2013 and all information contained in this statement rests with NRC's management. This future-oriented information has been prepared by management in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector. The future-oriented financial statements and accompanying notes are submitted in Part III of the Estimates (Report on Plans and Priorities), and will be used in the NRC's Departmental Performance Report to compare with actual results.

Management is responsible for the integrity and objectivity of the information contained in the future-oriented financial statements and for the process of developing forecasts and future projections. These forecasts and future projections are based upon information available and known to management at the time of development. They reflect current business and economic conditions, assume a continuation of current governmental priorities and are consistent with NRC's mandate and strategic objectives. Much of the future-oriented financial information uses best estimates, assumptions and judgment to derive forecasts and future projections while at the same time giving due consideration to materiality. At the time of preparation of this information, management believes these best estimates and assumptions to be reasonable. However, as with any use of best estimates and assumptions, there is a measure of uncertainty surrounding them. This uncertainty increases as the forecast horizon extends.

The actual results achieved for the fiscal year covered in the accompanying future-oriented financial statements will vary from the information presented and these variations may be material.

John R. McDougall, P.Eng.
President
Michel Piché, M.P.A., CMA, CIA
Vice-President, Corporate Management
and Chief Financial Officer

Ottawa, Canada
March 13, 2012

National Research Council Canada
Future-oriented Statement of Financial Position
as at March 31

(in thousands of dollars)
Estimated Results 2012 Forecast 2013
ASSETS
Financial Assets
Due from the Consolidated Revenue Fund
196,478 185,728
Accounts receivable and advances (Note 6)
25,058 24,613
Inventory for resale
2,200 2,200
Equity investments (Note 7)
472 472
Endowment fund investments (Note 8)
4,744 4,857
Total financial assets 228,952 217,870
Non-Financial Assets
Prepaid expenses
11,500 11,500
Inventory for consumption
3,132 3,132
Tangible capital assets (Note 9)
552,702 539,367
Total non-financial assets 567,334 553,999
TOTAL ASSETS 796,286 771,869
LIABILITIES AND EQUITY OF CANADA
Liabilities
Accounts payable and accrued liabilities (Note 10)
140,061 134,393
Vacation pay and compensatory leave
35,384 33,690
Deferred revenue (Note 11)
61,383 59,035
Lease obligations for tangible capital assets (Note 12)
146 75
Employee future benefits (Note 13)
62,919 57,103
Total liabilities 299,893 284,296
Equity of Canada 496,393 487,573
TOTAL LIABILITIES AND EQUITY OF CANADA 796,286 771,869

Contingent liabilities (Note 14)
Contractual obligations (Note 15)
Net debt indicator (Note 16)

The accompanying notes form an integral part of these financial statements.

John R. McDougall, P.Eng.
President
Michel Piché, M.P.A., CMA, CIA
Vice-President, Corporate Management and Chief Financial Officer

Ottawa, Canada
March 13, 2012

National Research Council Canada
Future-oriented Statement of Financial Position
as at March 31

(in thousands of dollars)
Estimated Results 2012 Forecast 2013
Expenses
Manufacturing Technologies
161,469 144,385
Information and Communication Technologies (ICT) and Emerging Technologies
82,494 75,051
Industrial Research Assistance
150,025 166,568
Health and Life Sciences Technologies
134,046 122,107
Energy and Environmental Technologies
50,042 45,493
National Science and Technology Infrastructure
105,073 98,491
Scientific, Technical and Medical Information
23,962 20,806
Internal Services
146,594 134,306
Total Expenses 853,705 807,207
Revenues
Manufacturing Technologies
81,597 82,120
Information and Communication Technologies (ICT) and Emerging Technologies
17,135 19,018
Industrial Research Assistance
960 1,335
Health and Life Sciences Technologies
26,548 30,364
Energy and Environmental Technologies
22,457 21,867
National Science and Technology Infrastructure
11,320 13,193
Scientific, Technical and Medical Information
4,356 3,286
Internal Services
9,025 10,098
Total Revenues 173,398 181,281
Net Cost of Operations 680,307 625,926

Segmented Information (Note 20)

The accompanying notes form an integral part of these financial statements.

National Research Council Canada
Future-oriented Statement of Equity of Canada
for the year ended March 31

(in thousands of dollars)
Estimated Results 2012 Forecast 2013
Equity of Canada, beginning of year 507,474 496,393
Net cost of operations
(680,307) (625,926)
Net cash provided by Government
638,667 599,412
Change in due from the Consolidated Revenue Fund
(822) (10,750)
Services provided without charge by other government departments (Note 17)
31,381 28,444
Equity of Canada, end of year 496,393 487,573

The accompanying notes form an integral part of these financial statements.

National Research Council Canada
Future-oriented Statement of Cash Flow
for the year ended March 31

(in thousands of dollars)
Estimated Results 2012 Forecast 2013
Operating Activities
Net cost of operations
680,307 625,926
Non-cash items
Amortization of tangible capital assets
(64,496) (62,987)
Services provided without charge by other government departments and agencies (Note 17)
(31,381) (28,444)
Net loss on disposal of tangible capital assets
(1,437) (1,541)
Other
(97) (4)
Variations in Statement of Financial Position
Decrease in liabilities
13,012 15,597
Decrease in inventory for consumption
(1,625) 0
Decrease in accounts receivable and advances
(746) (445)
Increase in endowment fund investments
113 113
Cash used in operating activities 593,650 548,215
Capital Investing Activities
Acquisitions of tangible capital assets
45,017 51,197
Cash used in capital investing activities 45,017 51,197
Net cash provided by Government of Canada 638,667 599,412

The accompanying notes form an integral part of these financial statements.

National Research Council Canada
Notes to the Future-oriented Financial Statements

Year ended March 31

1. Authority and Objectives

The National Research Council Canada (NRC) exists under the National Research Council Act and is a departmental corporation named in Schedule II of the Financial Administration Act. The mission of NRC is to work with clients and partners to provide strategic research, scientific and technical services to develop and deploy solutions to meet Canada's current and future industrial and societal needs.

In delivering its mandate, NRC reports under the following program activities:

  • Manufacturing Technologies: Multidisciplinary research and development in consultation with industry, universities, government departments and other key innovation players to improve the global competitiveness of Canadian industry by transforming knowledge and innovation into real economic value and by transferring technologies into industrial solutions for the marketplace.
  • Information and Communication Technologies (ICT) and Emerging Technologies: Mobilizes, collaborates and partners with key university, government and private sector players and forms major research collaborations to develop integrated research solutions in the areas of information and communications technologies and emerging technologies.
  • Industrial Research Assistance: Provides a range of technical and business-oriented advisory services, as well as financial support for small and medium-sized Canadian businesses engaged in research and development of technological innovations to augment their capacity and capability to innovate, commercialize and generate significant economic activity for Canadian Industry.
  • Health and Life Science Technologies: Mobilizes and partners with key university, government and private sector players and forms major research collaborations to develop integrated research solutions for complex health and related life science issues.
  • Energy and Environmental Technologies: In partnership with other government departments, universities and industry, brings together the knowledge and expertise needed to make an impact on areas of critical importance to Canada in environmental and sustainable energy.
  • National Science and Technology Infrastructure: Manages national science and engineering facilities and infrastructure critical to research, development and innovation by Canadian scientific and technological communities.
  • Scientific, Technical and Medical Information: Operates and maintains the national science library, specifically holding the national collection of Scientific, Technical and Medical information, to facilitate knowledge discovery, cross discipline research, innovation and commercialisation.
  • Internal Services: Groups of activities and resources administered to support the needs of programs and other corporate obligations of the organization. Includes only those activities and resources that apply across the organization and not those provided specifically to a program.

2. Significant Assumptions

The future-oriented financial statements have been prepared on the basis of the government priorities and the plans of the NRC as described in the Report on Plans and Priorities.
The main assumptions are as follows:

  1. Expenses and revenues, including the determination of amounts internal and external to the government, are based on a combination of information obtained through an organization-wide business planning process, monthly financial forecasts, and historical information.
  2. Program Activity Architecture (PAA) distribution in 2012-13 will be proportionally consistent with 2011-12.
  3. No significant change in foreign exchange rates is expected.
  4. Estimated year end information for 2012 is used as the opening position for the 2013 forecasts.
  5. Renewal of cluster funding of $66,700,000 in 2012-13 has not yet been approved as of the date of these statements. This funding and related expenses are not included in these statements.

These assumptions are adopted as at March 6, 2012.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to accurately forecast final results for the remainder of 2011-12 and for 2012-13, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing these financial statements, NRC has made estimates and assumptions concerning the future. These estimates and judgments may differ from the subsequent actual results. Estimates and judgments are continually evaluated and are based on historical information and other factors, including expectations of future events that are believed to be reasonable under the circumstances. As with all estimates and assumptions, there is a measure of uncertainty surrounding them and this uncertainty increases as the forecast horizon extends.

Factors that could lead to material differences between the future-oriented financial statements and the historical financial statements include:

  1. These statements are based on approvals received as at March 6, 2012. Subsequent increases or decreases to these approved amounts would have an impact on spending.
  2. Revenue generated for 2012-13 are based on targets set by NRC management, and represent a significant increase from 2011-12. Economic conditions may affect both the amount of revenue earned and the collectability of accounts receivables. Variations to revenue earned would have an impact on spending.
  3. Further changes to the operating budget through additional new initiatives, technical adjustments or reductions to program funding.
  4. Ratification of new collective bargaining agreements may result in an increase to salary expenditures. Due to the uncertain nature of future collective bargaining, no related increases have been forecast in the statements.
  5. The timing and amounts of acquisitions and disposals of tangible capital assets may affect gains/losses and amortization expense.

Once the Report on Plans and Priorities is presented, NRC will not be updating the forecasts for any changes to appropriations or forecast financial information made in ensuing supplementary estimates. Variances will be explained in the Departmental Performance Report.

4. Summary of Significant Accounting Policies

These future-oriented financial statements have been prepared in accordance with Treasury Board accounting policies stated below, which are based on Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles, except as disclosed in Note 16 Net Debt Indicator.

Significant accounting policies are as follows:

  1. Parliamentary authorities

    • NRC is financed mainly by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to NRC do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 5 provides a reconciliation between the bases of reporting.
  2. Net Cash Provided by Government

    • NRC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by NRC is deposited to the CRF and all cash disbursements made by NRC are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the Government.
  3. Amounts due from/to the CRF

    • Amounts due from/to the CRF are the result of timing differences at year end between the time when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that NRC is entitled to draw from the CRF without further authorities to discharge its liabilities.
  4. Revenues

    • Receipts are deposited to the Consolidated Revenue Fund. Under the NRC Act, money received by NRC through the conduct of its operations is respendable in the current or in subsequent years.
    • Revenues are recognized in the year in which the underlying transaction or event occurred that gave rise to revenue.
    • Funds received for which NRC has an obligation to other parties for the provision of goods, services or the use of assets in the future are recorded as deferred revenue.
    • Contributions of leased tangible capital assets are deferred and amortized to operations on the same basis as the related depreciable tangible capital assets.
  5. Expenses

    • Expenses are recorded on an accrual basis.
    • Grants are recognized in the year in which the conditions for payment are met. In the case of grants which do not form part of an existing program, the expense is recognized when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements.
    • Contributions are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement, provided that the transfer is authorized and a reasonable estimate can be made.
    • Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
    • Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans, audit of NRC’s financial statements, legal services and workers' compensation are recorded as operating expenses at their estimated cost and credited directly to equity.
  6. Employee future benefits

    1. Pension Benefits

      Eligible employees participate in the Public Service Pension Plan, a multiemployer plan administered by the Government. NRC’s contributions to the Plan are charged to expenses in the year incurred and represent NRC’s total obligation to the Plan. Current legislation does not require NRC to make contributions for any actuarial deficiencies of the Plan.

    2. Severance Benefits

      Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. The obligation relating to 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.

  7. Accounts receivable

    • Accounts receivable are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain.
  8. Conditionally repayable contributions

    • Conditionally repayable contributions are contributions that become repayable in part or in whole if conditions specified in the contribution agreement come into effect. Accordingly, they are not recorded on the Statement of Financial Position until the conditions specified in the agreement come into effect, at which time they are recorded as a receivable and a reduction in transfer payment expenses. An estimated allowance for uncollectibility is recorded where appropriate.
  9. Contingent liabilities

    • Contingent liabilities are potential liabilities, which may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the future-oriented financial statements.
  10. Environmental liabilities

    • Environmental liabilities reflect the estimated costs related to the management and remediation of environmentally contaminated sites. Based on management's best estimates, a liability is accrued and an expense recorded when the contamination occurs or when NRC becomes aware of the contamination and is obligated, or is likely to be obligated to incur such costs. If the likelihood of NRC's obligation to incur these costs is not determinable, or if an amount cannot be reasonably estimated, the costs are disclosed as contingent liabilities in the notes to the future-oriented financial statements.
  11. Inventories

    • Inventory for resale and for consumption is recorded at the lower of cost (using the average cost method) or net realizable value. The cost is charged to operations in the year in which the items are sold or used.
  12. Equity investments

    • Equity investments include shares in publicly and privately held companies. Equity investments are typically obtained as a result of debt settlement negotiations or as a result of non-monetary transactions (where financial assistance at better-than-market conditions was provided to firms through access to intellectual property, equipment and incubation space in laboratories). If the estimates of the non-monetary transactions cannot be determined, the equity investments are initially recorded at a nominal value. Otherwise they are initially recorded at fair value based on market prices. If the fair value of equity investments becomes lower than the book value and this decline in value is considered to be other than temporary, the equity investments are written down to fair value.
  13. Endowment fund investments

    • Endowments consist of restricted donations subject to externally imposed restrictions stipulating that the resources be maintained permanently. Income from the investment of endowments may only be used for the purposes established by the donors.

      Endowments are recognized as an asset when the amount to be received can be reasonably estimated and ultimate collection is reasonably assured.

      Funds received for endowments are invested in bonds and are carried at amortized cost. The premium or discount determined at the time of acquisition is amortized until the security’s maturity. Fair value of bonds is based on market prices.

  14. Foreign currency transactions

    • Transactions involving foreign currencies are translated into Canadian dollar equivalents using rates of exchange in effect at the time of those transactions. Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars using the rate of exchange in effect at year end. Gains and losses resulting from foreign currency transactions are included in the applicable line on the Statement of Operations according to the activities to which they relate. Net gains and losses relating to the sale of goods or services denominated in a foreign currency are included in revenues. Net gains and losses relating to the purchase of goods or services denominated in a foreign currency are included in expenses. Contractual obligations may contain foreign currencies that are translated into Canadian dollar equivalents using the rate of exchange in effect at the date of these statements.
  15. Tangible capital assets

    • Acquired tangible capital assets and leasehold improvements having an initial cost of $5,000 or more are recorded at their acquisition cost. Contributed tangible capital assets are recorded at market value at the date of contribution. NRC does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value. Assets acquired under tangible capital leases are initially recorded at the lower of the present value of the minimum lease payments at the inception of the lease or fair value. Tangible capital assets held for sale are recorded at the lower of their carrying value or fair value less cost to sell and no amortization is recorded.

      Amortization of tangible capital assets is calculated on a straight line basis over the estimated useful life of the asset as follows:

      Asset Class Amortization Period
      Land Not applicable
      Buildings and facilities 25 years
      Works and infrastructure 25 - 40 years
      Machinery, equipment and furniture 10 years
      Informatics equipment 5 years
      Informatics software 5 years
      Vehicles 7 years
      Aircraft 15 - 30 years
      Leasehold improvements Lesser of the remaining term of the lease or useful life of the improvement
      Leased tangible capital assets In accordance with asset class

      Assets under construction are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use.

      Where NRC enters into land leases at a nominal value, the transaction is considered as a non-monetary transaction and is recorded at fair value. Fair value of the transaction is based on market prices. If the estimates of the non-monetary transactions cannot be determined, the amount of the transaction is recorded at a nominal value.

5. Parliamentary Authorities

NRC receives funding through annual Parliamentary authorities. Items recognized in the statement of operations and the statement of financial position in one year may be funded through Parliamentary authorities in prior, current or future years. Accordingly, NRC has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:

  1. Reconciliation of net cost of operations to requested authorities

    (in thousands of dollars)
    Estimated 2012 Forecast 2013
    Net Cost of Operations 680,307 625,926
    Adjustments for items affecting net cost of operations but not affecting authorities:
    Revenues
    173,398 181,281
    Amortization of tangible capital assets
    (64,496) (62,987)
    Financial arrangements with other government departments and agencies
    (61,614) (46,225)
    Services provided without charge by other government departments (Note 17)
    (31,381) (28,444)
    Specified purpose accounts expenses
    (23,685) (9,167)
    Decrease in employee future benefits
    8,180 5,816
    Decrease in vacation pay and compensatory leave
    3,147 1,695
    Increase in salary accrual
    (3,044) (1,451)
    Cost of goods sold
    (2,487) (894)
    Loss on disposal of tangible capital assets
    (1,437) (1,541)
    Other
    699 922
    Bad debt expense
    (189) (174)
    Total items affecting net cost of operations but not affecting authorities
    (2,909) 38,831
    Adjustments for items not affecting net cost of operations but affecting authorities:
    Acquisitions of tangible capital assets and additions to assets under construction
    45,017 51,197
    Inventory purchases
    900 894
    Decrease in lease obligations for tangible capital assets
    67 71
    Contaminated sites remediation reducing the liability
    50 15
    Total items not affecting net cost of operations but affecting authorities 46,034 52,106
    Expected authorities available 723,432 716,863
  2. Authorities requested

    Authorities requested (in thousands of dollars)
    Estimated 2012 Forecast 2013
    Authorities requested:
    Vote 60 – Operating expenditures
    407,068 333,733
    Vote 65 – Capital expenditures
    42,167 42,549
    Vote 70 – Grants and contributions
    165,276 169,416
    Statutory amounts:
    Revenues pursuant to paragraph 5(1)(e) of the National Research Council Act
    140,610 190,983
    Contributions to employee benefit plans
    61,329 55,772
    Proceeds from the disposal of surplus Crown assets
    106 0
    Less:
    Revenues available for use in future years
    (66,388) (70,789)
    Lapsed authorities:
    Frozen allotments
    (10,801) (4,801)
    Unexpended authorities
    (15,935) 0
    Expected authorities available 723,432 716,863

    Forecast authorities requested for the year ending March 31, 2013 are the planned spending amounts presented in the 2012-13 Report on Plans and Priorities, estimates of amounts to be allocated at year end from Treasury Board centre votes and other expected allocation adjustments. Estimated authorities requested for the year ending March 31, 2012 include amounts presented in the 2011-12 Main Estimates, Governor General's Warrant, Supplementary Estimates (B) and (C), estimates of amounts to be allocated at year-end from Treasury Board central votes and other expected allocation adjustments.

6. Accounts Receivable and Advances

The following table presents details of NRC's accounts receivable and advances balances:

Accounts Receivable and Advances (in thousands of dollars)
Accounts Receivables and Advances Estimated 2012 Forecast 2013
Receivables from external parties 20,420 20,909
Receivable from other government departments and agencies 3,590 3,101
Employee advances 36 36
Total accounts receivable and advances before allowance for doubtful accounts 24,046 24,046
Less: allowance for doubtful accounts on receivables from external parties (871) (1,045)
Total less allowance for doubtful accounts on receivables from external parties 23,175 23,001
Repayable contributions 5,865 4,399
Less: allowance for uncollectibility (3,982) (2,787)
Net repayable contributions 1,883 1,612
Total 25,058 24,613

7. Equity Investments

Equity investments include shares in three publicly held companies and two privately held companies as of the assumption date of these statements. These shares were obtained through debt settlement or non-monetary transactions, and it is not management’s intention to hold equity investments over the long-term. NRC will consider timely opportunities for divestiture of equity investments by taking into account the interests, market liquidity and expected future growth of the applicable company.

NRC is not forecasting any change in the book value of the equity investments ($471,953 as of March 31, 2011) or the market value of NRC’s equity investments in publicly held companies ($281,123 as of March 31, 2011). The market value of the privately held companies is not determinable.

8. Endowment Fund Investments

This account was established pursuant to paragraph 5(1)(f) of the National Research Council Act to record the residue of the estate of the late H.L. Holmes. Up to two thirds of the endowment fund's yearly net income is used to finance the H.L. Holmes award on an annual basis. The award provides the opportunity to post-doctoral students to study at world famous graduate schools or research institutes under outstanding researchers.

Endowment Fund Investments (in thousands of dollars)
Estimated Results 2012 Forecast 2013
Restricted cash and investments, beginning of year 4,631 4,744
Net income from endowment 213 213
Awards granted (100) (100)
Restricted cash and investments, end of year 4,744 4,857

The portfolio had an average effective return of 4.70% in 2011 and an average term to maturity of 5.18 years as at March 31, 2011. The fair value of the endowment investments as at March 31, 2011 was $4,775,354.

9. Tangible Capital Assets

Tangible Capital Assets (in thousands of dollars)
Cost Accumulated Amortization Net Book Value
Tangible
capital
asset
class
Opening
balance
Acqui-
sitions
Transfers,
disposals
and
write-offs
Closing
balance
Opening
balance
Amorti-
zation
Transfers,
disposals
and
write-offs
Closing
balance
2013 Forecasted Net
book value
2012 Estimated Net
book value
Land 9,879 0 0 9,879 0 0 0 0 9,879 9,879
Buildings
and
facilities
695,358 4,445 10,725 710,528 (428,421) (19,597) 0 (448,018) 262,510 266,937
Works and
infra-
structure
21,921 147 40 22,108 (15,704) (579) 0 (16,283) 5,825 6,217
Machinery,
equipment
and
furniture
522,692 11,681 (6,644) 527,729 (370,975) (33,233) 18,678 (385,530) 142,199 151,717
Infor-
matics
equipment
55,913 2,038 (6,494) 51,457 (46,965) (4,075) 6,590 (44,450) 7,007 8,949
Infor-
matics
software
17,393 735 (1,297) 16,831 (11,326) (2,153) 2,838 (10,641) 6,190 6,067
Vehicles 2,882 0 (154) 2,728 (2,363) (128) 150 (2,341) 387 519
Aircraft 11,359 0 0 11,359 (10,070) (84) 0 (10,154) 1,205 1,289
Leasehold
improve-
ments
13,269 0 554 13,823 (4,343) (556) 0 (4,899) 8,924 8,926
Assets
under
construc-
tion
46,427 32,151 (26,529) 52,049 0 0 0 0 52,049 46,428
Leased
tangible
capital
assets
64,036 0 0 64,036 (18,262) (2,582) 0 (20,844) 43,192 45,774
Total 1,461,129 51,197 (29,799) 1,482,527 (908,429) (62,987) 28,256 (943,160) 539,367 552,702

When assets under construction are put into use during the fiscal year, they are transferred out of Assets under construction and into the capital asset class to which they relate, from which point on they are amortized as applicable.

The amortization expense forecast for the year ended March 31, 2013 is $62,987,000 ($64,496,000 in 2012).

As of the assumption date of these statements, NRC held eight land lease agreements (eight in 2011) for a nominal annual cost of one dollar with universities. In these instances, NRC owns the building on the leased land. The fair value of the land leases for these non-monetary transactions could not be determined at the inception of the lease therefore they are recorded at a nominal value.

On March 21, 1996, NRC entered into a non-monetary transaction consisting of a lease agreement with the University of Western Ontario for the relocation of the Integrated Manufacturing Technologies Institute (IMTI), whereby leased property was provided to NRC for twenty five years at a nominal cost of one dollar. Since the inception of the lease agreement, IMTI was restructured under NRC's Industrial Materials Institute (IMI) and NRC's Institute for Research in Construction (IRC). NRC has no obligations to the University of Western Ontario other than the relocation of the institute. The property was recorded as a leased tangible capital asset at its fair value of $10,000,000. The annual amortization of $400,000 for the leased tangible capital asset is exactly offset by the amortization of the deferred contribution related to the leased property.

On May 23, 2006, NRC took possession of a new facility and entered into a non-monetary transaction with the University of Alberta. NRC entered into a lease agreement with the University for the housing of NRC’s National Institute for Nanotechnology (NINT), whereby leased property is provided to NRC at a nominal cost of one dollar per year. The lease provides a one year term with options to renew on ten sequential occasions, each of the first nine renewals to be for a period of five years and the tenth renewal for a period of four years. The building was recorded as a leased tangible capital asset at its fair value of $44,400,000. The annual amortization of $1,776,000 for the leased tangible capital asset is exactly offset by the amortization of the deferred contribution related to the leased building.

On September 1, 2006, NRC took possession of a new facility and entered into a non-monetary transaction with the University of Prince Edward Island. NRC entered into a lease agreement with the University for the housing of NRC’s Institute for Nutrisciences and Health (INH), whereby leased property was provided to NRC at a nominal cost of one dollar per year. The lease provides a nineteen month term with renewal options for seven additional periods of five years, and one additional period of three years and five months (to August 31, 2046). The building was recorded as a leased tangible capital asset at its fair value of $9,300,000. The annual amortization of $372,000 for the leased tangible capital asset is exactly offset by the amortization of the deferred contribution related to the leased building.

10. Accounts Payable and Accrued Liabilities

The following table presents details of the NRC's accounts payable and accrued liabilities:

Accounts Payable and Accrued Liabilities (in thousands of dollars)
Estimated Results
2012
Forecast
2013
Suppliers and contributions payable 114,098 101,460
Payable to other government departments and agencies 16,406 21,940
Accrued wages and employee benefits 8,407 9,858
Contractor holdbacks 1,036 1,036
Sales tax payable 84 81
Contaminated site liabilities 30 15
Total 140,061 134,393

11. Deferred Revenue

Deferred revenue represents amounts received from external parties for which NRC has a future obligation for the provision of goods, services or the use of assets. Revenue is recognized in the period that goods are delivered or services are provided. A summary of the transactions related to this account are as follows:

Deferred Revenue (in thousands of dollars)
Estimated Results 2012 Forecast 2013
Deferred revenue – contributions related to leased tangible capital assets
Balance, beginning of year 48,042 45,494
Contributions recognized as revenue (2,548) (2,548)
Balance, end of year 45,494 42,946
Deferred revenue - other
Balance, beginning of year 15,689 15,889
Funds received 27,756 32,947
Revenue recognized (27,556) (32,747)
Balance, end of year 15,889 16,089
Total 61,383 59,035

12. Lease obligation for tangible capital assets

NRC has entered into an agreement to lease mechanical test equipment under capital lease with a cost of $336,000 and accumulated amortization of $89,600 as at March 31, 2013 ($336,000 and $56,000 in 2012). The obligations related to the upcoming years include the following:

Lease obligation for tangible capital assets (in thousands of dollars)
Estimated Results 2012 Forecast 2013
2013 80 0
2014 80 80
Total future minimum lease payments 160 80
Less: imputed interest (6.11%) (14) (5)
Balance of obligations under leased tangible capital assets 146 75

13. Employee Future Benefits

Employees of NRC are entitled to specific benefits on or after termination or retirement, as provided for under various collective agreements or conditions of employment.

  1. Pension benefits

    Eligible NRC employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government. Pension benefits accrue up to a maximum of 35 years at a rate of two percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Quebec Pension Plans benefits and they are indexed to inflation.

    Both the employees and NRC contribute to the cost of the Plan. The forecast expense are $45,000,000 in 2011-12 and $44,900,000 in 2012-13, representing approximately 1.9 times the contribution by employees.

    NRC’s responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan’s sponsor.

  2. Severance benefits

    NRC provides severance benefits to its employees based on eligibility, years of service and final salary. These severance benefits are not pre funded. Benefits will be paid from future authorities. Information about the severance benefits, estimated as at March 31, is as follows:

    Severance benefits (in thousands of dollars)
    Estimated Results 2012 Forecast 2013
    Accrued benefit obligation, beginning of year 71,099 62,919
    Increase (decrease) of the accrued expense for the year 1,220 584
    Benefits paid during the year (9,400) (6,400)
    Accrued benefit obligation, end of year 62,919 57,103

14. Contingent Liabilities

Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown. They are grouped into the two following categories:

  1. Contaminated sites

    Liabilities are accrued to record the estimated costs related to the management and remediation of contaminated sites where NRC is obligated or likely to be obligated to incur such costs. NRC has identified two sites in 2013 (two sites in 2012) where such action is possible and for which a liability of $15,000 ($30,000 in 2012) has been recorded. NRC has identified one additional site with contaminants exceeding an environmental standard and for which NRC may be responsible to incur remediation costs. This site is still under investigation and NRC is presently unable to determine the amount of the remediation liability, if any. Additional sites, changes in the remediation approach or material changes in amounts accrued or not accrued, are not forecasted for the future years presented in these statements. However, NRC's ongoing efforts to assess contaminated sites may result in additional environmental liabilities related to newly identified sites, or changes in the assessments or intended use of existing sites. These liabilities will be accrued by NRC in the year in which they become known and can be reasonably estimated.

  2. Claims and litigation

    Claims have been made against NRC in the normal course of operations. Based on NRC’s legal assessment of potential liability, NRC has no claim that will likely result in a liability as of the date of these future-oriented financial statements, for which no accrued liability has been recorded. NRC has 1 claim where the outcome is undeterminable. Some of these potential liabilities may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded in the financial statements.

15. Contractual Obligations

The nature of NRC’s activities can result in some large multi-year contracts and obligations whereby NRC will be obligated to make future payments in order to carry out its transfer payment programs or when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

Contractual Obligations (in thousands of dollars)
2012 2013 2014 2015 2016 and thereafter Total
Transfer payments 8,049 65,441 50,194 49,941 1,572 175,197
Operating contracts 781 2,840 1,367 196 0 5,184
Total 8,830 68,281 51,561 50,137 1,572 180,381

16. Net Debt Indicator

The presentation of the net debt indicator and a statement of change in net debt is required under the Canadian generally accepted accounting principles.

Net debt is the difference between a government's liabilities and its financial assets and is meant to provide a measure of the future revenues required to pay for past transactions and events. A statement of change in net debt would show changes during the period in components such as tangible capital assets, prepaid expenses and inventories. NRC is financed by the Government of Canada through appropriations and respendable revenues and operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by NRC is deposited to the CRF and all cash disbursements made by NRC are paid by the CRF. With the exception of endowment fund investments and receivables from other Federal Government departments, NRC's Financial Assets as well as future appropriations and respendable revenues generated by NRC's operations can be used to discharge existing liabilities.

Net Debt Indicator (in thousands of dollars)
Estimated Results
2012
Forecast
2013
Liabilities
Accounts payable and accrued liabilities
140,061 134,393
Vacation pay and compensatory leave
35,384 33,690
Deferred revenue
61,383 59,035
Lease obligation for tangible capital assets
146 75
Employee future benefits
62,919 57,103
Total Liabilities 299,893 284,296
Financial Assets
Due from the Consolidated Revenue Fund
196,478 185,728
Accounts receivable and advances
25,058 24,613
Inventory for resale
2,200 2,200
Equity investments
472 472
Endowment fund investments
4,744 4,857
Total Financial Assets 228,952 217,870
Net Debt Indicator 70,941 66,426

17. Related Party Transactions

NRC is related as a result of common ownership to all Government departments, agencies, and Crown corporations. NRC enters into transactions with these entities in the normal course of business and on normal trade terms.

  1. Common services provided without charge by other government departments and agencies

    NRC is forecasted to receive services without charge from other government departments and agencies. These services have been recognized in NRC’s Future-oriented Statement of Operations as follows:

    Related Party Transactions (in thousands of dollars)
    Estimated Results
    2012
    Forecast
    2013
    Employer's contributions to the health and dental insurance plans provided by Treasury Board 29,974 27,554
    Audit of NRC's financial statements provided by the Office of the Auditor General of Canada 517 0
    Legal services provided by Justice Canada 433 433
    Workers’ compensation benefits provided by Human Resources and Skills Development Canada 306 306
    Accommodation provided by Public Works and Government Services Canada 151 151
    Total 31,381 28,444

    The Government has centralized some of its administrative activities for efficiency, cost effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provided by Public Works and Government Services Canada are not included in the Future-oriented Statement of Operations.

18. Financial Instruments

NRC’s financial instruments consist of accounts receivable and advances, investments and accounts payable and accrued liabilities. Unless otherwise noted, it is management’s opinion that NRC is not exposed to significant interest, currency or credit risk arising from these financial instruments. Unless otherwise disclosed in these financial statements, management estimates that the carrying values of the financial instruments approximate their fair value due to their impending maturity.

19. Transfer to Shared Services Canada

Effective November 15, 2011, responsibility for NRC's information technology services was transferred to Shared Services Canada in accordance with an Order-in-Council. This resulted in an estimated $9.5 million reduction of expenses in fiscal year 2012 and $25.5 million of expenses in fiscal year 2013. Stewardship responsibility for the assets and liabilities related to the NRC's IT services are to be transferred as of March 31, 2012, however the value of those assets and liabilities had not been determined as of the date of these statements and therefore these asset still appear on NRC's Future-oriented Statement of Financial Position.

20. Segmented Information

Presentation by segment is based on NRC's program activity architecture (PAA). NRC allocates transactions over the PAA in accordance with stewardship principles, based on the Institutes, Branch or Program (IBP) that is responsible for managing the resource.

The presentation by segment is based on the same accounting policies as described in the Summary of Significant Accounting Policies (Note 4). The following table presents the forecasted expenses and revenues for the main program activities and by object of expense or revenue.

(in thousands of dollars)
Estimated results 2012 2013
Manufacturing Technologies ICT and Emerging Technologies Industrial Research Assistance Health and Life Sciences Technologies Energy and Environmental Technologies National Science and Technology Infrastructure Scientific, Technical and Medical Information Internal Services Forecast Total 2013
Expenses
Salaries and employee benefits
435,615 97,861 44,077 45,244 77,257 30,705 30,276 10,421 65,165 401,006
Grants and contributions
149,341 - - 114,347 - - 54,000 659 410 169,416
Utilities, materials and supplies
82,677 12,387 7,655 436 18,708 3,513 3,082 6,460 16,337 68,578
Amortization
64,496 19,772 12,304 129 15,014 6,929 4,157 1,155 3,527 62,987
Professional and special services
52,686 6,749 5,916 1,585 4,484 2,156 3,870 675 18,976 44,411
Transportation and communication
21,179 3,756 2,293 3,286 2,899 1,130 1,959 112 2,709 18,144
Repairs and maintenance
18,258 1,806 1,970 181 2,526 804 524 125 7,318 15,254
Payments in lieu of taxes
15,200 - - - - - - - 15,200 15,200
Rentals
4,898 815 497 1,289 344 40 409 40 490 3,924
Awards
2,200 - - - - - - - 3,091 3,091
Information
3,029 85 199 69 73 24 22 1,150 956 2,578
Net loss on disposal of capital assets
1,437 577 140 2 617 149 30 8 18 1,541
Cost of goods sold
2,487 492 - - 183 - 161 - 58 894
Bad debts
189 76 - - 2 43 1 1 51 174
Other
13 9 - - - - - - - 9
Total expenses 853,705 144,385 75,051 166,568 122,107 45,493 98,491 20,806 134,306 807,207
Revenues
Sales of goods and services
Services of non‑regulatory nature and other fees and charges
68,437 40,347 8,363 - 9,049 10,453 9,666 156 6,301 84,335
Rights and privileges
8,544 1,812 1,898 - 6,395 399 204 - - 10,708
Sales of goods and information products
5,034 3,873 - - 726 - 395 - 6 5,000
Lease and use of property
4,854 455 748 - 2,538 237 3 - 519 4,500
Revenues subtotal 86,869 46,487 11,009 - 18,708 11,089 10,268 156 6,826 104,543
Financial arrangements with other government departments and agencies
61,614 26,396 2,973 1,335 2,439 8,682 1,054 3,130 216 46,225
Revenues from joint project and cost sharing agreements
21,859 9,237 5,036 - 9,217 2,096 1,871 - - 27,457
Lease inducement revenue
2,548 - - - - - - - 2,548 2,548
Other
508 - - - - - - - 508 508
Total revenues 173,398 82,120 19,018 1,335 30,364 21,867 13,193 3,286 10,098 181,281
Net cost of operations 680,307 62,265 56,033 165,233 91,743 23,626 85,298 17,520 124,208 625,926
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