ARCHIVED - Consolidated Future-Oriented Financial Statements 2013-2014

Archived Content

Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact us to request a format other than those available.

ARCHIVED - Consolidated Future-Oriented Financial Statements 2013-2014 (PDF, 1.21 MB)

National Research Council Canada - For the Year Ending March 31, 2014

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 consolidated future-oriented financial statements which forecast results for the 2013-14 fiscal year and update 2012-13 projections. Responsibility for the compilation, content and presentation of the consolidated future-oriented financial statements for years ending March 31, 2013 and 2014 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 public sector accounting standards. The consolidated 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 consolidated 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
January 29, 2013

National Research Council Canada
Consolidated Future oriented Statement of Financial Position
As at March 31

(in thousands of dollars)
Estimated Results 2013 Forecast 2014
Liabilities
Accounts payable and accrued liabilities (Note 6)
117,885 120,332
Vacation pay and compensatory leave
30,512 25,912
Deferred revenue (Note 7)
58,153 55,605
Lease obligation for tangible capital assets (Note 8)
75 -
Employee future benefits (Note 9)
71,673 72,716
Total net liabilities 278,298 274,565
Financial Assets
Due from the Consolidated Revenue Fund
221,906 226,619
Accounts receivable and advances (Note 10)
22,302 25,487
Inventory for resale
3,164 2,829
Cash and investments (Note 11)
2,784 2,784
Total gross financial assets 250,156 257,719
Financial assets held on behalf of Government
Accounts receivable and advances (Note 10)
(303) (303)
Total financial assets held on behalf of Government (303) (303)
Total net financial assets 249,853 257,416
Departmental net debt 28,445 17,149
Non-Financial Assets
Prepaid expenses
11,670 11,670
Endowment fund investment (Note 12)
4,834 4,944
Inventory for consumption
4,103 4,103
Tangible capital assets (Note 13)
533,669 500,434
Total non financial assets 554,276 521,151
Departmental net financial position 525,831 504,002

Contractual obligations (Note 14)
Contingent liabilities (Note 15)

The accompanying notes form an integral part of these consolidated future-oriented 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
January 29, 2013

National Research Council Canada
Consolidated Future-oriented Statement of Operations and Departmental Net Financial Position
For the Year Ended March 31

(in thousands of dollars)
Estimated Results 2013 Forecast 2014
Expenses
Manufacturing Technologies
150,348 149,269
Information and Communication Technologies (ICT) and Emerging Technologies
71,785 69,974
Industrial Research Assistance
260,428 275,399
Health and Life Sciences Technologies
99,439 98,904
Energy and Environmental Technologies
41,498 41,360
National Science and Technology Infrastructure
104,503 104,305
Scientific, Technical and Medical Information
22,762 22,158
Internal Services
220,735 216,915
Total Expenses 971,498 978,284
Revenues
Research services
62,793 76,554
Technical services
66,352 80,895
Intellectual property royalties and fees
9,600 11,704
Sales of goods and information products
7,505 9,150
Rentals
4,912 5,990
Grants and contributions
1,935 2,359
Lease inducement revenue
2,548 2,548
Other
505 505
Revenues earned on behalf of Government
(295) (295)
Total Revenues 155,855 189,410
Net cost of operations before government funding and transfers 815,643 788,874
Government funding and transfers
Net cash provided by Government
(725,732) (708,983)
Change in due from the Consolidated Revenue Fund
(38,080) (4,713)
Services provided without charge by other government departments and agencies (Note 16)
(52,457) (53,349)
Net (surplus) cost of operations after government funding and transfers (626) 21,829
Departmental net financial position - Beginning of year 525,205 525,831
Departmental net financial position - End of year 525,831 504,002

Segmented Information (Note 17)

The accompanying notes form an integral part of these consolidated future-oriented financial statements.

National Research Council Canada
Consolidated Future-oriented Statement of Change in Departmental Net Debt
For the Year Ended March 31

(in thousands of dollars)
Estimated Results 2013 Forecast 2014
Net (surplus) cost of operations after government funding and transfers
(626) 21,829
Change due to tangible capital assets
Acquisition of tangible capital assets
42,090 30,778
Amortization of tangible capital assets
(62,261) (62,375)
Net loss on disposal capital assets including adjustments
(1,638) (1,638)
Total change due to tangible capital assets
(21,809) (33,235)
Change due to endowment fund investments
110 110
Net decrease in departmental net debt (22,325) (11,296)
Departmental net debt - Beginning of year 50,770 28,445
Departmental net debt - End of year 28,445 17,149

The accompanying notes form an integral part of these consolidated future-oriented financial statements.

National Research Council Canada
Consolidated Future-oriented Statement of Cash Flow
For the Year Ended March 31

(in thousands of dollars)
Estimated Results 2013 Forecast 2014
Operating Activities
Net cost of operations before government funding and transfers
815,643 788,874
Non-cash items
Amortization of tangible capital assets
(62,261) (62,375)
Net loss on disposal of tangible capital assets
(1,638) (1,638)
Services provided without charge by other government departments and agencies (Note 16)
(52,457) (53,349)
Variations in Statement of Financial Position
Increase (decrease) in accounts receivable and advances
(4,456) 3,185
Decrease in inventory for resale
(97) (335)
Increase in endowment fund investments
110 110
Increase in accounts payable and accrued liabilities
(15,080) (2,447)
Decrease in vacation pay and compensatory leave
4,600 4,600
Decrease in deferred revenue
2,548 2,548
Decrease in lease obligation for tangible capital assets
71 75
Increase in employee future benefits
(3,341) (1,043)
Cash used in operating activities (including transferred operations and discontinued operations) 683,642 678,205
Capital Investing Activities
Acquisitions of tangible capital assets
42,090 30,778
Cash used in capital investing activities 42,090 30,778
Net cash provided by Government of Canada 725,732 708,983

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

National Research Council Canada
Notes to Consolidated Future-oriented Financial Statements
For the Year Ended March 31, 2014

1. Authority and Objectives

The National Research Council Canada (NRC) exists under the National Research Council Act (NRC 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, commercialise 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 consolidated 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, quarterly financial forecasts, and historical information. The estimated results presented for 2012-13 are based on the November 30, 2012 financial update used by NRC for internal forecasting purposes, and the forecast presented for 2013-14 is based on the Annual Reference Level Update (ARLU).
  2. Program Activity Architecture (PAA) distribution in 2013-14 will be proportionally consistent with 2012-13.
  3. No significant change in foreign exchange rates is expected.
  4. Estimated year end information for 2013 is used as the opening position for the 2014 forecasts.

These assumptions are adopted as at January 29, 2013.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to accurately forecast final results for the remainder of 2012-13 and for 2013-14, 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 January 29, 2013. Subsequent increases or decreases to these approved amounts would have an impact on spending.
  2. Revenues generated for 2013-14 are based on targets set by NRC management, and represent a significant increase from 2012-13. 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. 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 consolidated future-oriented financial statements have been prepared using the Government's accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

a) 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 Consolidated Future-oriented Statement of Operations and Departmental Net Financial Position and in the Consolidated Future-oriented 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. The planned results amounts in the Consolidated Future-oriented Statement of Operations and Departmental Net Financial Position are the amounts reported in the consolidated future-oriented financial statements included in the 2013-14 Report on Plans and Priorities.

b) Consolidation

These consolidated financial statements include both NRC and its portion of the accounts of the Canada-France-Hawaii Telescope Corporation (CFHT). CFHT meets the definition of a government partnership under Canadian public sector accounting standards, which requires that its results be proportionally consolidated within those of NRC. All inter-organizational balances and transactions are eliminated as part of the consolidation process. CFHT forecasts statements as at December 31, 2012 and 2013 have been proportionally consolidated with NRC's March 31 future-oriented-financial statements.

c) 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 (including agencies) of the Government.

d) Amounts due from or to the CRF

Amounts due from or to the CRF are the result of timing differences at year-end between 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.

e) Revenues

Revenues are recognized in the year in which the underlying transaction or event occurred that gave rise to revenue as follows:

  • Research and Technical services: revenues are recognized as services are provided, using the percentage-of-completion method.
  • Intellectual property royalties and fees: revenues are recognized over the licence period.
  • Sales of goods and information products: revenue is recognized when goods or information products are delivered to the client.
  • Rentals: revenue is recognized in the period in which the lease or use of property relates to.
  • Grants and contributions: revenue is recognized when conditions for grant or contribution are met.
  • Contributions of leased tangible capital assets are deferred and amortized as Lease inducement revenue on the same basis as the related depreciable tangible capital assets.

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.

Receipts are deposited to the CRF. Under the NRC Act, money received by NRC through the conduct of its operations is respendable in the current or in subsequent years.

Revenues that are non-respendable are not available to discharge NRC's liabilities. While the President is expected to maintain accounting control, he has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity's gross revenues.

f) Expenses

  • Expenses are recorded on the accrual basis.
  • 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.
  • 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 consolidated financial statements.
  • 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 and agencies for accommodation, employer contributions to the health and dental insurance plans, legal services, workers' compensation and the services related to the email, data centre and network services and the email, data centre and network support unit are recorded as operating expenses at their estimated cost.

g) Employee future benefits

  1. Pension Benefits
    Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government of Canada. NRC's contributions to the Plan are charged to expenses in the year incurred and represent NRC's total obligation to the Plan. 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
    Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. 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.

h) 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.

i) 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 consolidated future-oriented financial statements.

j) 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 consolidated future-oriented financial statements.

k) Inventories

Inventory consists of parts, materials and supplies held for future program delivery as well as inventory for resale. 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.

l) Equity investments

Equity investments include shares in public 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.

m) Endowment fund investments

Endowments consist of 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.

n) 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 a foreign currency 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 Consolidated Future-oriented Statement of Operations and Departmental Net Financial Position 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 consolidated future-oriented financial statements.

o) Tangible capital assets

All 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.

The tangible capital assets from the CFHT Corporation are stated at cost. Betterments are charged to tangible capital assets while maintenance and repairs that do not increase the service potention of the asset are charged to expense. Amortization is calculated on the straight-line method over the estimated useful lives of the assets ranging from 4 to 50 years.

p) Measurement uncertainty

The preparation of these consolidated future-oriented financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the consolidated financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are percentage of completion on revenue from the provision of services, contingent liabilities, contaminated site liabilities, the liability for employee severance benefits, the allowance for doubtful accounts, the fair value of non-monetary transactions related to leased tangible capital assets and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the consolidated future-oriented financial statements in the year they become known.

q) Asset retirement obligations

Liabilities are recognized for statutory, contractual or legal obligations, when incurred, associated with the retirement of tangible capital assets when those obligations result from the acquisition, construction, development or normal operation of the assets. The obligations are measured initially at fair value, determined using present value methodology, and the resulting costs capitalized into the carrying amount of the related asset. In subsequent periods, the liability is adjusted for the accretion of discount and any changes in the amount or timing of the underlying future cash flows. The capitalized asset retirement cost is depreciated on the same basis as the related asset and the discount accretion is included in determining the results of operations.

5. Parliamentary Authorities

NRC receives most of its funding through annual parliamentary authorities. Items recognized in the Consolidated Future-oriented Statement of Operations and the Departmental Net Financial Position and the Consolidated Future-oriented 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:

a) Reconciliation of net cost of operations to current year authorities used

(in thousands of dollars)
Estimated Results 2013 Forecast 2014
Net Cost of Operations before government funding and transfers 815,643 788,874
Adjustments for items affecting net cost of operations but not affecting authorities:
Revenues
155,855 189,410
Amortization of tangible capital assets
(62,261) (62,375)
Services provided without charge by other government departments and agencies (Note 16)
(52,457) (53,349)
Financial arrangements with other government departments and agencies
(44,650) (44,650)
Decrease in vacation pay and compensatory leave
4,600 4,600
Loss on disposal of tangible capital assets
(1,638) (1,638)
Cost of goods sold
(2,445) (1,635)
Increase in employee future benefits
(3,341) (1,043)
Bad debt expense
(212) (173)
Increase in salary accrual
(5,078) (136)
Other
(100) (97)
Increase in inventory
1,048 -
Increase in litigation claim expense accrual
(347) -
Total items affecting net cost of operations but not affecting authorities
(11,026) 28,914
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets and additions to assets under construction
42,090 30,778
Inventory purchases
1,300 1,300
Decrease in lease obligations for tangible capital assets
71 75
Total items not affecting net cost of operations but affecting authorities 43,461 32,153
Expected authorities available 848,078 849,941

b) Authorities requested

(in thousands of dollars)
Estimated Results 2013 Forecast 2014
Authorities requested:
Vote 60 – Operating expenditures
408,502 342,387
Vote 65 – Capital expenditures
42,090 30,778
Vote 70 – Grants and contributions
259,566 275,109
Statutory amounts:
Revenues pursuant to paragraph 5(1)(e) of the National Research Council Act
205,175 264,066
Contributions to employee benefit plans
58,809 59,665
Less:
Revenues available for use in future years
(122,064) (118,064)
Lapsed authorities:
Frozen allotments - Operating
(4,000) (4,000)
Expected authorities available 848,078 849,941

Forecast authorities requested for the year ending March 31, 2014 are the planned spending amounts presented in the 2012-2013 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, 2013 include amounts presented in the 2012-13 Main Estimates, Supplementary Estimates (A) and (B), estimates to be allocated at year-end from Treasury Board central votes and other expected allocation adjustments.

6. Accounts Payable and Accrued Liabilities

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

(in thousands of dollars)
Estimated Results 2013 Forecast 2014
Suppliers and contributions payable 90,105 81,501
Payable to other government departments and agencies (Note 16) 9,441 19,106
Accrued wages and employee benefits 16,718 18,104
Contractor holdbacks 749 749
Contaminated site liabilities 637 637
Sales tax payable 119 119
CFHT - Accounts payable 116 116
Total net accounts payable and accrued liabilities 117,885 120,332

7. Deferred Revenue

Deferred revenue represents the balances at year-end of unearned revenues stemming from amounts received from external parties that are restricted in order to fund the expenditures related to specific research projects and stemming from amounts received for fees prior to services being performed. Revenue is recognized in the period in which these expenditures are incurred or in which the service is performed. Details of the transactions related to this account are as follows:

(in thousands of dollars)
Estimated Results 2013 Forecast 2014
Deferred revenue – contributions related to leased tangible capital assets
Opening balance 45,494 42,946
Contributions recognized as revenue (2,548) (2,548)
Closing balance 42,946 40,398
Deferred revenue - goods and services and joint projects
Opening balance 15,689 15,151
Funds received 31,095 31,095
Revenue recognized (31,633) (31,095)
Closing balance 15,151 15,151
CFHT - Deferred revenue 56 56
Total deferred revenue 58,153 55,605

8. 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 $123,200 as at March 31, 2014 ($336,000 and $89,600 respectively as at March 31, 2013). The obligations related to the upcoming years include the following:

(in thousands of dollars)
Estimated Results 2013 Forecast 2014
2014 80 -
Total future minimum lease payments 80 -
Less: imputed interest (6.11%) (5) -
Balance of obligations under leased tangible capital assets 75 -

9. 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.

a) 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 2% 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 expenses are $41,989,700 in 2012-2013 and $42,600,500 in 2013-2014, representing approximately 1.8% 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.

b) Severance benefits

NRC provides severance benefits to its employees based on eligibility, years of service and salary at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities.

As part of changes to conditions of employment for executives and certain non-represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.

Information about the severance benefits, estimated as at March 31, is as follows:

(in thousands of dollars)
Estimated Results 2013 Forecast 2014
Accrued benefit obligation, beginning of year 68,332 71,673
Expense for the year 8,341 6,043
Benefits paid during the year (5,000) (5,000)
Accrued benefit obligation, end of year 71,673 72,716

10. Accounts Receivable and Advances

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

(in thousands of dollars)
Estimated Results 2013 Forecast 2014
Receivables from external parties 18,695 22,053
Receivables from other government departments and agencies (Note 15) 4,110 4,110
CFHT - Accounts receivable 174 174
Employee advances 32 32
23,011 26,369
Less: allowance for doubtful accounts on receivables from external parties (709) (882)
Gross accounts receivable 22,302 25,487
Accounts receivable held on behalf of Government (303) (303)
Net accounts receivable 21,999 25,184

11. Cash and Investments

(in thousands of dollars)
Estimated Results 2013 Forecast 2014
Cash and investments held by CFHT 2,440 2,440
Equity Investments 344 344
Cash and Investments 2,784 2,784

Equity investments include shares in three public companies and one privately held company as of the assumption date of these statements. These shares were obtained through debt settlement or non-monetary transactions. 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 ($344,263 as of March 31, 2012) or the market value of NRC's equity investments in public companies ($169,685 as of March 31, 2012). The market value of the privately held companies is not determinable.

12. 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.

(in thousands of dollars)
Estimated Results 2013 Forecast 2014
Restricted cash and investments, beginning of year 4,724 4,834
Net income from endowment 210 210
Awards granted (100) (100)
Restricted cash and investments, end of year 4,834 4,944

The portfolio for Endowment Fund Investments had an average effective return of 4.41% in 2012 and an average term to maturity of 4.48 years as at March 31, 2012. The fair value of the endowment investments as at March 31, 2012 was $5,036,346.

13. Tangible Capital Assets

(in thousands of dollars)
Cost Accumulated Amortization Net Book Value
Tangible capital asset class Opening balance Acquisitions Adjustments
(1)
Disposals and write-offs Closing balance Opening balance Amortization Adjustments
(1)
Disposals and write-offs Closing balance 2014 Forecasted Net book value 2013 Estimated Net book value
Land 9,879 - - - 9,879 - - - - - 9,879 9,879
Buildings and facilities 721,513 6,771 7,325 - 735,609 (448,596) (20,114) - - (468,710) 266,899 272,917
Works and infrastructure 25,844 616 76 - 26,536 (16,626) (791) - - (17,417) 9,119 9,218
Machinery, equipment and furniture 530,597 9,233 10,540 (18,341) 532,029 (383,154) (31,419) - 17,217 (397,356) 134,673 147,443
Informatics equipment 47,973 1,539 776 (6,386) 43,902 (38,671) (3,640) - 6,327 (35,984) 7,918 9,302
Informatics software 16,488 616 628 (3,380) 14,352 (12,242) (2,105) - 2,929 (11,418) 2,934 4,246
Vehicles 2,859 - - (192) 2,667 (2,220) (158) - 188 (2,190) 477 639
Aircraft 12,003 - - - 12,003 (10,513) (141) - - (10,654) 1,349 1,490
Leasehold improvements 17,837 308 - - 18,145 (5,104) (750) - - (5,854) 12,291 12,733
Assets under construction 17,983 11,695 (19,345) - 10,333 - - - - - 10,333 17,983
Leased tangible capital assets 64,036 - - - 64,036 (20,845) (2,582) - - (23,427) 40,609 43,191
CFHT - Tangible capital assets 21,038 - - - 21,038 (16,410) (675) - - (17,085) 3,953 4,628
Total 1,488,050 30,778 - (28,299) 1,490,529 (954,381) (62,375) - 26,661 (990,095) 500,434 533,669

(1) Adjustments include assets under construction of $19,345,000 that are planned to be transferred to the other categories upon completion of the assets.

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.

Amortization expense forecast for the year ended March 31, 2014 is $62,375,000 ($62,260,600 in 2013).

As of the assumption date of these statements, NRC held nine land lease agreements (nine in 2012) for a nominal annual cost 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, whereby leased property was provided to NRC for twenty-five years at a nominal cost of one dollar. 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 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 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.

14. 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:

(in thousands of dollars)
2013 2014 2015 2016 2017 and thereafter Total
Transfer payments 3,280 58,250 57,091 1,304 - 119,925
Operating contracts 94 - 209 209 - 512
Total 3,374 58,250 57,300 1,513 - 120,437

Transfer payments contractual obligations to CFHT as shown in Note 16c have been excluded from the future contractual obligation.

15. Contingent Liabilities

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

a) 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 four sites as of the date of these consolidated future-oriented financial statements (four sites in 2012) where such action is possible and for which a liability of $636,995 ($636,995 in 2012) has been recorded. 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. 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 likely and are reasonably estimable.

b) 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 one claim that will likely result in a liability where the amount is determinable, two claims that will unlikely result in a liability and no claim where the outcome is undeterminable as of the date of these consolidated future-oriented financial statements. Therefore, a total accrued liability of $347,000 has been recorded based on NRC's legal assessment of potential liability. 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 consolidated future-oriented financial statements.

16. 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. NRC receives common services which are obtained without charge from other government departments as disclosed below.

a) 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 Consolidated Future-oriented Statement of Operations and Departmental Net Financial Position as follows:

(in thousands of dollars)
Estimated Results 2013 Forecast 2014
Employer's contributions to the health and dental insurance plans provided by Treasury Board 28,420 29,312
Email, data centre and network services and the email, data centre and network support unit provided by Shared Services Canada 23,112 23,112
Legal services provided by Justice Canada 475 475
Workers' compensation benefits provided by Human Resources and Skills Development Canada 290 290
Accommodation provided by Public Works and Government Services Canada 160 160
Total 52,457 53,349

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 NRC's Consolidated Statement of Operations and Departmental Net Financial Position.

b) Other transactions with related parties

(in thousands of dollars)
Estimated Results 2013 Forecast 2014
Accounts receivable from other government departments and agencies 4,110 4,110
Accounts payable to other government departments and agencies 9,441 19,106
Expenses - Other government departments and agencies 87,328 87,559
Revenues - Other government departments and agencies 58,963 71,633

Expenses and revenues disclosed in (b) exclude common services provided without charge, which are already disclosed in (a).

NRC has a related party relationship with the following non federal government entity:

c) Canada-France-Hawaii Telescope Corporation

NRC was a founding member of the Canada-France-Hawaii Telescope Corporation (CFHT), a tax-exempt, not-for-profit organization established under Hawaii State law to design, construct, and operate a large optical telescope near the summit of Mauna Kea, Hawaii, USA, along with laboratories, equipment, and associated installations. The Corporation was established in 1974 by a Tripartite Agreement among the NRC, the Centre National de la Recherche Scientifique of France, and the University of Hawaii. NRC makes annual contributions to fund its 42.5% share of the cost of operations of the telescope and receives no direct benefit in return. However, as a result of NRC's contributions, Canada receives access to telescope observation hours for Canadian astronomers. As a founding member, NRC can appoint four of the ten members of the board of directors. CFHT is considered a government partnership for accounting purposes and its results are proportionally consolidated in these statements. The planned contribution for 2012-13 is $3,181,490 and for 2013-14 is $3,261,027. These contributions are eliminated upon consolidation.

NRC's future contractual obligations to CFHT are not included in the Transfer payment contractual obligations (Note 14) and are as follows:

(in thousands of dollars)
2013 2014 2015 2016 2017 and
thereafter
Total
CFHT 3,181 3,261 3,196 3,276 2,503 15,417

17. 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 Portfolio, Branch or Program (PBP) that is responsible for managing the resource.

The presentation by segment is based on the accounting policies described in the Summary of Significant Accounting Policies in Note 4. The following table presents the forecasted expenses and revenues for the main program activities, by major object of expenses and by major type of revenues. The forecasted results by segment for the period are as follows:

(in thousands of dollars)
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 2014 Estimated results 2013
Expenses
Salaries and employee benefits
105,842 45,507 46,385 72,222 30,944 33,922 10,718 101,196 446,736 442,209
Grants and contributions
- - 219,590 - - 51,698 - 560 271,848 256,385
Utilities, materials and supplies
14,905 7,937 715 10,955 2,851 5,170 9,305 27,944 79,782 84,722
Amortization
11,221 7,260 47 8,266 4,012 3,665 376 27,528 62,375 62,261
Professional and special services
5,933 4,064 2,894 2,625 1,304 3,887 1,177 17,811 39,695 43,113
Transportation and communication
6,500 2,866 3,772 2,569 1,479 3,207 429 5,176 25,998 27,866
Repairs and maintenance
3,141 1,902 431 2,139 609 598 153 12,984 21,957 24,040
Payments in lieu of taxes
- - - - - - - 15,100 15,100 15,100
Rentals
664 400 1,441 53 50 75 - 2,559 5,242 5,784
Awards
- - - - - - - 3,580 3,580 2,956
Information
422 38 124 75 111 43 - 1,478 2,291 2,535
Net loss on disposal of capital assets
- - - - - 812 - 826 1,638 1,638
Cost of goods sold
636 - - - - 999 - - 1,635 2,445
Other
5 - - - - 229 - - 234 232
Bad debts
- - - - - - - 173 173 212
Total expenses 149,269 69,974 275,399 98,904 41,360 104,305 22,158 216,915 978,284 971,498
Revenues
Research services
28,814 10,146 19,259 14,756 3,579 - - - 76,554 62,793
Technical services
50,352 3,914 2,476 9,903 5,377 1,335 544 6,994 80,895 66,352
Intellectual property royalties and fees
- 33 - - - - - 11,671 11,704 9,600
Sales of goods and information products
3,642 329 1 - 1,765 2,814 - 599 9,150 7,505
Rentals - - 15 - - - - 5,975 5,990 4,912
Grants and contributions
- 1,219 61 - 1,079 - - - 2,359 1,935
Lease inducement
- - - - - - - 2,548 2,548 2,548
Other
- - - - - - - 505 505 505
Revenues earned on behalf of Government
- - - - - - - (295) (295) (295)
Total revenues 82,808 15,641 21,812 24,659 11,800 4,149 544 27,997 189,410 155,855
Net cost from continuing operations 66,461 54,333 253,587 74,245 29,560 100,156 21,614 188,918 788,874 815,643
Date modified: