Consolidated Future-Oriented Statement of Operations

Consolidated Future-Oriented Statement of Operations - For the Year Ending March 31, 2017 (PDF, 68 KB)

National Research Council Canada
Consolidated Future-Oriented Statement of Operations
For the Year Ending March 31

(in thousands of dollars)

Forecast Results
2015‑16
Planned Results
2016‑17
Expenses
Technology Development and Advancement 357,295 374,940
Industrial Research Assistance Program 291,186 264,667
Science infrastructure and Measurement 112,054 124,740
Internal Services 257,817 259,170
Total Expenses 1,018,352 1,023,517
Revenues
Research services 52,068 59,290
Technical services 82,547 93,995
Intellectual property, royalties and fees 6,900 7,857
Sales of goods and information products 5,349 5,349
Rentals 6,366 6,366
Grants and contributions 2,420 2,420
Lease inducement revenue 2,548 2,548
Revenues earned on behalf of Government (100) (100)
Total Revenues 158,098 177,725
Net cost of operations before government funding and transfers 860,254 845,792

The accompanying notes form an integral part of the consolidated Future-Oriented statement of operations.

National Research Council Canada
Notes to the Consolidated Future-Oriented Statement of Operations
For the Year Ending March 31, 2017

1. Methodology and Significant Assumptions

The Consolidated Future-Oriented Statement of Operations has been prepared on the basis of 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 forecast results presented for 2015‑16 are based on the October 31, 2015 financial update used by NRC for internal forecasting purposes, and the planned results presented for 2016‑17 is based on the Annual Reference Level Update (ARLU).
  2. Program alignment architecture (PAA) distribution in 2016‑17 will be proportionally consistent with 2015‑16.
  3. No significant change in foreign exchange rates is expected.

2. Variations and Changes to the Forecast Financial Information

While every attempt has been made to forecast final results for the remainder of 2015‑16 and for 2016‑17, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing this Consolidated Future-Oriented Statement of Operations, NRC has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Factors that could lead to material differences between the consolidated Future-Oriented statement of operations and the historical consolidated statement of operations include:

  1. This statement is based on approvals received as at January 04, 2016. Subsequent increases or decreases to these approvals would have an impact on spending.
  2. Revenues generated for 2016‑17 are based on targets set by NRC management, and represent a significant increase from 2015‑16. 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.
  5. Implementation of new collective agreements.
  6. Due to delays and uncertainty, it is too early for NRC to consolidate its portion of the accounts of TMT International Observatory LLC (TIO). During the Construction phase of the Thirty Meter Telescope, NRC will record the contribution as capital assets and therefore the contribution are excluded from expenses.
  7. Internal services in 2015‑16 include an investment plan project expenditures of $10,000,000 relating to the implementation of the Business Continuity and Secure NRC project, undertaken as a result of NRC's IT environment being compromised.

Once the Report on Plans and Priorities is presented, NRC will not be updating its forecasts for changes in financial resources made in ensuing supplementary estimates. Variances will be explained in the Departmental Performance Report.

3. Summary of Significant Accounting Policies

This Consolidated Future-Oriented Statement of Operations has been prepared in accordance with the Treasury Board Accounting standards in effect for the 2015‑16 fiscal year. These accounting policies stated below, are based on Canadian public sector accounting standards. The presentation and results using these accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

a) Consolidation

This Consolidated Future-Oriented Statement of Operations includes both NRC and its portion of the accounts of the Canada France Hawaii Telescope Corporation (CFHT). The NRC relationship with 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. CHFT forecasts statements as at December 31, 2015 and 2016 have been proportionally consolidated with NRC's March 31 Future-Oriented statement of operations.

b) 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 based on percentage of completion.
  • Intellectual property, royalties and fees: Revenues are recognized over the license 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 to which the lease or use of property relates.
  • Grants and contributions: Revenue is recognized when the transfer payment is authorized and eligibility criteria are met, except to the extent that transfer stipulations give rise to an obligation that meets the definition of a liability.

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 Consolidated Revenue Fund (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 NRC's gross revenues.

c) Expenses

  • Expenses are recorded on an 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 statement of operations.
  • 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 as well as the acquisition and provision of hardware and software for end user devices are recorded as operating expenses at their estimated cost.
  • Expenses also include provisions to reflect changes in the value of assets, including provisions for bad debt on accounts receivable, provision for valuation on loans, investments and advances and inventory obsolescence or liabilities, including contingent liabilities and environmental liabilities to the extent the future event is likely to occur and a reasonable estimate can be made.
  • Expenses also include amortization of tangible capital assets which are capitalized at their acquisition cost. Amortization of tangible capital assets is done on a straight line basis over the estimated useful life of the asset

4. Parliamentary Authorities

NRC is financed 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. Items recognized in the Consolidated Future-Oriented Statement of Operations in one year may be funded through parliamentary authorities in prior, current, or future years. Accordingly, NRC has different net cost 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 requested authorities

(in thousands of dollars)

Forecast
Results
2015‑16
Planned
Results
2016‑17
Net cost of operations before government funding and transfers 860,254 845,792
Adjustments for items affecting net cost of operations but not affecting authorities:
Revenues 158,098 177,725
Amortization of tangible capital assets (60,000) (60,000)
Services provided without charge by other government departments and agencies (49,485) (53,039)
Decrease in salary accrual 1,975 -
Cost of goods sold (755) (890)
Bad debt expenses (200) (200)
Other (100) (100)
Total items affecting net cost of operations but not affecting authorities 49,533 63,496
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets and additions to assets under construction 104,462 172,282
Inventory purchases 1,200 1,200
Total items not affecting net cost of operations but affecting authorities 105,662 173,482
Requested authorities 1,015,449 1,082,770

b) Authorities requested

(in thousands of dollars)

Forecast Results
2015‑16
Planned Results
2016‑17
Authorities requested:
Vote 1 – Operating expenditures 401,990 400,732
Vote 5 – Capital expenditures 59,086 108,759
Vote 10 – Grants and contributions 307,659 304,913
Statutory amounts:
Revenues pursuant to paragraph 5(1)(e) of the National Research Council Act 302,908 265,956
Contributions to employee benefit plans 59,724 63,777
Less:
Revenues available for use in future years (90,956) (51,367)
Lapsed authorities:
Frozen allotments - Grants and contributions (14,962)
Frozen allotments - Operating (10,000) (10,000)
Requested authorities 1,015,449 1,082,770
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