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1^1 



Government Gouvernement 
of Canada du Canada 

Receiver General for Canada 

Hon. Michel Cote 



public accounis of conocio 




Volume III 

The President of the Treasury Board : 

Annual Report to Parliament 
on Crown Corporations 
and other 

Corporate Interests 
of Canada 



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Canada 



©Minister o 
Av 



"'-« Canada 1987 



Canadi 



Catalogue No. Pf 
ISBN 0-660- 125 

Pri< 



For information about matters reported in this volume, contact 

Corporate Information and Systems Division 

Crown Corporations Directorate 

Department of Finance and Treasury Board of Canada 

Phone 613-957-0111 



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B . ^ ^, n A TOROMTO 

Receiver General for Canada 

Hon. Michel C6t6 LIBRARY 



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public occounis of conodo 




Volume III 

The President of the Treasury Board , 

Annual Report to Parliament 
on Crown Corporations 
and other 

Corporate Interests 
of Canada 



Canada 



INTRODUCTION TO THE PUBLIC ACCOUNTS 



Nature of the Public Accounts 

The Public Accounts is the report of the Government 
of Canada prepared each fiscal year by the Receiver 
General as required by Section 55 of the Financial 
Administration Act. 

The report covers the fiscal year of the Government, 
which ends on March 31, and is prepared from data 
contained in the accounts of Canada and from more 
detailed records maintained in departments and agen- 
cies. The accounts of Canada is the centralized record of 
the Government's financial transactions maintained by 
the Receiver General in which the transactions of all 
departments and agencies are summarized. Each depart- 
ment and agency is responsible for agreeing its accounts 
to the control accounts of the Receiver General, and for 
maintaining detailed records of the transactions in their 
accounts. 

The report covers the financial transactions of the 
Government during the year. In certain cases, parlia- 
mentary authority to undertake transactions was pro- 
vided by legislation approved in earlier years. 



Format of the Public Accounts 

The Public Accounts is produced in three volumes. 

Volume I presents a summary analysis of the financial 
transactions of the Government. Volume II is published 
in two parts. Part I presents the financial operations of 
the Government, segregated by ministry while Part 11 
presents additional information and analyses. 

Volume III responds to Subsection 153(1) of Part XII 
of the Financial Administration Act. In it, the President 
of the Treasury Board provides Parliament with an 
annual consolidated report on the businesses and activi- 
ties of all parent Crown corporations. The report 
includes a list naming, as of a specified date, all Crown 
corporations and all corporations of which any shares 
are held by, on behalf of or in trust for the Crown or any 
Crown corporation. Employment and financial data, 
including aggregate borrowings of parent Crown corpo- 
rations and other information, are also provided. 



^0¥ I 7 1237 



THE PRESIDENT'S MESSAGE 

This is the fourth Consolidated Annual Report to Parliament pursuant to Subsection 153(1) of Part XII of the 
Financial Administration Act (FAA). I am pleased to present this report on the businesses and activities of 
Canada's portfolio of parent Crown corporations. For completeness, I have continued a practice initiated last year of 
including information on the eight parent Crown corporations which are exempt from the reporting and most other 
provisions of Part XII of the FAA. 

As in previous years, this report is divided into two parts. The first part provides financial and other information 
on all Crown corporations, as reported by each corporation at its financial year-end on or before July 31, 1987. The 
second part contains a list of all corporations whose shares are held, wholly or in part, by, on behalf of, or in trust 
for the Crown or for any Crown corporation. 

THE PORTFOLIO 

The most recent information, as of September 1, 1987, shows that 58 Crown corporations make up the portfolio. 
All are included in this report. Forty-six of them are listed in Schedule C of the FAA and are therefore required to 
conduct their businesses and activities in a manner consistent with that Act and its regulations. Four corporations 
have been directed by the Governor-in-Council to report their affairs as if they were listed in Schedule C. They are: 
Petro-Canada International Assistance Corporation and the three subsidiaries of Canada Lands Company Limited. 
As well, as noted previously, information on the eight corporations that are exempt from Part XII is included in this 
report. Finally, three scheduled corporations are in the process of being dissolved. They are: Canadian National 
(West Indies) Steamships, Ltd. , Canagrex and Mingan Associates Limited . 

OVERVIEW 

At their financial year-ends, the corporations comprising the portfolio (but excluding the Bank of Canada ) 
reported assets totalling $59.6 billion, of which financial institutions accounted for 42 per cent. 

Data for the same period indicate that all Crown corporations and their wholly-owned subsidiaries employed 
183,000 people, a decrease of 17,000, or 8.5 per cent, from the last report. This results, in the main, from the 
privatization of both Canadair Limited and The de Havilland Aircraft of Canada, Limited , (subsidiaries of Canada 
Development Investment Corporation ) as well as from a slight decline in employment in general during the past 
year. 

Budgetary funding from Canada to all corporations amounted to $4.7 billion during this reporting period, a 
decrease of $0.8 billion from last year's total. The decrease reflects reduced funding for Canadair Limited and The 
de Havilland Aircraft of Canada, Limited , which were privatized during the reporting period, for the Canada 
Mortgage and Housing Corporation , and other relatively minor variances. Funding provided to the eight exempt 
corporations was $1.2 billion, an increase of 9.3 per cent from the last report. 

More complete information on individual parent Crown corporations may be found in their annual reports which 
are tabled in Parliament, pursuant to subsection 152(1) of Part XII of the FAA. 

CORPORATE HIGHLIGHTS 

While privatization issues dominated much of the activity related to Crown corporations, there were other 
significant developments during the past year. 

The Government of Canada recovered $133 million from Canada Ports Corporation and the local port 
corporations in December 1986. This sum represented the balance of the cash recovery exercise initiated in the 1985 
Budget. The Port of Saint John (N.B.) was established as a local port corporation in December 1986. As a result of 
this addition to the number of local port corporations, Canada Ports Corporation has retained responsibility for the 
management of seven non-corporate ports as well as overseeing the national system of ports. 



Ill 



In May, the government announced its decision to allocate $361 million to VIA Rail Canada Inc. for the 
refurbishing of long-haul cars, the acquisition of new high-power locomotives, the continuation of station upgrading, 
infrastructure improvement and construction of maintenance facilities. It is expected that these capital investments 
will lead to increased passenger comfort and equipment reliability. 

Aided by low fuel prices, a $150-million cost reduction program and strong traffic demand from Expo 86, Air 
Canada earned a record profit in the last six months of 1986 and recorded a $40.4 million net profit for the year. 
The corporation anticipates a higher net profit in 1987 as passenger revenues have remained strong. 

Marine Atlantic Inc. reduced its reliance on government operating subsidies from $143 million in 1985 to $123 
million in 1986. Operating expenses remained constant with commercial revenues increasing by 12 per cent. 
Passenger traffic increased, particularly to Newfoundland, with the introduction of the new M.V. Caribou ferry. 

The government approved a seven-year, $175-million rehabilitation program for the St. Lawrence Seaway 
Authority for the Welland Canal in November 1986. During the year, $14.3 million was spent there on lock wall 
reinforcing and restoration, and on canal bank stabilization and rehabilitation of ancillary structures. 

Losses incurred by the Farm Credit Corporation in the amount of $132.5 million for the year have now eroded 
the corporation's capital base and resulted in a negative shareholder's equity of $ 1 24.8 million as of March 3 1 , 
1987. 

Canada Post Corporation continued to make progress towards the goal of financial self-sufficiency in 1988-89. 
The corporation's operating deficit was $129 million, or 4 per cent of its total expenses, in 1986-87, down from $210 
million in 1985-86. Mail volumes continued to grow slightly. 

The National Capital Commission received a revised mandate focusing on the three principles of the National 
Capital as Canada's Meeting Place, Communicating Canada to Canadians, and Safeguarding and Preserving the 
Capital. The Commission's responsibility for the physical evolution of the National Capital was confirmed and 
enhanced, through its revised mandate from the government, to develop the National Capital as a national symbol. 
Additionally, the government decided to transfer to the Commission responsibility for the care of Canada's official 
residences in the National Capital Region. 

Petro-Canada' s financial performance showed considerable improvement over the previous year, with earnings 
after tax rising 28 per cent to $123 million. This reflected both cost-cutting by the corporation as well as the partial 
recovery of international oil prices. The corporation announced, in March 1987, that it will move ahead on the 
development of the Terra Nova oil field off Newfoundland. Drilling of two delineation wells in the summer of 1987 
could lead to a development plan for the Terra Nova field in 1988. 

In 1986, the Canadian National Railway Company (CN) sold its CN Route trucking subsidiary to a group of 
Canadian private sector investors. In early 1987, CN sold the Newfoundland Dockyard to Marine Atlantic Inc. and, 
in July 1987, it announced that agents had been retained for the sale of CN Hotels . Proceeds from the sale will be 
used to reduce the corporate debt. 

During 1986, the Canada Deposit Insurance Corporation (CDIC) was required to make payments to insured 
depositors as a result of financial difficulties experienced by three member institutions: the Columbia Trust 
Company, the Bank of British Columbia, and the North West Trust Company. More recently, another member 
institution. Principal Savings and Trust Co., was ordered to wind-up, and payments in this regard will be required 
from CDIC. 

The International Centre for Ocean Development (ICOD) completed its second year of operation, focusing 
exclusively on management of the 200-mile economic coastal zone. ICOD is establishing a unique identity within 
the Canadian and international development assistance structure. The corporation is assisting developing countries 
to build institutions and to elaborate long-range policy and plans for the development of their marine sectors. 



IV 



PRIVATIZATION 

The creation, in December 1986, of the Office of Privatization and Regulatory Affairs in support of the Minister 
of State (Privatization) has continued to give impetus to the government's privatization program. 

In the period since the appointment of the Honourable Barbara McDougall in June 1986, the number of 
privatized Crown corporations has risen to 1 1 , and more candidates for privatization are under active and detailed 
review. 

The following privatizations have been completed since the last report: 

— Nanisivik Mines Limited . The government's 18 per cent interest in the corporation was sold in October 1986, 
for $6 million, to Mineral Resources International Limited. 

— CN Route . The firm was sold in December 1986, for $29 million, to Route Canada Holdings Inc. 

— Canadair Limited . The government sold the corporation in December 1986, to Bombardier Inc., for $120 
million cash plus future royalty payments on Challenger sales. 

— Northern Canada Power Commission . The Yukon portion of the corporation was transferred to territorial 
ownership in March 1987, for $19.5 million cash and notes of $56 million. 

— Teleglobe Canada . The firm was sold in April 1987 to Memotec Data Inc., for $488.3 million cash, a $106 
million dividend and $16.6 million in shares. 

— Fisheries Products International . Also in April 1987, a public share offering was completed, resulting in net 
proceeds to the government of $104.4 million. 

— Canada Development Corporation . Two share offerings have been completed: 21.8 million shares were sold in 
September 1986 with net proceeds of $246 million; and 1.4 million shares were sold in June 1987 for $15.8 
million. 

Those divestitures, coupled with four previous privatizations of federal Crown corporations ( Northern 
Transportation Company Limited , The de Havilland Aircraft of Canada, Limited , Pecheries Canada Inc. and 
Canadian Arsenals Limited ), have produced more than $1.3 billion in net proceeds for the federal government. 

Other Crown holdings are currently under review as potential candidates for privatization in 1987-88 and beyond. 
In every case, a careful review encompassing all aspects of a Crown corporation's operations and purpose is carried 
out before the Minister of State (Privatization) makes her recommendations to Cabinet. 

PUBLIC POLICY 

Official Languages 

Parent Crown corporations and their wholly-owned subsidiaries are subject to the provisions of the Official 
Languages Act. They are therefore required to provide services to the public in both official languages at their head 
offices, in the National Capital Region, and elsewhere in Canada where there is significant demand. In general, 
services provided in English are satisfactory, services provided in French have improved, but improvements are still 
required in regions of significant demand outside the National Capital Region and Quebec. 

The Treasury Board Secretariat continues to assist Crown corporations with the implementation of the 
government's official languages objectives. Major Crown corporations were consulted with respect to the new Bill 
C-72 that the government introduced on June 25, 1987 to update the Official Languages Act. 



Employment Equity 

This year. Treasury Board received from Crown corporations their first annual reports respecting employment 
equity. The reports reflect the efforts of Crown corporations to meet employment equity goals, despite their 
divergent mandates and often difficult circumstances. 

During the past year. Crown corporations continued to meet regularly to discuss issues and initiatives of common 
concern in implementing employment equity programs, and to receive updates from the Treasury Board Secretariat 
and other relevant resource organizations. During the summer of 1987, recommendations drawn from the annual 
reports of Crown corporations were submitted to Treasury Board for approval. Highlights of those initiatives are as 
follows: 

Marine Atlantic Inc. — The marine industry is one of several industries steeped in tradition. This has tested the 
creativity and initiative of Marine Atlantic to develop an action plan. Its plan, however, includes the expansion and 
development of a co-op education program, ensuring that women represent at least 50 per cent of placements. This 
initiative could serve as a model for other Crown corporations within similar industrial sectors. 

Canadian Broadcasting Corporation (CBC) — The CBC developed a native broadcaster training program in the 
North a number of years ago, and has worked in association with others to develop a two-year journalism program 
at Arctic College. The first students were accepted in September 1987. One of the measures that the CBC has also 
undertaken to address the visible minorities issue is to conduct internal studies to identify qualified members of this 
designated group from which the CBC can draw to staff positions throughout the corporation. 

Defence Construction (1951) Limited — The corporation is significantly smaller than the majority of Crown 
corporations designated to submit an action plan. In planning for disabled persons, the corporation has identified 
basic activities whereby the participation rate of this designated group may be increased within any work 
environment. The activities include eliminating non-essential physical barriers, ensuring technical aids are available 
if required, and including a representative from this designated group on employee selection committees. 

While the foregoing represents advancements made by individual corporations, all Crown corporations are 
making efforts towards the implementation of employment equity. Through the continued commitment of senior 
management, employment equity coordinators and all other employees, I trust Crown corporations will place 
themselves in a strong leadership role with respect to employment equity initiatives. 

MIXED AND JOINT ENTERPRISE CORPORATIONS 

As indicated above, the second part of this report lists corporations which are only partially owned by Canada. 
Canada's investment in these corporations, as of July 1987, was valued at approximately $265 million, a reduction 
of approximately $400 million since April 1, 1986, due mainly to the sale of Canada Development Corporation 
shares and the privatization of Fisheries Products International . There are now 1 3 mixed and joint enterprise 
corporations, a reduction of one from the last report. 

During the past year. Treasury Board instituted a policy resulting in an improved reporting regime for mixed and 
joint enterprises. The annual reports of all such corporations will now be tabled in Parliament. The submission of 
quarterly financial reports to Treasury Board is another new requirement. A five-year corporate plan will also be 
required from corporations seeking new equity investment, and when significant financial assistance is provided by 
Canada. 

REGULATIONS 

Since the last Annual Report, the following regulations have been promulgated: 

Crown Corporation Summaries Regulations, 1986 (labelling, timing) — 29/12/86 SOR/87-37 (superseding 
Crown Corporation Summaries Regulations (timing) — 24/1/84 SOR/85-128). 



VI 



A list of other regulations, promulgated pursuant to Part XII of the FAA, is as follows: 

Crown Corporation General Regulations (notification, disposal of property by Agent corporations, remuner- 
ation and by-laws)— 31/08/84 SOR/84-743, amended 05/07/85 SOR/85-643. 

Crown Corporation Borrowing Regulations (transactions, approvals, exemptions) — 31/08/84 SOR/84-742, 
amended 07/03/85 SOR/85-230, amended 12/09/85 SOR/85-902. 

Crown Corporation Borrowing Regulations, amended — 16/01/86 SOR/86-143. 

Crown Corporation Corporate Plan and Budget Regulations (form, contents, timing and period covered) — 
29/07/86 SOR/86-828. 

CONCLUSION 

Two major issues continue to dominate the Crown corporation environment: privatization initiatives and the 
implementation of Part XII of the FAA. It is clear that the government has met with success in honouring its 
commitment to privatization, and that it will pursue this objective in the future. 

The effect of the implementation of the improved control and accountability framework enshrined in Part XII of 
the FAA and its regulations is far-reaching. Part XII has been in place for three years now, and I am happy to 
report that there is continued improvement in the quality and timeliness of Crown corporations' submissions. 
Corporate plans, budgets and annual reports are proving to be key accountability and control instruments, as 
envisaged by the Act. They are also the vital linkages to overall corporate performance. As a result, considerable 
progress has been made in improving the accountability of Crown corporations to Parliament itself. 




Don Mazankowski 



vu 



TABLE OF CONTENTS 

Page 
PART I Annual Consolidated Report on the Businesses and Activities of All Parent Crown corporations 

1. Introduction to Part 1 3 

2. Parent Crown corporation data on individual financial year basis; all pursuant to s. 153 of 
the FAA: 

— Description of Tables 5 

— Table 1. The Financial Position 6 

— Table 2. Employment, Borrowing and Budgetary Funding from Canada 8 

3. Parent Crown corporation data as at March 31, 1987 

— Description of Table 11 

—Table 3. Financial Data, as at March 31, 1987 12 

4. Summary Pages and the audited financial statements for each parent Crown corporation 

Air Canada 18 

Atlantic Pilotage Authority 24 

Atomic Energy of Canada Limited 29 

Bank of Canada 35 

Canada Council 39 

Canada Deposit Insurance Corporation 46 

Canada Development Investment Corporation 52 

Canada Harbour Place Corporation 62 

Canada Lands Company Limited 67 

Canada Lands Company (Mirabel) Limited 72 

Canada Lands Company (Le Vieux-Port de Montreal) Limited 74 

Canada Lands Company (Vieux-Port de Quebec) Inc 78 

Canada Mortgage and Housing Corporation 85 

Canada Museums Construction Corporation Inc 95 

Canada Ports Corporation 100 

Canada Post Corporation 106 

Canadian Arsenals Limited 112 

Canadian Broadcasting Corporation 121 

Canadian Commercial Corporation 127 

Canadian Dairy Commission 131 

Canadian Film Development Corporation 138 

Canadian Institute for International Peace and Security 142 

Canadian Livestock Feed Board 146 

Canadian National Railway Company 150 

Canadian National (West Indies) Steamships, Ltd 160 

Canadian Patents and Development Limited 163 

Canadian Saltfish Corporation 167 

Canadian Wheat Board,The 171 

Canagrex 190 

Cape Breton Development Corporation 193 

Defence Construction (1951) Limited 200 

Export Development Corporation 204 

Farm Credit Corporation 210 

Federal Business Development Bank 215 

Freshwater Fish Marketing Corporation 220 

Great Lakes Pilotage Authority, Ltd 224 

Halifax Port Corporation 228 

ix 



Harbourfront Corporation 232 

International Centre for Ocean Development 238 

International Development Research Centre 243 

Laurentian Pilotage Authority 249 

Marine Atlantic Inc 253 

Mingan Associates, Ltd 258 

Montreal Port Corporation 260 

National Arts Centre Corporation 264 

National Capital Commission 271 

Northern Canada Power Commission 276 

Pacific Pilotage Authority 281 

Petro-Canada 285 

Petro-Canada International Assistance Corporation 296 

Port of Quebec Corporation 299 

Prince Rupert Port Corporation 303 

Royal Canadian Mint 307 

St. Anthony Fisheries Limited 312 

Saint John Port Corporation 314 

St. John's Port Corporation 317 

St. Lawrence Seaway Authority, The 321 

Standards Council of Canada 333 

Teleglobe Canada 337 

Vancouver Port Corporation 349 

VIA Rail Canada Inc 353 

PART 11 Crown Corporations and Other Corporate Interests 

1. Introduction to Part II 361 

2. Statistical Summary 362 

3. The Listings: 

.1 Parent Crown corporations, wholly-owned subsidiaries, other subsidiaries and 

associates 363 

.2 Joint and mixed enterprises 371 

.3 Other entities 372 

.4 International organizations 373 

Appendix 'A' : Additions/Deletions to Part II Listings 375 

4. Corporate Information: 

.1 Joint and mixed enterprises 378 

.2 Other entities 381 

.3 International organizations 386 



PARTI 



ANNUAL CONSOLIDATED REPORT 

ON THE BUSINESSES AND ACTIVITIES 

OF ALL PARENT CROWN CORPORATIONS 



PUBLIC ACCOUNTS, 1986-87 

1. INTRODUCTION TO PART I 



Part I of this Annual Report is a document of record on the financial affairs of all parent Crown corporations, 
comprised as follows: 

• Tables 1 and 2 respond to subsection 153(3)(b) of the Financial Administration Act (FAA) in presenting for 60 
Crown corporations aggregate financial and employment data relative to their individual financial years. The 60 
are: 

• 49 parent Crown corporations listed in schedule C of the FAA in the twelve months ending July 31, 1987; 

• four subsidiaries of listed corporations which, by Orders pursuant to s. 97(2) of the FAA, are required to 
report their affairs as if they are parent Crown corporations; and, 

• seven parent Crown corporations which, by s. 96(1) of the FAA are exempted from the provisions of 
divisions I to IV of the FAA. 

Table 3 presents financial data for the same 60 corporations but, in contrast to the previous tables, all of the data 
are as at the single date March 31, 1987. 

Audited financial statements for the period covered by the report for each of the above 60 corporations and for 
the Bank of Canada. 

A Summary Page for each corporation precedes its financial statements. This page presents a financial summary 
of several years' performance of the particular corporation, along with basic information about the corporation. 

Tables 1 and 2 show that at the close of the period covered by their reports the 60 corporations had total assets of 
$60.2 billion and their combined employment was 181 thousand; their obligations to private sector lenders increased 
in the report periods by $1.25 billion while their obligations to Canada were reduced by $1.41 billion. Budgetary 
funding to the corporations totalled $4.7 billion, which is $0.8 billion less than the previous Report's total. The 
reduction reflects reduced funding for Canada Mortgage and Housing Corporation and for the aircraft subsidiaries 
of Canada Development Investment Corporation which were sold to private sector interests in this report period. 



PUBLIC ACCOUNTS, 1986-87 



2. PARENT CROWN CORPORATION DATA ON INDIVIDUAL 
FINANCIAL YEAR BASIS 



Tables 1 and 2 

Tables 1 and 2, which follow, respond to the requirement in the 
Financial Administration Act (FAA) that financial data, including 
employment and aggregate borrowing by corporations, be reported. The 
Act calls for data for individual corporations "for their financial years 
ending on or before July 31," 1987, and totals of these data, therefore, do 
not relate to a single 1 2-month period. 

Data are presented for 60 corporations comprising: 49 corporations 
which were listed in schedule C of the FAA in the report period; four 
subsidiaries, being Petro-Canada International Assistance Corporation 
and three subsidiaries of Canada Lands Company Limited, all of which 
have been directed to report as if they are parent corporations, and seven 
of the eight corporations which, pursuant to s. 96 of the FAA, are 
exempted from scheduling. The other exempt corporation, the Bank of 
Canada, is excluded from the tables because of the unique nature of its 
financial data (see its Summary Page). 

Reporting of data is on the following principles: 

• Year-end dates: December year-ends relate to 1986; other year-ends 
relate to 1987, unless footnotes indicate otherwise. 

• Employment data describe the number of full-time employees. They 
relate to the parent corporation and all its subsidiaries. Special cases 
are footnoted. Bank of Canada (2,320 employees) is excluded. 

• Net new borrowing data comprise changes during the financial 
period in outstanding principal amounts of capital leases and long- 
term and short-term borrowings. To the extent possible, they do not 
include adjustments for exchange rate variations and they take no 
account of transfer of assets and related debts such as those 
occurring between the port administrations. 

• Budgetary funding from Canada comprises cash paid to the parent 
corporation and, as well, that paid directly to its subsidiaries. 
Payments for which a class or kind of recipient is eligible are 
excluded from these data. (Examples of such exclusions are 
Petroleum Incentive Payments and those for Rehabilitation of 
Prairie Branch Railway Lines.) Canada Post data include cultural 
mail subsidies. 

• Shareholder's equity. For four corporations, Canadian Dairy 
Commission, Canada Council, The Canadian Wheat Board and 
Freshwater Fish Marketing Corporation, the corporate mandate and 
operation cause the excess of assets over liabilities to be surplus 
which is due to clients and not Equity of Canada. 



PUBLIC ACCOUNTS, 1986-87 






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Notes to Tables 1 and 2 

1 . For some corporations, audited consolidated financial statements for the period covered by this Report were not 
available when the Report was sent to press. Therefore, preliminary data for the report period are presented in 
respect of Canada Lands (Mirabel) Ltd. 

2. Financial data presented are from audited financial statements for a period other than the report period, as 
follows: 

Canadian Arsenals Limited - 12 months ending March 31, 1986 

Canadian Dairy Commission - 12 months ending July 31, 1986 

The Canadian Wheat Board - 12 months ending July 31, 1986 

3. The equity value for Canada Deposit Insurance Corporation takes account of the position of its Deposit 
Insurance Fund. 

4. Funding data for Export Development Corporation are Corporate Account data. Budgetary funding to Canada 
Post Corporation includes cultural and special mail subsidies. 

5. Employment data: 

• for Canadian Dairy Commission, Freshwater Fish Marketing Corporation, National Arts Centre 
Corporation and The Canadian Wheat Board are as at December 31, 1986. 

• for Canada Development Investment Corporation comprises employment in Eldorado Nuclear Limited and 
that in the parent corporation. 

• for Canada Ports Corporation do not include employment in the local port corporations named in these 
Tables. 

• for the four Pilotage Authorities include contract pilots. 

6. Petro-Canada International Assistance Corporation and three subsidiaries of Canada Lands Company Limited 
are shown amongst C-I corporations since, though not scheduled in the report period, they have been directed, 
pursuant to s. 97(2) of the FAA, to report their affairs as if they are (C-I) parent Crown corporations. 



PUBLIC ACCOUNTS, 1986-87 11 

3. PARENT CROWN CORPORATION DATA AS AT MARCH 31, 

1987 



Table 3 

This table provides basic information about the corporations listed in 
tables 1 and 2 but, in contrast to those tables, these data are as at a single 
date, being March 31, 1987, the closing day of government's financial 
year. 

The data comprise: 

• values for total assets and for principal amounts outstanding of short 
and long-term borrowings, bank loans, notes issued and capital 
leases. Values are derived from audited financial statements or, 
where a corporation's financial year ends on a date other than 
March 3 1 , from schedules confirmed by the corporation's auditors; 
and 

• the value recorded in the accounts of Canada as the outstanding 
balance of loans, investments and advances made by Canada to each 
corporation. Subject to any related reserve created in those accounts 
to ensure fair presentation of the financial position of Canada, the 
value recorded is an asset of Canada. The aggregate of the reserves 
in place in respect of all of these corporations is noted at the foot of 
this column of data. 



12 



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PUBLIC ACCOUNTS, 1986-87 



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14 PUBLIC ACCOUNTS, 1986-87 

Notes to Table 3 

1 , Obligations to the private sector: 

— of the Canadian Wheat Board include financing provided by agents 

— of Petro-Canada include redeemable preferred shares of a subsidiary which could be a charge on the parent. 

2. Canadian Arsenals Limited was sold six weeks after the date for which data are presented in this table; 
therefore, no values have been provided for this corporation. 



PUBLIC ACCOUNTS, 1986-87 15 



4. SUMMARY PAGES AND THE AUDITED FINANCIAL STATEMENTS 
FOR EACH PARENT CROWN CORPORATION 



PUBLIC ACCOUNTS, 1986-87 17 



A Summary Page precedes the audited financial statements of each of 
the Crown corporations (57 parents and 4 subsidiaries). 

Each Summary Page presents basic information about a corporation's 
mandate, origins and present status and names the senior officers as of 
September 18, 1987. As well, a financial summary includes information 
such as obligations (which comprise long-term and short-term loan 
principal outstanding and other funding to be repaid, plus capital leases) 
and details of the cash provided to the corporation and its subsidiaries by 
Canada. The non-budgetary amounts displayed in the financial summary 
include equity infusions as well as loan funding. 

Bracketed values () denote: for assets or equity, a deficit; 

for "cash from Canada, net", a net payment 
to the Consolidated Revenue Fund. 

When the word restated is shown for a year's financial data, this 
indicates that changes made by the corporation in its audited financial 
data subsequent to the publication of its Annual Report for that year are 
reflected in the summary. 



18 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
AIR CANADA 



MANDATE 

To provide a publicly-owned air transportation service, with powers to carry out other businesses incidental to the 
airline operation, having due regard to sound business principles and, in particular, the contemplation of profit. 

BACKGROUND 

The corporation's operation began in 1937. Until 1978, it was a subsidiary of CNR. Today it operates 114 jet 
aircraft, has 22,570 employees and its operations comprise about 60 per cent of Canadian revenue-passenger miles 
flown. No federal funds have been invested in Air Canada since the conversion to equity in 1978 of $324 million of its 
debt obligations to Canada. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS OF 
INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



500 Dorchester Boulevard West 
Montreal, Quebec 
H2Z 1X5 

—Schedule C, Part II 

— not an agent of Her Majesty 

The Honourable John Crosbie, P.C., Q.C., M.P. 

Transport 

1937; by the Trans Canada Airlines Act, repealed and replaced by 
Air Canada Act, 1977 (S.C. 1977-78, C. 5). 

Pierre J. Jeanniot 

Claude I. Taylor 
Thorne, Ernst & Whinney 



FINANCIAL SUMMARY ($ million) The financial year is the calendar year. 

1986 

At the end of the year 

Total Assets 2,923 

Obligations to the private sector 1,510 

Obligations to Canada 176 

Equity of Canada 553 

Cash from Canada in the year 

— budgetary nil 

— non-budgetary nil 



1985 
(restated) 


1984 
(restated) 


1983 


2,555 

1,230 

196 

513 


2,508 

1,087 

228 

528 


2,187 
848 
246 
486 


nil 
nil 


nil 
nil 


nil 
nil 



PUBLIC ACCOUNTS, 1986-87 



19 



AIR CANADA 

MANAGEMENT REPORT 

The consolidated financial statements contained in this annual 
report have been prepared by management in accordance with gener- 
ally accepted accounting principles and the integrity and objectivity of 
the data in these financial statements are management's responsibility. 
Management is also responsible for all other information in the annual 
report and for ensuring that this information is consistent, where 
appropriate, with the information and data contained in the financial 
statements. 

In support of its responsibility, management maintains a system of 
internal control to provide reasonable assurance as to the reliability of 
financial information and the safeguarding of assets. The Corporation 
has an internal audit department whose functions include reviewing 
internal controls and their application, on an ongoing basis. 

The Board of Directors is responsible for ensuring that management 
fulfills its responsibilities for financial reporting and internal control 
and exercises this responsibility through the Audit Committee of the 
Board, which is composed of directors who are not employees of the 
Corporation. The Audit Committee meets with management, the 
internal auditors and the external auditors at least four times each 
year. 

The external auditors, Thorne Ernst & Whinney, conduct an 
independent examination, in accordance with generally accepted audit- 
ing standards, and express their opinion on the financial statements. 
Their examination includes a review and evaluation of the Corpora- 
tion's system of internal control and appropriate tests and procedures 
to provide reasonable assurance that the financial statements are pre- 
sented fairly. The external auditors have full and free access to the 
Audit Committee of the Board and meet with it on a regular basis. 

Pierre J. Jeanniot 
President & Chief 
Executive Officer 

L.S. Desrochers 

Senior Vice President 

Finance & Planning 

CONSOLIDATED BALANCE SHEET DECEMBER 31 

(in thousands of dollars) 



AUDITORS' REPORT 

TO THE HONOURABLE 

THE MINISTER OF TRANSPORT 

We have examined the consolidated balance sheet of Air Canada as 
at December 31, 1986 and the consolidated statements of income and 
retained earnings and changes in financial position for the year then 
ended. Our examination was made in accordance with generally 
accepted auditing standards, and accordingly included such tests and 
other procedures as we considered necessary in the circumstances. 

In our opinion, these consolidated financial statements present fairly 
the financial position of the Corporation as at December 31, 1986 and 
the results of its operations and the changes in its financial position for 
the year then ended in accordance with generally accepted accounting 
principles applied, except for the change in accounting for pension 
costs and obligations as explained in Note l(i) to the consolidated 
financial statements, on a basis consistent with that of the preceding 
year. 

Further, we have examined the transactions of the Corporation and 
its subsidiaries that came to our notice in the course of the abovemen- 
tioned examination of the consolidated financial statements of Air 
Canada for the year ended December 31,1 986 to determine whether 
they were in accordance with Part XII of the Financial Administration 
Act, its regulations, the Air Canada Act and the By-laws of the Corpo- 
ration. Our examination of these transactions was made in accordance 
with generally accepted auditing standards, and accordingly included 
such tests and other procedures as we considered necessary in the cir- 
cumstances. In our opinion, these transactions were, in all significant 
respects, in compliance with the authorities specified. 



Montreal, Canada 
February 17, 1987 



Thorne Ernst & Whinney 
Chartered Accountants 



ASSETS 



1986 



1985 



Current 

Cash and short-term investments 

Accounts receivable 

Spare parts, materials and supplies 

Prepaid expenses 

Deferred income taxes 

~ 860,183 

Property and equipment {Note 2) 1,669,675 

Flight equipment under capital leases (Note 3) 74,097 

Investment in other companies (Note 4) 59,310 

Deferred charges (Note 5) 259,681 



382,422 


62,293 


326,012 


301,457 


99,078 


89,622 


13,545 


12,144 


39,126 


38,489 



504,005 

1,807,189 

91,715 

31.604 

120,028 



2,922,946 2,554.541 



LIABILITIES 



1986 



1985 



Current 

Accounts payable and accrued liabilities 384,965 348,537 

Advance ticket sales 187,201 171,127 

Current portion of long-term debt and capital lease 

obligations 74,302 108,399 

646,468 628,063 

Long-term debt (Note 6) 1,049,679 1,228,795 

Long-term obligations under capital leases (Note 7) .... 13,897 88,938 

Other long-term liabilities 22,1 19 19,836 

Deferred credits (Note 8) 301,309 75,833 

2.033,472 2.041,465" 

Subordinated perpetual bonds (Note 9) 336,000 

SHAREHOLDER'S EQUITY 

Share capital 

Authorized: S750 million divided into shares of one 
thousand dollars each 

Issued and fully paid: 329,009 shares 329,009 329,009 

Retained earnings 224.465 184.067 



553,474 513,076 
2.922.946 2,554.541 



See accompanying notes. 

On behalf of the Board: 

CLAUDE I. TAYLOR 
Chairman of the Board 

PIERRE J. JEANNIOT 

President A Chief Executive Officer 



20 



PUBLIC ACCOUNTS, 1986-87 



AIR CANADA— Continued 

CONSOLIDATED STATEMENT OF INCOME AND 
RETAINED EARNINGS 
YEAR ENDED DECEMBER 31 
(in thousands of dollars) 



CONSOLIDATED STATEMENT OF CHANGES 
IN FINANCIAL POSITION 
YEAR ENDED DECEMBER 31 
(in thousands of dollars) 



1986 



Operating revenues 

Passenger 

Cargo 

Contract services and other 

Operating expenses 

Salaries, wages and benefits 

Aircraft fuel 

Sales commissions 

Maintenance materials, supplies and services 

Passenger meals and services 

Depreciation, amortization and obsolescence 

Airport and airway user charges 

Contracted ground handling and other services 
Other 

Operating income 

Non-operating income (expense) 

Interest on long-term debt and capital lease obliga- 
tions (125,393) 

Gain on disposal of property, equipment and invest- 
ments 

Other 

Income (loss) before income taxes and extraordinary 
items 

Provision for (recovery oQ deferred income taxes 
(Note 10) 

Net income (loss) before extraordinary items 

Extraordinary items (Note 1 1) 

Net income (loss) 

Retained earnings at beginning of year 

Retained earnings at end of year 224,465 

See accompanying notes. 



1985 



1986 



1985 



2,218,437 


2,109,845 


354,059 


319,330 


312,765 


293,402 


2,885,261 


2,722,577 


873,204 


910,223 


480,800 


565,153 


201,755 


188,591 


156,937 


142,347 


150,415 


135,613 


189,012 


192,561 


105,808 


84,950 


105,193 


88,198 


495,803 


413,400 


2,758,927 


2,721,036 


126,334 


1,541 



(114,110) 



23,602 
30,539 


13,859 
42,950 


(71,252) 


(57,301) 


55,082 
19,141 


(55,760) 
(33,865) 


35,941 
4,457 


(21,895) 
7,074 


40,398 
184,067 


(14,821) 
198,888 



Cash provided by (used for) 
Operations 

Net income (loss) before extraordinary items 35,941 (21,895) 

Extraordinary items 6,456 (5,062) 

Non-cash items included in net income (loss) 148,340 129,122 

Income results 190,737 102,165 

Change in net trade balances 11,873 (33,464) 

Increase in advance ticket sales 16,074 18,075 

Increase in spare parts, materials and supplies (12,685) (18,925) 

Other (15,977) (3,231) 

190.022 64,620 

Financing 

Subordinated perpetual bonds 336,000 

Debt defeasance (268,671) 

Long-term borrowings 9,129 136,545 

Repayment of long-term debt (1 1 1,129) (1 13,503) 

Repayment of capital lease obligations (18,183) (22,814) 

Other (9,150) 15,933 

(62,004) 16,161 

Investments 

Additions to fixed assets (87,127) (104,169) 

Proceeds from disposal of fixed assets 294,244 36,491 

Investment in affiliated companies (18,554) (3,884) 

Dividends received from affiliated companies 3,548 2,390 

192,111 (69,172) 

Increase in cash position 320,129 1 1,609 

Cash position at beginning of year 62,293 50,684 

Cash position at end of year 382,422 62,293 

Cash position consists of cash and short-term investments. 
See accompanying notes. 



184,067 



PUBLIC ACCOUNTS, 1986-87 



21 



AIR CANADA— Continued 

NOTES TO CONSOLIDATED 
FINANCIAL STATEMENTS 

I . Summary of significant accounting policies 

(a) Consolidation 

The consolidated financial statements include the accounts of 
Air Canada and its wholly-owned subsidiaries, Touram Inc., 
enRoute Card Inc. and enRoute Card International Inc. All 
inter-company transactions have been eliminated. 

(b) Depreciation and amortization 

Operating property and equipment, including assets under 
capital lease, are depreciated or amortized to estimated 
residual values based on the straight-line method over their 
estimated service lives. Estimated service lives for flight 
equipment range from 14 to 18 years, except when extended 
by significant modifications. Estimated service lives for other 
property and equipment range from 5 to 30 years. 

(c) Maintenance 

Maintenance and repairs are charged to operating expenses 
except for significant modification costs which are capital- 
ized. 

(d) Spare parts, materials and supplies 

Spare parts, materials and supplies are valued at average 
cost. A provision for the obsolescence of flight equipment 
spare parts is accumulated over the estimated service lives of 
the related Hight equipment. 

(e) Airline revenue 

Airline passenger and cargo sales are recognized as operating 
revenues when the transportation is used. The value of 
unused transportation is included in current liabilities. 

(0 Interest capitalized 

Interest on funds used to finance the acquisition of new flight 
equipment and other property and equipment is capitalized 
for periods preceding the dates the assets are put into service. 

(g) Translation of foreign currencies 

Monetary assets and liabilities in foreign currencies, with the 
exception of subordinated perpetual bonds, are translated at 
month-end exchange rates. Gains or losses are included in 
income of the year, except gains or losses relating to long- 
term debt and capital lease obligations which are deferred 
and amortized over the remaining life of the debt and obliga- 
tions. Other assets and liabilities, subordinated perpetual 
bonds and items affecting income are converted at rates of 
exchange in effect at the date of the transaction. 

(h) Investment tax credits 

Investment tax credits related to assets acquired prior to 
1985 are recognized in income net of applicable deferred 
income taxes, using the flow through method in the year in 
which the credits are claimed for tax purposes. Investment 
tax credits related to assets acquired after 1984 are recog- 
nized as a reduction of the cost of property and equipment in 
the year of acquisition, 
(i) Pension costs and obligations 

The Corporation has adopted the new recommendations of 
the Canadian Institute of Chartered Accountants on 
accounting for pension costs and obligations with prospective 
application from January I, 1986. Pension expense consists 
of the actuarially computed costs using management's best 
estimate assumptions of pension benefits in respect of current 
year's service, imputed interest on plan assets and pension 
obligations, and straight-line amortization of experience 
gains or losses and assumption and plan changes, over the 



average remaining service life of the employee group. The 
difference between the actuarial present value of the accrued 
pension obligation and the market value of the pension fund 
assets at January 1, 1986, is also being amortized into income 
on a straight-line basis over the expected average remaining 
service life of the employee group. Corporation pension con- 
tributions during the year in excess of the amounts in the 
income statement are recorded as a deferred charge in the 
balance sheet. If this change had not been made, net income 
for the year would have been reduced by $23.0 million and 
the deferred charge in the balance sheet would have been 
reduced by $43.9 million. 

(j) Sale and leaseback of assets 

Gains on sale and leaseback of assets are deferred and amor- 
tized to income over the terms of the leases as a reduction in 
rental expense. 

2. Property and equipment 

1986 1985 

S S 

Cost 

Flight equipment 2,097,044 2,270,03! 

Other properly and equipment 720,597 694,285 

2.817,641 2.964.3 16~ 
Accumulated depreciation and amortization 

Flight equipment 738.727 806,910 

Other property and equipment 424,383 387,550 

1,163.110 I.194.460~ 

1,654,531 1,769,856 

Progress payments 15,144 37,333 

Net book value 1,669,675 1,807,189 



Flight equipment includes one aircraft with a net book value of 
$2.6 million which was sold in January 1987 for $1 1.9 million. 

During the year, the Corporation sold and leased back under 
operating leases, 24 DC-9 aircraft and an office and computer 
building. 

3. Flight equipment under capital leases 

1986 1985 
S S 

Flight equipment under capital leases 292,266 295,985 

/.e,w.- accumulated depreciation 218,169 204,270 

Net book value 74,097 91.715 

4. Investment in other companies 

Investments in companies accounted for on the equity basis 
included GPA Group Limited (26.0% owned, 22.7% owned until 
March 31, 1986), Innotech Aviation Industries (1986) Limited 
(30.0% owned). Aerospace Realties (1986) Limited (30.0% 
owned), MATAC Cargo Ltd. (50.0% owned). Global Travel 
Computer Holdings Ltd. (33.3% owned). Air Ontario Limited 
(24.5% owned effective March 4, 1986) and Air Nova Inc. (49.0% 
owned effective July I, 1986). The Corporation's share of the 
earnings of these companies has been included in other non-oper- 
ating income and amounted to $12.7 million (1985 — $9.1 
million). 



22 



PUBLIC ACCOUNTS, 1986-87 



AIR CANADA— Continued 

NOTES TO CONSOLIDATED 
FINANCIAL STATEMENTS— Co«//«Merf 

5. Deferred charges 



1986 



1985 



Foreign currency exchange losses on long-term debt... 1 58,800 
Employer pension plan contributions in excess of 

charges to income 51,152 

Bond issue costs 22,808 

Other 26,921 



79,795 



11,615 
28,618 



259,681 120,028 



Amortization of deferred charges for the year amounted to 
$33.3 million (1985— $9.6 million). 



6. Long-term debt 



1986 



1985 



Government of Canada 
7.2% note, payable semi-annually maturing in 

1993 175,589 

Other 

8.7% notes due 1995/96 

7.3% bonds due 1991 to 1995 

6.25% bonds due 1992 

5.5% bonds due 1995 

9.0% bonds due 1992 

7.375% bonds due 1993 

1 1 .25% bonds due 1994 

8.0% notes due 1990/91 

8.5% note due 1991/92 

9.25% note due 1991 to 1993 

8.375% note due 1990 

Various notes due 1987 to 1992 

In-substance defeasance (Note 1 2) 

Current portion 

Net value of related long-term forward exchange 
contracts 



196,098 



477,266 


504.211 


130,875 


104,760 


85,590 


67,860 


85,590 


67,860 


71,740 


57,190 


71,740 


57,190 


70,000 


70,000 


41,161 


50,733 


38,356 


46,699 


31,574 


32,128 


26,896 


35,007 


2,370 


53,530 


1,133,158 


1,147,168 


1,308,747 


1,343,266 


(180,067) 




1,128,680 


1,343,266 


(60,118) 


(84,142) 


1,068,562 


1,259,124 


(18,883) 


(30,329) 


1,049,679 


1,228,795 



revolving and term periods are three and five years respectively. 
As at December 31, 1986 there were no outstanding drawings 
against these agreements. 

Lease obligations 

The future minimum lease payments under capital and operat- 
ing leases are as follows: 

Operating 

leases — 

Capital Aircraft 

leases — & 

Aircraft property 



1987 16,786 66,034 

1988 13,935 61,940 

1989 7,685 54,983 

1990 3,651 53,974 

1991 51,165 

Remaining years 413,085 

Total future minimum lease payments 42.057 701,181 

Less: amount representing interest and holdbacks 10,933 

Present value of capital lease obligations net of 

amounts defeased of $62.1 million (Note 12) 31,124 

Less: current portion of net obligations 14.184 

Present value of net long-term obligations under 

capital leases 16.940 

Less: net value of related long-term forward 

exchange contracts 3,043 

Present value of long-term obligations under capital 

leases 13.897 



Capital leases are recorded at the present value of the lease 
payments using the interest rate implicit in the lease. The average 
implicit interest rate of these obligations is 7.6% and their expiry 
dates are from 1989 to 1991. 

Def(;rred credits 

1986 1985 

$ $ 

Gains on sale and leaseback of assets 21 1.931 

Income taxes 87.172 67.738 

Other 2.206 8,095 

301,309 75,833 



None of the long-term debt is secured. 

Repayment requirements over the next five years amount to 
$347.3 million net of defeasance: $60.1 million in 1987, $67.6 mil- 
lion in 1988, $70.9 million in 1989, $70.7 million in 1990 and 
$78.0 million in 1991. Long-term debt includes $581.5 million 
payable in U.S. funds, $171.2 million in Swiss francs, $143.5 mil- 
lion in German marks, $130.9 million in Japanese yen, $70.0 mil- 
lion in U.K. Sterling, and $31.6 million in French francs. Essen- 
tially all the U.S. debt is covered by long-term U.S. currency 
forward exchange contracts. The Corporation has a currency 
swap agreement with a Canadian bank which has the effect of 
extinguishing future exchange fluctuations of the Sterling debt 
and interest. 

In 1985 the Corporation entered into interest rate swap agree- 
ments expiring in 1988 and 1990 aggregating U.S. $150 million in 
notional principal. The Corporation has assumed the variable 
interest rate position adjusted quarterly to the prevailing LIBOR 
rate against an average 10.15% fixed interest rate position 
assumed by third parties. 

The Corporation has revolving and term credit agreements 
totalling $200 million with two Canadian chartered banks. The 



9. Subordinated perpetual bonds 



1986 



300 million Swiss francs at 6'/4% Callable in year 

2001 and every fifth year thereafter at 102% of par 201,600 

200 million Swiss francs at 5y4% Callable at \0\*/i% 
of par in year 1999 and every fifth year thereafter 
at 102% of par 134,400 



336,000 



1985 



The maturity of these bonds is only upon the liquidation, if 
ever, of the Corporation. Principal and interest payments on these 
bonds are subordinated to the prior payment in full of all indebt- 
edness for borrowed money. Since it is not probable that circum- 
stances will arise requiring redemption of the bonds, they are 
valued at the historical exchange rate and no provision is made for 
foreign exchange fluctuations. 



PUBLIC ACCOUNTS. 1986-87 



23 



AIR CANADA— Concluded 

NOTES TO CONSOLIDATED 
FINANCIAL STATEMENTS— Concluded 

10. Income taxes 

The Corporation's provision for (recovery oQ deferred income 
taxes is comprised as follows: 

1986 1985 
S S 

Provision for (recovery oO income taxes based on the 

combined basic Canadian federal and provincial 

income tax rate 24,787 (24,535) 

Lower effective income tax rate on capital (gains) 

losses 1,258 (5,125) 

Tax exempt earnings of related companies (5,450) (4,024) 

Investment tax credits, net of deferred income tax of 

$1,054 (1,288) 

Miscellaneous (166) (181) 

Provision for (recovery oQ deferred income taxes 19,141 (33,865) 

As at December 31, 1986 the Corporation has available $21.9 
million of investment tax credits that can be applied in 1987 or 
1988 as a reduction to future federal income taxes payable. The 
benefit of these credits has not been recognized in the accounts. 

11. Extraordinary items 

During the year the Corporation defeased $268.7 million of 
long-term debt and capital lease obligations resulting in a gain of 
$9.9 million after deducting deferred income taxes of $6.4 million. 

Provision for the cost of staff reduction programs amounted to 
$5.4 million (1985— $2.8 million) after deducting deferred 
income taxes of $4.4 million (1985 — $2.2 million). 

12. In-substance defeasance 

In 1986 the Corporation deposited $251.8 million of govern- 
ment securities in irrevocable trusts, solely to satisfy the scheduled 
interest and principal repayment requirements of $200.6 million 
in long-term debt and $68.1 million in long-term capital lease 
obligations. As at December 31, 1986, these obligations, which 
amounted to $180.1 million in long-term debt and $62.1 million in 
capital lease obligations, are considered extinguished for financial 
reporting purposes and, together with the related securities, have 
been removed from the Corporation's balance sheet. 

1 3. Changes in accounting estimates 

Estimated residual values of aircraft spare parts were adjusted 
in the determination of the provision for obsolescence in 1986. 
This resulted in a decrease in amortization and an increase in net 
income of $5.0 million after deducting deferred income taxes of 
$4.1 million. 

14. Commitments 

As at December 31, 1986, the Corporation had undertakings to 
increase its participation in Air Ontario Limited from 24.5% to 
75%, to acquire 75% of Austin Airways Ltd. and 100% of AirBC. 
These undertakings involved an estimated expenditure of $68.8 
million. The Air Ontario and AirBC commitments were con- 
cluded subsequent to year-end. 

Contracts for aircraft modifications amounted to approximately 
U.S. $6.3 million. Other commitments for property, ground 
equipment and spare parts, amounted to approximately $37.6 mil- 
lion Canadian. 

At December 31,1 986, the Corporation had contracted for sale 
in mid 1987, 2 L-101 1 aircraft presently under capital lease. Pro- 
ceeds of sale will exceed the carrying value of these aircraft. 



1 5. Pension Plans 

Air Canada maintains several defined benefit pension plans 
covering substantially all of its employees. Based on the latest 
actuarial reports prepared as of December 31, 1985 using man- 
agement's best estimate assumptions, the present value of the 
accrued pension benefits as at December 31, 1986 amounted to 
$1,746.2 million, and the market value of the net assets available 
to provide these benefits was $2,260.4 million. 

In accordance with generally accepted accounting principles 
recommended by the Canadian Institute of Chartered Account- 
ants, the amount by which the Corporation's 1986 funding contri- 
butions exceeded the amounts recorded in the determination of its 
net income, has been refiected in the balance sheet as a deferred 
charge. 

16. Contingencies 

Various lawsuits and claims are pending by and against the 
Corporation. It is the opinion of management supported by coun- 
sel that final determination of these claims will not materially 
affect the financial position or the results of the Corporation. 

Under aircraft sale and leaseback agreements, the Corporation 
may be required to provide residual value support not exceeding 
$39.5 million. Independent appraisals presently indicate that the 
Corporation will not be required to provide this support. 

17. Related party transactions 

In the ordinary course of business, the Corporation enters into 
transactions with related parties, including the Government of 
Canada, its agencies and other Crown corporations. The Corpora- 
tion derives revenues from related parties for passenger, cargo and 
contract services. Expenses with related parties include landing 
fees, terminal assessments, taxes and interest on long-term debt. 
Account balances resulting from these transactions are included 
in the balance sheet and are settled on normal trade terms. 

18. Comparative figures 

Certain of the 1985 comparative figures have been reclassified 
to conform to the presentation adopted in 1986. 

19. Act of incorporation 

The Corporation operates under the Air Canada Act, 1977, as 
amended. 

20. Subsequent events 

In February 1987, the Corporation entered into an agreement 
with CSFB-Effectenbank in Germany pursuant to which it will 
issue to the bank Deutsche Mark 200 million of 6y8% interest 
adjustable subordinated perpetual bonds in consideration for 
which the bank will convert Deutsche Mark 200 million of exist- 
ing long-term public bond debt into these subordinated perpetual 
bonds and to fund the interest payment requirements on the new 
perpetual bonds until conversion in 1992 and 1993. The principal 
component of the subordinated perpetual debt will be recorded in 
the accounts upon actual conversion and until such time the Cor- 
poration will be contingently liable for such obligations. The 
bonds are unsecured. The interest rate will be 6^8% until 1994 and 
re-set for each subsequent 3 year period based on an interest rate 
index. The bonds may be called by the Corporation on each inter- 
est rate re-set date at 100% of par. As a result of this transaction, 
the deferred foreign exchange position in respect of the Deutsche 
Mark 200 million of existing long-term public bond debt ($52.1 
million deferred loss as at December 31, 1986) will no longer be 
amortized to income. 



24 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
ATLANTIC PILOTAGE AUTHORITY 



MANDATE 

To establish, operate, maintain and administer in the interests of safety, an efficient pilotage service within 
designated waters in and around the Atlantic provinces. 

BACKGROUND 

Established in 1972, the Authority provides pilotage services and has the power to make regulations, subject to the 
approval of the Governor in Council, which establish compulsory pilotage areas; prescribe the ships/classes of ships 
that are subject to compulsory pilotage, the circumstances under which compulsory pilotage may be waived and 
pilotage tariffs; and which cover the licensing of pilots and issuance of pilotage certificates. Tariffs must be fair and 
reasonable and sufficient to permit the Authority to operate on a self-sustaining financial basis. 



CORPORATION DATA 

HEAD OFFICE 



STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHAIRMAN AND CHIEF 
EXECUTIVE OFFICER 

AUDITOR 



Suite 1203 

Bank of Montreal Tower 
5151 George Street 
Halifax, Nova Scotia 
B3J 1M5 

—Schedule C, Part I 

— not an agent of Her Majesty 

The Honourable John Crosbie, P.C, Q.C., M.P. 

Transport 

1972; pursuant to the Pilotage Act (S.C. 1970-71-72, C. 52) 
proclaimed on February 1, 1972. 

A. Douglas Latter 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year is the calendar year. 



At the end of the year 

Total Assets 

Obligations to the private sector 

Obligations to Canada 

Equity of Canada 

Cash from Canada for the year 

— budgetary 

— non-budgetary 



1986 



1985 



1984 



1983 



1.4 


1.2 


1.7 


1.9 


0.1 


0.3 


nil 


nil 


0.4 


0.4 


0.5 


0.6 


(0.3) 


(0.6) 


(0.1) 


negl 


0.7 


0.6 


0.1 


nil 


nil 


nil 


nil 


nil 



PUBLIC ACCOUNTS, 1986-87 

ATLANTIC PILOTAGE AUTHORITY 

AUDITOR'S REPORT 

TO THE MINISTER OF TRANSPORT 

I have examined the balance sheet of Atlantic Pilotage Authority as 
at December 31, 1986 and the statements of operations, deficit, con- 
tributed capital and changes in financial position for the year then 
ended. My examination was made in accordance with generally 
accepted auditing standards, and accordingly included such tests and 
other procedures as I considered necessary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the Authority as at December 31,1 986 and the results of its 
operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Authority that have 
come to my notice during my examination of the financial statements 
have, in all significant respects, been in accordance with Part XII of 
the Financial Administration Act and regulations, the Pilotage Act 
and regulations, and the by-laws of the Authority. 

Raymond Dubois, C.A. 
Deputy Auditor General 
for the Auditor General of Canada 
Ottawa, Canada 
February 20, 1987 



25 



BALANCE SHEET AS AT DECEMBER 31, 1986 



ASSETS 1986 1985 

S $ 

Current 

Cash 303 16,801 

Accounts receivable 667,793 526,967 

Prepaid expenses 14,507 14,869 

682,603 558,637" 

Fixed, at cost (Note 4) 1,471,929 1,476,593 

Le55; accumulated depreciation 767,177 807,182 

704,752 669,411 



LIABILITIES 1986 



Current 

Bank indebtedness 

Accounts payable and accrued liabilities 

Obligation under capital lease agreements 

(Note 5) 

Current portion of accrued employee termina- 
tion benefits 

Long-term 

Accrued employee termination benefits 

Obligation under capital lease agreements 
(Note 5) 



CONTRIBUTED CAPITAL AND DEFICIT 

Contributed capital 

Deficit (1,203,362) 



1985 



1,387,355 1,228,048 



$ 


S 


111,455 
401,281 


300,000 
400,646 


84,340 


77,685 


52.969 


24,538 


650,045 


802,869 


719.810 


694,950 


286,874 


371,214 


1,006,684 


1,066,164 


1,656,729 


1,869,033 


933,988 
(1,203,362) 


845,503 
(1.486,488) 


(269,374) 


(640,985) 



1,387,355 1,228,048 



Approved by the Authority: 

A. D. LATTER 
Chairman 

C. R. WORTH INGTON 

Member 

M. R. McGRATH 
Treasurer 



26 



PUBLIC ACCOUNTS, 1986-87 



ATLANTIC PILOTAGE WTUORITY— Continued 

STATEMENT OF OPERATIONS 

FOR THE YEAR ENDED DECEMBER 31, 1986 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED DECEMBER 31, 1986 



1986 1985 



Income 

Pilotage charges 

Interest and other income 

Expenses 

Pilots' fees, salaries and benefits 

Pilot boats, operating costs 

Staff salaries and benefits 

Transportation and travel 

Professional and special services 

Rentals 

Depreciation 

Communications 

Utilities, materials and supplies 

Sundry 

Interest on capital leases 

Net loss for the year (Note 3(c)) 239,500 564,896 



1986 



1985 



$ 


$ 


5,804,151 


5,484,593 


30,267 


64,860 


5,834,418 


5,549,453 


2,976,931 


3,019,500 


1,889,727 


1,897,577 


367,469 


366,023 


247,261 


242,789 


215,275 


199,821 


123,700 


127,612 


63.191 


73,676 


59,582 


58,061 


51,080 


42,703 


43,194 


43,792 


36,508 


42,795 


6,073,918 


6,114,349 



STATEMENT OF DEFICIT 

FOR THE YEAR ENDED DECEMBER 31, 1986 



1986 



1985 



Balance, beginning of year 1,486,488 921,592 

Net loss for the year 239,500 564,896 

1,725,988 1,486,488 

Parliamentary appropriation to finance (Note 3(a)) 

Cash operating loss 522,626 

Balance, end of the year 1,203,362 1,486,488 



STATEMENT OF CONTRIBUTED CAPITAL 
FOR THE YEAR ENDED DECEMBER 31, 1986 



1986 1985 



Balance, beginning of year 845,503 845,503 

Parliamentary appropriation to finance (Note 3(a)) 

Additions to fixed assets 10,800 

Principal payments on capital leases 77,685 

88,485 

Balance, end of year 933,988 845,503 



Financing activities 
Parliamentary appropriation to finance 
(Note 3(a)) 

Cash operating loss 522,626 

Fixed asset additions 10,800 

Principal payments for capital leases 77,685 

611,111 
Reimbursement of parliamentary appropriation. 

Principal portion of capital lease payments (77,685) 

Increase (decrease) in bank indebtedness (188,545) 

Cash provided by financing activities 344,881 

Operating activities 

Cash (used for) provided from operations 

Net loss for the year (239,500) 

Items not requiring cash 

Depreciation 63,191 

Increase in accrued employee termination 

benefits 

Loss on disposal of fixed assets 

Cash (used for) operations 

Cash provided by (invested in) non cash work 

ing capital 

Employee termination benefits payments 

Cash (used for) operating activities 

Investing activities 

Additions to fixed assets 

Cash (used for) investing activities 

(Decrease) in cash during the year 

Cash, beginning of year 

Cash, end of year 303 



(186,468) 
(71,558) 
300,000 



41,974 



(564,896) 
73,676 



82,186 
1,105 


70,713 
2,220 


(93,018) 

(139,829) 
(28,895) 


(418,287) 

279,738 
(93,989) 


(261,742) 


(232,538) 


(99,637) 


(10,800) 


(99,637) 


(10,800) 


(16,498) 
16,801 


(201,364) 
218,165 



16,801 



NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, 1986 

1 . Nature of activities 

The Atlantic Pilotage Authority was established on February 1, 
1972 pursuant to the Pilotage Act. The objects of the Authority 
are to establish, operate, maintain and administer a safe and effi- 
cient pilotage service within designated Canadian waters. The Act 
provides that pilotage tariffs shall be fair, reasonable and suffi- 
cient, together with any revenue from other sources, to permit the 
Authority to operate on a self-sustaining financial basis. 

2. Significant accounting policies 

(a) Parliamentary appropriations 

When revenues are not sufficient to permit the Authority to 
operate on a self-sustaining financial basis, cash operating 
losses are recovered from parliamentary appropriations. 
These appropriations are recorded in the accounts when 
approved by Parliament and are reflected in the statement of 
deficit. 

(b) Depreciation 

Depreciation of fixed assets is calculated on a straight-line 
basis and is based on the estimated useful life of the assets as 
follows: 

Buildings 20 years 

Pilot boats 20 years 

Pilot boats under capital lease 25 years 

Furniture and equipment 10 years 



PUBLIC ACCOUNTS, 1986-87 



W 



ATLANTIC PILOTAGE AUTHORITY— Co«r/n«e^ 

NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, 19S6— Continued 

(c) Contributed capital 

Capital assets and the principal portion of payments under 
capital lease agreements flnanced from parliamentary appro- 
priations are shown as contributed capital when approved by 
Parliament. 

(d) Capital leases 

The Authority leases three pilot boats from Canada under 
long-term Hnancing leases. Under the terms of the lease 
agreements, the Authority assumes the rights and obligations 
of ownership. As a result, the leases are treated as purchases 
and the principal portion of lease payments is capitalized and 
depreciated over the estimated useful lives of the boats. The 
corresponding liability is reduced by the principal portion of 
lease payments and the interest portion is expensed in the 
year to which it relates. 

(e) Pension plan 

All employees are covered by the Public Service Superannua- 
tion Plan administered by the Government of Canada. Con- 
tributions to the Plan are required from both the employee 
and the Authority. Contributions with respect to current ser- 
vice are expensed in the current period. Contributions with 
respect to past service benefits are expensed when paid, gen- 
erally over the remaining years of service of the pilots. 

(0 Employee termination benefits 

Employees of the Authority are entitled to specified benefits 
on termination as provided for under labour contracts and 
conditions of employment. The liability for these benefits is 
recorded in the accounts as the benefits accrue to the 
employees. 

3. Parliamentary appropriation 

(a) On March 26, 1986, the Government of Canada provided, 
through Appropriation Act No. 4, 1985-86, for the 1985 cash 
operating loss and capital expenditures of the Atlantic Pilot- 
age Authority. An amount of $61 1,1 1 1 was received in 1986 
by the Authority in respect of this appropriation. 

(b) On December 4, 1986, the Treasury Board of Canada 
approved, under T.B. 803674, the amended 1986 Capital 
Budget of the Atlantic Pilotage Authority for the construc- 
tion of a new pilot boat (Note 4). Approval has been granted 
for a 1986-87 final Supplementary Estimate to transfer 
$450,000 from Transport Canada Vote 5 to the Authority. 
A contract to construct the pilot boat, for a total cost of 
approximately $395,000, was signed on December 19, 1986. 
Delivery is expected in June, 1987. 

(c) On February 12, 1987, Treasury Board approved the Author- 
ity's application, in the amount of $275,000, to include an 
item in Supplementary Estimates for 1986-87 for the 1986 
cash operating loss and capital expenditures. The actual 
amounts are as follows: 



4. Fixed assets 






1986 




1985 




Cost 


Accumu- 
lated 
depre- 
ciation 


Net 


Net 


Land and buildings 
Pilot boats 


S 

450 
299,909 

964,000 
129,076 

78,494 


S 

224,452 

466,720 
76,005 


$ 

450 

75,457 

497,280 
53,071 

78,494 


S 

450 
85,918 

535,840 
47,203 


Pilot boats under capital 
lease 

Furniture and equipment . 

Pilot boat under construc- 
tion (Note 3(b)) 










1,471,929 


767,177 


704,752 


669,411 



5. Capital lease agreements 

The Authority leases three pilot boats under long-term financ- 
ing leases. The payments required under the leases are as follows: 



1986 



1985 



S 

328,715 

124,305 



S 

lease agreement, due April 1991, payable 

in blended annual payments of $54,785 273,930 

lease agreement, due October 1989, pay- 
able in blended annual payments of 

$31,077 93,228 

lease agreement, due November 1989, 
payable in blended annual payments of 
$31,077 

Total lease payments 

Less: amount representing interest 

Principal amount of capital lease 

Less: current portion 

Principal amount of capital lease agree 
ments net of current portion 



The following is a schedule of lease payments under the capital 
leases expiring in 1989 and 1991. 

1986 1985 

$ $ 

Year ending December 3 1 

1986 116,939 

1987 1 16,939 1 16,939 

1988 1 16,939 1 16,939 

1989 1 16,939 1 16,939 

1990 54,784 54,784 

1991 54,785 54.785 

Total lease payments 460,386 577,325 



93,228 


124,305 


460,386 
89.172 


577,325 
128,426 


371,214 
84,340 


448,899 
77,685 


286,874 


371.214 



Upon maturity of the leases, the Authority has the option to 
purchase each of the boats for $1 . 



Cash operating loss 121,913 

Fixed asset additions 21,143 

Principal payments for capital leases 84,340 

227,396 



28 



PUBLIC ACCOUNTS, 1986-87 



ATLANTIC PILOTAGE AVTHORITY— Concluded 

NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, \9i6— Concluded 

6. Pension plan 

Under provisions of the Pilotage Act, pilots may choose to 
become employees of the Authority and become entitled to count 
service prior to becoming an employee as pensionable under the 
Public Service Superannuation Act. For pilots who have elected to 
purchase pension benefits with respect to past service, the Author- 
ity is required to match the employee contribution. Total past ser- 
vice pension expense was $19,464 in 1986 ($20,985—1985). The 
estimated unfunded past service pension contribution with respect 
to these employees was approximately $128,000 at December 31, 
1986 ($127,000 at December 31, 1985) and will be funded over 
the remaining years of service of the pilots, or the terms of pur- 
chase, whichever is the lesser. 

7. Related party transactions 

The Canadian Coast Guard, through its Vessel Traffic Service 
Centres in Nova Scotia, New Brunswick and Newfoundland, pro- 
vides a pilot dispatching service to the Authority without charge. 

8. Cost reduction 

The Authority continually monitors its operating expenditures 
in striving to operate on a self-sustaining financial basis. During 
1986, steps were taken to reduce costs of pilots, pilot boats, and 
administrative overheads. 

9. Income tax 

Under the provisions of the Income Tax Act, the Authority is 
not subject to income tax. 



PUBLIC ACCOUNTS, 1986-87 



29 



SUMMARY PAGE 
ATOMIC ENERGY OF CANADA LIMITED 



MANDATE 

To develop the utilization of atomic energy for peaceful purposes. The mandate of the corporation is prescribed by 
s. 10(1) of the Atomic Energy Control Act and by its charter and articles of incorporation. 

BACKGROUND 

Founded in 1952, AECL developed Candu power generating technology. It operates Canada's major research and 
development laboratories at Chalk River, Ontario and at Pinawa, Manitoba. Three provincial utilities received 
federal financing for nuclear facilities through AECL and now make repayments to it which are passed on to 
Canada. The corporation was responsible for Candu reactors built recently in Argentina and in Korea and is 
providing services related to two Candu reactors under construction in Romania. Its design and engineering teams are 
important to the continued improvement and development of nuclear power stations and nuclear technology in 
general. Consideration is now being given to the privatization of the Radiochemical division of the company which 
produces and markets radiating isotopes and medical equipment. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



275 Slater Street 
Ottawa, Ontario 
K1A0S4 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable Marcel Masse, P.C., M.P. 

Energy, Mines and Resources 

February 14, 1952 under Part I of Canada Corporations Act; 
continued July 8, 1977 under the Canada Business Corporations Act; 
certificate amended July 15, 1982. 

James Donnelly 

Basil A. Beneteau 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 

1986-87 

At the end of the period 

Total Assets 1,018 

Obligations to the private sector 23 

Obligations to Canada 626 

Equity of Canada 196 

Cash from Canada in the period 

— budgetary 218 

— non-budgetary nil 



1985-86 



1984-85 



1983-84 



1,107 


1,226 


1,285 


24 


36 


44 


649 


720 


767 


177 


148 


143 


275 


326 


336 


nil 


nil 


5 



30 



PUBLIC ACCOUNTS, 1986-87 



ATOMIC ENERGY OF CANADA LIMITED 

MANAGEMENT RESPONSIBILITY 

The financial statements and all other information presented in this 
annual report are the responsibility of the management and the Board 
of Directors of the Corporation. The financial statements have been 
prepared in accordance with generally accepted accounting principles 
and include estimates based on the experience and judgement of man- 
agement. 

The corporation maintains books of account, financial and manage- 
ment control, and information systems, together with management 
practices designed to provide reasonable assurance that reliable and 
accurate financial information is available on a timely basis, that 
assets are safeguarded and controlled, that resources are managed 
economically and efficiently in the attainment of corporate objectives, 
that operations are carried out effectively and that transactions are in 
accordance with Part XII of the Financial Administration Act and its 
regulations, as well as the charter, the by-laws and policies of the cor- 
poration. The corporation has met all reporting requirements estab- 
lished by the Financial Administration Act, including submission of a 
corporate plan, an operating budget, a capital budget, and this annual 
report. 

The corporation's internal auditor has the responsibility for assess- 
ing the management systems and practices of the Corporation. The 
Auditor General of Canada conducts an independent examination of 
the financial statements of the Corporation and reports on his exami- 
nation to the Minister of Energy, Mines and Resources. 

The Board of Directors' Audit Committee, composed of directors 
who are not employees of the Corporation, reviews and advises the 
Board on the financial statements, the Auditor General's reports 
thereto and the plans and reports related to special examinations, and 
oversees the activities of internal audit. The Audit Committee meets 
with management, the internal auditor and the Auditor General on a 
regular basis. 



AUDITOR'S REPORT 

TO THE MINISTER OF ENERGY, MINES AND RESOURCES 

I have examined the balance sheet of Atomic Energy of Canada 
Limited as at March 31, 1987 and the statements of income, con- 
tributed capital, retained earnings and changes in financial position for 
the year then ended. My examination was made in accordance with 
generally accepted auditing standards, and accordingly included such 
tests and other procedures as I considered necessary in the circum- 
stances. 

In my opinion, these financial statements present fairly the financial 
position of the Corporation as at March 31, 1987 and the results of its 
operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the financial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, the charter 
and the by-laws of the Corporation. 



Kenneth M. Dye, F.C.A. 
Auditor General of Canada 



Ottawa, Canada 
May 8, 1987 



BALANCE SHEET AS AT MARCH 31, 1987 
(in thousands of dollars) 



ASSETS 



1987 



1986 



Current 

Cash and short-term deposits 57,701 55,495 

Accounts receivable 142,182 126,858 

Inventories (Note 3) 59,595 61,667 

259,478 244,020 

Non-current inventory (Note 3) 1,579 

Long-term receivables (Note 4) 597,378 699,163 

Investment and deferred costs (Note 5) 107,652 1 10,280 

Property, plant and equipment (Note 6) 53,607 51,955 



LIABILITIES 

Current 
Accounts payable and accrued liabilities . 
Current portion of long-term debt 

Deferred revenue 

Provision for contracts in progress 

Accrued employee termination benefits 

Long-term debt (Note 7) 



1987 



1986 



124,594 
26,353 


133,759 
24,171 


150,947 
14,592 

34,370 
622,545 


157,930 
64,255 
25,024 
34,084 

648,898 


822,454 


930,191 



1,018,115 1,106,997 



SHAREHOLDER'S EQUITY 

Capital stock 

Authorized — 75,000 common shares 

Issued — 54,000 common shares 15,000 

Contributed capital 71,051 

Retained earnings 109,610 



15,000 
69,795 
92,011 



195,661 176,806 
1,018,115 1,106,997 



Approved by the Board: 

B. A. BENETEAU 
Director 

JAMES DONNELLY 
Director 



PUBLIC ACCOUNTS, 1986-87 

ATOMIC ENERGY OF CANADA LIMITED— Continued 

STATEMENT OF INCOME 

FOR THE YEAR ENDED MARCH 31, 1987 

(in thousands of dollars) 



31 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED MARCH 31, 1987 
(in thousands of dollars) 



1987 



1986 



1987 



1986 



Commercial operations 
Revenue 

Nuclear supply and services 87,603 93,269 

Radiation equipment and isotopes 1 1 1,209 92,617 

Interest on long-term receivables 63,355 64,197 

Interest on short-term deposits 5,965 10,238 

^8,132 260,32r 
Costs and expenses 

Cost of sales and services 1 14,094 1 19,467 

Product development 17,820 10,332 

Marketing and administration 57,222 40,593 

Interest on long-term debt 58,303 62,231 

247.439 232,623' 

Operating profit 20,693 27,698 

Research and development operations 

Expenses 222,870 21 1,683 

Less: revenue 38,039 24,867 

parliamentary appropriations 181,737 176,612 

Net expenses 3,094 10,204 

Discontinued operations 

Expenses 36,397 58,161 

Less: parliamentary appropriations 34,588 58,161 

recovery from asset sales 1,809 

Net income 17,599 17,494 



Operating activities 

Net income 17,599 17,494 

Depreciation and amortization 6,822 6,175 

24,421 23,669 

Increase in operating working capital (13,444) (26,173) 

Cash from (used in) operations 10,977 (2,504) 

Investing activities 

Heavy water production (29,193) 

Parliamentary appropriations for heavy water produc- 
tion 29,193 

Acquisition of commercial property, plant and equip- 
ment net of disposal (7,438) (4,947) 

Increase in deferred costs (1,758) (6,985) 

Cash invested (9,196) (11,932) 

Financing activities 

Repayment of long-term debt (24,171) (83,013) 

Proceeds from long-term notes receivable 23,340 19,126 

Parliamentary appropriations for loan principal repay- 
ment 1,256 11,154 

Cash from (used in) financing 425 (52,733) 

Increase (decrease) in cash and short-term deposits 2,206 (67,169) 

Cash and short-term deposits at beginning of the year 55,495 1 22,664 

Cash and short-term deposits at end of the year 57,701 55,495 



STATEMENT OF CONTRIBUTED CAPITAL 
FOR THE YEAR ENDED MARCH 31, 1987 
(in thousands of dollars) 



1987 1986 



Balance at beginning of the year 69,795 58,641 

Parliamentary appropriations for loan principal repayment .. 1,256 11,154 



Balance at end of the year 71.051 69,795 



STATEMENT OF RETAINED EARNINGS 
FOR THE YEAR ENDED MARCH 31, 1987 
(in thousands of dollars) 



1987 1986 



Balance at beginning of the year 92,01 1 

Net income 17,599 

Balance at end of the year 109,610 92,011 



74,517 
17,494 



SUMMARY OF SIGNIFICANT ACCOUNTING 
POLICIES 

These financial statements have been prepared in accordance with 
generally accepted accounting principles applied on a consistent basis. 
The most significant accounting policies are summarized below: 

Foreign currency translation 

Transactions denominated in a foreign currency are translated into 
Canadian dollars at the exchange rate in effect at the date of the trans- 
action, except those covered by forward exchange contracts, where the 
rate established by the terms of the contract is used. Monetary assets 
and liabilities outstanding at the balance sheet date are adjusted to 
reflect the exchange rate in effect at that date. Exchange gains and 
losses arising from the translation of foreign currencies are included in 
income. 

Inventories 

Radiation equipment and materials are valued at the lower of aver- 
age cost and net realizable value. Maintenance and general supplies 
are valued at cost. Heavy water is valued at the lower of average cost, 
less related parliamentary appropriations, and net realizable value. 
Heavy water inventory not expected to be sold within the next year or 
used in operations is classified as non-current. 

Investment and deferred costs 

Investment and deferred costs are recorded at cost and charged to 
the revenue derived therefrom over the expected period of revenue gen- 
eration. 

Property, plant and equipment 

Property, plant and equipment of a research and development 
nature are recorded at cost and expensed in the year of acquisition. 



32 



PUBLIC ACCOUNTS, 1986-87 



ATOMIC ENERGY OF CANADA LIMITED— Continued 

SUMMARY OF SIGNIFICANT ACCOUNTING 
POLICIES— Co/ic/u</e^ 

Other property, plant and equipment are recorded at cost and 
depreciated on a straight-line basis over the estimated useful life of the 
asset as follows: 



Machinery and equipment 
Buildings 



3 to 20 years 
20 to 50 years 



Costs of decommissioning nuclear facilities are expensed when 
incurred. 

Long-term contracts 

Revenue and costs on long-term contracts are accounted for by the 
percentage-of-completion method, applied on a conservative basis to 
recognize the absence of certainty on these contracts. Full provision is 
made for all estimated losses to completion of contracts in progress. 

Parliamentary appropriations 

The Government of Canada, through parliamentary appropriations, 
funds certain operations of the Corporation as outlined in Note 2. The 
parliamentary appropriations are offset against the applicable expendi- 
tures except for the portion used to discharge certain loan principal 
which is recognized as an increase in contributed capital. 

Pension plan 

Employees are covered by the Public Service Superannuation Plan 
administered by the Government of Canada. The Corporation's contri- 
butions to the plan are limited to an amount equal to the employees' 
contributions on account of current service. These contributions repre- 
sent the total pension obligations of the Corporation and are charged 
to income on a current basis. 

Employee termination benefits 

Employees are entitled to specific termination benefits as provided 
for under collective agreements and conditions of employment. The 
liability for these benefits is charged to income as benefits accrue to 
the employees. 



NOTES TO THE FINANCIAL STATEMENTS 
FOR THE YEAR ENDED MARCH 31, 1987 

1 . Accounting policies 

The summary of significant accounting policies is an integral 
part of these financial statements. 

2. Parliamentary appropriations 

Parliamentary appropriations were used during the year for the 
following purposes: 

1987 1986 

(in thousands of 

dollars) 

Research and development operations 181,737 176,612 

Discontinued operations 

Prototype reactors 1 1,855 18,331 

Heavy water plant closures 18,839 35,382 

LaPrade plant protection 1,850 2,302 

Heavy water plant loan interest 2,044 2,146 

34,588 58,161 

Heavy water production 29,193 

Heavy water plant loan principal 1,256 11,154 

217,581 275,120 



3. Inventories 



1987 



1986 



(in thousands of 
dollars) 



Current 

Radiation equipment and materials 44,916 37,763 

Heavy water 9,653 20,904 

Maintenance and general supplies 5,026 3,000 

59,595 61,667 

Non-current 

Heavy water 554,787 556,366 

£e55.- accumulated parliamentary appropriations ... 554,787 554,787 



1,579 



Accumulated parliamentary appropriations are repayable, 
together with interest thereon, to the extent of future revenue 
from sales of related heavy water. At March 31, 1987 no signifi- 
cant contracts had been finalized for the sale of heavy water 
funded by parliamentary appropriations. 

4. Long-term receivables 

1987 1986 
(in thousands of 
dollars) 
Notes receivable from provincial utilities in respect of 
the financing of nuclear facilities (refer to Note 7 
for related debt) 600,219 623,559 

Contract receivables maturing through 1995 34,069 96,064 

Mortgages receivable and other 5,523 5,132 

639,811 724,755 
Current portion 42,433 25,592 

597,378 699,163 



During the year, a major project was completed and the terms 
of payment of amounts still outstanding under the contract were 
re-negotiated. As a result, the related provision for contracts in 
progress and deferred revenue balances as at March 31, 1987 are 
reflected as an allowance against contract receivables. 



5. Investment and deferred costs 



Investment in Pickering 1 and 2 
The Corporation, Ontario Hydro, and the Province 
of Ontario are parties to an agreement for the con- 
struction and operation of Units 1 and 2 of the 
Pickering «A» nuclear generating station, with 
ownership of these units being vested in Ontario 
Hydro. Under the agreement, the Corporation is 
entitled to receive payments until the year 2001 
based on the net operational advantage of the 
power generated by Pickering Units 1 and 2 as 
compared with the coal-fired Lambton Units 1 and 
2 

Deferred costs 
Costs incurred in modifying non-corporation 
owned facilities for revenue-producing purposes 
and other deferred costs 



1987 



1986 



(in thousands 
of dollars) 



84,012 84,012 



23,640 26,268 
107,652 110,280 



Pickering Units 1 and 2 remain shut down for replacement of 
the pressure tubes and therefore the Corporation did not earn any 
revenue during the 1986 and 1987 years. As a result, no amortiza- 
tion of the investment was charged in either year. The reactors are 
currently scheduled to be back in operation in calendar 1987. 
Extension of the agreement beyond 2()01 is currently being final- 
ized with Ontario Hydro due to the shutdown. 

Amortization of deferred costs for the year amounted to $1.5 
million (1986—5.5 million). 



PUBLIC ACCOUNTS, 1986-87 



n 



ATOMIC ENERGY OF CANADA UMlTYJy— Continued 

NOTES TO THE FINANCIAL STATEMENTS 

FOR THE YEAR ENDED MARCH 31, \ni —Continued 

6. Property, plant and equipment 



1987 



1986 



Commercial operations 
Land and improve- 
ments 

Buildings 

Machinery and 
equipment 



Research and develop- 
ment operations 

Land and improve- 
ments 9,689 

Buildings 67,690 

Reactors and equip- 
ment 240,350 

Construction in 
progress 57,730 



Cost 


Government 
funding and 
accumulated 
depreciation 


Net 


Net 




(in thousands of dollars) 




2,419 
49,328 


1,067 
19,919 


1,352 
29,409 


1,587 
26,642 


39,787 


19,673 


20,114 


20,866 


91,534 


40,659 


50,875 


49,095 



9,689 
64,958 

240,350 

57,730 



2,732 2,860 



375,459 372,727 



2,732 2,860 



Discontinued opera- 
tions 
Prototype reactors .. 
Heavy water plants 



170,557 
802,881 



170,557 
802,881 



1,440,431 1,386,824 



53,607 51,955 



Depreciation of commercial property, plant and equipment for 
the year ended March 31, 1987 amounted to $5.3 million (1986 — 
$5.7 million). 

Research and development property, plant and equipment ex- 
pensed during the year amounted to $20.1 million (1986 — 
$17.9 million). 

The decommissioning of nuclear research and prototype facili- 
ties is an integral part of the nuclear program. A program has 
been developed and implemented to bring the facilities to a safe- 
storage mode as the initial stage of decommissioning. Currently, 
the Gentilly 1 and Douglas Point prototype reactors are on a safe- 
keeping basis. The balance of the Douglas Point program is pro- 
ceeding on target, with an estimated cost to complete of $3.2 mil- 
lion. The future net decommissioning costs of nuclear research 
and prototype facilities cannot be quantified at this time due to 
the uncertainty as to the exact nature, timing and ultimate dis- 
posal alternatives. In accordance with the Corporation's account- 
ing policy, any such costs will be expensed when incurred. 

The closure of the heavy water plants at Glace Bay and Port 
Hawkesbury commenced July 1985 and is close to completion, 
with an estimated cost of $2.0 million for remaining work. 



7. Long-term debt 



Loans from Government of Canada 

To finance provincial utility nuclear facilities 
maturing through 2008 at fixed interest rates 
varying from 6.687% to 9.706% (refer to Note 4 
for related receivables) 

To finance leased heavy water and other assets, 
maturing through 2003 at fixed interest rates 
varying from 4.125% to 10% 

Loans from third parties 

To finance the purchase of the Glace Bay heavy 
water plant, maturing through 1998 at an 
imputed interest rate of 8.875% 

Current portion 



1987 1986 

(in thousands of 

dollars) 



599,582 621,643 



25,964 27,142 



23.352 24,284 
648,898 673,069 

26.353 24,171 
622,545 648,898 



Loan repayments required over the succeeding years are as fol- 
lows (millions of dollars): 1988— $26.4; 1989— $47.7; 1990— 
$30.3; 1991— $32.9; 1992— $35.9; and subsequent to 1992— 
$475.7. 

Related party transactions 

In addition to the transactions disclosed elsewhere in these 
financial statements, the Corporation had the following transac- 
tions with the Government of Canada: 

1987 1986 



(in thousands 
of dollars) 

81,358 134,757 
12,748 14,526 



Repayment of loans and interest 

Payments to the Public Service Superannuation Plan. 

In the normal course of business, the Corporation also enters 
into various transactions with the Government of Canada, its 
agencies and other Crown corporations. 

9. Contingencies 

Certain claims against the corporation have arisen in the course 
of its medical products business and were pending at March 31, 
1987. While the amount of any ultimate liability cannot be deter- 
mined at this time, the outcome of these matters in the opinion of 
management will have no material effect on the corporation's 
financial position or results of operations. 

10. Supplementary information 

Incorporation 

Pursuant to the authority and powers of the Minister of Energy, 
Mines and Resources under the Atomic Energy Control Act, the 
corporation was incorporated in 1952 under the provisions of the 
Canada Corporations Act (and continued in 1977 under the provi- 
sions of the Canada Business Corporations Act) to develop the 
utilization of atomic energy for peaceful purposes. 

The corporation is a Schedule C Part I Crown corporation 
under the Financial Administration Act. The corporation is 
exempt from income taxes. 

Operations 

The operations of the corporation are reported in the Statement 
of Income as commercial operations, research and development 
op)erations, and discontinued operations. 

Commercial operations consist of nuclear power engineering 
and design, project management, operating plant support services, 
manufacturing and selling of medical and industrial radiation 
equipment and radioisotopes, and investments. 



34 



PUBLIC ACCOUNTS, 1986-87 



ATOMIC ENERGY OF CANADA lAMlTED— Concluded 

NOTES TO THE FINANCIAL STATEMENTS 
FOR THE YEAR END MARCH 31, 19%7— Concluded 

Research and development operations consist of basic and 
applied nuclear research and development, and contract research 
and development services. 

Discontinued operations consist of placing and maintaining 
prototype reactors in a safe-storage mode as the initial stage of 
decommissioning, as well as the activities associated with closure 
and protection of the heavy water plants at Glace Bay, Port 
Hawkesbury and LaPrade. 

Insurance 

The corporation assumes substantially all risks pertaining to the 
assets and operations of research and development, and prototype 
reactors. Commercial assets and operations, as well as heavy 
water inventories, are insured to the extent considered appropri- 
ate. 

Sales agents' remuneration 

Guidelines concerning the commercial practices of Crown cor- 
porations require disclosure of sales agents and the total remuner- 
ation paid to them during the year. 

Remuneration and expenses paid to the following sales agents 
and representatives in 1987, primarily with respect to commercial 
operations, aggregated $2.0 million (1986 — $2.3 million): 

Alnor Instruments AB, Sweden; Aristons Ltd., Sri Lanka; B.C. 
Simeon Park, U.S.A.; Bio Nuclear Diagnostica Industria E. 
Comercio Ltda., Brazil; Companhio Brazileira De Radiologia, 
Brazil; ETS F.A. Kettaneh S.A., Lebanon; Eastronics Limited, 
Israel; Gammaster, B.V., The Netherlands; Gemed Sistemas 
Medicos C.A., Venezuela; General Machinery Company Ltda., 
Chile; General Medica De Columbia Ltda., Columbia; Hamco 
Commercial S.C.R.L. Lima, Peru; International General Elec- 
tric Co. (India) Ltd., India; Jardin Danby Ltd., Hong Kong; 
Korea General Trading Corporation, Republic of South Korea; 
Kostas Karayannis S.A., Greece; Marsman & Company Incor- 
porated, Philippines; Marubeni Corporation, Japan; Medtel Pty 
Limited, N.S.W. Australia; Mundinter, Portugal; Novelait 
(Medical) Limited, Hong Kong; Nuclital, s.r.l., Italy; Pacific 
Economic Development Corporation, U.S.A.; P.I. I., U.S.A.; 
P.T. Sanga Kencana International, Indonesia; Radiotherapy & 
Medical Systems Pty Ltd., Australia; Societa Lombarda Di 
Televisione s.r.l., Italy; Tecnologia Em Radiacao Ltda., Brazil; 
Tamathe s.r.l., Argentina; Tareq Company, Kuwait; Zelin Lim- 
ited, Pakistan. 



PUBLIC ACCOUNTS, 1986-87 



35 



SUMMARY PAGE 
BANK OF CANADA 



MANDATE 

The Bank of Canada is responsible for the formulation and implementation of monetary policy in Canada and acts as 
the government's fiscal agent. The Bank has the sole right to issue currency intended for circulation in Canada and it 
fixes the percentage of the deposit liabilities of chartered banks which they must maintain as secondary reserves. It 
conducts open-market operations, buying or selling securities as, in its judgement, the progress of Canada's economy 
requires. As fiscal agent, it handles the issue of securities of Canada and payment of related interest and principal; it 
also cashes and negotiates cheques drawn on the Receiver General. It administers the Exchange Fund Account and 
acts as agent for the government's operations in the foreign exchange market. 



BACKGROUND 

The Bank was created by its Act in 1934 as Canada's central bank. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

AUDITOR 



234 Wellington Street 
Ottawa, Ontario 
K1A0G9 

Acts as the fiscal agent of the Government of Canada; is exempt 
from the provisions of Divisions I to IV of Part XII of the Finan- 
cial Administration Act. 

The Honourable Michael Wilson, P.C., M.P. 

Finance 

1934, by The Bank of Canada Act (R.S.C. 1970, B-2). 

J. W. Crow 

Arthur Andersen & Co. and Ernst & Whinney. 



FINANCIAL SUMMARY ($ million) The financial year is the calendar year. 



Expenses, before depreciation 



1986 

143 



1985 

135 



1984 

118 



1983 

110 



Note: This Financial Summary is cursory compared with that for any other corporation in this Report. This is 
appropriate because the nature of the operations of a central bank makes its financial statements unique in their 
import. For example: the Bank's assets are mostly securities of Canada and its revenues are mostly the interest paid 
to it by Canada on those securities. Therefore, the substantial net income (1985, $1,880 million; 1986, $1,936 
million) which the Bank pays to Canada is simply completion of a circular flow of cash, diminished by the amount of 
the Bank's operating expenses. 



36 



PUBLIC ACCOUNTS, 1986-87 



BANK OF CANADA 

AUDITORS' REPORT 

We have examined the statement of assets and liabilities of the Bank 
of Canada as at December 31, 1986 and the statement of revenue and 
expense for the year then ended. Our examination was made in accord- 
ance with generally accepted auditing standards, and accordingly 
included such tests and other procedures as we considered necessary in 
the circumstances. 

In our opinion, these fmancial statements present fairly the fmancial 
position of the Bank as at December 31, 1986 and the results of its 
operations for the year then ended in accordance with the accompa- 
nying summary of significant accounting policies, applied on a basis 
consistent with that of the preceding year. 



Ottawa, Canada 
January 15, 1987 



Arthur Andersen & Co. 
Ernst & Whinney 



STATEMENT OF ASSETS AND LIABILITIES 
AS AT DECEMBER 31, 1986 
(with comparative figures for 1985) 
(in thousands of dollars) 



ASSETS 

Deposits payable in foreign currencies 

U.S.A. dollars 

Other currencies 

Advances to members of the Canadian Payments 

Association (Note 2) 

Investments — At amortized values (Note 3) 

Treasury bills of Canada 

Other securities issued or guaranteed by 

Canada maturing within three years 

Other securities issued or guaranteed by 

Canada not maturing within three years 

Other investments 

Bank premises (Note 4) 

Cheques drawn on members of the Canadian Pay- 
ments Association (Note 8) 

Accrued interest on investments 

Collections and payments in process of settlement 
Government of Canada (net) (Note 8) 

Other assets 



1986 



1985 



LIABILITIES 



1986 



1985 



314,896 
8,159 


533,581 
35,723 


323,055 


569,304 


867,531 


3,468,756 


7,803,859 


3,983,915 


2,969,430 


3,459,594 


7,437,840 
1,024,157 


8,223,748 
2,633 


19,235,286 
138,472 


15,669,890 
118,471 


323,363 


767,344 
345,224 


57,008 


145,771 
49,830 



20,944,715 21,134,590 



Capital paid up (Note 5) 

Rest fund (Note 6) 

Notes in circulation 

Deposits 

Government of Canada 

Chartered banks 

Other members of the Canadian 

Payments Association 241,21 1 

Other deposits 159,132 

2,895,029 
Liabilities payable in foreign currencies 

Government of Canada 86,992 

Other 27 

87,019 

Bank of Canada cheques outstanding (Note 8) 1 1,351 

Other liabilities (Note 7) 9,956 



5,000 


5,000 


25,000 


25,000 


17.911,360 


16,671,992 


48,647 


313.416 


2,446,039 


2,201,122 



205,528 
168,238 



2,888,304 

371,943 
27 



371,970 
935,793 
236,531 



20,944,715 21,134,590 



See accompanying notes to the fmancial statements. 

G. K. BOUEY 

Governor 

J. E. H. CONDER 
Chief Accountant 



PUBLIC ACCOUNTS, 1986-87 
BANK OF CANADA— Continued 

STATEMENT OF REVENUE AND EXPENSE 
YEAR ENDED DECEMBER 31, 1986 
(with comparative figures for 1985) 
(in thousands of dollars) 



1986 



1985 



Revenue 
Revenue from investments and other sources 
net of interest paid on deposits of $6,601 ($4,552 
in 1985) 2,092,189 2,027,447 

Expense 

Salanes<'> 62,234 57,018 

Contributions to pension and insurance funds^^^ 7,040 8,073 

Other staff expenses*^) 1,411 1,564 

Directors' fees 109 70 

Auditors' fees and expenses 740 380 

Taxes — Municipal and business 8,161 7,496 

Banknote costs 32,561 33,007 

Data processing and computer costs 5,745 5,142 

Premises maintenance — Net of rental income'*^ 14,805 12,585 

Printing of publications 541 459 

Other printing and stationery 2,1 19 1,831 

Postage and express 2,158 2,106 

Telecommunications 1,574 1,817 

Travel and staff transfers 2,009 2,112 

Other expenses 2,067 1,770 

143,274 135,430 

Depreciation on buildings and equipment 1 2,449 1 1 ,986 



155,723 147,416 



Net revenue payable to Receiver General for Canada .. 1,936,466 1,880,031 

See accompanying notes to the financial statements. 

('* Salaries include overtime and are for Bank staff other than those engaged in 
premises maintenance. The number of employee years worked by such staff 
(including temporary, part-time and overtime work) was 2,289 in 1986 com- 
pared with 2,215 in 1985. 

<^> Contributions to pension and insurance funds for Bank staff other than those 
engaged in premises maintenance. 

^^' Other staff expenses include retirement allowances and educational training 
costs. 

'*' Premises maintenance comprises building and equipment maintenance 
expenses including related staff costs. 



37 



NOTES TO THE FINANCIAL STATEMENTS 
DECEMBER 31, 1986 

1 . Significant Accounting Policies 

The financial statements of the Bank conform to the disclosure 
and accounting requirements of the Bank of Canada Act and the 
Bank's by-laws. The significant accounting policies of the Bank 
are: 

(a) Revenues and Expenses 

Revenues and expenses are accounted for on the accrual basis 
except for interest on advances to a bank ordered to be 
wound up where interest is recorded as received. 

(b) Investments 

Investments, consisting mainly of Government of Canada 
treasury bills and bonds, are recorded at cost adjusted for 
amortization of purchase discounts and premiums. The 
amortization as well as gains and losses on disposition are 
included in revenue. 

(c) Translation of Foreign Currencies 

Assets and liabilities in foreign currencies are translated to 
Canadian dollars at the rates of exchange prevailing at the 
year-end. Gains and losses from translation of, and transac- 
tions in, foreign currencies are included in revenue. 

(d) Bank Premises 

Bank premises, consisting of land, buildings and equipment, 
are recorded at cost less accumulated depreciation. Deprecia- 
tion is calculated on the declining balance method using the 
following annual rates: 



Buildings 

Computer equipment 
Other equipment 



35% 
20% 



Advances to Members of the Canadian Payments Association 

Advances as at December 31, 1986 include a total of 
$790,831,007 ($1,575,555,885 in 1985) provided to the Canadian 
Commercial Bank and the Northland Bank for which winding-up 
orders have been issued by the courts. The liquidators appointed 
by the courts were also appointed as agents of the Bank of 
Canada for the purpose of realizing on the loan portfolios held as 
security against the respective advances. 

To ensure the maximum return on the realization of the loan 
portfolios, the liquidations may extend over several years. On the 
basis of the information available at December 31, 1986, it is the 
opinion of the Bank of Canada that its advances will be fully 
repaid from the proceeds of the liquidations. 

Investments 

Included are securities of the Government of Canada held 
under Purchase and Resale Agreements (PRA). As at December 
31, 1986 there were no securities held under PRA ($75,145,489 in 
1985). 



38 



PUBLIC ACCOUNTS, 1986-87 



BANK OF CANADA— Concluded 

NOTES TO THE FINANCIAL STATEMENTS 
DECEMBER 31, 1986— Concluded 



4. Bank Premises 




1986 




1985 




Cost 


Accu- 
mulated 
depre- 
ciation 


Net 


Net 


Land and buildings 

Computer equipment 

Other equipment 


.... 138,572 
.... 26,436 
.... 34,964 


(in thousands of dollars) 

53,820 84,752 
17,678 8,758 
20,411 14,553 


63,200 
9,721 
13,112 


Projects in progress 


199,972 
... 30,409 


91,909 


108,063 
30,409 


86,033 
32,438 




230,381 


91,909 


138,472 


118,471 



During 1986 the Bank of Canada also participated in an inter- 
national initiative to provide short-term credit facilities to the 
Banco de Mexico through the Bank for International Settlements. 
Under this arrangement, the Bank's potential liability is limited to 
the placing of deposits with the Bank for International Settle- 
ments in the event that repayments due under the credit facility 
are not met. As at December 31, 1986, the Bank of Canada's con- 
tingent liability on the principal amount outstanding under this 
arrangement was U.S. $16,356,635 ($22,580,334 at the Decem- 
ber 31, 1986 exchange rate); a repayment by the Banco de Mex- 
ico on January 5, 1987 reduced the Bank of Canada's potential 
liability to U.S. $10,160,923 ($13,961,108 at the January 5, 1987 
exchange rate). 



5. Capital 

The authorized capital of the Bank is $5,000,000 divided into 
100,000 shares of the par value of $50 each. The shares are fully 
paid and in accordance with the Bank of Canada Act have been 
issued to the Minister of Finance, who is holding them on behalf 
of Canada. 

6. Rest Fund 

The rest fund was established by the Bank of Canada Act and 
represents the general reserve of the Bank. In accordance with the 
Act, the rest fund was accumulated out of net revenue until it 
reached the stipulated maximum amount of $25,000,000 in 1955. 
Subsequently all net revenues have been paid to the Receiver 
General for Canada. 

7. Other Liabilities 

As at December 31, 1986, all net revenue for 1986 had been 
paid to the Receiver General for Canada. (In 1985, $230,031,132 
was paid subsequent to year-end). 

8. Settlement of Daily Clearing of Cheques and Other Payment 
Items 

In response to a request from the Canadian Payments Associa- 
tion, the Bank of Canada took steps during 1986 to eliminate the 
effect of the one-day lag in the settlement of the daily clearing of 
cheques and other payment items among banks and other deposit- 
taking institutions. This change resulted in the elimination or sub- 
stantial reduction in payment items in process of settlement, as 
reflected in the relevant categories in the Statement of Assets and 
Liabilities. The corresponding figures for 1985 reflect a one-day 
lag in settlement. 

9. Contingent Liabilities 

The Bank has agreed with the Bank for International Settle- 
ments to participate in an international initiative to provide credit 
facilities to the International Monetary Fund. The Bank's poten- 
tial liability under this agreement, which expires in June 1988, is 
limited to the placing of deposits with the Bank for International 
Settlements, if required, to finance loans made under the facility. 
Pursuant to the agreement, the Bank is contingently liable in the 
amount of SDR 176,407,186 ($297,884,147 at the December 31, 
1986 exchange rate). 



PUBLIC ACCOUNTS, 1986-87 



39 



SUMMARY PAGE 
CANADA COUNCIL 



MANDATE 



To foster and promote the study, enjoyment and production of works in the arts; to coordinate UNESCO activities in 
■ Canada and Canadian participation in various UNESCO activities abroad. 



BACKGROUND 



The Council receives a parliamentary grant each year for its operations. As well, it has income from the $50 million 
Endowment Fund which was created by its Act and from monies and properties donated to the Council and 
administered as Special Funds. It is a charitable organization for the purposes of the Income Tax Act. 



rORPORATION DATA 

lEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHAIRMAN 

CHIEF EXECUTIVE 
OFFICER 

AUDITOR 



99 Metcalfe Street 
Ottawa, Ontario 
K1P5V8 

— exempt from Divisions I to IV of Part XII of the Financial 
Administration Act; 

— not an agent of Her Majesty 

The Honourable Flora MacDonald, P.C, M.P. 

Communications 

1957, by the Canada Council Act (R.S.C. 1970, C-2) 

Maureen Forrester 
Peter Roberts 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 

1986-87 

At the end of the period 

Assets — Endowment Account 121.2 

— Special Funds 38.8 

^ash from Canada in the period 

— budgetary 85.5 

— non-budgetary nil 

)ther revenues 9.6 

)utlays on grants, services and art 84.3 



1985-86 



1984-85 



1983-84 



107.4 


97.3 


96.6 


35.9 


31.7 


29.4 


74.2 


72.6 


65.6 


nil 


nil 


nil 


11.6 


11.5 


10.8 


69.4 


70.4 


65.6 



40 



PUBLIC ACCOUNTS, 1986-87 



CANADA COUNCIL 

AUDITOR'S REPORT 

TO THE CANADA COUNCIL AND THE 
MINISTER OF COMMUNICATIONS 

I have examined the balance sheets of the Endowment Account and 
Special Funds of the Canada Council as at March 31, 1987 and the 
statements of revenue and expenditure and equity of the Endowment 
Account and Special Funds and the statement of changes in financial 
position of the Endowment Account for the year then ended. My 
examination was made in accordance with generally accepted auditing 
standards, and accordingly included such tests and other procedures as 
I considered necessary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the Council as at March 31, 1987 and the results of its 
operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Raymond Dubois, C.A. 
Deputy Auditor General 
for the Auditor General of Canada 
Ottawa, Canada 
June 12, 1987 



ENDOWMENT ACCOUNT 

BALANCE SHEET AS AT MARCH 31, 1987 
(in thousands of dollars) 



ASSETS 



1987 



1986 



Cash and short-term deposits 9,853 6,814 

Accrued interest 1,418 1,671 

Accounts receivable 231 271 

Prepaid expenses 239 393 

Investments (Note 4) 96,785 87,124 

Equipment and leasehold improvements (Note 5) 1,470 809 

Works of art 11,249 10,327 



121,245 107,409 



LIABILITIES 

Bank overdraft 

Grants payable 

Accounts payable and accrued liabilities 

Deferred credits (Note 6) 

Due to Special Funds 

Due to Special Trusts (Note 7) 

Provision for employee termination benefits . 



EQUITY 

Fund capital 
Principal, established pursuant to Section 14 of the Act. 
Accumulated net gains on disposal of investments 

Contributed surplus — Works of art 

Surplus 

Appropriated 

Unappropriated 



1987 



1986 



3,828 




19,081 


19,285 


1,649 


1,762 


392 


985 


2,483 


2,245 


1,307 


873 


799 


1,049 


29,539 


26,199 


50,000 


50,000 


26,121 


13,850 


76,121 


63,850 


11,249 


10,327 


87,370 


74,177 


2,700 


2,300 


1,636 


4,733 


4,336 


7,033 


91,706 


81,210 



121,245 107,409 



Approved by the Council: 

PETER BROWN 

Treasurer 

JACQUES LEFEBVRE 

Vice-chairman 



PUBLIC ACCOUNTS, 1986-87 

CANADA COUNCIL— Co/rnTiMe^ 

SPECIAL FUNDS 

BALANCE SHEET AS AT MARCH 31, 1987 
(in thousands of dollars) 



41 



ASSETS 



1987 1986 



LIABILITIES 



1987 1986 



Cash and short-term deposits 2,845 3,077 

Accrued interest 509 625 

Investments (Note 4) 32,961 29,973 

Due from Endowment Account 2,483 2,245 



38,798 35,920 



Grants payable 2,355 3,189 

EQUITY 

Fund capital 

Principal 30,484 30,256 

Accumulated net gains on disposal of investments 5,338 1,936 

35,822 32,192 

Surplus 621 539 



36,443 32,731 
38,798 35,920 



Approved by the Council: 

PETER BROWN 
Treasurer 

JACQUES LEFEBVRE 
Vice-chairman 



STATEMENT OF REVENUE AND EXPENDITURE 

OF THE ENDOWMENT ACCOUNT 

FOR THE YEAR ENDED MARCH 31, 1987 

(in thousands of dollars) 



1987 1986 



Revenue 

Parliamentary grants 85,31 1 74,244 

Interest and dividends 8,423 10,470 

Art Bank rental fees 737 670 

Cancelled grants, approved in previous years, and refunds . 43 1 47 1 



94,902 85,855 
Expenditure 

Arts 

Grants and services 83,166 68,441 

Administration (Schedule) 7,145 6,255 

Works of art 922 811 

~9l 

Canadian Commission for UNESCO 

Administration (Schedule) 

Grants 

General administration (Schedule) 

Excess of revenue over expenditure (expenditure over reve- 
nue) for the year (2,697) 3,759 



91,233 


75,507 


741 
182 


838 
143 


923 


981 


5,443 


5,608 


97,599 


82,096 



42 PUBLIC ACCOUNTS, 1986-87 

CANADA COVNCII^-Continued 

STATEMENT OF EQUITY OF THE ENDOWMENT ACCOUNT 
FOR THE YEAR ENDED MARCH 31,1987 
(in thousands of dollars) 

Contributed 

Fund capital surplus Surplus 

Accu- 
mulated 
net gains 

on disposal Total Total Total 

of invest- Appro- Unappro- 

Principal ments 1987 1986 1987 1986 priated priated 1987 1986 

Balance at beginning of the year 50,000 13,850 63,850 59,586 10,327 9,516 2.300 4,733 7,033 3,274 

Net gains on disposal of investments ... 1 2,27 1 1 2,27 1 4,264 

Works of art purchased during the 

year 922 811 

Increase in appropriated surplus 400 (400) 

Excess of revenue over expenditure 

(expenditure over revenue) for the 

year (2,697) (2,697) 3,759 

Balance at end of the year 50,000 26,121 76,121 63,850 11,249 10,327 2,700 1,636 4,336 7,033 

STATEMENT OF REVENUE, EXPENDITURE AND EQUITY OF THE SPECIAL FUNDS (NOTE 2) 
FOR THE YEAR ENDED MARCH 31, 1987 
(in thousands of dollars) 

Izaak Killam Coburn 

Walton Special Frances John Fellow- Total 

Killam Scholar- Jean A. Molson Lynch- and J.P. B.C. Vida ship 

Memorial ship Chalmers Prize Staunton Barwick Watkins Peene Trust 1987 1986 

Revenue and expenditure 
Revenue 

Interest and dividends .. 
Expenditure 

Grants 

Administration 

Excess of revenue over 
expenditure (expendi- 
ture over revenue) for 
the year 

Equity 
Fund capital 
Principal 
Balance at beginning 

of the year 13,315 14,029 500 1,000 699 93 600 20 30,256 27,809 

Cash received 2,187 

Net income capital- 
ized 127 1_01 228 260 

Balance at end of the 

year 13,442 14,130 500 1,000 699 93 600 20 30,484 30,256 

Accumulated net gains 
on disposal of 
investments 
Balance at beginning 

of the year 987 651 122 176 1,936 881 

Net gains on disposal 

of investments 1,664 1,400 166 172 3,402 1,055 

Balance at end of the 
year 

Surplus 

Balance at beginning of 
the year 69 2 28 5 312 8 115 539 415 

Excess of revenue over 
expenditure (expen- 
diture over revenue) 
fortheyear 244 99 2 (5) (56) 8 17 1 310 384 

Net income capitalized (127) (101) (228) (260) 

Balance at end of the 

year 186 30 256 16 132 1 621 539 

16,279 16,181 530 1,288 1,303 109 132 600 21 36,443 32,731 



1,439 


1,211 


47 


99 


100 


8 


17 


52 


1 2,974 


3,231 


1,029 
166 


908 
204 


42 
3 


100 

4 


156 






52 


2,287 

377 


2,547 
300 


1,195 


1,112 


45 


104 


156 






52 


2,664 


2,847 


244 


99 


2 


(5) 


(56) 


8 


17 




1 310 


384 



2,651 


2,051 




288 


348 








5,338 


1,936 


16,093 


16,181 


500 


1,288 


1,047 


93 


600 


20 


35,822 


32,192 



PUBLIC ACCOUNTS, 1986-87 

CANADA COVNCIL— Continued 

STATEMENT OF CHANGES IN FINANCIAL POSITION 

OF THE ENDOWMENT ACCOUNT 

FOR THE YEAR ENDED MARCH 31, 1987 

(in thousands of dollars) 



43 



1987 1986 



Operations 

Excess of revenue over expenditure (expenditure over 

revenue) for the year (2.697) 3,759 

Items not affecting cash 

Depreciation and amortization 332 174 

Loss on disposal of equipment 27 

Employee termination benefits (250) 34 

(2,588) 3,967 

Decrease (increase) in accrued interest 253 (229) 

Decrease (increase) in accounts receivable 40 (146) 

Decrease (increase) in prepaid expenses 154 (93) 

Increase (decrease) in grants payable (204) 834 

Increase (decrease) in accounts payable (113) 484 

Increase (decrease) in deferred credits (593) 543 

Increase in amount due to Special Funds and Special 

Trusts 672 867 

Funds provided by (applied to) operation activities (2,379) 6,227 

Investment 

Acquisition of equipment and leasehold improvements (1,079) (717) 

Proceeds on disposal of equipment 59 

Increase in investments (9,661) (6,667) 

Funds applied to investment activities (10,681) (7,384) 

Financing ' 

Net gains on disposal of investments 12,271 4,264 

Funds generated by financing activity 12,271 4,264 

Increase (decrease) in funds (789) 3,107 

Funds at beginning of the year 6,814 3,707 

Funds (cash, short-term deposits and bank overdraft) at end 

of the year.. 6_025 6,814 



NOTES TO FINANCIAL STATEMENTS 

MARCH 31, 1987 

1 . Authority and operations 

The Canada Council was established by the Canada Council 
Act in 1957 which authorized the creation of an Endowment 
Fund of $50 million. Except for the annual parliamentary grant, 
monies or properties donated to the Council pursuant to Section 
20 of the Act are generally accounted for as Special Funds. The 
Council is not an agent of Her Majesty. Its objectives are to foster 
and promote the study, enjoyment and production of works, in the 
arts. 

2. Special funds 

(a) Izaak Walton Killam Memorial 

A bequest of $12,339,615 in cash and securities was received 
from the estate of the late Mrs. Dorothy J. Killam for the 
establishment of the Izaak Walton Killam Memorial Fund 
for Advanced Studies "to provide scholarships for advanced 
study or research at universities, hospitals, research or scien- 
tific institutes, or other equivalent or similar institutions both 
in Canada and in other countries in any field of study or 
research other than the 'arts' as presently defined in the 
Canada Council Act and not limited to the 'humanities and 
social sciences' referred to in such Act." 

The bequest contains the following provisions: "the Fund 
shall not form part of the Endowment Account or otherwise 



be merged with any assets of the Council"; and "in the event 
that the Canada Council should ever be liquidated or its 
existence terminated or its powers and authority changed so 
that it is no longer able to administer any Killam trust, the 
assets forming any such Killam trust shall thereupon be paid 
over to certain universities which have also benefited under 
the will." 

The cash and securities received and the proceeds have been 
invested in a separate portfolio. 

(b) Killam Special Scholarship 

This fund was established by way of securities received from 
the late Mrs. Dorothy J. Killam. Dividends and proceeds 
from the redemption of those securities amounted to 
$13,653,344. The net income from this fund is available to 
provide fellowship grants to Canadians for advanced study or 
research in the fields of medicine, science and engineering at 
universities, hospitals, research or scientific institutions or 
other equivalent of similar institutions in Canada. 

(c) Jean A. Chalmers 

An endowment of $500,000 in cash was received from Mrs. 
Floyd S. Chalmers to establish a special Jean A. Chalmers 
Fund for the crafts. In consultation with the Canadian Crafts 
Council, the income of the fund is used to provide a small 
number of special project grants for the development or 
advancement of the crafts in Canada. 

(d) Molson Prize 

Gifts of $1,000,000 were received from the Molson Founda- 
tion for the establishment of the Molson Prize Fund. The 
income of the fund is used for awarding cash prizes to 
Canadians "for outstanding achievement in the fields of the 
Arts, the Humanities or the Social Sciences that enriches the 
cultural or intellectual heritage of Canada or contributes to 
national unity". There is no restriction placed on the recipi- 
ent as to the use of the prize. 

(e) Lynch-Staunton 

This fund was established by a bequest in cash of $699,066 
received from the estate of the late V.M. Lynch-Staunton, 
the income from which is available for the regular pro- 
grammes of the Council. 

(0 Frances Elizabeth Barwick and J. P. Barwick 

A bequest of $40,000 in cash was received from the estate of 
the late Mrs. Frances Elizabeth Barwick with the condition 
that "such bequest be applied for the benefit and encourage- 
ment of the arts". A bequest of $53,000 was also received 
from the estate of J. P. Barwick "for the benefit of the musi- 
cal division of the arts and for the encouragement of the 
musical arts". The total fund is to be used for the benefit of 
the musical division. 

(g) John B.C. Watkins 

This fund was established by a bequest consisting of the net 
income from the residue of the estate of the late John B.C. 
Watkins to provide scholarships for postgraduate studies in 
specified countries. 

(h) Vida Peene 

This fund was established by a bequest in cash of $599,761 
received from the late Vida Peene to provide payments to 
specified organizations. 



44 



PUBLIC ACCOUNTS, 1986-87 



CANADA COVNCll^Continued 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \m— Continued 

(i) Funds will eventually be received from the following 
bequests: 

(a) Edith Davis Webb 

This fund, estimated at $400,000, is intended "for the 
purpose of making grants or establishing scholarships 
for musical study in such manner as the Council shall 
determine". 

(b) Coburn Fellowship Trust 

This fund, the amount of which cannot be determined 
at this time, is to provide for exchanges of scholars 
between Israel and Canada. It consists of an amount of 
$100 from Kathleen Coburn to establish this fund as 
well as a $20,000 donation received from F.E. Coburn. 

3. Significant accounting policies 

(a) Investments 

Bonds, debentures, equities and mortgages are recorded at 
cost. The portfolios of two Special Funds (Molson Prize and 
Lynch-Staunton) are merged with the Endowment Account. 
The participation of each fund was calculated on the basis of 
market value. Interest, dividends, gains and losses on disposal 
of investments are allocated to each fund based on the per- 
centages established at the beginning of each quarter. 

(b) Equipment and leasehold improvements 

Equipment and leasehold improvements are recorded at cost 
and depreciated over their estimated useful lives on the 
straight-line method, as follows: 

Equipment 3 to 5 years 

Leasehold improvements term of the lease 

(maximum 10 years) 

(c) Works of art 

Works of art are recorded at cost. 

(d) Employee termination benefits 

Employees are entitled to specific termination benefits as 
provided for under the Council's policy and conditions of 
employment. The cost of these benefits is expensed in the 
year in which they are earned. 

(e) Gains and losses on disposal of investments 

Pursuant to subsection 19(2) of the Act, net gains on disposal 
of investments are credited to the fund capital. Net losses on 
disposal of investments are charged against this account to 
the extent of the balance available therein. In the event that 
losses exceed the balance available in the account, the excess 
is recorded as an expenditure in the year of realization. 

(f) Contributed surplus 

Amounts paid during the year for the purchase of works of 
art are expensed. Such purchases are then capitalized as con- 
tributed surplus — Works of art and no depreciation is 
recorded. 

(g) Appropriated surplus 

The Council has established a reserve to reduce the erosion of 
value of the original endowment due to inflation. Any 
changes in this account are approved by the Council. 

(h) Capitalization of net income of Special Funds 

The Council capitalizes 10% of the revenue less administra- 
tion expenditure of the Izaak Walton Killam Memorial Fund 
for Advanced Studies and the Killam Special Scholarship 
Fund, in accordance with advice received from the trustees of 
these Funds in order to preserve the equity of these Funds for 



future beneficiaries. However, for the purposes of the Funds, 
the Council reserves the right to draw at any time on the 
accumulated net income capitalized. 

(i) Pension plan 

Employees participate in the Public Service Superannuation 
Plan administered by the Government of Canada. The 
employees and the Council contribute equally to the cost of 
the Plan. This contribution represents the total liability of the 
Council. 

(j) Grants 

Grants approved by the Council are recorded as expenditure 
in the year determined by the Treasurer in consultation with 
the Arts Division. Cancelled grants, approved in previous 
years, and refunds are shown as revenue in the Endowment 
Account. For Special Funds, such items are deducted from 
the grants expenditure. 

4. Investments 



1987 



1986 





Cost 


Market 
value 


Cost 


Market 
value 


Endowment Account 

Equities 

Bonds and debentures 

Mortgages 


... 51,117 
... 43,323 
... 2,345 


(in thousands of dollars) 

68,336 30,612 

49,021 53,844 

2,207 2,668 


48,507 

60,750 

2,464 




96,785 


119,564 


87,124 


111,721 


Special Funds 

Bonds and debentures 

Equities 

Mortgages 


... 18,700 

... 13,916 

345 


20,084 

20,472 

270 


18,718 

10,867 

388 


21,084 

16,182 

298 




32,961 


40,826 


29,973 


37,564 



5. Equipment and leasehold improvements 



1987 



1986 



Cost 



Accu- 






mulated 






deprecia- 






tion and 


Net 


Net 


amor- 


book 


book 


tization 


value 


value 



Equipment 

Leasehold improvements . 



(in thousands of dollars) 

1,230 491 739 
841 no 731 


505 
304 


2,071 601 1,470 


809 



6. Deferred credits 

1987 1986 

(in thousands 

of dollars) 

Deferred revenue — Art Bank 212 244 

Canadian Commission for UNESCO 180 232 

Deferred rent 509 



392 985 



The deferred credit amount from the Canadian Commission for 
UNESCO represents funds received for specific programs for 
which expenditures have not yet been incurred 



PUBLIC ACCOUNTS, 1986-87 

CANADA COVNCll^-Concluded 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \9il— Concluded 

1. Due to Special Trust 

These funds have been accounted for separately due to special 
conditions related to the donations. 

(i) Glenn Gould Prize Fund 

The Council received $475,113 from the Glenn Gould 
Memorial Foundation to provide a prize of $50,000 every 
three years (funds permitting) to an outstanding individual 
for his/her original contribution in the field of Music and 
Communications. Since inception, the fund has earned 
$76,767, and has received a further advance of $50,000, and 
the balance stood at $601,880 at March 31, 1987. 

(ii) Joseph S. Stauffer Fund 

The Council received $350,000 from the Estate of Joseph S. 
Stauffer, the income from which is to provide prizes to 
encourage promising young Canadians in the fields of music, 
visual arts and literature. Since inception, the fund has 
earned $51,140, and the balance stood at $401,140 at March 
31, 1987. 

(iii) The Duke and Duchess of York Prize in Photography 

During the year, the Government of Canada endowed 
$170,000 to Council as a wedding gift to The Duke and 
Duchess of York. The income from this endowment is to be 
used to provide an annual scholarship to a professional artist 
for personal creative work or advanced study in photography. 
The endowment earned $1,860 during the year and the value 
of the endowment was $171,860 at March 31, 1987. 

(iv) The Gershon Iskowitz Prize 

The Gershon Iskowitz Foundation has created the Gershon 
Iskowitz Prize to be administered and awarded by Council 
every two years to a mature, successful professional 
Canadian artist for personal creative work or continuing 
research in visual arts. During the year. The Gershon Isko- 
witz Foundation donated $29,750 to Council to cover the 
prize and its administration. As at March 31, 1987, the bal- 
ance stood at $2,791. 

(v) Visiting Foreign Artists Program 

The Visiting Foreign Artists Program is administered by the 
Arts Awards Service of the Canada Council on behalf of the 
Department of External Affairs. It is a residency program 
through which professional Canadian organizations receive 
assistance to invite distinguished foreign artists from any 
country outside Canada for periods ranging from two weeks 
to four months. As at March 31, 1987, the balance stood at 
$128,908. 

8. Lease commitments 

The Council is a party to long-term leases in respect to rental 
accommodation. The aggregate minimum annual rental is as 
follows: 

(in 
thousands 

of 
dollars) 



SCHEDULE OF ADMINISTRATION EXPENDITURE 
OF THE ENDOWMENT ACCOUNT 
FOR THE YEAR ENDED MARCH 31, 1987 
(in thousands of dollars) 



Salaries 

Employee benefits 

Staff travel 

Office accommodation 

Communications 

informatics 

Depreciation and 

amortization 

Office ex[)enses and 

equipment 

Printing, publications 

and duplicating 

Investment portfolio 

management 

Council boards' 

expenses including 

members' honoraria . 65 
Professional and spe- 
cial services 151 

Miscellaneous 71 





Cana- 










dian 










Commis- 
sion for 


- 


Total 










Arts 


UNESCO 


General 


1987 


1986 


4,811 


474 


2,741 


8.026 


8,041 


454 


48 


285 


787 


1,055 


693 


58 


82 


833 


720 


178 




608 


786 


773 


435 


37 


160 


632 


521 


14 


7 


321 


342 


210 


42 




290 


332 


174 


46 


10 


262 


318 


203 


185 


23 


109 


317 


283 






300 


300 


199 



62 



158 



107 
20 



285 



279 
92 



218 



225 
79 



7,145 



741 



5,443 13,329 12,701 



1988 1,511 

1989 1.521 

1990 1,527 

1991 1,430 

1992 1,410 

9. Comparative figures 

Certain of the comparative figures have been reclassified to 
conform to the current year's presentation. 



46 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
CANADA DEPOSIT INSURANCE CORPORATION 



MANDATE 



To provide limited insurance in respect of deposits with federal institutions (banks, trust and loan companies) and 
approved provincial institutions (trust and loan companies). 

BACKGROUND 

The corporation was established by the Canada Deposit Insurance Corporation Act in 1967. Member institutions pay 
annual premiums to the Deposit Insurance Fund to meet depositors' claims. However, recent payments to depositors 
of insolvent financial institutions have caused this fund to have a net deficit position. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



320 Queen Street 
P.O. Box 2340, Station D 
Ottawa, Ontario 
K1P5W5 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable Thomas Hockin, P.C, M.P., 
Minister of State for Finance. 

Finance 

1967; by The Canada Deposit Insurance Corporation Act (R.S.C. 
1970, C-3, as amended). 

Charles C. de Lery 



Ronald McKinlay 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year is the calendar year. 



At the end of the year 

Total Assets 

Obligations to the private sector 

Obligations to Canada 

Equity of Canada* 

Cash from Canada in the year 

— budgetary 

— non-budgetary, net 

* Represents deficiency in the Insurance Fund. 



1986 


1985 


1984 
(restated) 


1983 


1,530 
1,277 
965 
[1,245) 


1,676 
1,034 
956 
(1,235) 


830 

975 

nil 

(827) 


1,157 
805 
30 
(332) 


nil 
16 


nil 
956 


nil 
(30) 


nil 
30 



PUBLIC ACCOUNTS, 1986-87 



47 



CANADA DEPOSIT INSURANCE CORPORATION 

AUDITOR'S REPORT 

TO THE MINISTER OF FINANCE 

I have examined the balance sheet of the Canada Deposit Insurance 
Corporation as at December 31, 1986 and the statements of invest- 
ment and administrative operations, deposit insurance fund and 
changes in fmancial position for the year then ended. My examination 
was made in accordance with generally accepted auditing standards, 
and accordingly included such tests and other procedures as I con- 
sidered necessary in the circumstances. 

In my opinion, these financial statements present fairly the fmancial 
position of the Corporation as at December 31, 1986 and the results of 
its operations and the changes in its fmancial position for the year then 
ended in accordance with generally accepted accounting principles 
applied, after giving retroactive effect to the change in accounting 
policy as described in Note 3 to the fmancial statements, on a basis 
consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the financial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, the Canada 
Deposit Insurance Corporation Act and the by-laws of the Corpora- 
tion. 



Kenneth M. Dye, F.C.A. 
Auditor General of Canada 



Ottawa, Canada 
May 8, 1987 



BALANCE SHEET AS AT DECEMBER 31, 1986 
(in thousands of dollars) 



ASSETS 



1986 



1985 



LIABILITIES 



1986 



1985 



Treasury bills and term deposits 63,251 64,191 

Premiums and other accounts receivable 8,688 16,95 1 

Income taxes recoverable 44,025 

Mortgages 747 1,039 

Loans to member institutions (Note 4) 497,414 500,062 

Claims in respect of insured deposits (Note 5) 959,324 1,049,895 

Furniture, equipment and leasehold improvements 584 206 



1,530,008 1,676,369 



Bank indebtedness 840 10,532 

Accounts payable 3,982 2,626 

Accrued liability (Note 6b) 275,000 

Due to member institutions 27,647 

Loans from member institutions 1,001,044 995,895 

Loans from Consolidated Revenue Fund 

(Note 7) 965,212 956,211 

2,246,078 1,992,911 

General provision for loss (Note 8) 529,215 918,836 

2,775,293 2,911,747 
DEPOSIT INSURANCE FUND 

Deficiency at year end (1,245,285) (1,235,378) 



1,530,008 



1,676,369 



Approved by the Board: 

R. McKINLAY 
Chairman 

R.M. HAMMOND 
Director 



48 



PUBLIC ACCOUNTS, 1986-87 



CANADA DEPOSIT INSURANCE CORPORATION— Continued 



STATEMENT OF INVESTMENT 
AND ADMINISTRATIVE OPERATIONS 
FOR THE YEAR ENDED DECEMBER 31, 1986 
(in thousands of dollars) 



1986 



1985 



5,640 

2,859 

134 


(restated) 

3,835 
256 


8,633 


4,091 


5,191 
1,112 
1,432 


5,254 

1,008 

709 


7,735 


6,971 


898 


(2,880) 



Interest revenue 

Income tax recovery 

Treasury bills 

Other 

Expenses 

Inspection and other fees 

General, administrative and other 

Salaries and employee benefits 

Net earnings (loss) from investment and administra- 
tive operations 



STATEMENT OF DEPOSIT INSURANCE FUND 
FOR THE YEAR ENDED DECEMBER 31, 1986 
(in thousands of dollars) 



1986 1985 

Deficiency, beginning of year 

Insurance operations 

Premiums 

Interest on loans to member institutions 

Other interest 

Cost of guarantees (Note 6) 

Interest on loans from member institutions 

Interest — Consolidated Revenue Fund 

Interest in respect of insured deposits 

Provision for loss (reversal) 

Deficiency from insurance operations for the year. 
Deficiency before net earnings (loss) from invest 

ment and administrative operations 

Net earnings (loss) from investment and adminis 

trative operations 

Deficiency, end of year 1,245,285 1,235,378 



1,235,378 


(restated) 
826,787 


216,792 

109,553 

90 


57,876 

105,629 

3,934 


326,435 


167,439 


475,000 

108,859 

82,820 

561 

(330,000) 


108,606 

35,101 

9,443 

420,000 


337,240 


573,150 


10,805 


405,711 


1,246,183 
898 


1,232,498 
(2,880) 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED DECEMBER 31, 1986 
(in thousands of dollars) 



1986 1985 

Cash provided by (used in) Investment and 

Administrative Operations 

Interest revenue 

Inspection and other fees 

General, administrative and other 

Salaries and employee benefits 

Income tax recovery 

Purchase of furniture, equipment and leasehold 

improvements 

Cash provided by (used in) Insurance Activities 

Premiums 

Cost of guarantees 

Payment of claims in respect of insured deposits 
Recoveries of claims in respect of insured depos- 
its 

Interest on loans to member institutions 

Interest in respect of insured deposits 

Realization of mortgages 

Interest on mortgages 

Interest — Consolidated Revenue Fund 

Repayment of due to member institutions 

Loans to member institutions 

Repayment of loans to member institutions 

Quebec sales tax on insurance premiums 

Non-cash Insurance Activities 

Loans to member institutions 

Recoveries of claims in respect of insured depos- 
its 

Cash provided by (used in) Financing Activities 

Loans from Consolidated Revenue Fund 260,000 935,000 

Repayment of loans from Consolidated Revenue 

Fund _ (243,547) 

Non-cash Financing Activities 

Loans from member institutions 

Increase (decrease) in cash 

Cash balance at beginning of year 

Cash balance at end of year 

Cash is comprised of 

Treasury bills and term deposits 63,251 64,191 

Bank indebtedness (840) (10,532) 

62,411 53,659 



8,601 


4,084 


(6.275) 


(4,199) 


(1,133) 


(908) 


(1,421) 


(666) 


44,025 




(470) 


(88) 


43,327 


(1,777) 


219,054 


66,823 


(200,000) 




(97,933) 


(1,029,047) 


144,329 


120,252 


7,284 


6,758 


(1,200) 


(9,443) 


283 


1,329 


93 


188 


(90,271) 


(13,877) 


(27,647) 




(29,076) 


(81,361) 


23,033 


900 


1,023 


187 


(51,028) 


(937,291) 


(28,197) 


(81,984) 


23,048 


40,000 


(5,149) 


(41,984) 



16,453 


935,000 


5,149 


41,984 


8,752 
53,659 


(4,068) 
57,727 


62,411 


53,659 



PUBLIC ACCOUNTS, 1986-87 



49 



CANADA DEPOSIT INSURANCE CORPORATION— Continued 



NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, 1986 

1 . Authority and objective 

The Corporation was established in 1967 by the Canada 
Deposit Insurance Corporation Act (the Act). It is a Crown cor- 
poration named in Schedule C Part I of the Financial Administra- 
tion Act. 

The Corporation's principal objective is to provide insurance on 
deposits with member institutions (banks, and federal and provin- 
cial trust and loan companies) up to $60,000 per depositor per 
institution. Section 1 1 of the Act empowers the Corporation to 
take such action as it deems necessary to fulfill its mandate 
including the right to acquire assets from, or advance funds to 
member institutions to reduce or avert a threatened loss to the 
Corporation. 

2. Accounting policies 
Basis of preparation 

These financial statements have been prepared in accordance 
with accounting principles generally accepted in Canada. 

These financial statements do not reflect the assets, liabilities 
and operations of member institutions whose operations the Cor- 
poration is financing in order to secure an orderly wind down. 

The more significant policies adopted are set out below. 

Premium recognition 

Premiums are based on insured deposits accepted by member 
institutions as at April 30 of each year and are collectible in two 
equal installments on June 30 and December 31 of the year. Pre- 
miums are recognized when assessed. 

General provision for loss 

The general provision for loss reflects the Corporation's best 
estimate of losses in respect of member institutions against which 
the Corporation has or is certain to have a financial claim. This 
estimate includes consideration of losses expected in respect of 
claims arising from payments made to insured depositors, loans to 
member institutions and operations for the duration of the wind 
down period of member institutions under management by agents. 

The general provision for loss is reduced by identified losses on 
loans to member institutions or claims in respect of insured depos- 
its. 

The general provision for loss does not include an estimated 
contingent liability for potential claims of depositors of any mem- 
ber institutions not specifically identified as being in difficulty as 
such claims would be impossible to estimate. 

Loans to Member Institutions and Claims in Respect of Insured 
Deposits 

Loans to member institutions and claims in respect of insured 
deposits are reported net of identified losses. 

Interest recognition 

The Corporation charges interest on loans advanced directly or 
indirectly to member institutions that are operating under agency 
agreements. It ceases to charge interest when a member institu- 
tion is placed in liquidation. It charges interest on other loans in 
accordance with the terms of the specific loan agreements. 
Accrued interest is included on the balance sheet as part of "loans 
to member institutions". 

3. Change in accounting policy 

During the year, the Corporation changed its method of 
accounting for interest receipts and payments. In prior years, 
interest receipts on insured deposits and mortgages and interest 
payments on loans from the Consolidated Revenue Fund and in 
respect of insured deposits were included in the statement of 



investment and administrative operations. Since the transactions 
giving rise to these receipts and payments were made for the ben- 
efit of member institutions, the Corporation has decided to 
include the resulting interest receipts and payments in the state- 
ment of deposit insurance fund. This change has been applied 
retroactively. The effect of this change has been to reduce the loss 
from investment and administrative operations and to increase the 
deficiency from insurance operations by $83.3 million for 1986 
(1985— $39.7 million). 

4. Loans to member institutions 

Certain member institutions that have experienced financial 
difficulties have been placed under the control of regulatory 
authorities. In accordance with Section 1 1 of the CDIC Act, the 
Corf)oration entered into agency agreements with other member 
institutions (agents) to ensure that the respective operations of 
institutions experiencing financial difficulties, would be wound 
down in an orderly fashion over a five year term with a majority 
of these agreements terminating in 1988. The liabilities and oper- 
ations of these companies are being financed on a continuing basis 
by way of direct loans or by the respective agents providing loans 
on behalf of the Corporation. The Corporation has also made 
direct loans to other member institutions experiencing financial 
difficulties. 

As at December 31,1 986, direct loans or loans made by agents 
on behalf of the Corporation were as follows: 



Member institutions 
under agency 
agreements 



Total 
Direct By agents 1986 



Total 
1985 



(in thousands of dollars) 



CCB Mortgage 
Investment Corpo- 
ration 50,936 

Crown Trust Com- 
pany 

District Trust Com- 
pany 

Fidelity Trust Com- 
pany 47,481 

Greymac Mortgage 
Corporation 68,189 

Greymac Trust Com- 
pany 50,131 



211,117 
14,510 

365,189 
61,600 

151,250 



50,936 

211,117 
14,510 
412,670 
129,789 
201,381 



47,929 
235,500 
7,840 
360,131 
113,738 
196,470 



216,737 803,666 1,020,403 



961,608 



In liquidation 

Amic Mortgage 
Investment Corpo- 
ration 

Canadian Commer- 
cial Bank 

Seaway Mortgage 
Corporation 

Seaway Trust Com- 
pany 



Other 
Bank of British 
Columbia 

Identified losses 

Balance 







933 






75,000 


54.135 


54,135 


76,234 


132,501 


132,501 


137,451 





186,636 


186.636 


289,618 


3,200 




3.200 




219,937 
175,840 


990,302 
536,985 


1.210,239 
712,825 


1,251,226 
751,164 


44,097 


453,317 


497,414 


500,062 



so 



PUBLIC ACCOUNTS, 1986-87 



CANADA DEPOSIT INSURANCE CORPORATION— Co«/i«we^ 



NOTES TO FINANCIAL STATEMENTS 

DECEMBER 31, \9i6— Continued 

The Corporation has registered a floating charge on all the 
assets of member institutions under agency agreements as security 
for the loans. During the term of the agreements, the agents are 
paying all liabilities on maturity and are disposing of the assets in 
a manner to optimize recovery. The assets of these member insti- 
tutions consist primarily of mortgages and real estate. The ulti- 
mate realization of these assets is dependent on the state of 
economy, interest rate levels and the real estate market. 

5. Claims in respect of insured deposits 

When the Corporation pays a depositor's claim it acquires a 
subrogation of the rights and interest of the depositor as against 
the assets of the member institution. The Corporation's claims in 
respect of payments to insured depositors of the following member 
institutions are identified below: 



1986 



1985 



Amic Mortgage Investment Corporation. 

Astra Trust Company 

Canadian Commercial Bank 

Columbia Trust Company 

Continental Trust Company 

London Loan Limited 

Northguard Mortgage Corporation 

Northland Bank 

Pioneer Trust Company 

Seaway Trust Company 

Western Capital Trust Company 

Identified losses 



6. Cost of guarantees 



(in thousands 


of dollars) 


22,791 


22,768 


339 


339 


276,836 


277,000 


84,309 




41,008 


113,901 


23.854 


23,854 


27,634 


27,552 


317,503 


316,083 


81,721 


116,015 


86,968 


110,062 


19,321 


42,321 


982,284 


1,049,895 


22,960 




959,324 


1,049,895 



(a) The Corporation, under the general powers of Section 1 1 of 
the CDIC Act, made a payment of $200 million to The 
Hongkong and Shanghai Banking Corporation for purposes 
of reducing a risk or averting a threatened loss to the Corpo- 
ration. In exchange for this payment, the Hongkong Bank of 
Canada assumed substantially all of the assets and obliga- 
tions of the Bank of British Columbia and The Hongkong 
and Shanghai Banking Corporation provided the Corporation 
with a number of undertakings, the most significant of which 
is the guarantee of the deposit liabilities of the Hongkong 
Bank of Canada, including those deposit liabilities acquired 
by the Hongkong Bank of Canada from the Bank of British 
Columbia. 

(b) Subsequent to year end, the Corporation entered into an 
agreement ("North West Trust Company Rehabilitation 
Agreement") whereby it agreed to make a loan in the 
amount of $275 million to the North West Trust Company, a 
member institution. The right to repayment of this loan will 
be assigned to the Province of Alberta. In exchange, the 
Province agrees to indemnify the Corporation for any loss 
occurring by reason of its obligation to make payment under 
a policy of deposit insurance. This loan will not be repaid to 
the Corporation; therefore, it has been charged to the deposit 
insurance fund rather than recorded as an asset. These finan- 
cial statements reflect the related liability. 



Loans from consolidated revenue fund 

With the approval of the Governor in Council, the Corporation 
can borrow up to $1.5 billion from the Consolidated Revenue 
Fund. Bill C-42 was tabled in the House of Commons on March 
3, 1987 and when enacted, will increase the Corporation's borrow- 
ing authority to $3 billion. 

General provision for loss 

1986 1985 

(in thousands 

of dollars) 

Balance, beginning of year 918,836 676,569 

Provision for loss (reversal) (330.000) 420.000 

588.836 1.096.569 

Less identified losses 

Loans to member institutions 36.661 177.733 

Claims in respect of insured deposits 22.960 

59.621 177.733 

Balance, ending of year 529.215 918,836 



The Corporation has not taken into account any estimate of the 
taxes payable by member institutions in arriving at its potential 
recoveries of claims in respect of insured depositors, and accord- 
ingly the general provision for loss. In a Notice of Ways and 
Means Motion tabled in the House of Commons by the Minister 
of Finance February 18, 1987, amendments to the Income Tax 
Act are proposed which will eliminate anomalies which may result 
in double taxation of a member institution in liquidation in 
respect of amounts paid by the Corporation to insured depositors 
of the institution. 

9. Contingent liabilities 

The Corporation is a defendant in a number of judicial actions 
arising out of the collapse or insolvency of various member institu- 
tions. The Corporation does not believe it has any liability as a 
result of these actions and has therefore not provided for any 
potential claims. 

10. Income taxes 

The Corporation is subject to federal income taxes although it 
is not subject to taxation on premiums assessed and may not take 
a deduction for claims paid. 

The Corporation has available losses which can be carried for- 
ward to reduce future years' earnings otherwise subject to taxa- 
tion. Such losses total $158 million and expire as follows: 



Taxation 
year 

1984 
1985 
1986 



Expiry 
date 



Amount 



1991. 
1992. 
1993. 



33,000.000 
62.000.000 
63,000.000 
158.000.000 



PUBLIC ACCOUNTS, 1986-87 51 

CANADA DEPOSIT INSURANCE CORPORATION— Co/ic/w^e^ 

NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, 19S6— Concluded 

1 1 . Deposit insurance fund deficiency 

The Corporation is currently assessing premiums at the max- 
imum rate of 1 /1 of 1% of the insured deposits as allowed by law 
which is due to expire on April 30, 1987. Bill C-42 was tabled in 
the House of Commons on March 3, 1987 and when enacted, will 
provide the authority, with Governor in Council approval, to set 
the premium rate to a maximum of '/6 of 1% of the insured depos- 
its. 

1 2. Insured deposits 

Deposits insured by the Corporation, on the basis of returns 
received from member institutions, as at April 30, 1986 and 1985 
were as follows: 

1986 1985 



(in billions 
of dollars) 

Federal Institutions 173 i60 

Provincial Institutions 15 14 



174 



13. Long-term operating lease commitments 

The following is a schedule of future minimum lease payments 
for premises expiring in 1991. 

Year Ending December 3 1 Amount 

1987 422,434 

1988 436,406 

1989 436,406 

1990 436.406 

1991 213,767 



1,945,419 



14. Comparative figures 

Certain of the 1985 figures have been reclassified so as to con- 
form with the presentation adopted for 1986, as follows: 

(a) Loans to member institutions have been increased and claims 
in respect of insured deposits decreased by $47,929,000 to 
reflect the reclassification of the amount receivable from 
CCB Mortgage Investment Corporation. 

(b) Loans to member institutions have been increased and claims 
in respect of insured deposits decreased by $40,000,000 to 
record a change in the application of amounts recovered from 
Seaway Trust Company. 

(c) Comparative figures in the statement of changes in financial 
position have been restated to give effect to the changes 
required by the Canadian Institute of Chartered Accountants 
in the presentation of such statements. 

(d) Other comparative figures have been restated as explained in 
Note 3. 



I 



52 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 



CANADA DEVELOPMENT INVESTMENT CORPORATION 

MANDATE 

To privatize its holdings while gaining a fair return for Canada in the process and, in the interim, to ensure that its 
subsidiaries are managed in a sound commercial manner. 

BACKGROUND 

CDIC was incorporated in 1982 to hold and manage enterprises and investments assigned to it by the federal 
government, and to divest those enterprises and investments when commercially feasible. Investments currently 
owned by CDIC, or assigned to it for management are Eldorado Nuclear Limited, Varity Corporation and Massey 
Combines Corporation. Divestitures include: the sale of The de Havilland Aircraft of Canada, Limited to the Boeing 
Company on January 31, 1986; the sale of Canadair Limited to Bombardier Inc. on December 23, 1986; the public 
sale of 21.8 million shares of Canada's equity holdings of 30.7 million shares in Canada Development Corporation; 
and the sale of the assets and operations of Teleglobe Canada to Memotec Data Inc. on April 3, 1987. 

CORPORATION DATA 

HEAD OFFICE Suite 4520 

1 First Canadian Place 
Toronto, Ontario 
M5X 1A4 

STATUS — Schedule C, Part II 

— an agent of Her Majesty 

APPROPRIATE MINISTER The Honourable Barbara McDougall, P.C, M.P. 

Minister of State (Privatization) 

YEAR AND MEANS 1982; by Canada Development Corporation under the Canada 

OF INCORPORATION Business Corporations Act. Letters patent, May 26, 1982 

CHIEF EXECUTIVE Vacant 

OFFICER 

CHAIRMAN W. Darcy McKeough 

AUDITOR Peat, Marwick, Mitchell & Co. and the 

Auditor General of Canada 

FINANCIAL SUMMARY ($ million) The financial year ends December 31. 

9 months to 
1986 1985 1984 Dec. 31, 1983 

(as restated) 

At the end of the period 

Total Assets 336 642 679 175 

Obligations to the private sector* nil 144 1,261 1,170 

Obligations to Canada nil nil nil negl 

Equity of Canada 287 485** (709) (1,042) 

Cash from Canada to subsidiaries in the period 

— budgetary (Ill) 500 550 300 

— non-budgetary nil nil nil nil 

* The obligations were largely those of a subsidiary, Canadair Financial Corporation Inc. However, legislation in 
June 1985 provided authority for the assumption by Canada of this Canadair debt. In that year $1,044 million of it 
was assumed and the $144 million principal balance was assumed in 1986; accrued interest of approximately $40 
million was also assumed, for a total of $1.23 billion to Canada's account. Since then, Canada has discharged all 
but $333 million of these obligations, in disbursements separate from the Cash from Canada amounts shown above. 

**The 1985 assumption of debt by Canada was allocated to contributed surplus in CDIC's accounts and was the 
main factor in reversing the Equity amounts recorded. 



PUBLIC ACCOUNTS, 1986-87 

CANADA DEVELOPMENT INVESTMENT CORPORATION 

AUDITORS' REPORT 

PRESIDENT OF THE TREASURY BOARD 

We have examined the consolidated balance sheet of Canada 
Development Investment Corporation as at December 31, 1986 and 
the consolidated statements of income (loss) and accumulated deficit, 
contributed surplus and changes in fmancial position for the year then 
ended. Our examination was made in accordance with generally 
accepted auditing standards, and accordingly included such tests and 
other procedures as we considered necessary in the circumstances. 

In our opinion, these consolidated fmancial statements present fairly 
the financial position of the corporation as at December 31, 1986 and 
the results of its operations and the changes in its fmancial position for 
the year then ended in accordance with generally accepted accounting 
principles applied on a basis consistent with that of the preceding year. 

Further, in our opinion, the transactions of the corjxjration and of its 
wholly-owned subsidiaries that have come to our notice during our 
examination of the consolidated fmancial statements have, in all sig- 
nificant respects, been in accordance with Part XII of the Financial 
Administration Act and regulations, and the charters and by-laws of 
the corporation and its wholly-owned subsidiaries. 



53 



Ottawa, Canada 



Toronto, Canada 
February 27, 1987 



Kenneth M. Dye, F.C.A. 
Auditor General of Canada 



Feat, Marwick, Mitchell & Co. 
Chartered Accountants 



CONSOLIDATED BALANCE SHEET 
DECEMBER 31, 1986 
(in thousands of dollars) 



ASSETS 



1986 1985 



LIABILITIES AND SHAREHOLDER'S 
EQUITY 



1986 



1985 



Current assets 

Cash and short-term investments 11,960 3,588 

Cash restricted as to use (Note 4) 88,571 

Other receivables 178 2,975 

Current portion of notes receivable 5,400 

106,109 6,563 

Investments 

Non-consolidated subsidiaries (Note 5) 140,646 509,006 

Portfolio investments (Note 6) 26,349 126,349 

166,995 635,355 

Notes receivable 43,200 

Canadair technology rights (Note 5) 20,000 

Other 91 151 



3,529 
9,164 

143,864 



Current liabilities 

Accounts payable and accrued liabilities 49,676 

Accrued interest 

Current portion of long-term debt 

49,676 

SHAREHOLDER'S EQUITY 

Capita! stock 

Authorized — Unlimited number of common 
shares 

Issued and fully paid — 101 common shares 1 

Contributed surplus 3,506,765 

Accumulated deficit (3,220,047) 

286,719 485,512 

Contingencies (Note 5) 



156,557 



3,351,848 
(2,866,337) 



336,395 642,069 



336,395 



642,069 



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

On behalf of the Board: 

PIERRE DES MARAIS 
Director 

PAUL M. MARSHALL 
Director 



54 



PUBLIC ACCOUNTS, 1986-87 



CANADA DEVELOPMENT INVESTMENT CORPORATION— Continued 



CONSOLIDATED STATEMENT OF INCOME (LOSS) AND 

ACCUMULATED DEFICIT 

FOR THE YEAR ENDED DECEMBER 31, 1986 

(in thousands of dollars) 



CONSOLIDATED STATEMENT OF CHANGES 
IN FINANCIAL POSITION 
FOR THE YEAR ENDED DECEMBER 31, 1986 
(in thousands of dollars) 



1986 



1985 



1986 



1985 



Net income (loss) of subsidiaries 

Canadair Limited 

Eldorado Nuclear Limited 

The de Havilland Aircraft of Canada, Limited. 



96,858 
(64,358) 



27,574 
(57,204) 
(94,426) 



32,500 



(124,056) 



Corporate expenses 

Operating expenses, net (Note 7) 1,167 3,531 

Financial expense 2,183 211,209 

Provisions for losses 

Massey Combines Corporation (Note 6) 100,000 

The de Havilland Aircraft of Canada, Lim- 
ited (Note 5) 15,000 46,656 

Canadair Limited (Note 5) 122,860 

241,210 261.396 

Net loss (208,710) (385,452) 

Accumulated deficit, beginning of year (2,866,337) (2,480,885) 

(3,075,047) (2,866,337) 

Dividends (145,000) 

Accumulated deficit, end of year (3,220,047) (2,866,337) 

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



CONSOLIDATED STATEMENT OF CONTRIBUTED SURPLUS 
FOR THE YEAR ENDED DECEMBER 31, 1986 
(in thousands of dollars) 



1986 



1985 



Balance, beginning of year 3,351,848 1,772,007 

Assumption of long-term debt of Cartierville Financial 
by the Government of Canada 154,917 1,079,841 

Contributed in cash by the Government of Canada to 
subsidiaries 

Cartierville Financial 300,000 

de Havilland 200,000 

Balance, end of year 3,506,765 3,351,848 

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



Operations 

Corporate operations (1,167) (3,531) 

Item not requiring cash — Depreciation 60 49 

Increase (decrease) in payables to related parties (74,551) 

Decrease in accounts payable (1,424) (10,648) 

Increase (decrease) in other items 2,797 (56,935) 

266 (145,616) 
Proceeds received on disposal of Canadair (net of cash 

restricted as to use) 1 1 1,000 

Cash portion of dividend received from Canadair 8,400 

119,400 

Cash portion of dividend paid (11 1,000) 

8,666 (145.616) 

Financing 

Contributed surplus (Cartierville Financial) 154,917 1,379,841 

Decrease in long-term debt (143,864) (1,1 16,893) 

Interest and financing expenses net of amortization 

of foreign exchange losses (2,183) (94,814) 

Increase (decrease) in accrued interest (9,164) (28,793) 

(294) 139,341 

Increase (decrease) in cash and short-term invest- 
ments 8,372 (6,275) 

Cash and short-term investments, beginning of year 3,588 9,863 

Cash and short-term investments, end of year 11,960 3,588 

The accompanying notes are an integral part of these consolidated financial 

statements. 

For purposes of this statement, cash and increase (decrease) in cash excludes 

cash transactions relating to cash restricted as to use. 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
FOR THE YEAR ENDED DECEMBER 31, 1986 
(All dollar amounts are stated in thousands) 

1 . The corporation 

Canada Development Investment Corporation ("the corpora- 
tion") was incorporated on May 26, 1982 under the provisions of 
the Canada Business Corporations Act and is wholly-owned by 
Her Majesty in right of Canada. The corporation is subject to the 
Financial Administration Act and is an agent of Her Majesty. 

2. Basis of presentation 

In a statement dated October 30, 1984, the Minister of the 
Government of Canada responsible for the corporation announced 
the intention of the Government to cause the corporation to dis- 
pose of its investments in Massey- Ferguson Limited ("Massey- 
Ferguson"), now Varity Corporation ("Varity") and Massey 
Combines Corporation ("Massey Combines") (see Note 6), 
Canadair Limited ("Canadair"), The de Havilland Aircraft of 
Canada, Limited ("de Havilland") and Eldorado Nuclear Lim- 
ited ("Eldorado") in an orderly fashion. Disposal of the corpora- 
tion's investment in de Havilland and Canadair was completed in 
1986. Any divestiture plan or proposal for Eldorado will require 
formal approval by the Government pursuant to the requirements 
of the Financial Administration Act. As no formal plans of dives- 
titure have been presented for approval with respect to Eldorado, 
the corporation believes that it is appropriate to continue to carry 
the investment in Eldorado on the equity basis of accounting. 
Eventual disposal prices for Eldorado may be more or less than 
the carrying value. 



PUBLIC ACCOUNTS, 1986-87 



ss 



CANADA DEVELOPMENT INVESTMENT CORPORATION— Conrmwe^/ 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
FOR THE YEAR ENDED DECEMBER 31, \9%fi— Continued 

3. Significant accounting policies 

(a) Basis of consolidation 

The financial statements of Cartierville Financial Corpora- 
tion Inc. ("Cartierville Financial"), formerly Canadair 
Financial Corporation Inc., have been consolidated with 
those of the corporation. 

(b) Investments in non-consolidated subsidiaries 

The corporation's investment in a subsidiary originally 
acquired with the objective of its eventual disposition or pri- 
vatization is accounted for on the equity basis, unless there is 
a formal plan, approved by the Government of Canada, to 
dispose of the investment, in which case the investment is 
carried at the lower of the equity basis carrying value and net 
realizable value. A consolidation of the corporation's finan- 
cial statements and such subsidiaries has not been prepared 
as the corporation believes that the equity method provides a 
more informative presentation to the shareholder. The finan- 
cial statements of the non-consolidated subsidiary is 
attached. 

(c) Foreign currency translation 

Foreign currency assets and liabilities are translated into 
Canadian dollars in accordance with the temporal method. 
Under that method, monetary assets and liabilities are trans- 
lated at the year-end rate, non-monetary assets and liabilities 
arc translated at rates in effect on the dates of the transac- 
tions. 

4. Cash restricted as to use 

These funds are held in special accounts (primarily in the Con- 
solidated Revenue Fund of Canada on a non-interest basis) to sat- 
isfy payment of contingent liabilities relating to the sale of the 
corporation's investments in de Havilland and Canadair (see 
Note 5). 

5. Investments in non-consolidated subsidiaries 

The carrying value of the corporation's investments is as 
follows: 





Carrying 
Value 
Decem- 
ber 
3!, 1985 


Equity 

in 
Income 
(Loss) 


Dividends 
Received 


Sale of 
Subsidi- 
ary 


Carrying 
Value 
Decem- 
ber 
31,1986 


Canadair 

de Havilland ... 
Eldorado 


... 224.002 

80.000 

... 205.004 


96.858 
(64,358) 


(57.000) 


(263.860) 
(80.000) 


140.646 




509.006 


32.500 


(57.000) 


(343.860) 


140.646 



During the year, the corporation disposed of its investment in 
de Havilland and Canadair as follows: 

(a) On January 31, 1986, the corporation sold its investment in 
de Havilland to the Boeing Company ("Boeing"). The nomi- 
nal consideration for the sale was $155,000 of which $90,000 
was received in cash on closing. $65,000 of the purchase price 
is payable in instalments, without interest, over a fifteen year 
period. 

The corporation and the Government of Canada have agreed 
to indemnify Boeing and de Havilland for certain contingent 
liabilities and other expenditures which may be incurred by 
Boeing and de Havilland over a maximum of six years after 
closing. 



These contingent liabilities include the following: 

(i) A portion of de Havilland's product liability insurance 
premiums; 

(ii) Certain suppliers' claims which may be asserted against 
de Havilland for production slow-down or termination 
and potential claims against de Havilland pursuant to 
product financing agreements up to a maximum of 
$60,000. 

(iii) Claims related to possible losses caused by health hazards 
to workers at the de Havilland factory. 

Due to the discounting of the $65,000 portion of the purchase 
consideration and to the estimates of those indemnifications 
and contingencies which could be reasonably determined, the 
net realizable value of the corporation's investment in de 
Havilland at the time of sale was recorded as $80,000. As 
some of the potential liabilities became quantifiable during 
the year, the corporation has provided an additional $15,000 
in this regard. 

No further provision for the related indemnity liability has 
been reflected in these financial statements, as reasonable 
estimates of the effects of certain future events and condi- 
tions cannot be made at this time. Such amounts will be rec- 
ognized as appropriate in future fiscal periods when reason- 
able estimates can be made as to the likely amount, if any, 
which will ultimately be paid pursuant to the indemnities. 

(b) On December 23, 1986, the corporation sold its investment in 
Canadair Limited to Bombardier Canadair Inc. ("Bombar- 
dier"). The nominal consideration for the sale was $120,000 
in cash at closing and receipt of 1,000,000 Class A and 
500,000 Class B shares of Bombardier having a stated value 
of $150,000. The redemption value of these shares is 
expected to be reduced through actions by Bombardier and 
Canadair as specified in the agreement. In addition, Cana- 
dair has agreed to pay royalties to the corporation on future 
sales of Challenger Aircraft and on Canadair's contract to 
service CF18 aircraft for the Department of National 
Defence. 

For purposes of the sale, the value of the consideration was 
determined to be as follows: 

Proceeds 

Cash 120.000 

Bombardier preferred shares 10.000 

Canadair technology rights and royalties 20.000 

150,000 

Costs of disposal and provision for contingent liabili- 
ties 9.000 

141.000 

Carrying value of investment in Canadair 263.860 

Loss on sale 122.860 



Prior to the sale, Canadair declared and paid the corporation 
a dividend of $57,000 consisting of $48,600 in interest bear- 
ing notes and the balance in cash. 

(c) As at December 31, 1986, the Government of Canada pro- 
vides authorities and guarantees for the borrowing of 
Eldorado of $600,000 of which $584,248 is being utilized at 
December 31, 1986. 



PUBLIC ACCOUNTS, 1986-87 



CANADA DEVELOPMENT INVESTMENT CORPORATION— Continued 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
FOR THE YEAR ENDED DECEMBER 31, 19S6— Concluded 

6. Portfolio investments 



Carrying 
Value 
Decem- 
ber 
31, 1985 


Reallo- 
cation 
on 
Reorgani- 
zation 


Reduc- 
tion 
in 
Carrying 
Value 


Carrying 
Value 
Decem- 
ber 
31,1986 


126,349 


26.348 
100,001 

(126,349) 


(100.000) 


26,348 

1 


126,349 




(100,000) 


26,349 



Varity 

Masscy Combines . 
Massey- Ferguson. 



During 1986. Massey- Ferguson was reorganized on a basis 
agreed between its lenders and shareholders. As a result of this re- 
organization, CDIC now holds securities in Varity which, in 
aggregate, have been valued at $26,348. In addition, the corpora- 
tion holds preferred shares in Massey Combines as well as an 
option to purchase 10% of the common shares of that company for 
a nominal amount. The balance of the corporation's original 
investment of $126,349 in Massey- Ferguson has been attributed 
to the Massey Combines securities in the amount of $100,001. 
The corporation believes that this cost of its investment in Massey 
Combines significantly exceeds the value of that investment; 
accordingly, the carrying value of that investment has been writ- 
ten down to $1. 



7. Net operating expenses of CDIC 



1986 1985 



Service fees from subsidiaries 1,704 3,084 

Interest earned on short-term investments 308 418 

Other income 79 

2,091 3,502 
Corporate and divestiture expenses 4,483 7,033 

(2.392) (3,531) 
Recovery of divestiture expenses incurred in prior year. . 1,225 
Net operating expenses (1,167) (3,531) 

Divestiture expenses include costs of disposing of Teleglobe 
Canada which are recoverable at the time of sale. 

Income tax 

As at December 31, 1986, Cartierville Financial has tax losses 
of $258,000 available to reduce taxable income expiring as fol- 
lows: 

1990 166,000 

1991 92,000 

258,000 



PUBLIC ACCOUNTS, 1986-87 



57 



CANADA DEVELOPMENT INVESTMENT CORPORATION— Continued 



APPENDIX 

ELDORADO NUCLEAR LIMITED 

AUDITORS' REPORT 

TO THE SHAREHOLDER 

We have examined the statement of consolidated flnancial position 
of Eldorado Nuclear Limited as at December 31, 1986 and the state- 
ments of consolidated earnings and retained earnings (deficit) and 
changes in consolidated fmancial position for the year then ended. Our 
examination was made in accordance with generally accepted auditing 
standards, and accordingly included such tests and other procedures as 
we considered necessary in the circumstances. 

In our opinion, these consolidated financial statements present fairly 

the financial position of the Corporation as at December 31, 1986 and 

the results of its operations and the changes in its fmancial position for 

—^ the year then ended in accordance with generally accepted accounting 

mk principles applied on a basis consistent with that of the preceding year. 

^B Further, in our opinion, the transactions of the corporation that have 
^B come to our notice during our examination of the consolidated fman- 
^Kcial statements have, in all signiflcant respects, been in accordance 
^^pvith the Financial Administration Act and regulations, and the chart- 
ers and by-laws of the corporation. 



Clarkson Gordon 
Chartered Accountants 



Ottawa, Canada 
February 2, 1987 



STATEMENT OF CONSOLIDATED FINANCIAL POSITION 
AS AT DECEMBER 31, 1986 
(in thousands of dollars) 



1986 



Current assets 

Cash and short-term investments 

Accounts receivable 

Income taxes receivable 

Inventories 

Supplies and prepaid expenses 

Current liabilities 

Bank loans and short-term debt 

Accounts payable and other liabilities 

Long-term debt due within one year 

Working capital (deficiency) 

Non-current assets 

Property and equipment 

Deferred charges 

Inventory committed under long-term contracts. 

Other assets 

Capital employed 

Represented by 

Long-term debt 

Advances under long-term contracts 

Other liabilities 

Provision for reclamation 

Minority shareholding in a subsidiary 

Shareholder's equity 

Share capital 

Deficit 

Total financing of capital 811,786 

(See accompanying notes). 
Approved by the Board of Directors: 

MARCEL BfeLANGER 

Director 

N. M. EDIGER 
Director 



1985 



6,903 
20,180 

7,062 
70,386 
13,233 


40,480 
12,855 
6,435 
55.284 
11,872 


117,764 


126,926 


82,007 
59,868 

1,745 


106 
64,526 
79,968 


143,620 


144,600 


(25,856) 


(17,674) 


766,089 

39,285 

29,306 

2,962 


798,428 

28,597 

29,306 

3,349 


837,642 


859,680 


811,786 


842,006 


547,206 

52,490 

2,510 

25,434 

43,500 


513,471 

52,490 

3,510 

24,031 

43,500 


671,140 


637,002 


296.586 
(155,940) 


296,586 
(91,582) 


140,646 


205,004 



842.006 



58 



PUBLIC ACCOUNTS, 1986-87 



CANADA DEVELOPMENT INVESTMENT CORPORATION— Continued 

APPENDIX— Continued 

ELDORADO NUCLEAR LIMITED— Co/tr/«ue</ 



STATEMENT OF CONSOLIDATED EARNINGS 
AND RETAINED EARNINGS (DEFICIT) 
FOR THE YEAR ENDED DECEMBER 31, 1986 
(in thousands of dollars) 



STATEMENT OF CHANGES IN CONSOLIDATED 
FINANCIAL POSITION 

FOR THE YEAR ENDED DECEMBER 31, 1986 
(in thousands of dollars) 



1986 



Revenue 

Sales of products and services 

Expenses 

Cost of products and services sold 

Exploration 

Research and development 

Administration 

Total operating expenses 

Earnings from operations 

Financing expense 

Interest expense 

Amortization of Foreign Exchange 

Other expense 

Loss before other items 

Mineral royalties 

Distribution to preferred shareholders of a subsidi 

ary 

Net loss 

Deficit — Beginning of year 

Deficit— End of year (155,940) 

(See accompanying notes). 



1985 



1986 



1985 



202,266 


219,792 


141,614 
5,470 
3,197 
8,318 


139,781 
5,796 
2,649 
7,520 


158,599 


155,746 


43,667 

75,133 

24,053 

1,305 


64,046 

73,126 

14,110 

5,234 


(56,824) 
3,184 

4,350 


(28,424) 
24,430 

4,350 


(64,358) 
(91,582) 


(57,204) 
(34,378) 



(91,582) 



196,518 


305,164 


109,547 
16,465 
9,230 


91,754 
15,357 
23,374 


135,242 


130,485 


61,276 


174,679 



Operating activities 

Cash received from sales 196,518 252,674 

Advances under long-term contracts 52,490 

Cash applied to 

Production costs 

R&D, exploration and administration 

Mineral royalties 

Cash provided from operations 

Investing activities 
Cash received from 

Prior year income tax overpayment 8,312 

Sale of property and equipment 7,035 782 

Cash applied to 

Additionjto property and equipment 

Additions to deferred charges 

Mine shutdown 

Cash required for investment 

Net cash provided from operations and investment 

Financing activities 
Cash received from 

Income on investments 

Cash applied to 

Repayment of long-term debt 69,475 

Net change in short-term debt (81,901) 19,894 

Interest on debt 81,532 76,582 

Distribution to preferred shareholders of a subsidiary . 4,350 4,350 

Cash required for financing 

Increase (decrease) during the year 

Cash and short-term investments at beginning of year . 

Cash and short-term investments at end of year 6,903 40,480 

(See accompanying notes). 



7,035 


9,094 


14,357 

13,906 

764 


38,962 
6,754 
3,555 


29,027 


49,271 


21,992 


40,177 


39,284 


134,502 


595 


1,025 


595 


1,025 



73,456 


100,826 


72,861 


99,801 


(33,577) 
40,480 


34,701 
5,779 



PUBLIC ACCOUNTS, 1986-87 

CANADA DEVELOPMENT INVESTMENT CORPORATION— Continued 

APPENDIX— Continued 

ELDORADO NUCLEAR LIMITED— Continued 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
FOR THE YEAR ENDED DECEMBER 31, 1986 



59 



1 . Eldorado Nuclear Limited 

Eldorado Nuclear Limited is incorporated under the Canada 
Business Corporations Act, is subject to the Financial Adminis- 
tration Act, the Government Companies Operations Act, is an 
agent of Her Majesty in Right of Canada, and is wholly-owned by 
Canada Development Investment Corporation. The Company is 
primarily engaged in the mining, reflning and conversion of 
uranium for sale as fuel for generating electricity in nuclear power 
reactors in Canada and other countries. 

2. Accounting policies 

A statement of significant accounting policies of the Company 
is provided elsewhere herein. 

3. Other expense (income) 

1986 1985 



(in thousands of 
dollars) 



Write-down of fixed asscU i...,..™..; 992 6,226 

Interest on investments (706) (459) 

Other 1,019 (533) 

Total 1,305 5,234 



4. Income taxes and mineral royalties 

The provisions for income taxes and mineral royalties are as 



follows: 



Income taxes 

Mineral royalties. 
Total 



1986 1985 

(in thousands 

of dollars) 



3,184 24,430 
3,184 24,430 



I 



As at December 31, 1986, the company had tax loss carry-for- 
wards, investment tax credits and timing differences aggregating 
approximately $143.2 million for which no accounting benefit has 
been recognized. This amount includes $95.4 million which will 
expire at various dates up to 1993. The balance can be carried for- 
ward indefinitely. 

5. Inventories 

1986 1985 

(in thousands of 

dollars) 

Eldorado uranium 59,367 43,793 

Customer conversion 9,681 9,850 

Specialty metals 1,338 1,641 



Total 70,386 55,284 



6. Property and equipment 



1986 



1985 



(in thousands of 
dollars) 



Mining 

Plant and equipment 181,175 177,298 

Development costs 49,096 47,612 

Property acquisitions 1 56,460 1 56,460 

Collins Bay Project 100,878 97,406 

Fuel services 

Plant and equipment 41 1,539 407,584 

Other 12,907 15,050 



Total property and equipment 912,055 901,410 

Less: accumulated depreciation and amortization 145,966 102,982 



Net property and equipment 766.089 798.428 

Depreciation and amortization for year 



44,407 30,714 



7. Joint venture activities 

Through a wholly-owned subsidiary, the Company is a one- 
sixth partner in a joint venture mining operation at Key Laice, 
Saskatchewan. In accordance with the joint venture agreement, 
Eldorado is obligated to meet its proportionate share of the com- 
mitments of the joint venture. Other than normal operating 
expenditures, the Company has no outstanding commitments as at 
December 31, 1986. 

The following amounts are included in the financial statements 
and represent the Company's proportionate share of the assets, 
liabilities, and operating expenses of the Key Lake mining joint 
venture: 

1986 1985 



Assets 


(in thousands 
of dollars) 

94,567 93.582 


Liabilities 


1,330 1.814 


Net assets 


93.237 91,768 






Expenses 


8.785 8,469 







8. Deferred charges 



1986 1985 

(in thousands of 

dollars) 



36,815 
2.470 



25,431 
3.166 



Production 

Financing costs 

Total 39.285 28.5"97 

Amortization for year 



3.218 2,354 



9. Long-term sales contracts 

Eldorado has entered into contracts which provide for the 
future sale and delivery of uranium in the form of UFe at flexible 
dates over the eight-year term of the contracts. The Company has 
sold the future sales contract to interested financing parties and 
has retained certain rights and obligations under all of the con- 
tracts. On the statement of Consolidated Financial Position, the 
Company has segregated the inventory committed and the 
advances under long-term contracts which will be satisfied out of 
the future revenues associated with these transactions. The impact 
on the Statement of Consolidated Earnings and Retained Earn- 
ings (deficit) will be recognized as deliveries take place. 



60 



PUBLIC ACCOUNTS, 1986-87 



CANADA DEVELOPMENT INVESTMENT CORPORATION— Continued 

APPENDIX— Continued 

ELDORADO NUCLEAR LIMITED— Continued 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
FOR THE YEAR ENDED DECEMBER 31, 19%6— Continued 



10. Minority shareholding in a subsidiary 

In April, 1984, an Eldorado subsidiary acquired all rights to 
and benefits in the 1970 New Continental Oil royalty agreement 
from Aberford Resources Limited, Hacienda Oil & Minerals Ltd. 
and Oak Ridge Oil & Minerals Ltd. This agreement gives the 
holder a 20 percent interest in the profits derived from certain 
Athabasca basin properties held by Eldorado's Eldor Mines divi- 
sion and others. Consideration was $5.0 million cash and $43.5 
million redeemable preferred shares of the subsidiary company. 
The shares, with certain restrictions, can be redeemed between 
1988 and 1994 and bear a 10 percent annual dividend. 

As security, the three companies hold a lien on certain uranium 
inventory. At Eldorado's option, the lien can also be satisfied from 
time to time by a letter of credit. The lien covers the value of the 
subsidiary's redeemable preferred shares plus future dividends, 
through to the shares' designated redemption dates. Each pay- 
ment of a dividend or redemption of a share reduces the lien by a 
similar amount. At December 31, 1986, the Company had inven- 
tories in excess of the prescribed value. 

For consideration of $5.0 million cash, Aberford Resources 
Limited, Hacienda Oil & Minerals Ltd. and Oak Ridge Oil & 
Minerals Ltd. acquired from Eldorado a royalty interest on 
uranium sales from certain designated properties. The royalty 
covers that portion of such sales in excess of a designated base 
selling price which is adjusted annually for inflation. During 1986, 
sales did not exceed the adjusted base price and no royalty was 
paid. 

1 1 . Long-term debt 

1986 1985 



12. Share Capital 



(in thousands of 
dollars) 



Notes due 1986, at 13.25% ($50 million U.S.) 69,875 

Loan due 1987-1992, at 8.8% (2 billion Japanese 

yen) 17,450 13,968 

Notes due 1988, at 9.19% (10.108 billion Japanese 

yen) 88,192 70,594 

Debenture due 1988, at 11% 30,000. 30,000 

Euro notes, due 1989 to be set semi-annually at 

LIBOR rate ($100 million U.S.) 138,050 139,750 

Notes due 1990 at 9.125% 10,093 10,093 

Loan due 1991, at 7% (100 million Swiss francs) 85,590 67^860 

Loan due 1992, at 14.25% ($44.7 million U.S.) 61,641 62,399 

Notes due 1592, at 14.5% ($100 million U.S.) 138,050 139,750 

Bonds due 1992, at 8.5% (10 billion Japanese yen), 

with 10% of principal due in each of years 1988- 

1991 87.250 69,840 

Sub-total 656,316 674,129 

Less: current portion of long-term debt listed 

above 1,745 79,968 

deferred loss on foreign exchange 107,365 80,690 

Total 547,206 513,471 



The long-term debt payments due in each of the next five years 
are as follows: 1987— $1.7 million; 1988— $130.4 million; 1989— 
$150.3 million; 1990— $22.3 million; 1991— $97.8 million. Inter- 
est on long-term debt amounted to $71.1 million (1985 — $74.9 
million). 



1986 



1985 



Authorized 
Common shares 






(Unlimited 
par\ 
1,600,000 

(in thous 
dolla 




Preference shares 






^alue) 
1,600,000 

ands of 
irs) 




shares 


(1985— 


Issued and fully paid 
Common— 3,852,880 
3,852.880) 


201,586 

95,000 

296,586 


201,586 

95,000 

296,586 


Preference— 800.000 shares (1985- 
Total 


-800,000). 









Each preference share is redeemable at the option of either 
party at a value of $1 1 8.75 per share and carries a non-cumulative 
dividend of $7. 1 25 per annum. 

13. Commitments and contingencies 

(a) The Company has defined benefit pension plans covering all 
of its regular full-time employees. 

The pension funds, which are administered by independent 
trustees, are valued at least every three years by consulting 
actuaries. Based on the latest actuarial valuations at June 30, 
1986 and December 31, 1985, the plans have a surplus of 
$27.7 million. 

(b) In 1986, the government ordered Eldorado to cease its pro- 
gram to site a new waste disposal facility to accommodate 
the wastes currently at two waste storage sites. Responsibility 
for selecting a new disposal site now rests with the govern- 
ment. The Company will continue to expense the ongoing 
maintenance costs of the existing storage facilities. No provi- 
sion will be made for future disposal costs until a new site is 
selected and approved, the costs can be reasonably estimated, 
and the responsibilities for such costs are determined. 

(c) To reduce its dependency on oil generated electricity, the 
Company has entered into a 10 year commitment, with cer- 
tain qualifications, to buy 50 GWH per year of hydro electric 
power at 120 per KWH, a price which approximates its cur- 
rent cost of oil generated electricity. 

(d) In connection with its operations, the Company is the defend- 
ant in certain litigation. While the amount of any ultimate 
liability cannot yet be determined, the Company after discus- 
sion with legal counsel, is of the opinion that there will be no 
material adverse effect on its financial position. 

1 4. Supplementary information 

(a) During 1986, the Company paid sales commissions to 
Marubeni Corporation, Toyomenka Canada Ltd., and Ura- 
nerzbergbau-GmbH . 

(b) During 1986, the total remuneration paid to the Company's 
outside directors was $101,792 (1985— $93,709). The Com- 
pany's officers received remuneration totalling $633,500 
(1985 — $607,500). One officer is also a director but is not 
compensated for service as a member of the Board or its 
committees. 



PUBLIC ACCOUNTS, 1986-87 61 
CANADA DEVELOPMENT INVESTMENT CORPORATION— Co/ic/M^e</ 

APPENDIX— Concluded 

ELDORADO NUCLEAR LIMITED— Concluded 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
FOR THE YEAR ENDED DECEMBER 31, \9%6— Concluded 

(c) A management fee of $242,000 (1985 — $286,000) was paid Depreciation and Amortization 

to Canada Development Investment Corporation. Fuel Services and Mining buildings and equipment, mine develop- 
ed) Certain 1985 accounts have been reclassified for comparison "^^^^ ^"^ mineral properties are depreciated or amortized according to 
purposes. the unit-of-production method. This method allocates the cost of these 

assets to each accounting period. For Fuel Services, the amount is 

1 5. Segmented Information equal ^^ {^g portion of the facilities' total estimated lifetime production 

(a) Industry Segment produced in that period. For Mining, the amount is equal to the por- 

_, -, . r . • • . tion of the mine's total recoverable ore reserves recovered during the 

The Company is of the opinion that virtually all its sales period 

revenues are in the industry segment identified as the nuclear 

fuel industry. Mobile mining equipment and other assets, including Research & 

Development, Exploration, Specialty Metals, and Corporate Assets, 

(b) Sales are depreciated according to the composite straight-line method based 
Sales revenues, which are derived primarily from sales to for- o" the estimated useful lives of these assets, which ranges from 3 to 10 
eign and domestic electric utilities, are as follows: years. 

Fuel Services and certain mining facility costs associated with 

° ''-^ capacity additions are deferred until a commercial level of production 

(in thousands of [^ achieved. These costs are then amortized over 10 years. Other costs 

dollars) ^^^ charged to production as incurred. 

Export Sales 159,414 164,806 

Domestic Sales 42,852 54,986 Amortization of Financing Costs 

Total Sales 202.266 219.792 Debt discounts and issue expenses associated with long-term financ- 

ing are deferred and amortized over the term of the debt. 

Provision for Reclamation 

STATEMENT OF ACCOUNTING POLICIES The estimated costs of decommissioning and reclaiming producing 

The accompanying consolidated financial statements were prepared '■«^°"'"" Properties are accrued and charged to operations according to 

by management in conformance with Canadian generally accepted the un.t-of-production method. Actual costs of decommissioning and 

accounting principles considered to be appropriate in the circum- reclamation are applied to this accrual, 

stances, and have been applied on a basis consistent with that of the Research and Development and Exploration Costs 
preceding year. A summary of significant accounting policies of the 

Company is presented to assist the reader in interpreting the state- Expenditures for applied research and development relative to the 

ments contained herein. products and processes of the Company and expenditures for geologi- 
cal exploration programs are charged against earnings as incurred. 
Consolidation 

_, ,. , , o. . . .... ,. Sales of Products and Services 

The consolidated financial statements include the accounts of 
Eldorado Nuclear Limited, its wholly-owned subsidiaries, and the ^" accordance with normal industry practices, the Company con- 
Company's proportionate interest in the accounts of the Key Lake tracts for future delivery of mine concentrates and conversion services. 
Mining joint venture Sales revenue is recorded in the fiscal year that title passes or, with 

customer-owned material, when delivery is effected. 
Inventories 

, ■ e ■ r. J J J J Foreign Exchange 

inventories of mine concentrates, refined and converted products are 
valued at the lower of weighted average cost or net realizable value. Cash and short-term investments, accounts receivable, accounts pay- 
Cost for customer-owned products is the cost of the refining and con- ^ble, short-term and long-term debt denominated in foreign currencies 
version processes only ^re translated into Canadian dollars at rates of exchange in effect at 

, . . . , J year-end. Income and expenses are translated at rates in effect at the 

Inventories of mine concentrates are initially measured and ^jj^g of the transaction 
accounted for in the financial statements when the material is sealed in 

containers upon completion of the milling process. Except for certain U.S. dollar-denominated long-term debt that is 

hedged against future U.S. dollar revenue, the change in value in 

Supplies Canadian funds over the year of long-term debt denominated in a for- 

Operating and general supplies are carried at lower of cost or mar- «'«" *;""«"*=y »^ amortized evenly over the remaining life of the debt, 

u J For all other accounts, gains or losses resulting from foreign currency 

translation are reflected in the statement of consolidated earnings and 
Property and equipment retained earnings. 

Assets are carried at cost. Costs of additions, betterments, and 
renewals are capitalized. When assets are retired or sold, the resulting 
gains or losses are reflected in current earnings. 

Maintenance and repair expenditures are charged to cost of produc- 
tion. 



62 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
CANADA HARBOUR PLACE CORPORATION 

MANDATE 

Administer properties at Canada Place in Vancouver, originally constructed as the Canadian pavilion at Expo 86. 



BACKGROUND 

The corporation commenced operations in 1982, and constructed the Canada Place facilities and managed the 
Canada Pavilion at Expo 86. The facilities called Canada Place include a cruise ship terminal for the Vancouver Port 
Corporation, the Canada Pavilion and a hotel-office complex built for the Tokyu Corporation. Following Expo 86, 
the Pavilion was converted to a trade and convention centre and leased to the Province of British Columbia for a 
period of 20 years. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHAIRMAN AND CHIEF 
EXECUTIVE OFFICER 

AUDITOR 



Suite 690 

999 Canada Place 

Vancouver, British Columbia 

V6C3CI 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable John Crosbie, P.C, Q.C., M.P. 

Transport 

1982; by letters patent (no. 132316) under the Canada Business 
Corporations Act. 

Thomas G. Rust 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 

1986-87 1985-86 1984-85 1983-84 

At the end of the period 

Total Assets 86.0* 145.2 88.3 34.8 

Obligations to the private sector nil nil nil nil 

Obligations to Canada nil nil nil nil 

Equity of Canada 80.3 132.7 76.5 28.4 

Cash from Canada in the period 

— budgetary 13.6 55.6 48.1 20.9 

— non-budgetary nil nil nil nil 

* An amount of $43.7 million relating to construction of the Canada Pavilion at Expo 86 was capitalized in 1984- 
1985 but was expensed in 1986-87. 



PUBLIC ACCOUNTS, 1986-87 

CANADA HARBOUR PLACE CORPORATION 

AUDITOR'S REPORT 

TO THE MINISTER OF TRANSPORT 

I have examined the balance sheet of Canada Harbour Place Corpo- 
ration as at March 31, 1987 and the statements of operations, equity 
of Canada and changes in financial position for the year then ended. 
My examination was made in accordance with generally accepted 
auditing standards, and accordingly included such tests and other 
procedures as I considered necessary in the circumstances. 

In my opinion, these fmancial statements present fairly the flnancial 
position of the Corporation as at March 31, 1987 and the results of its 
operations and the changes in its financial position for the year ended 
in accordance with generally accepted accounting principles applied on 
a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the financial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, and the 
articles and by-laws of the Corporation. 



«3 



Kenneth M. Dye, F.C.A. 
Auditor General of Canada 



Ottawa, Canada 
May 15, 1987 



BALANCE SHEET AS AT MARCH 31, 1987 
(in thousands of dollars) 



ASSETS 

Cash and short-term investments .. 

Accounts receivable 

^Construction in progress (Note 3). 
Kferred costs 



1987 



1986 



8,981 


29.177 


2,993 


4.505 


74.052 


67,788 




43,712 



LIABILITIES AND EQUITY OF CANADA 



Accounts payable . 
Equity of Canada . 



1987 



1986 



86,026 145,182 



5,726 12,479 
80,300 132.703 

86,026 145.182 



Approved by the Board: 

JAMES H.GREEN 
Director 

T. G. RUST 
Director 



«4 



PUBLIC ACCOUNTS, 1986-87 



CANADA HARBOUR PLACE CORPORATION— Co/ir/nwe^ 



STATEMENT OF OPERATIONS CANADA PAVILION 
FOR THE YEAR ENDED MARCH 31, 1987 
(in thousands of dollars) 



1987 1986 



Expenses (Note 6) 75,219 

Revenues (Note 6) 9,352 

Net cost of operations 65,867 



STATEMENT OF EQUITY OF CANADA 
FOR THE YEAR ENDED MARCH 31, 1987 
(in thousands of dollars) 

1987 1986 



Capital stock 

Contributed capital 

Beginning of year 132,703 76,510 

Parliamentary appropriations received during the year ... 13,464 56,193 

146,167 132,703 

Net cost of operations — Canada Pavilion 65,867 

Balance at end of year 80,300 132,703 

STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED MARCH 31, 1987 
(in thousands of dollars) 



1987 1986 



Cash Provided by (Used for) Operations 

Net cost of operations (65,867) 

Transfer of net deferred costs to operations 43,712 

Increase (decrease) in accounts payable (6,753) 728 

Decrease (increase) in accounts receivable 1,512 (1,554) 

(27,396) (826) 

Cash Provided by Financing Activities 

Contribution from Canada 13,464 56,193 

Parliamentary appropriation receivable 19,200 

r3,464 75,393~ 

Cash Invested 

Net addition to construction in progress 6,264 15,555 

Net deferred costs 36,062 

"6,264 51,617~ 

Increase (decrease) in cash during the year (20,196) 22,950 

Cash and short-term investments 

Beginning of year 29,177 6,227 

End of year 8,981 29,177 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, 1987 

1 . Authority and objectives 

The Canada Harbour Place Corporation was incorporated on 
June 9, 1982 under the Canada Business Corporations Act. The 
Corporation is an agent of Her Majesty pursuant to the Govern- 
ment Companies Operation Act, and is named as an agency 
Crown corporation in Part I of Schedule C of the Financial 
Administration Act. The three shares issued and outstanding are 
all held in right of Canada by the Minister of Transport, the 
Responsible Minister with whom control of the Corporation lies. 

The Corporation is exempt from income taxes. 

The objectives of the Corporation are to act as a developer and 
acquire, administer and dispose of land, and manage real property 
for the Government of Canada in Vancouver, B.C. For this pur- 
pose, it is to design and construct a facility at Canada Place to 
include a cruise ship terminal and a Canadian host pavilion for 
Expo 86 suitable to be converted to a trade and convention centre. 
In addition, the Corporation has the authority to manage and 
operate the facility at Canada Place, either by itself or with 
others, and organize, operate and manage the participation of the 
Government of Canada as exhibitor and host nation for Expo 86. 

The total cost of the facility at Canada Place, including the 
Canada Pavilion for Expo 86 and the cost to convert the Pavilion 
to a Trade and Convention Centre, is estimated at $227.4 million 
of which $151.8 million is expected to be contributed by the Gov- 
ernment, $22.8 million by the Vancouver Port Corporation in 
respect of the cruise ship terminal and $52.8 million from other 
sources. 

The Responsible Minister is to recommend to the Governor in 
Council prior to December 31, 1988 on the continued activities of 
the Corporation beyond that date. 

2. Significant accounting policies 

Construction in progress 

All expenditures including those for acquisition, design, con- 
struction and administration for the permanent structures at 
Canada Place will be capitalized until the facility is fully devel- 
oped in July 1987. Interest income is credited to construction in 
progress. Receipts from the sale of development rights, leaseholds 
and the Imax Theatre sponsorship are also deducted from the con- 
struction costs. 

Depreciation will commence in 1987-88 when the facility is 
fully developed. Depreciation of the facility will be calculated on a 
straight line basis over a 40 year period. 

Canada Pavilion 

The expenditures to design, construct and fit-out the Pavilion 
and to organize, operate and manage the participation of the Gov- 
ernment of Canada as exhibitor and host nation for Expo 86 
respectively, net of related revenues, were recorded as deferred 
costs at March 3 1 , 1986. 

The expenditures on the Pavilion and its operating and other 
related expenditures and revenues have been taken into income 
during 1987 and offset against contributed capital. 
Administration 

Corporate and construction administration expenses are 
charged against construction in progress. Administration expenses 
for the Pavilion are included in Pavilion expenses. 



PUBLIC ACCOUNTS, 1986-87 



€5 



CANADA HARBOUR PLACE CORPORATION— Continued 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \9%1— Continued 



3. Construction in progress 



Cumu- 
lative to 
March 3 1 , 
1986 



Cumu- 
lative to 
March 31, 
1987 1987 



(in thousands of dollars) 



Construction costs 95,330 

Soft costs 15,760 

Access and site purchase 14,551 

Trade and Convention Centre con- 
version 5.421 

Total costs 131,062 

Less receipts (Note 4) 63,274 

Costs, net of receipts 67,788 



612 95,942 

1,615 17,375 

209 14,760 

6,343 11,764 



8,779 139,841 
2,515 65,789 



6,264 74,052 



Soft costs include corporate and construction administration, 
architects and consultants fees and related management costs. 

Title to that part of the bed of Vancouver harbour on which the 
facility is located was transferred to the Corporation from Van- 
couver Port Corporation for one dollar and has been so recorded 
in site purchase costs. 

The ownership of the access roads to the facility will be trans- 
ferred at no cost to the City of Vancouver. The cost of the access 
roads included in construction in progress is $9.4 million. 

4. Receipts 



Lease Agreements 

Hotel Air Rights 

Parking Lot 

Development Agreement 

Cruise Ship Terminal... 
Sponsorship Agreement 

Imax Theatre 

Interest income 

Restaurant 

Other 



Cumu- 
lative to 
March 31, 
1986 


1987 


Cumu- 
lative to 
March 31, 
1987 


(in thousands of dollars) 


29,838 
1,000 


1,051 


29,838 
2,051 


22,807 




22,807 


5.000 
4,629 


1,028 

403 

33 


5,000 

5,657 

403 

33 


63,274 


2,515 


65,789 



(a) Lease Agreements — Hotel Air Rights and Parking Lot 

In 1983, the Corporation entered into 99-year agreements 
with Tokyu Canada Corporation, for the lease of air rights at 
Canada Place to Tokyu. The net amount under these leases 
for air rights and construction costs is $29.8 million. Tokyu 
will also pay additional rent for its share of the common area 
and operating costs. 

In 1986, the Corporation entered into a 20 year agreement 
with Citicom Ltd. to operate the parking facilities at Canada 
Place. Citicom paid $1 million to the Corporation at the time 
the agreement was signed and made monthly payments 
totalling $1 million based on varying percentages of gross 
parking revenues. 

(b) Development agreement — Cruise Ship Terminal 

The Corporation executed a development agreement with the 
Vancouver Port Corporation to construct a cruise ship termi- 
nal for $22.8 million in the Canada Place project. 

(c) Sponsorship agreement — Imax Theatre 

The Corporation has entered into an agreement with 
Canadian National for rights respecting an Imax Theatre at 
Canada Place. The rights are for the sponsorship of the film 
"Transitions" and for the theatre to be named the "CN Imax 
Theatre" for a period of 40 years commencing May 2, 1986. 



In return for these rights, CN has paid the Corporation $5 
million which has been allocated wholly against construction 
costs. 

5. Commitment — Trade and Convention Centre 

During the year, the Government of Canada and the Province 
of B.C. signed an agreement in which the Province of B.C. will 
take over and operate the Trade and Convention Centre starting 
in July 1987. 

Under the signed agreement, the Government of Canada 
agreed to do the following: 

• Complete construction and outfit the Trade and Convention 
Centre at the Corporation's cost which is estimated to be 
$17.5 million. 

• Pay $1 million to the Province of B.C. in July 1987. 

• Lease to the Province of B.C., at a nominal consideration of 
$1, space in the Canada Place project for the Trade and Con- 
vention Centre including pre-function areas, meeting rooms 
and retail space for a term of 20 years with renewal options 
for three successive similar terms. 

6. Operating Expenses and Revenues — Canada Pavilion 

Expenses and revenues attributable to the period of operation of 
the Canada Pavilion at Expo 86 follow: 

Defer- Cumu- 

red at lative to 

March 31, March 31, 

1986 1987 1987 



(in thousands of dollars) 



Expenses 

Construction and Exhibitry 31,417 

Imax Theatre 4,884 

General administration 3,877 

Cultural programs 2,985 

Public affairs 2,054 

Operations 1,700 

Building Management 

Commissioner General 458 

Royalty Fees — Expo'86 

Exhibitry Disposal Proceeds (42) 



Revenues 

Sponsorship 

Food Fair and Retail . 



6,325 37,742 

530 5,414 

1,619 5,496 

5,448 8,433 

2,731 4,785 

7,295 8,995 

3,222 3,222 

1,615 2,073 

830 830 

(1,729) (1,771) 



47,333 


27,886 


75,219 


3,576 
45 


774 
4,957 


4,350 
5,002 


3,621 


5,731 


9,352 



7. Contractual obligations 

At March 31, 1987, the construction and related costs to com- 
plete the project including conversion costs are estimated at $7.3 
million of which approximately $3.7 million has already been 
committed. 

8. Long-term lease commitment 

The Corporation has entered into a long-term lease agreement 
for the Imax projection system. The future minimum lease pay- 
ments by fiscal year are as follows: 

(in 
thousands 

of 
dollars) 



1988 
1989. 
1990. 
1991. 
1992. 



740 
162 
162 
162 
162 



66 

CANADA HARBOUR PLACE CORPORATION— Cowc/w^e^ 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \ni— Concluded 

9. Retirement plan 

Because of the term nature of the project, the Corporation has 
agreed to make annual payments for certain employees to retire- 
ment plans of their choice and to provide for a retiring allowance 
to senior officers. These benefits are equivalent to %Vi% of the 
annual salary for each of these employees and officers. 

10. Related party transactions 

The Corporation is related in terms of common ownership to all 
Government of Canada created departments, agencies and Crown 
corporations. 

The Corporation is dependent on the Government of Canada 
for working capital and to finance expenditures. 

All significant related party transactions are disclosed in Notes 
3 and 4. Certain components of the Canada Pavilion and 
increased federal activities in support of Expo 86 that have been 
provided directly by departments, agencies and Crown corpora- 
tions are not reflected in these financial statements. The Corpora- 
tion also enters into transactions with departments, agencies and 
Crown corporations in the normal course of business. 



PUBLIC ACCOUNTS, 1986-87 



PUBLIC ACCOUNTS, 1986-87 



67 



SUMMARY PAGE 
CANADA LANDS COMPANY LIMITED 



MANDATE 

The Canada Lands Company Limited has the mandate to hold certain leases for a property in London, England and 
two properties on Indian reserves in Canada. It is also the shareholder in three subsidiary corporations. 

BACKGROUND 

Formerly the Public Works Lands Company, the corporation is not active; it transacts no business. It has three 
subsidiaries, Canada Lands Company (Mirabel) Limited, Canada Lands Company (Le Vieux-Port de Montreal) 
Limited and Canada Lands Company (Vieux-Port de Quebec) Inc. 



CORPORATION DATA 

HEAD OFFICE 



STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHIEF EXECUTIVE OFFICER 
AUDITOR 



Sir Charles Tupper Building 
Confederation Heights 
Riverside Drive 
Ottawa, Ontario 
K1A0M2 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable Stewart Mclnnes, P.C, M.P. 

Public Works 

1956; by letters patent; reorganized under the Canada Corporations 
Act, September 19, 1977. Certificate of Continuance under the 
Canada Business Corporations Act July 7, 1981. 

Robert Giroux 

The Auditor General of Canada 



FINANCIAL INFORMATION. 

The corporation's financial year ends March 3 1 . No value is assigned in its accounts to any of its assets; the accounts 
of its subsidiaries are reported separately and are not consolidated with those of this corporation since it is not likely 
to benefit from any increase in the equity of the subsidiaries. 



CANADA LANDS COMPANY LIMITED 

AUDITOR'S REPORT 

TO THE MINISTER OF PUBLIC WORKS 

I have examined, in accordance with generally accepted auditing 
standards, the balance sheet of Canada Lands Company Limited as at 
March 31, 1987. In my opinion, it presents fairly the financial position 
of the Corporation at that date in accordance with generally accepted 
accounting principles applied on a basis consistent with that of the 
preceding years. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the balance sheet 
have, in all significant respects, been in accordance with Part XII of 
the Financial Administration Act and regulations, the articles and by- 
laws of the Corporation. 

Raymond Dubois, C.A. 
Deputy Auditor General 
for the Auditor General of Canada 
Ottawa, Canada 
June 19, 1987 



PUBLIC ACCOUNTS, 1986-87 



BALANCE SHEET AS AT MARCH 31, 1987 



ASSETS 

Investments (Notes 2(a), 2(b) and 2(c)) . 



1987 1986 SHAREHOLDER EQUITY 
Capital stock (Note 2(d)) 



1987 1986 



Approved by the Board: 

ROBERT J. GIROUX 
President 



PUBLIC ACCOUNTS, 1986-87 

CANADA LANDS COMPANY LIMITED— Continued 

NOTES TO FINANCIAL STATEMENT 
MARCH 31, 1987 

1 . Authority and activities 

The Canada Lands Company Limited, an agent corporation, 
originally named Public Works Lands Company Limited, was 
incorporated under the Companies Act on March 7, 1956. It was 
added to Schedule C to the Financial Administration Act on May 
17, 1979 and listed as a parent Crown corporation on June 29, 
1984 in Schedule C, Fart I of the Financial Administration Act. 

The Corporation has, by virtue of its letters patent of incorpora- 
tion, the power to acquire, purchase, lease, hold, improve, man- 
age, exchange, sell, turn to account or otherwise deal in or dispose 
of real or personal property or an interest therein. However, it has 
been used only to hold, in trust for other departments, certain 
leasehold interests in one property in London, England, and two 
properties on Indian reserves in Canada. Funding for these leases 
are borne by other departments. 

2. Significant accounting policies 

(a) Investments in subsidiaries 

The Corporation wholly-owns the following three subsidiary 
corporations: 

Canada Lands Company (Mirabel) Limited 
Canada Lands Company (Vieux-Port de Quebec) inc. 
Canada Lands Company (Le Vieux-Port de Montreal) Lim- 
ited. 

The shares have been acquired in consideration of services 
rendered. 

(b) Other investments 

The Corporation holds two out of the three issued shares of 
the Canada Museums Construction Corporation Inc. The 
third share is held by the Minister of Public Works; however, 
control of this corporation lies with the Minister of Public 
Works through a shareholders' agreement. 

(c) Exclusion of subsidiaries from consolidation 

The financial statements of the subsidiaries are excluded 
from consolidation because increases in their equity are not 
likely to accrue to the parent. 

On January 22, 1987, the Governor General in Council 
declared that certain sections of the Financial Administration 
Act apply to the subsidiaries as if each of these corporations 
were a parent Crown corporation set out in Schedule C, Part 
I of the Act. Pursuant to this Order, these subsidiaries are 
required to submit their corporate plans, operating and capi- 
tal budgets, summaries of the plans and budgets and annual 
reports in accordance with the Act. 

(d) Capital stock 

The Corporation is authorized to issue three shares which 
shall not be transferred to any person other than a person 
approved by the Minister of Public Works. The authorized 
shares have been issued in consideration of services rendered 
and are held in trust for Her Majesty in right of Canada by 
the Minister of Public Works. 

3. Financial statement 

The Corporation has not been involved in any financial transac- 
tions. As a result, the balance sheet has nil balances and no other 
financial statement is presented. 



79 

CANADA LANDS COMPANY LIMITED— Continued 

AUDITOR'S REPORT 

TO THE MINISTER OF PUBLIC WORKS 

I have examined, in accordance with generally accepted auditing 
standards, the balance sheets of Canada Lands Company Limited as at 
March 31, 1982 to 1986. In my opinion, they present fairly the finan- 
cial position of the Corporation at those dates in accordance with gen- 
erally accepted accounting principles applied consistently. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the balance sheets 
have, in all significant respects, been in accordance with Part XII of 
the Financial Administration Act and regulations, the articles and by- 
laws of the Corporation. 

Raymond Dubois, C.A. 
Deputy Auditor General 
for the Auditor General of Canada 
Ottawa, Canada 
December 16, 1986 



PUBLIC ACCOUNTS, 1986-87 



BALANCE SHEETS AS AT MARCH 31 



ASSETS 



1986 1985 



1984 



1983 



1982 



SHAREHOLDER 
EQUITY 



1986 



1985 



1984 



1983 



1982 



Investments (Notes 
2(a) and 2(b)) 



Capital stock (Note 
2(d)) 



Approved by the Board: 

ROBERT J. GIROUX 
President 



PUBLIC ACCOUNTS, 1986-87 71 

CANADA LANDS COMPANY LIMITED— Concluded 

NOTES TO FINANCIAL STATEMENT 
MARCH 31, 1986 

1 . Authority and activities 

The Canada Lands Company Limited, an agent corporation, 
originally named Public Works Lands Company Limited, was 
incorporated under the Companies Act on March 7, 1956. It was 
added to Schedule C of the Financial Administration Act on May 
17, 1979 and listed as a parent Crown corporation on June 29, 
1984 in Schedule C, Part I of the Financial Administration Act. 

The Corporation has, by virtue of its letters patent of incorpora- 
tion, the power to acquire, purchase, lease, hold, improve, man- 
age, exchange, sell, turn to account or otherwise deal in or dispose 
of real or personal property or an interest therein. However, it has 
been used only to hold, in trust for other departments, certain 
leasehold interests in one property in London, England, and two 
properties on Indian reserves in Canada. Funding for these leases 
are borne by other departments. 

2. Significant accounting policies 

(a) Investments in subsidiaries 

The Corporation wholly-owns the following three subsidiary 
corporations: 

Canada Lands Company (Mirabel) Limited 

Canada Lands Company (Vieux-Port de Quebec) inc. 

Canada Lands Company (Le Vieux-Port de Montreal) Lim- 
ited. 

The shares have been acquired in consideration of services 
rendered. 

(b) Other investments 

The Corporation holds two out of the three issued shares of 
the Canada Museums Construction Corporation Inc. The 
third share is held by the Minister of Public Works; however, 
control of this corporation lies with the Minister of Public 
Works through a shareholders' agreement. 

For the years ended March 31, 1982 to 1984, the Corpora- 
tion held two out of the three issued shares of Canada Har- 
bour Place Corporation. However, control of this corporation 
lay with the Minister of State for Social Development. On 
August 31, 1984, these two shares were transferred to the 
Minister of Transport. 

(c) Exclusion of subsidiaries from consolidation 

The financial statements of the subsidiaries are excluded 
from consolidation because increases in their equity are not 
likely to accrue to the parent. 

(d) Capital stock 

The Corporation is authorized to issue three shares which 
shall not be transferred to any person other than a person 
approved by the Minister of Public Works. The authorized 
shares have been issued in consideration of services rendered 
and are held in trust for Her Majesty in right of Canada by 
the Minister of Public Works. 

3. Financial statement 

The Corporation has not been involved in any financial transac- 
tions. As a result, the balance sheets have nil balances and no 
other financial statement is presented. 



72 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
CANADA LANDS COMPANY (MIRABEL) LIMITED 



MANDATE 

Administer, pending disposition, and sell on behalf of the Crown, properties peripheral to the airport called Montreal 

North. 

BACKGROUND 

Since July 1982, the corporation has managed the lands which the Crown had acquired for the international airport 
at Mirabel but which were not required for the functioning of the airport. A program for the sale of all those 
properties has been developed and is being implemented by the corporation. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHAIRMAN AND CHIEF 
EXECUTIVE OFFICER 

AUDITOR 



9850 Belle Riviere 
P.O. Box 180 
Mirabel, Quebec 
JON ISO 

— Not an agent of Her Majesty 

— A wholly-owned subsidiary of Canada Lands Company Limited; 
it has been directed by Order in Council (PC 1987-86) to report 
its affairs as if it is a parent Crown corporation. 

The Honourable Stewart Mclnnes, P.C, M.P, 

Public Works 

1981; by Canada Lands Company Limited, under the Canada 
Business Corporations Act. 

Pierre Hardy 



The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 3L 



1986-87 



1985-86 



1984-85 



1983-84 



At the end of the period 

Total Assets 

Obligations to the private sector 

Obligations to Canada 

Equity of Canada 

Cash from Canada in the period 

— budgetary, net 

— non-budgetary 



5.4 


3.2 


5.0 


4.8 


nil 


1.2 


0.1 


0.3 


nil 


1.3 


4.3 


3.8 


nil 


nil 

2.4 


nil 


nil 


6.8 


5.2 


2.3 


nil 


nil 


nil 


nil 



PUBLIC ACCOUNTS, 1986-87 73 

CANADA LANDS COMPANY (MIRABEL) LIMITED 



THE AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 1987 
WERE NOT AVAILABLE AT DATE OF PRINTING 



74 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
CANADA LANDS COMPANY (LE VIEUX-PORT DE MONTREAL) LIMITED 



MANDATE 

Promote the development of the lands of Le Vieux-Port de Montreal and develop them; administer, manage and 
maintain Crown property there. 

BACKGROUND 

Since February 1982, the corporation has managed the Crown lands at Le Vieux-Port, including lands transferred to 
the Crown in 1983 from Canada Ports Corporation. Planning and consultation with the public and with the other 
levels of government have resulted in plans for major developments on the lands. Those plans are at present a 
significant issue for the various governments. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHAIRMAN AND CHIEF 
EXECUTIVE OFFICER 

AUDITOR 



333 rue de la Commune ouest 
Montreal, Quebec 
H2Y 2E2 

— Not an agent of Her Majesty 

— A wholly-owned subsidiary of Canada Lands Company Limited; 
it has been directed by Order in Council (PC 1987-86) to report 
its affairs as if it is a parent Crown corporation. 

The Honourable Stewart Mclnnes, P.C., M.P. 

Public Works 

1981; by Canada Lands Company Limited, under the Canada 
Business Corporations Act. 

Roger Beaulieu 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 



1986-87 



At the end of the period 

Total Assets 

Obligations to the private sector 

Obligations to Canada 

Equity of Canada 

Cash from Canada in the period 

— budgetary 

— non-budgetary 



1985-86 



1984-85 



1983-84 



0.6 


1.9 


5.7 


1.8 


nil 


nil 


nil 


nil 


0.1 


nil 


nil 


nil 


nil 


nil 


nil 


nil 


3.3 


5.9 


31.6 


12.6 


nil 


nil 


nil 


nil 



PUBLIC ACCOUNTS, 1986-87 

CANADA LANDS COMPANY (LE VIEUX-PORT DE MONTREAL) LIMITED 

AUDITOR'S REPORT 

TO THE MINISTER OF PUBLIC WORKS 

I have examined the balance sheet of Canada Lands Company (Le 
Vieux-Port de Montreal) Limited as at March 31, 1987 and the state- 
ments of transactions and changes in fmancial position for the year 
then ended. My examination was made in accordance with generally 
accepted auditing standards, and accordingly included such tests and 
other procedures as I considered necessary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the Corporation as at March 31, 1987 and the results of its 
operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the financial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, the charter 
and by-laws of the Corporation, as well as the agreement between the 
Corporation and Her Majesty in right of Canada represented by the 
Minister of Public Works. 

Raymond Dubois, C.A. 
Deputy Auditor General 
for the Auditor General of Canada 
Ottawa, Canada 
May 28, 1987 



75 



BALANCE SHEET AS AT MARCH 3 1 , 1 987 



ASSETS 



1987 



1986 



LIABILITIES 



1987 



1986 



Cash and temporary investments 382,388 1,544,657 

Accounts receivable 101,741 44,000 

Due from Receiver General for Canada (Note 3) 124,748 288,795 

Prepaid expenses 15,801 15,072 



624,678 1,892,524 



Accounts payable 408,912 1,607,019 

Due to Minister of Public Works (Note 4) 215,766 285,505 

624,678 1,892,524 
SHAREHOLDER'S EQUITY 

Capital stock (Note 5) 



624,678 1,892,524 



Approved by the Board: 

ROGER BEAULIEU 
Director 

BENOiT LEMAY 
Director 



76 PUBLIC ACCOUNTS, 1986-87 

CANADA LANDS COMPANY (LE VIEUX-PORT DE MONTREAL) LIMITED— Continued 

STATEMENT OF TRANSACTIONS 

CARRIED OUT AS AGENT AND ON BEHALF OF THE 

MINISTER OF PUBLIC WORKS STATEMENT OF CHANGES IN FINANCIAL POSITION 

FOR THE YEAR ENDED MARCH 3 1 , 1 987 FOR THE YEAR ENDED MARCH 31,1987 



1987 



1986 



1987 



1986 



Expenditures 

Operating 

Maintenance of property 853,271 737,856 

Permanent personnel 629,199 765,241 

Administration 418,904 393,049 

Communications and animation 388,142 359,156 

Professional services 320,547 264,524 

Bad debt 130,223 

2,610,063 2,650,049 

Capital 1,139,026 4,404,754 

Total of expenses 3,749,089 7,054,803 

Proceeds from other than the direct use of fixed 
assets 

Concessions 340,179 74,957 

Interest, related principally to the receipt of 
parliamentary appropriations in advance of 

needs 61,071 310,524 

Other 1,100 279 

4C 

Net expenditures to be funded (Note 4) 

Cumulative net expenditures since November 26, 
1981 

Proceeds from the direct use of fixed assets 

Rentals to be remitted (Note 3) 

Cumulative direct proceeds since November 26, 
1981 

Excess of net expenditures over direct proceeds 
For the year 

Cumulative since November 26, 1981 59,969,396 56,806,734 



402,350 


385,760 


3,346,739 


6,669,043 


60,581,634 


57,234,895 


184,077 


109,142 


612,238 


428,161 


3,162,662 


6,559,901 



Operating activities 
Transactions carried out as agent and on 
behalf of the Minister of Public Works 

Operating expenses 2,610,063 

Proceeds from other than the direct use of 

fixed assets (402,350) 

Proceeds from the direct use of fixed assets ( 1 84,077) 

Remittances to the Consolidated Revenue 

Fund 20,030 

2,043,666 

Increase (decrease) in accounts receivable 57,741 

Increase in prepaid expenses 729 

Decrease in accounts payable 1,198,107 



2,650,049 

(385,760) 
(109,142) 

113,594 



2,268,741 

(63,406) 

6,854 

4,103,328 



3,300,243 



6,315,517 



Investing activities 
Capital expenses carried out as agent and on 

behalf of the Minister of Public Works 1,139,026 4,404,754 

Financing activities 
Parliamentary appropriation (3,277,000) (8,405,968) 

Cash and temporary investments 

Decrease for the year (1,162,269) (2,314,303) 

Balance at beginning of the year 1 ,544,657 3,858,960 

Balance at end of the year 382,388 1,544,657 



NOTES TO FINANCIAL STATEMENTS 
AS AT MARCH 31, 1987 

1 . Authority and activities 

Canada Lands Company (Le Vieux-Port de Montreal) Limited 
was incorporated on November 26, 1981 under the Canada Busi- 
ness Corporations Act and is a wholly-owned subsidiary of 
Canada Lands Company Limited, a Crown corporation named in 
Part I of Schedule C to the Financial Administration Act. 

Effective February 1, 1982, pursuant to an agreement between 
the Corporation and Her Majesty in Right of Canada represented 
by the Minister of Public Works, the Corporation is responsible 
for developing and for promoting the development of the lands of 
Le Vieux-Port de Montreal, and for administering, managing and 
maintaining the property of Her Majesty located therein. The 
Corporation fulfills this responsibility in the name and for the 
account of the Minister of Public Works who continues to hold 
title to the fixed assets for the benefit of Her Majesty. 

2. Significant accounting policies 

(a) Financial statement presentation 

The statements present transactions carried out by the Cor- 
poration as agent and on behalf of the Minister of Public 
Works. All expenditures, net of proceeds from other than the 
direct use of fixed assets, are reimbursable to the Corpora- 
tion. Proceeds from the direct use of fixed assets, principally 
rental revenues, are payable to the Receiver General for 
Canada. 

Differences between parliamentary appropriations received 
and net reimbursable expenditures are recorded by the Cor- 
poration as due from or due to the Minister of Public Works. 



PUBLIC ACCOUNTS, 1986-87 77 

CANADA LANDS COMPANY (LE VIEUX-PORT DE MONTREAL) LIMITED— Concluded 

NOTES TO FINANCIAL STATEMENTS 
AS AT MARCH 31, \9%1— Concluded 

(b) Expenditures of a capital nature 

Expenditures of a capital nature represent costs which sig- 
nificantly increase the value or extend the useful lives of 
properties administered by the Corporation. They also 
include costs of demolishing structures. 

(c) Employee termination benefits 

On termination of employment, employees of the Corpora- 
tion are entitled to certain benefits provided for under the 
salary administration policy of the Corporation. The cost of 
these benefits is recorded in the year in which they are 
earned by the employees. The estimated liability resulting 
from this policy is included in accounts payable. 

(d) Retirement savings plan 

The Corporation has established a group retirement savings 
plan under which a single trust was established with a private 
sector organization in order to accumulate contributions to 
provide a retirement income for the employees through 
individually registered retirement savings plans. All contribu- 
tions are paid by the employees, the Corporation acting solely 
as an agent without incurring any liability. 

3. Due from Receiver General for Canada 

1987 1986 



$ S 

Balance receivable at beginning of the year 288,795 284,343 

Direct proceeds 184,077 109,142 

104,718 175,201 

Remittances to the Consolidated Revenue Fund 20,030 1 1 3,594 



Balance receivable at end of the year 124,748 288,795 

4. Due to Minister of Public Works 

1987 1986 



Balance payable (receivable) at beginning 

of the year 285,505 (1,451,420) 

Net expenditures (3,346,739) (6.669,043) 

(3,061,234) (8,120,463) 

Less: 
funds drawn from Department of Public 
Works for Canada Lands Com- 
pany (Le Vieux-Port de Montreal) 
Limited 

Vote 70 in 1985 

Vote 45 in 1986 

Vote 40 in 1987 

reimbursements 

Balance payable at end of the year 



S. Capital stock 

The Corporation is authorized to issue a single share, to be held 
in trust for Her Majesty in Right of Canada, which may not be 
transferred without the consent of the Governor in Council. The 
authorized share has been issued in consideration of services ren- 
dered. 



3,277.000 


2,512,000 
6,029,350 

(135,382) 


3,277,000 


8,405,968 


215,766 


285,505 



7» 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
CANADA LANDS COMPANY (VIEUX-PORT DE QUEBEC) INC. 



MANDATE 

Implement a general development plan for certain lands of the Vieux-Port de Quebec; administer, manage, promote 
and operate those lands and their developments. 

BACKGROUND 

Since August 1, 1981, the corporation has developed and managed the Crown lands of the Vieux-Port; for two years, 
ending February 27, 1986, it held, managed and directed a further parcel of Vieux-Port land and the improvements 
on it. 

CORPORATION DATA 

HEAD OFFICE 1 1 2 Dalhousie Street 

P.O. Box 95, Station B 
Quebec City, Quebec 
G1K7A1 

STATUS — Not an agent of Her Majesty 

— A wholly-owned subsidiary of Canada Lands Company Limited; 
it has been directed by Order in Council (PC 1987-86) to report 
its affairs as if it is a parent Crown corporation. 

APPROPRIATE MINISTER The Honourable Stewart Mclnnes, P.C, M.P. 

DEPARTMENT Public Works 

YEAR AND MEANS 1981; by Canada Lands Company Limited, under the Canada 

OF INCORPORATION Business Corporations Act. 

CHAIRMAN AND CHIEF Robert Labbe 

EXECUTIVE OFFICER 

AUDITOR The Auditor General of Canada 

FINANCIAL SUMMARY ($ million) The financial year ends March 3L 

1986-87 1985-86 1984-85 1983-84 

At the end of the period 

Total Assets 1.8 2.0* 7.3 14.5 

Obligations to the private sector nil nil nil nil 

Obligations to Canada 0.9 0.4 0.4 nil 

Equity of Canada 0.2 0.2 3.8 nil 

Cash from Canada in the period 

— budgetary 5.0 5.5 27.0 32.5 

— non-budgetary nil nil nil nil 

* Lands and improvements returned to Canada in the period had been recorded in the corporation's accounts at a 
value of $3.6 million. 



HJBUC ACCOUNTS, 1986-87 
[^^CANADA LANDS COMPANY (VIEUX-PORT DE QUEBEC) INC. 

AUDITOR'S REPORT 

TO THE MINISTER OF PUBLIC WORKS 

I have examined the balance sheet of Canada Lands Company 
(Vieux-Port de Quebec) inc. as at March 31, 1987 and the statements 
of operations and retained earnings, contributed surplus, transactions 
and changes in fmancial position for the year then ended. My exami- 
nation was made in accordance with generally accepted auditing 
standards, and accordingly included such tests and other procedures as 
I considered necessary in the circumstances. 

In my opinion, these fmancial statements present fairly the flnancial 
position of the Corporation as at March 31, 1987 and the results of its 
operations and the changes in its flnancial position for the years then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the flnancial state- 
ments have, in all signiflcant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, the charter 
and by-laws of the Corporation, and the agreement between the Cor- 
poration and Her Majesty in Right of Canada represented by the Min- 
ister of Public Works. 

Raymond Dubois, C.A. 
Deputy Auditor general 
for the Auditor General of Canada 
Ottawa, Canada 
June 26, 1987 



79 



BALANCE SHEET AS AT MARCH 31, 1987 



ASSETS 



1987 



1986 



LIABILITIES 



1987 



1986 



Cash and term deposit 924,217 1,079,467 

Accounts receivable (Note 3) 862,537 784,858 

Due from Receiver Genera! for Canada (Note 4) 120,465 



1,786,754 1,984,790 



Accounts payable 643,864 1,276,220 

Due to Receiver General for Canada (Note 4) 657,623 

Due to Minister of Public Works (Note 5) 281,857 505,160 

1,583,344 1,781,380 

SHAREHOLDER'S EQUITY 

Capital stock (Note 6) 

Contributed surplus 178,250 178,250 

Retained earnings 25,160 25,160 



1,786,754 1,984,790 



Approved by the Board: 

lOBERT LABBE 
')irector 

rOLETTE SAVARD 
'director 



80 



PUBLIC ACCOUNTS, 1986-87 



CANADA LANDS COMPANY (VIEUX-PORT DE QUEBEC) INC.— Continued 



STATEMENT OF TRANSACTIONS 

CARRIED OUT AS AGENT AND ON BEHALF OF 

THE MINISTER OF PUBLIC WORKS 

FOR THE YEAR ENDED MARCH 31, 1987 



1987 



1986 



Expenditures 

Expenditures incurred for goods received or ser- 
vices rendered 
Operating 

Administration, finance and property 3,246,178 

Public affairs and animation 1,170,751 

Management's office 293,641 

4,710,570 
Capital 704,453 

Total 5.415,023 

Proceeds from other than the direct use of fixed 
assets 

Animation 302,612 

Interest, related principally to the receipt of 
parliamentary appropriations in advance of 

needs 88.120 

Other proceeds 3.373 

3! 

Net expenditures to be funded (Note 5) 

Cumulative net expenditures since April 9. 1981 ... 

Proceeds from the direct use of fixed assets 
Rentals to be remitted (Note 4) 

Cumulative direct proceeds since April 9, 1981 .. 

Excess of net expenditures over direct proceeds 
For the year 



3,580,516 

1,248,021 

340,981 



5,169,518 
616.819 



5,786.337 



160,942 
9,049 



394,105 


169.991 


5.020.918 


5.616.346 


99.772,748 


94.751.830 


778.088 


713.788 


2.512.927 


1,734,839 


4.242.830 


4,902,558 



Cumulative since April 9, 1981 97.259.821 93,016,991 



STATEMENT OF OPERATIONS AND RETAINED EARNINGS 
FOR THE YEAR ENDED MARCH 31, 1987 (NOTE 1) 





1987 


1986 


Rental revenues 


$ 

25.160 
25,160 


S 

( 1 1 months) 

392,330 

382,087 

10,243 

14,917 

25,160 


Expenditures 


Net income for the year 

Retained earnings at beginning of the year 

Retained earnings at end of the year 



STATEMENT OF CONTRIBUTED SURPLUS 
FOR THE YEAR ENDED MARCH 31, 1987 



Balance at beginning of the year .... 
Fixed assets retroceded to Canada . 
Balance at end of the year 



1987 


1986 


$ 

178,250 


S 
3,790 000 




3,611 750 






178,250 


178.250 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED MARCH 31, 1987 



1987 



1986 



Operating activities 
Transactions carried out as agent and on behalf 
of the Minister of Public Works 

Operating expenditures 4,710,570 5,169,518 

Proceeds from the direct use of fixed assets (778,088) (713,788) 

Proceeds from other than the direct use of 

fixed assets (394,105) (169,991) 

Remittances to the Consolidated Revenue 

Fund 766,713 

Results for the year 

Net income of the year (10,243) 

Non-cash item 
Depreciation (81.700) 

3,538.377 4.960,509 

Increase (decrease) in accounts receivable 77,679 (300,967) 

Decrease in accounts payable 632,356 1.719,602 



4,248,412 6,379,144 



Investing activities 
Capital expenses carried out as agent and on 
behalfoftheMinisterof Public Works 704,453 616,819 

Financing activities 
Parliamentary appropriation (4,797,615) (5,660,970) 

Cash and term deposit 

Decrease for the year 155,250 1,334.993 

Balance at beginning of the year 1.079.467 2.414,460 

Balance at end of the year 924,217 1.079,467 



NOTES TO THE FINANCIAL STATEMENTS 
MARCH 31, 1987 

1 . Authority and activities 

Canada Lands Company (Vieux-Port de Quebec) inc. was 
incorporated on April 9, 1981 under the Canada Business Corpo- 
rations Act and is a wholly-owned subsidiary of Canada Lands 
Company Limited, a Crown corporation named in Part I of 
Schedule C to the Financial Administration Act. 

Effective August 1, 1981, pursuant to an agreement between 
the Corporation and Her Majesty in Right of Canada represented 
by the Minister of Public Works, the Corporation is responsible 
for the implementation of a general development plan for the 
lands of the Vieux-Port de Quebec under its jurisdiction and for 
administering, managing, promoting and operating such lands and 
their developments. The Corporation fulfils this responsibility in 
the name and for the account of the Minister of Public Works 
who continues to hold title to the fixed assets for the benefit of 
Her Majesty. 

From February 9, 1984 to February 27, 1986, the Corporation 
was responsible for its own account for the management, charge 
and direction of a parcel of land together with the improvements 
thereon which had been transferred to it, subject to certain limit- 
ing conditions, by order of the Governor General in Council on 
February 9, 1984. This property was retroceded on February 27, 
1986. 



PUBLIC ACCOUNTS, 1986-87 



M 



CANADA LANDS COMPANY (VIEUX-PORT DE QUEBEC) INC.— Continued 



NOTES TO THE FINANCIAL STATEMENTS 
MARCH 31, \9S1— Concluded 

2. Significant accounting policies 

(a) Financial statements presentation 

The Statement of Operations presents the transactions car- 
ried out by the Corporation for the management, charge and 
direction of the assets held from February 9, 1984 to Febru- 
ary 27, 1986 for the benefit of Her Majesty. 
The Statement of Transactions presents transactions carried 
out by the Corporation as agent and on behalf of the Minis- 
ter of Public Works. All expenditures, net of proceeds from 
other than the direct use of fixed assets, are reimbursable to 
the Corporation. Proceeds from the direct use of fixed assets, 
principally rentals, are payable to the Receiver General for 
Canada. 

Differences between parliamentary appropriations received 
and net reimbursable expenditures are recorded by the Cor- 
poration as due from or due to the Minister of Public Works. 

(b) Expenditures of a capital nature 

Expenditures of a capital nature represent costs which sig- 
nificantly increase the value or extend the useful lives of 
properties administered or owned by the Corporation. They 
also include costs of acquiring and demolishing structures. 

(c) Fixed assets and depreciation 

Fixed assets transferred free of charge from Canada on Feb- 
ruary 9, 1984 were recorded at their current value at the date 
of transfer, with the offset being credited to contributed sur- 
plus. Depreciation was calculated under the straight line 
method using a rate of 2.5% per annum based on the 
estimated useful life for the main structure of the building. 

These were retroceded free of charge to Canada on February 
27, 1986. The retrocession of these fixed assets was recorded 
at their net book value. 

3. Accounts receivable 

The accounts receivable include the following amounts: 

1987 1986 



S $ 

Public services organization.. 471,929 468,368 

Canada Ports Corporation 175,000 175,000 

Others 215,608 141,490 



862,537 784,858 



The amount receivable from the public services organization is 
for specific work carried out by the Corporation during the year 
1982-83. The related cost is recoverable upon the signing of a 
protocol by the Corporation, the Canada Ports Corporation and 
the organization. The protocol, not yet signed, provides for the 
transfer of certain privileges from the Corporation and the 
Canada Ports Corporation. The work is completed for all practi- 
cal purposes. The Corporation has not yet decided to transfer the 
privileges requested by the organization. It is possible that the 
Corporation may not recover the related cost and would have to 
account for it as a capital expenditure. 

The amount receivable from the Canada Ports Corporation 
derives from a protocol providing for the reimbursement to the 
Corporation of expenditures it incurred for work carried out 
inside the strip of land upon which the Canada Ports Corporation 
has operational jurisdiction. This protocol provides that the reim- 
bursement will be made out of a global amount approved by the 
Treasury Board to the Canada Ports Corporation, if there are 



funds remaining available. As at March 31, 1987, the Corpora- 
tion had claimed for the reimbursement of $650,000 for exjsendi- 
tures incurred mainly during the year 1982-83, of which $475,000 
had been received to that date. Not being able to determine the 
funds remaining available to the Canada Ports Corporation, the 
Corporation cannot establish the additional amount it might 
expect to receive, or any amount up to the $475,000 already 
received it might have to refund. Any difference established at the 
time of the final settlement of this transaction will be accounted 
for as a capital expenditure. 

4. Due to (from) Receiver General for Canada 

1987 1986 

S S 

Balance at beginning of the year (120,465) (67,540) 

Direct proceeds 778,088 713,788 

657,623 646,248 

Remittances to the Consolidated Revenue Fund (766,713) 

Balance at end of the year 657,623 (120,465) 



5. Due to Minister of Public Works 

1987 1986 

S S 

Balance at beginning of the year 505,160 460,536 

Net expenditures 5.020.918 5.616,346 

4,515,758 5,155,810 
Less: funds drawn from Department of Public 
Works vote for Canada Lands 
Company (Vieux-Port de Quebec) inc. 

Vote 40 in 1985-86 283,615 5,660,970 

Vote 35 in 1986-87 4,514,000 

4,797,615 5,660,970 

Balance at end of the year 281.857 505.160 



6. Capital stock 

The Corporation is authorized to issue a single share, to be held 
in trust for Her Majesty in Right of Canada and which may not 
be transferred without the consent of the Governor in Council. 
The authorized share has been issued in consideration of services 
rendered. 

7. Contingencies 

The Corporation and the corporation Quebec 1534-1984 signed 
a protocol of general understanding determining the rights and 
obligations of each party for the staging in 1984 of a festive event 
and for the use of the site and of the equipment under the jurisdic- 
tion of the Corporation. Under the terms of the agreement, the 
Corporation has not granted the right to use the totality of the 
site, reserving for itself some premises that it might rent for com- 
mercial purposes. Leases were signed but, because of poor attend- 
ance, several were modified, cancelled or abandoned. The Corpo- 
ration has received claims arising from those leases and from 
other activities, for a total in excess of $3.3 million, and more may 
be received. Management is of the opinion that these claims will 
not result in any significant financial responsibility for the Corpo- 
ration. 

8. Disposal of lands 

The Corporation has embarked in a program under which it 
should dispose in the short term of the lands under its responsibil- 
ity to public sector organizations or to private interests. 



82 



PUBLIC ACCOUNTS, 1986-87 



CANADA LANDS COMPANY (VIEUX-PORT DE QUEBEC) INC.— Continued 

AUDITOR'S REPORT 

TO THE MINISTER OF PUBLIC WORKS 

I have examined the balance sheet of Canada Lands Company 
(Vieux-Port de Quebec) inc. as at March 31, 1986 and the statements 
of operations and retained earnings, contributed surplus, and of trans- 
actions for the year then ended. My examination was made in accord- 
ance with generally accepted auditing standards, and accordingly 
included such tests and other procedures as I considered necessary in 
the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the Corporation as at March 31, 1986 and the results of its 
operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the financial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, the charter 
and by-laws of the Corporation, and the agreement between the Cor- 
poration and Her Majesty in Right of Canada represented by the Min- 
ister of Public Works, except that the Corporation did not maintain 
proper books of account and records and financial control and infor- 
mation systems from which it may prepare its financial statements. To 
prepare the financial statements as at March 31, 1986, it was neces- 
sary, as compensatory procedures, to analyse certain transactions 
which had not been reflected fairly in the accounts and those which 
were recorded in the subsequent year. 



Kenneth M. Dye, F.C.A. 
Auditor General of Canada 



Ottawa, Canada 
December 24, 1 986 



BALANCE SHEET AS AT MARCH 31, 1986 



ASSETS 1986 1985 

$ $ 

Cash 1,079,467 2,414,460 

Accounts receivable (Note 3) 784,858 1,085,825 

Due from Receiver General for Canada (Note 4) 120,465 67,540 

Fixed assets 3,693,450 



LIABILITIES 



Accounts payable (Note 5) 

Due to Minister of Public Works (Note 6). 

SHAREHOLDER'S EQUITY 

Capital stock (Note 7) 

Contributed surplus 

Retained earnings 



1986 



1985 



1,984,790 7,261,275 



s 


$ 


1,276,220 
505,160 


2,995,822 
460,536 


1,781,380 


3,456,358 


178,250 
25,160 


3,790,000 
14,917 



1,984,790 7,261,275 



Approved by the Board: 

ROBERT LABBE 

Director 

COLETTE SAVARD 
Director 



PUBLIC ACCOUNTS, 1986-87 



83 



CANADA LANDS COMPANY (VIEUX-PORT DE QUEBEC) INC.— Continued 

STATEMENTS OF OPERATIONS 
AND RETAINED EARNINGS 
FOR THE YEAR ENDED MARCH 31. 1986 
(NOTE 1) 



1986 


1985 


(11 months) (12 months) 


S 

392.330 


$ 

408.335 


149,392 

108,687 

81,700 

42,308 


145.616 

1 1 2.682 

89.125 

45.244 


382,087 


392.667 


10,243 
14.917 


15.668 
(751) 



Rentals 

Heating and services 

Grants in lieu of taxes 

Depreciation 

Repairs and maintenance 

Net income 

Retained earnings (Deficit) at beginning of the 

year 

Retained earnings at end of the year 25.160 14,917 

STATEMENT OF CONTRIBUTED SURPLUS 
FOR THE YEAR ENDED MARCH 31, 1986 

1986 1985 

$ $ 

Balance at beginning of the year 3.790,000 3,790.000 

Fixed assets retroceded to Canada 3.61 1,750 

Balance at end of the year 178,250 3,790,000 

STATEMENT OF TRANSACTIONS 

CARRIED OUT AS AGENT AND ON BEHALF OF 

THE MINISTER OF PUBLIC WORKS 

FOR THE YEAR ENDED MARCH 31, 1986 



1986 



1985 



3,321,031 


2.686,504 


1,248.021 


1,188,875 


340.981 


541.085 


259.485 


296,946 


5,169.518 


4,713,410 


616,819 


18,132,436 




19,584 




3,407,345 


5.786.337 


26,272,775 



Expenditures 

Expenditures incurred for goods received or ser- 
vices rendered 
Operating 

Administration, finance and property 

Public affairs and animation 

Management's office 

Planning and development 

Capital 

Employment program — Job creation 

Quebec 1534-1984 

Total 



Proceeds from other than the direct use of fixed 

assets 
Interest, related principally to the receipt of 

parliamentary appropriations in advance of 

needs 160.942 258.720 

Other proceeds 9.049 320 

Net expenditures to be funded (Note 6) 

Cumulative net expenditures since April 9. 1981 .. 

Proceeds from the direct use of fixed assets 
Rentals to be remitted (Note 4) 

Cumulative direct proceeds since April 9. 1981 . 

Excess of net expenditures over direct proceeds 

For the year 

Cumulative since April 9. 1981 ' 93,016.991 88,114.433 



169.991 


259.040 


5,616,346 


26.013.735 


94,751,830 


89,135,484 


713.788 


636,814 


1.734.839 


1,021.051 


4,902,558 


25.376,921 



NOTES TO THE FINANCIAL STATEMENTS 
MARCH 31, 1986 

1 . Authority and activities 

Canada Lands Company (Vieux-Port de Quebec) Inc. was 
incorporated on April 9, 1981 under the Canada Business Corpo- 
rations Act and is a wholly-owned subsidiary of Canada Lands 
Company Limited, a Crown corporation named in Part I of 
Schedule C to the Financial Administration Act. 

Effective August 1, 1981, pursuant to an agreement between 
the Corporation and Her Majesty in Right of Canada represented 
by the Minister of Public Works, the Corporation is responsible 
for the implementation of a general development plan for the 
lands of the Vieux-Port de Quebec under its jurisdiction and for 
administering, managing, promoting and operating such lands and 
their developments. The Corporation fulfils this responsibility in 
the name and for the account of the Minister of Public Works 
who continues to hold title to the fixed assets for the benefit of 
Her Majesty. 

From February 9, 1984 to February 27, 1986, the Corporation 
was responsible for its own account for the management, charge 
and direction of a parcel of land together with the improvements 
thereon which had been transferred to it, subject to certain limit- 
ing conditions, by order of the Governor General in Council on 
February 9, 1984. This property was retroceded on February 27, 
1986. 

2. Significant accounting policies 

(a) Financial statements presentation 

The Statement of Operations presents the transactions car- 
ried out by the Corporation for the management, charge and 
direction of the assets held from February 9, 1984 to Febru- 
ary 27, 1986 for the benefit of Her Majesty. 

The Statement of Transactions presents transactions carried 
out by the Corporation as agent and on behalf of the Minis- 
ter of Public Works. All expenditures, net of proceeds from 
other than the direct use of fixed assets, are reimbursable to 
the Corporation. Proceeds from the direct use of fixed assets, 
principally rentals, are payable to the Receiver General for 
Canada. 

Differences between parliamentary appropriations received 
and net reimbursable expenditures are recorded by the Cor- 
poration as due from or due to the Minister of Public Works. 

(b) Expenditures of a capital nature 

Expenditures of a capital nature represent costs which sig- 
nificantly increase the value or extend the useful lives of 
properties administered or owned by the Corporation. They 
also include costs of acquiring and demolishing structures. 

(c) Fixed assets and depreciation 

Fixed assets transferred free of charge from Canada on Feb- 
ruary 9, 1984 were recorded at their current value at the date 
of transfer, with the offset being credited to contributed sur- 
plus. Depreciation was calculated under the straight line 
method using a rate of 2.5% per annum based on the 
estimated useful life for the main structure of the building. 

These were retroceded free of charge to Canada on February 
27, 1986. The retrocession of these fixed assets was recorded 
at their net book value. 



84 



PUBLIC ACCOUNTS, 1986-87 



CANADA LANDS COMPANY (VIEUX-PORT DE QUEBEC) INC.— Concluded 



NOTES TO THE FINANCIAL STATEMENTS 
MARCH 31, \9i6— Concluded 

3. Accounts receivable 

The accounts receivable include the following amounts: 

1986 1985 



Public services organization 468,368 467,816 

Canada Ports Corporation 175,000 175,000 

Department of Public Works (Note 5) 54,824 

Others 141,490 388,185 



784,858 1,085,825 



The amount receivable from the public services organization is 
for specific work carried out by the Corporation during the year 
1982-83. The related cost is recoverable upon the signing of a 
protocol by the Corporation, the Canada Ports Corporation and 
the organization. The protocol, not yet signed, provides for the 
transfer of certain privileges from the Corporation and the 
Canada Ports Corporation. The work is completed for all practi- 
cal purposes. The Corporation has not yet decided to transfer the 
privileges requested by the organization. It is possible that the 
Corporation may not recover the related cost and would have to 
account for it as a capital expenditure. 

The amount receivable from the Canada Ports Corporation 
derives from a protocol providing for the reimbursement to the 
Corporation of expenditures it incurred for work carried out 
inside the strip of land upon which the Canada Ports Corporation 
has operational jurisdiction. This protocol provides that the reim- 
bursement will be made out of a global amount approved by the 
Treasury Board to the Canada Ports Corporation, if there are 
funds remaining available. As at March 31, 1986, the Corpora- 
tion had claimed for the reimbursement of expenditures totalling 
$650,000 for expenditures incurred mainly during the year 
1982-83, of which $475,000 had been received to that date. Not 
being able to determine the funds remaining available to the 
Canada Ports Corporation, the Corporation cannot establish the 
additional amount it might expect to receive, or any amount up to 
the $475,000 already received it might have to refund. Any differ- 
ence established at the time of the final settlement of this transac- 
tion will be accounted for as a capital expenditure. 

4. Due from Receiver General for Canada 



Balance receivable at beginning of the year 
Direct proceeds 

Remittances to the Consolidated Revenue Fund 
Balance receivable at end of the year 



1986 


1985 


$ 

67,540 
713,788 


$ 

704,354 
636,814 


646,248 
766,713 


67,540 


120,465 


67,540 



6. Due to Minister of Public Works 

1986 1985 

S $ 

Balance payable (receivable) at begining of the 

year 460,536 (242,329) 

Net expenditures 5,616,346 26,013,735 

5,155,810 26,256,064 
Less: 

funds drawn from Department of Public 
Works Vote 40 (Votes 15 and 65 in 1985) 
for Canada Lands Company (Vieux-Port de 

Quebec) Inc 5,660,970 26,516,600 

funds drawn from Department of Communica- 
tions Vote 10 for the special cultural initia- 
tives Program 200,000 

5,660.970 26,716,600 
Balance payable at end of the year 505,160 460,536 



7. Capital stock 

The Corporation is authorized to issue a single share, to be held 
in trust for Her Majesty in Right of Canada and which may not 
be transferred without the consent of the Governor in Council. 
The authorized share has been issued in consideration of services 
rendered. 

8. Contingencies 

The Corporation and the corporation Quebec 1534-1984 signed 
a protocol of general understanding determining the rights and 
obligations of each party for the staging in 1 984 of a festive event 
and for the use of the site and of the equipment under the jurisdic- 
tion of the Corporation. Under the terms of the agreement, the 
Corporation has not granted the right to use the totality of the 
site, reserving for itself some premises that it might rent for com- 
mercial purposes. Leases were signed but, because of poor attend- 
ance, several were modified, cancelled or abandoned. The Corpo- 
ration has received claims arising from those leases, for a total in 
excess of $3.0 million, and more may yet be received. Manage- 
ment is of the opinion that these claims will not result in any sig- 
nificant financial responsibility for the Corporation. 



5. Accounts payable 

The accounts payable include an amount of $182,704 due to the 
Department of Public Works as at March 31, 1986 ($54,824 
receivable as at March 31, 1985) as follows: 



1986 



1985 



Grants in lieu of taxes paid by the Department 
for the account of the Corporation since Feb- 
ruary 9, 1984 230,523 121,836 

Rentals received to be reimbursed 150,214 

Claim for late delivery of the leased premises 89,546 89,546 

470,283 211,382 

Less: cost of fitting-up premises for renting 287,579 266,206 

Due to (due from) at the end of the year 182,704 (54,824) 



PUBLIC ACCOUNTS, 1986-87 



85 



SUMMARY PAGE 
CANADA MORTGAGE AND HOUSING CORPORATION 



MANDATE 

To promote the construction of new houses, the repair and modernization of existing houses and the improvement of 
housing and living conditions. 

BACKGROUND 

Established in 1946, the corporation acts as the government's agent in the provision of grants, contributions and 
subsidies for the advancement of housing and community development. It conducts research and provides policy 
advice to government; it administers the Mortgage Insurance Fund, the prime purpose of which is to ensure an 
adequate supply of mortgage funds for housing, and it lends to groups and individuals for housing purposes and 
invests in housing-related projects. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



682 Montreal Road 
Ottawa, Ontario 
K1A0P7 

—Schedule C, Part I 

— an agent of Her Majesty, except when s.l4 of its Act applies. 

The Honourable Stewart Mclnnes, P.C., M.P. 

Public Works 

1946; by the Central Mortgage and Housing Corporation Act 
(R.S.C. 1970, C-16). 

George D. Anderson 

Robert E. Jarvis, Q.C. 
Deloitte Haskins & Sells 



FINANCIAL SUMMARY ($ million) The financial year is the calendar year. 

1986 

At the end of the year 

Total Assets 9,815 

Obligations to the private sector nil 

Obligations to Canada 9,544 

Equity of Canada 50 

Cash from Canada in the year 

— budgetary 1,355 

— non-budgetary 222 



1985 


1984 


1983 
(restated) 


10,051 


10,277 


10,383 


nil 


nil 


nil 


9,802 


9,990 


10,212 


50 


50 


50 


1,656 


1,728 


1,890 


293 


374 


424 



96 



PUBLIC ACCOUNTS, 1986-87 



CANADA MORTGAGE AND HOUSING CORPORATION 



MANAGEMENT'S RESPONSIBILITY FOR 
FINANCIAL REPORTING 

The Management of the Corporation is responsible for establishing 
and maintaining a system of books, records, internal controls and man- 
agement practices to provide reasonable assurance that: reliable finan- 
cial information is produced; the assets of the Corporation are safe- 
guarded and controlled; the transactions of the Corporation are in 
accordance with the relevant legislation, regulations and by-laws of the 
Corporation; the resources of the Corporation are managed efficiently 
and economically and the operations of the Corporation are carried out 
effectively. 

Management is also responsible for the integrity and objectivity of 
the financial statements. The accompanying financial statements of 
the Corporation as at December 31, 1986 were prepared by manage- 
ment in accordance with the accounting policies, consistently applied, 
as described in the notes to the financial statements. The financial 
information contained elsewhere in this Annual Report is consistent 
with that in the financial statements. 

The Board of Directors is responsible for ensuring that management 
fulfills its responsibilities for financial reporting and internal control. 
The Board exercises its responsibilities through the Audit Committee 
which includes a majority of members who are not officers of the Cor- 
poration. The Committee meets from time to time with management, 
internal audit staff and the independent external auditor to review the 
manner in which these groups are performing their responsibilities and 
to discuss auditing, internal controls and other relevant financial mat- 
ters. The Audit Committee has reviewed the financial statements with 
the external auditor and has submitted its report to the Board of 
Directors. The Board of Directors has reviewed and approved the 
financial statements. 

The financial statements have been examined by the auditor, Robert 
D. Hepburn, C.A. of the firm Deloitte Haskins & Sells and his reports 
offer an independent opinion on the financial statements to the Minis- 
ter responsible for Canada Mortgage and Housing Corporation. 

G.D. Anderson 
President and Chief Executive Officer 



FINANCIAL STATEMENTS 
DECEMBER 31, 1986 

Canada Mortgage and Housing Corporation was incorporated as a 
Crown Corporation by an Act of Parliament on January 1, 1946. Its 
activities are regulated by the National Housing Act, the Canada 
Mortgage and Housing Corporation Act and, in certain respects, the 
Financial Administration Act, and include: 

Corporate Account 

Financing housing and community improvement through the mak- 
ing of loans and investments under specific conditions at interest rates 
normally at market rates which are generally higher than the rates it 
pays on funds borrowed from the Government of Canada. 

Minister's Account 

Making certain payments or incurring expenses in the process of 
delivering housing programs on behalf of the Government of Canada. 
These payments and expenses include grants, contributions, subsidies, 
loan forgiveness, losses on real estate, losses under federal-provincial 
agreements, interest rate losses, research and development, and speci- 
fied administrative costs. The funding for these activities is provided 
for in Main and Supplementary Estimates which are tabled in Parlia- 
ment. Parliamentary approval is by way of the Appropriations Act 
together with Statutory Authorities which authorize the responsible 
Minister to reimburse the Corporation for the specified payments and 
expenses for the fiscal year concerned. 

Funds Administered 

Administering certain Insurance and Guarantee Funds on behalf of 
the Government of Canada. The Mortgage Insurance Fund is the chief 
instrument for establishing a framework of confidence for mortgage 
lending by private institutions. This instrument facilitates an adequate 
supply of mortgage funds by reducing the risk to lenders and 
encouraging the secondary market trading of mortgages, and thereby 
increasing the access to housing by Canadians. 



Ottawa, Canada 
February 23, 1987 



N.E. Hallendy 
Acting Senior Vice-President Corporate Resources 



PUBLIC ACCOUNTS, 1986-87 



S7 



CANADA MORTGAGE AND HOUSING CORPORATION— Co/ifmwe^/ 

AUDITOR'S REPORT 

TO THE HONOURABLE STEWART D. MClNNES, P.C, M.P. 

MINISTER RESPONSIBLE FOR 

CANADA MORTGAGE AND HOUSING CORPORATION 

I have examined the balance sheet of Canada Mortgage and Hous- 
ing Corporation, Corporate Account as at December 31, 1986, and the 
statements of operations and reserve fund, and changes in financial 
position for the year then ended. My examination was made in accord- 
ance with generally accepted auditing standards and accordingly 
included such tests and procedures as I considered necessary in the cir- 
cumstances. 

In my opinion, these financial statements, present fairly the finan- 
cial position of the Corporation as at December 31, 1986, and the 
results of its operations and changes in its financial position for the 
year then ended in accordance with generally accepted accounting 
principles applied on a basis consistent with that of the preceding year. 

I further report that, in my opinion, the transactions of the Corpora- 
tion that have come to my notice during my examination of the finan- 
cial statements were, in all significant respects, in accordance with the 
Financial Administration Act and regulations, the Canada Mortgage 
and Housing Corporation Act, the National Housing Act, the by-laws 
of the Corporation and any directives given to the Corporation. 



Ottawa, Canada 
February 23, 1987 



Robert D. Hepburn, C.A. 
of the firm Deloitte Haskins & Sells 



CORPORATE ACCOUNT 

BALANCE SHEET AS AT DECEMBER 31, 1986 
(in thousands of dollars) 



ASSETS 

Loans and investments — 
Schedule 

Market housing 

Social housing 

Housing support 

Accounts Receivable 

The Minister 

Other 

Deferred Income Taxes 

Business Premises, Office 
Furniture and Equip- 
ment, at cost 

Accumulated deprecia- 
tion 

Other Assets 



1986 


1985 


LIABILITIES 
Borrowings from the Gov- 


1986 


1985 


























ernment of Canada 




9,513.779 




9.761.059 


1,890,335 




2,044,579 




Cheques Issued in Excess 










6,497,463 




6,475,292 




of Funds on Deposit 




149,998 




106.532 


1,352,168 


9.739,966 


1,435,968 
13,188 


9.955.839 


Accounts Payable and 
Accrued Liabilities 
The Receiver General 
for Canada 


30,472 
3,675 




40,853 
886 




26,301 


Funds administered 




11,587 


37,888 
7,691 


17.455 


30.643 
7.199 


Other 

Unfunded Pension Fund 
Liability 


53,643 


87,790 
13,565 


49,172 


90.911 
4.901 


39,030 




35,939 




CAPITAL AND 




9,765,132 




9.963.403 


24,309 


14,721 
14.866 


21,916 


14,023 
5.699 


RESERVE FUND 

Capital 
Authorized and fully 
paid by the Govern- 
ment of Canada 


25,000 




25,000 












Reserve Fund 


25,000 


50.000 

9,815,132 


25,000 


50.000 










9,815,132 


10,013,403 


10.013.403 



See accompanying notes. 



88 



PUBLIC ACCOUNTS, 1986-87 



CANADA MORTGAGE AND HOUSING CORPORATION— Continued 

CORPORATE ACCOUNT CORPORATE ACCOUNT 



STATEMENT OF OPERATIONS AND RESERVE FUND 
FOR THE YEAR ENDED DECEMBER 31, 1986 
(in thousands of dollars) 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED DECEMBER 31, 1986 
(in thousands of dollars) 





1986 




1985 




Market Housing 

Interest earned 

Gain (Loss) on disposal 
of real estate 


176,772 

(27) 
176,745 
159,501 

585,456 

4,528 
589,984 
551,618 

122,141 

9,535 

738 
132,414 
113,017 


17,244 
38,366 

19,397 

8,597 

83,604 

9,064 

92,668 

44,250 


197,052 

14,242 
211,294 
171,387 

581,397 

463 
581,860 
547,604 

129,049 
12,172 

(1,380) 

139,841 
118,909 




Interest expense 

Social Housing 
Interest earned 


39,907 


Gain on disposal of real 
estate 

Interest expense 

Housing Support 
Interest earned 


34,256 


Gain on disposal of land 
assembly projects 

Gain (Loss) on disposal 
of real estate 




Interest expense 

Other Interest Income 

Margin on Financing 

Operations 

Services to Others 


20,932 

11,511 

106,606 
13,023 


Administrative Expenses ... 


119,629 
44,560 



1985 



Income before Income 
Taxes and Extraordi- 
nary Item 

Income Taxes 

— Current 

— Deferred 

Income before Extraordi- 
nary Item 

Extraordinary Item 

Net Income 

Reserve Fund, beginning 
of year 

Transferred to the 
Receiver General for 
Canada 

Reserve Fund, end of year . 

See accompanying notes. 



24,343 
(492) 



48,418 



23,851 



34,042 
1,776 



24,567 



24,567 
25,000 



49,567 
24,567 



25,000 



75,069 



35,818 



39,251 
5,356 



33,895 
25,000 



58,895 



33,895 



25,000 



48,418 


75,069 


5,520 


(9.996) 


2,393 


2.190 


56.331 


67,263 


453,686 


587,885 


222,100 


293,000 




8,630 


2,789 




8,018 




742,924 


956,778 



351.355 



468,606 

1,273 
13,113 


478,074 
2,691 




874 
10.135 
47.028 


25,284 

33,895 

111 


28,086 

39,654 

122 


786.390 


958,019 



1,241 



1986 



Cash Generated by Operations 
Income before income taxes and extraordinary item 

Add (Deduct): net change in accrued interest 

depreciation 

Repayments of loans and investments 

Borrowings from the Government of Canada 

Decrease in accounts receivable from the Minister... 
Increase in accounts payable to Funds administered 
Other 

Cash Applied to Operations 

Additions to loans and investments 244.108 

Repayment of borrowings from the Government of 
Canada 

Unfunded pension fund liability contribution 

Increase in accounts receivable from the Minister 

Decrease in accounts payable to Funds Adminis- 
tered 

Special pension plan contribution 

Other 

Paid to Receiver General for Canada 

— Federal income taxes 

— Excess in reserve fund 

—Other 

Decrease in Cash 43.466 

See accompanying notes. 



CORPORATE ACCOUNT 

NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, 1986 

1 . Significant Accounting Policies 

In the Corporate Account, the Corporation follows generally 
accepted accounting principles. The financial statements of the 
Mortgage Insurance Fund and the other Insurance and Guarantee 
Funds are not consolidated with these financial statements. The 
principal accounting policies followed by the Corporation are: 

(a) Loans 

Loans are capitalized as funds are advanced. Where loans 
contain forgiveness clauses, such forgiveness is recorded and 
recovered from the Minister when the loans are advanced. 
Loans under certain programs give rise to interest rate losses 
which are recoverable from the Minister. No provisions are 
made for possible losses on loans. Losses on insured loans are 
recoverable from the Mortgage Insurance Fund while prop- 
erty acquired upon default of uninsured loans is subject to 
loss recovery as described under Real Estate. Other losses on 
uninsured loans are recoverable from the Minister. 

(b) Federal-Provincial Agreements 

Loans and investments are made under various cost sharing 
agreements with the provinces and territories to encourage 
development of rental housing, land assembly, co-operative 
housing, rural and native housing and housing rehabilitation. 
Only the Corporation's share of costs plus capitalized interest 



PUBLIC ACCOUNTS, 1986-87 



89 



CANADA MORTGAGE AND HOUSING CORPORATION— Continued 

CORPORATE ACCOUNT 



NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, I9i6— Concluded 

are reflected in these statements. The Corporation's share of 
subsidies and losses related to these agreements are recovered 
from the Minister. Gains on the sale of land assembly are 
recognized as income in the Corporate Account. In account- 
ing for federal-provincial loans and investments, the Corpora- 
tion relies, in the majority of instances, on information pro- 
vided by the provinces and territories. 

(c) Real Estate 

Real estate includes vacant land and properties acquired 
directly by the Corporation, or through the Government of 
Canada at no cost, or through default on uninsured loans. All 
real estate is recorded at cost which includes acquisition costs 
and any modernization and improvement costs. 
Holding costs on real estate acquired directly by the Corpo- 
ration are capitalized up to appraised values after which the 
costs are expensed in the Corporate Account. Net gains and 
losses on the disposal of these properties are recorded in the 
Corporate Account. 

Holding costs on real estate acquired through the Govern- 
ment of Canada at no cost, or through default on uninsured 
loans, are capitalized. Net gains and losses on the disposal of 
these properties are paid to or recovered from the Minister. 
All net operating losses on real estate are recovered from the 
Minister. 

(d) Depreciation 

Depreciation of real estate is recorded on a straight line basis 
over the expected useful life of the properties. 
Depreciation on business premises, office furniture and 
equipment is recorded on a diminishing balance basis. 

(e) Employees' Pension Plan 

Current service costs of the employees' pension plan and 
interest on the unfunded liability are recorded as administra- 
tive expenses in the current year. Experience gains or losses 
are recognized in the year in which they are identified. An 
actuarial valuation is made at least every three years in 
accordance with the provisions of the Pension Benefits Stand- 
ards Act. 

(0 Reserve Fund 

Income or loss after income taxes is transferred to the 
Reserve Fund which is limited by an Order-in-Council to $25 
million. Any excess over this amount is transferred to the 
credit of the Receiver General for Canada. 

(g) Interest Income and Expense 

Interest income and expense are accounted for on the accrual 
basis. 

2. Borrowings from the Government of Canada 

The Corporation borrows from the Government of Canada 
under the provisions of Section 22 of the Canada Mortgage and 
Housing Corporation Act and Sections 40 and 55 of the National 
Housing Act to finance loans and investments. The borrowings 
are evidenced by debentures or other evidences of indebtedness, 
which bear interest at varying rates and are repayable over peri- 
ods not in excess of 50 years. 

3. Contingent Liabilities 

In the normal course of operations, the Corporation is subject 
to legal claims, the effect of which cannot be determined until 
they are settled. At December 31, 1986, most of the claims out- 
standing are not expected to have a result which would be signifi- 
cant in relation to the financial (Msition of the Corporation. How- 



ever, during 1982 a large number of legal actions, which total 
approximately $48 million at December 31, 1986, were begun 
against the Corporation jointly with other parties claiming dam- 
ages arising from installation of urea formaldehyde foam insula- 
tion. The Corporation does not admit liability in these cases and, 
until the actions have been heard by the courts, it is impossible to 
determine if there is a potential liability in this respect and thus 
no provision for ixtssible loss arising from these legal actions is 
included in these financial statements. Should costs arise as a 
result of these actions they would be expensed in the year when 
the costs are incurred. 

4. Interest Loss Recoveries 

The Corporation was authorized by the Government of Canada 
to approve certain loans and investments at a negative interest 
margin and to recover this loss from the Government. The interest 
loss recovered is included in interest earnings. The recoveries by 
program are as follows: 

1986 1985 
(in millions 
of dollars) 

Market Housing 63.8 59.0 

Social Housing 18.7 19.3 

Housing Support 1.2 1.3 

5. Services to Others 

The major components of services to others are: delivery of 
Canadian Home Insulation Program grants on behalf of Energy, 
Mines and Resources Canada; inspections; and administration of 
mortgages for third parties. 

6. Actuarial Valuation of the CMHC Pension Fund 

The Corporation maintains a compulsory contributory defined 
benefit pension plan for all regular employees who satisfy certain 
eligibility conditions. The plan provides pensions based on the 
annual average salaries of any six-year period multiplied by the 
number of years of credited service. 

The administrative expenses of the Corporation for 1986 
include a charge of $9.9 million, being the increase in the 
unfunded future benefits obligation arising from an actuarial 
valuation of the Fund at January 1, 1986. 

The cumulative difference between the amounts expensed and 
the funding contribution has been reflected in the balance sheet as 
a liability. This liability will be funded by annual payments up to 
the year 2000. 

7. Administrative Expenses 

Total administrative expenses of the Corporation for the year 
ended December 31, 1986 amounted to $178.5 million (1985 — 
$174.6 million). These administrative expenses have been 
allocated to the Corporate Account, Minister's Account and 
Funds Administered. 

8. Commitments 

Commitments outstanding for loans and investments amounted 
to $435 million at December 31, 1986 (1985— $495 million). 

9. Comparative Figures 

The 1985 comparative figures have been reclassified to conform 
to the statement presentation adopted in 1986. The 1985 figures 
are based upon financial statements which were reported on by 
Paul-Andre Michaud, C.A. of the firm, Samson Belair. 



90 



PUBLIC ACCOUNTS, 1986-87 



CANADA MORTGAGE AND HOUSING CORPORATION— Continued 



CORPORATE ACCOUNT 

SCHEDULE OF LOANS AND INVESTMENTS 
BALANCE DECEMBER 31 
(in thousands of dollars) 



Market Housing 

Loans 

Federal-provincial agreements 

Loans 

Real estate 

Investments in housing projects . 

Land 



Social Housing 

Loans 

Federal-provincial agreements 

Loans 

Investments in housing projects . 

Real estate 
Investments in housing projects . 
Land 



Housing Support 

Loans 

Federal-provincial agreements 

Loans 

Land assembly projects 

Real estate 
Land 

Total 9,739,966 9,955,839 



1986 


1985 


1,813,615 


1,960,040 


61,155 


70,386 


1,314 
14,251 


1,345 
12,808 


15,565 


14,153 


1,890,335 


2,044,579 


2,439,325 


2,492,049 


2,707,817 
1,322,964 


2,720,741 
1,231,115 


4,030,781 


3,951,856 


26,188 
1,169 


30,217 
1,170 


27,357 


31,387 


6,497,463 


6,475,292 


1,247,728 


1,321,562 


49,873 
34,719 


59,686 
34,439 


84,592 


94,125 


19,848 


20,281 


1,352,168 


1,435,968 



MINISTER'S ACCOUNT 
AUDITOR'S REPORT 

TO THE HONOURABLE STEWART D. MCINNES, P.C, M.P. 

MINISTER RESPONSIBLE FOR 

CANADA MORTGAGE AND HOUSING CORPORATION 

I have examined the Canada Mortgage and Housing Corporation, 
Minister's Account — Statement of Expenditures and Recoveries for 
the year ended December 31, 1986. My examination was made in 
accordance with generally accepted auditing standards and accord- 
ingly included such tests and procedures as I considered necessary in 
the circumstances. 

In my opinion, this financial statement presents fairly the expendi- 
tures for and recoveries from the Minister for the year then ended in 
accordance with the accounting policy described in Note 1 to this 
financial statement applied on a basis consistent with that of the 
preceding year. 

I further report that, in my opinion, the transactions in the 
Minister's Account that have come to my notice during my examina- 
tion of the financial statement were, in all significant respects, in 
accordance with the Financial Administration Act and regulations, the 
Canada Mortgage and Housing Corporation Act, the National Hous- 
ing Act, the by-laws of the Corporation and any directives given to the 
Corporation. 



Ottawa, Canada 
February 23, 1987 



MINISTER'S ACCOUNT 



Robert D. Hepburn, C.A. 
of the firm Deloitte Haskins & Sells 



STATEMENT OF EXPENDITURES AND RECOVERIES 
FOR THE YEAR ENDED DECEMBER 31, 1986 
(in thousands of dollars) 



1986 



1985 



Expenditures 

Market Housing 62,990 246,284 

Social Housing 1,228,578 1,327,512 

Housing Support 13,974 12,388 

Administrative Expenses 62,622 61,332 

Total 1,368,164 1,647,516 

Accounts Receivable from the Minister, beginning of 

year 13,188 21,818 

1,381,352 1,669,334 

Recoveries 1,355,051 1.656,146 

AccountsReceivablefrom the Minister, end of year 26,301 13,188 

See accompanying notes. 



PUBLIC ACCOUNTS, 1986-87 



91 



CANADA MORTGAGE AND HOUSING CORPORATION— Continued 

MINISTER'S ACCOUNT FUNDS ADMINISTERED 



NOTES TO FINANCIAL STATEMENT 
DECEMBER 31, 1986 

1 . Significant Accounting Policy 

Expenditures made on behalf of the Minister responsible for the 
Corporation are recorded as recoverable when disbursed. No 
accruals are made at December 31, 1986 in this account. The 
year-end for the Government of Canada is March 31, 1987, at 
which time accruals will be recorded in accordance with Treasury 
Board Guidelines and reported in the Public Accounts of Canada. 

2. Contingent Liabilities 

In the normal course of operations, the Corporation is subject 
to legal claims, the effect of which cannot be determined until 
they are settled. During 1982, a large number of legal actions, 
which total approximately $48 million at December 31, 1986, 
were begun against the Corporation jointly with other parties 
claiming damages arising from installation of urea formaldehyde 
foam insulation. The Corporation does not admit liability in this 
respect and it is unclear whether costs, if any, arising from these 
actions could be charged to the Government of Canada. Thus, no 
provision for possible loss arising from these legal actions is 
included in the accompanying statement of account. Should costs 
arise as a result of these actions they would be expensed in the 
year when the costs are incurred. 

3. Administrative Expenses 

The administrative expenses charged to the Minister by the 
Corporation for the year ended December 31, 1986 amounted to 
$62.6 million (1985— $61.3 million). 

4. Comparative Figures 

The 1985 comparative figures have been reclassified to conform 
to the statement presentation adopted in 1986. The 1985 figures 
are based up)on financial statements which were reported on by 
Paul-Andre Michaud, C.A. of the firm, Samson Belair. 



AUDITOR'S REPORT 

TO THE HONOURABLE STEWART D. MClNNES, P.C, M.P. 

MINISTER RESPONSIBLE FOR 

CANADA MORTGAGE AND HOUSING CORPORATION 

I have examined the balance sheets of the Funds Administered by 
Canada Mortgage and Housing Corjwration: Mortgage Insurance 
Fund, Home Improvement Loan Insurance Fund and Rental Guaran- 
tee Fund as at December 31, 1986, and the related statements of oper- 
ations and deficit or surplus, and of changes in financial position for 
the year then ended. My examination was made in accordance with 
generally accepted auditing standards, and accordingly included such 
tests and procedures as I considered necessary in the circumstances. 

In my opinion, these financial statements, present fairly the finan- 
cial position of these funds as at December 31,1 986, and the results of 
operations and changes in financial position for the year then ended in 
accordance with generally accepted accounting principles applied on a 
basis consistent with that of the preceding year. 

I further report that, in my opinion, the transactions that have come 
to my notice during my examination of these financial statements 
were, in all significant respects, in accordance with the Financial 
Administration Act and regulations, the Canada Mortgage and Hous- 
ing Corporation Act, the National Housing Act, the by-laws of the 
Corporation and any directives given to the Corporation. 



Robert D. Hepburn, C.A. 
of the firm Deloitte Haskins & Sells 



Ottawa, Canada 
February 23, 1987 



FUNDS ADMINISTERED 
MORTGAGE INSURANCE FUND 

BALANCE SHEET AS AT DECEMBER 31, 1986 
(in thousands of dollars) 



ASSETS 



1986 



1985 



Accounts Receivable 

Canada Mortgage and 

Housing Corporation.. 3,553 

Other 4,839 

Investments in Securities... 

Mortgages 

Real Estate, at cost 465,563 

Provision for revaluation 196,421 



8,392 
141,895 
79,298 

269,142 
498,727 



948 
16.247 



534,602 
205,384 



17,195 

93,760 

329,218 



440,173 



LIABILITIES 



1986 



1985 



Accounts Payable and Accrued Liabilities 

Provision for Loss on Claims 

Unearned Premiums 

Premium Deficiency 

Borrowings from the Government of Canada 

932,010 
Deficit 433,283 



11,188 


4,934 


263,192 


271,139 


395,587 


320,429 


262,043 


316,110 




255.500 



1.168,112 
727.939 



498,727 440,173 



See accompanying notes. 



92 



PUBLIC ACCOUNTS, 1986-87 



CANADA MORTGAGE AND HOUSING CORPORATION— Continued 



FUNDS ADMINISTERED 
MORTGAGE INSURANCE FUND 

STATEMENT OF OPERATIONS AND DEFICIT 
FOR THE YEAR ENDED DECEMBER 31, 1986 
(in thousands of dollars) 



FUNDS ADMINISTERED 
MORTGAGE INSURANCE FUND 

STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED DECEMBER 31, 1986 
(in thousands of dollars) 



1986 



1985 



Revenue 

Earned premiums 81,663 64,521 

Application fees 25,135 29,772 

Interest 12.643 11,670 

Total Revenue 119,441 105,963 

Expenses 

Insurance issuance 39,913 42,594 

Loss on claims 86,939 73,035 

126,852 115,629 

Adjustment to premium deficiency (54,067) (67,890) 

Total Expenses 72,785 47,739 

Income before Recovery of Losses 46,656 58,224 

Recovery of Losses 248,000 

Net Income 294,656 58,224 

Deficit, beginning of year 727,939 786,163 

Deficit, end of year 433,283 727,939 

See accompanying notes. 



1986 



Cash Generated by Operations 

Premiums 

Application fees 

Interest received 

Claims paid 

Proceeds from real estate sales 

Administrative costs 

Other 

Cash Applied to Investment Activities 
Investment in securities 

Cash Applied to Financing Activities 

Borrowings from the Government of Canada 

Repayment of borrowings 

Increase (Decrease) in Accounts Receivable from 
Canada Mortgage and Housing Corporation 2,605 

See accompanying notes. 



1985 



156.821 


170.450 


25,135 


29,772 


12,109 


11.582 


(213,535) 


(585.955) 


212.485 


243.451 


(62.102) 


(68.715) 


20,379 


2.996 



151.292 


(196,419) 


(141.187) 


(141.187) 


8.000 
(15,500) 


258,600 
(63,000) 


(7,500) 


195,600 



(819) 



FUNDS ADMINISTERED 

HOME IMPROVEMENT LOAN INSURANCE FUND 

BALANCE SHEET AS AT DECEMBER 31, 1986 
(in thousands of dollars) 



ASSETS 



1986 1985 



LIABILITIES 



1986 1985 



Cash and Investment in Securities 1,318 1,179 

Accounts Receivable from Canada Mortgage and Housing 

Corporation 16 7 

Mortgages 5 8 

1,339 1,194 

See accompanying notes. 



Unearned Premiums. 
Surplus 



1.339 1,191 



1.339 1.194 



FUNDS ADMINISTERED 

HOME IMPROVEMENT LOAN INSURANCE FUND 

STATEMENT OF OPERATIONS AND SURPLUS 
FOR THE YEAR ENDED DECEMBER 31, 1986 
(in thousands of dollars) 



1986 1985 



Revenue 

Interest 

Other 

Total Revenue 

Expenses 

Claims and administrative charges 

Net Income 

Surplus, beginning of year 

Assets returned to the Government of Canada 

Surplus, end of year 1,339 

See accompanying notes. 



Ill 


428 


51 


36 


162 


464 


14 


33 


148 


431 


1,191 


7,590 




6,830 



1,191 



PUBLIC ACCOUNTS, 1986-87 

CANADA MORTGAGE AND HOUSING CORPORATION— Continued 

FUNDS ADMINISTERED 
RENTAL GUARANTEE FUND 

BALANCE SHEET AS AT DECEMBER 31, 1986 
(in thousands of dollars) 



n 



ASSETS 



1986 



1985 



Cash and Investment in 










Securities 




3,514 




3,438 


Accounts Receivable from 










Canada Mortgage and 










Housing Corporation 




106 






Real Estate, at cost 


11,457 




10,936 




Provision for loss 


3,757 


7,700 


3,186 


7,750 



11,320 



11,188 



LIABILITIES 



1986 1985 



Accounts Payable to Canada Mortgage and Housing Corpo- 
ration 69 

Accrued Liabilities 96 122 

Surplus 1 1,224 10,997 



11,320 11, U 



See accompanying notes. 



FUNDS ADMINISTERED 
RENTAL GUARANTEE FUND 

STATEMENT OF OPERATIONS AND SURPLUS 
FOR THE YEAR ENDED DECEMBER 31, 1986 
(in thousands of dollars) 



1986 1985 

Revenue 

Interest 305 1,188 

Expenses 

Provision for loss on real estate 571 (1,992) 

Other (493) (69) 

Total Expenses 78 (2,061) 

Net Income 227 3,249 

Surplus, beginning of year 10,997 26,548 

Assets returned to the Government of Canada 18,800 

Surplus, end of year 1 1,224 10,997 

See accompanying notes. 



FUNDS ADMINISTERED 

NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, 1986 

1 . Significant Accounting Policies 

The principal accounting policies followed by the Corporation 
in administering the Insurance and Guarantee Funds on behalf of 
the Government of Canada are: 

(a) Premiums 

Premiums are deferred and are taken into income over the 
life of the related policies. Premiums earned in a year reflect 
the amount of risk in that year as determined by the valua- 
tion actuary. The determination is based upon factors pre- 
scribed by the Department of Insurance Canada. 

(b) Application Fees 

Application fees for insurance are recognized as income when 
received. 

(c) Issuance Costs 

Issuance costs are expensed as incurred. 



(d) Premium Deficiency 

Annually, the Corporation compares the amount of its 
unearned premiums by line of business to the discounted 
costs of claims that have not yet occurred on insurance poli- 
cies in force. Whenever it is determined that the unearned 
premiums on a line of business are inadequate to meet the 
expected net costs of future claims, a premium deficiency is 
established. The premium deficiency is taken into income on 
the same basis as the related unearned premiums. 

(e) Real Estate 

Real estate acquired upon the payment of a claim resulting 
from a loan default is valued at net realizable value. Cost is 
comprised of the unpaid loan balance plus interest accrued to 
the date of acquisition together with acquisition and capital 
improvement expenditures. Net realizable value is calculated 
as the current appraised value of the property, as determined 
by the Corporation, less the discounted value of estimated 
holding and disposal costs. Depreciation is not recorded on 
the real estate. 

(0 Provision for Loss on Claims 

This provision represents the estimated loss on claims in pro- 
cess of payment and the estimated loss on loans, where 
defaults have occurred, but for which a claim has not yet 
been received by the Corporation. 

(g) Interest Income and Expense 

Interest income and expense are recorded on the accrual 
basis. 

(h) Mortgages 

Mortgages are shown net of a provision for losses. 

(i) Income Tax 

The Insurance and Guarantee Funds are not subject to the 
provisions of the Income Tax Act, Canada. 

Borrowings from the Government of Canada — Mortgage Insur- 
ance Fund 

The Corporation may borrow from the Government of Canada, 
on behalf of the Fund, under provisions of Section 9 of the 
National Housing Act in order to meet the Fund's obligations. 
Borrowing arrangements pursuant to an Order-in-Council dated 
August 8, 1984 authorize interest free borrowings secured by pro- 
missory notes due on demand to a maximum of S400 million. 



PUBLIC ACCOUNTS, 1986-87 



CANADA MORTGAGE AND HOUSING CORFORATION— Concluded 

FUNDS ADMINISTERED 

NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, \9S6— Concluded 

3. Actuarial Valuation — Mortgage Insurance Fund 

At September 30, 1986 an actuarial study of the Fund under- 
taken by the Corporation during the year disclosed that the Fund 
continues to be insufficient to pay all future claims in respect of 
business in force. The deficit as at September 30, 1986, estimated 
to be $454.3 million, has decreased to $433.3 million at December 
31, 1986. 

4. Recovery of Losses — Mortgage Insurance Fund 

As a result of Treasury Board approval in December 1985, the 
outstanding borrowings of $248 million at March 27, 1986 were 
forgiven. This forgiveness represents partial reimbursement for 
the losses on the Assisted Home Ownership and Assisted Rental 
Programs. 

In 1987, the Corporation will pursue with the Government of 
Canada avenues for eliminating the remaining deficit. 

5. Insurance in Force — Mortgage Insurance Fund 

At December 31, 1986, the insurance policies in force totalled 
approximately $39.3 billion (1985— $37.7 billion). 

6. Home Improvement Loan Insurance and Rental Guarantee Funds 

The Home Improvement Loan Insurance and Rental Guaran- 
tee Programs are no longer active. 

7. Administrative Expenses — Funds Administered 

The administrative expenses allocated to the Funds by the Cor- 
poration for the year ended December 31, 1986 amounted to 
$67.3 million ( 1 985— $68.7 million). 

8. Comparative Figures 

The 1985 comparative figures have been reclassified to conform 
to the statement presentation adopted in 1986. The 1985 figures 
are based upon financial statements which were reported on by 
Paul-Andre Michaud, C.A. of the firm, Samson Belair. 



PUBLIC ACCOUNTS, 1986-87 



95 



SUMMARY PAGE 
CANADA MUSEUMS CONSTRUCTION CORPORATION INC. 



MANDATE 

To construct in the National Capital Region the National Gallery of Canada, the Canadian Museum of Civilization, 
(formerly called The National Museum of Man) and any other museum which the Governor in Council may direct. 

BACKGROUND 

The main structures of the corporation's two projects are scheduled for completion by 1989. To March 31, 1987, the 
government had allocated for the corporation a total of $308.0 million for these projects for the period to March 31, 
1990. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHAIRMAN AND CHIEF 
EXECUTIVE OFFICER 

AUDITOR 



55 Murray Street 

P.O. Box 395, Station A 

Ottawa, Ontario 

K1N5M3 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable Stewart Mclnnes, P.C., M.P. 

Public Works 

1982; by letters patent (No. 01 32 11 4) under the Canada Business 
Corporations Act. 

Robert Giroux 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 

1986-87 

At the end of the period 

Total Assets 173.2 

Obligations to the private sector nil 

Obligations to Canada nil 

Equity of Canada 157.4 

Cash from Canada in the period 

— budgetary 66.0 

— non-budgetary nil 



1985-86 



1984-85 



1983-84 



100.3 


50.1 


15.5 


nil 


nil 


nil 


nil 


nil 


nil 


91.3 


44.8 


13.4 


46.5 


31.5 


10.8 


nil 


nil 


nil 



I 



96 



PUBLIC ACCOUNTS, 1986-87 



CANADA MUSEUMS CONSTRUCTION CORPORATION INC. 



RESPONSIBILITY FOR FINANCIAL STATEMENTS 

The Board of Directors of the Canada Museums Construction Cor- 
poration Inc. is responsible for the financial statements and the integ- 
rity and objectivity of data contained therein. The flnancial statements 
have been prepared by management in accordance with generally 
accepted accounting principles and, where appropriate, include 
amounts based on management's estimates and judgement. 

Management has developed and maintains books of account, 
records, fmancial and management controls and information systems. 
These are designed to provide reasonable assurance that assets are 
safeguarded and controlled and that transactions are in accordance 
with the Financial Administration Act and regulations, and the 
articles and by-laws of the Corporation. 

The Board of Directors appoints the Audit Committee which is com- 
posed of three directors, two of whom are not employees of the Corpo- 
ration. The Audit Committee meets at least annually to review and 
advise the Board of Directors with respect to the financial statements 
and the auditor's report thereon. The Audit Committee also oversees 
the internal audit activities of the Corporation and performs such other 
functions as are assigned to it. 

The Corporation's external auditor, the Auditor General of Canada, 
examines the financial statements and reports to the Minister of Public 
Works who is responsible for the Canada Museums Construction Cor- 
poration Inc. 

R. Plourde 
Treasurer and Comptroller 

R.J. Giroux 
Chairman and Chief Executive Officer 



AUDITOR'S REPORT 

THE MINISTER OF PUBLIC WORKS 

I have examined the balance sheet of Canada Museums Construc- 
tion Corporation Inc. as at March 31, 1987 and the statement of 
changes in financial position for the year then ended. My examination 
was made in accordance with generally accepted auditing standards, 
and accordingly included such tests and other procedures as I con- 
sidered necessary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the Corporation as at March 31, 1987 and the results of its 
operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the financial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, and the 
articles and by-laws of the Corporation. 

Raymond Dubois, C.A. 
Deputy Auditor General 
for the Auditor General of Canada 
Ottawa, Canada 
June 12, 1987 



BALANCE SHEET AS AT MARCH 31, 1987 
(in thousands of dollars) 



ASSETS 



1987 



1986 



LIABILITIES 



1987 



1986 



Cash and short-term deposits 4,489 4,177 

Accounts receivable 549 1 16 

Construction in progress (Schedule) 168,138 95,957 



173,176 100,250 



Accounts payable and accrued liabilities 7,776 5,449 

Contractors holdbacks payable 8,053 3,454 

15,829 8,903 
SHAREHOLDERS' EQUITY 

Capital stock (Note 3) 

Contributed capital (Note 4) 157,347 91,347 



173,176 100,250 



Approved by the Board: 

ROBERT J. GIROUX 

Chairman and Chief Executive Officer 

JEAN E. PIGOTT 
Director 



PUBLIC ACCOUNTS, 1986-87 



97 



CANADA MUSEUMS CONSTRUCTION CORPORATION INC— Continued 



(65,688) 


(46,348) 


66,000 


46,500 


66,000 


46,500 


312 

4,177 


152 
4,025 



I 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED MARCH 31, 1987 
(in thousands of dollars) 



1987 1986 

Operating activities 

Accounts receivable (433) (28) 

Construction in progress (Schedule) (72,181) (49,986) 

Accounts payable and accrued liabilities 2,327 1,715 

Contractors holdbacks payable 4,599 1,951 

Cash used in operating activities 

Financing activities 

Contributed capital (Note 4) 

Cash provided by financing activities 

Increase in cash 

Cash and short-term deposits 

Beginning of year 

End of year ~ 4,489 4,177 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, 1987 

1 . Authority and activities 

The Corporation was incorporated on June 21, 1982 under the 
Canada Business Corporations Act as an agent of Her Majesty 
pursuant to the Government Companies Operations Act, and was 
named as a parent Crown corporation on February 7, 1985 in 
Schedule C, Part I of the Financial Administration Act. Two- 
thirds of the capital stock is held by the Canada Lands Company 
Limited, also a parent Crown corporation. On May 16, 1985 one- 
third was transferred from the Minister of Communications to the 
Minister of Public Works, the Responsible Minister with whom 
the control of the Corporation lies. 

The business of the Corporation is limited to construction, in 
the National Capital Region, of buildings for the National Gal- 
lery of Canada (NGC), the Canadian Museum of Civilization 
(CMC) (previously known as National Museum of Man) and any 
other national museum which the Governor in Council may 
direct, including the acquisition, control, administration and dis- 
posal of land required for the construction. Unless otherwise 
directed by the Governor in Council, the Corporation shall be 
wound up after completion of the museum construction projects. 

(a) Funding 

In September 1981, the Government allocated $185 million 
for the two projects. This was revised in November 1983 to 
$191.45 million. In October 1985, the Treasury Board 
approved an increase of $69.54 million, and in January 1987, 
Treasury Board approved an additional $46.79 million, 
bringing the total funds allocated for construction of the 
museums to $307.78 million for the period to March 31, 
1990 as follows: 



NGC CMC Total 
(in millions of dollars) 

Construction 115.56 149.28 264.84 

Architects and consulUnts 10.84 19.55 30.39 

126.40 168.83 295.23 

Administration expenses 6.28 6.27 12.55 

132.68 175.10 307.78 



In October 1985, the Government directed the National 
Capital Commission to undertake the landscaping of both 



sites, estimated to cost the Commission $7 million from funds 
provided out of the Commission's existing budget. 

The Corporation's budget for landscaping of the museums is 
$10.8 million; $3.8 million is included in the construction 
costs indicated above and the work is being done under the 
direction of the Corporation. 

In January 1987, Treasury Board approved the establishment 
of a special reserve of $142.8 million within its Operating 
Reserve to provide the required funding to 1989-90 for all 
agencies (Department of Public Works, National Museums 
of Canada, National Capital Commission and Canada 
Museums Construction Corporation) involved in completing 
the Canadian Museum of Civilization. The reserve is to cover 
all incremental costs associated with completing the 
Museum, including construction, fit-up, exhibit development 
and initial operating costs of the Museum. Treasury Board, 
while noting that estimates sufficiently accurate to obtain 
effective project approval are not yet available, also approved 
a project approval level of $168.8 million for the construction 
of the Museum and expected that construction would be 
completed within this total. Any further cost increases or 
other funding requirements to 1989-90 are to be absorbed 
within the reserve and/or from approved funds within the 
portfolios of the Ministers of Public Works and of Communi- 
cations. Treasury Board also underlined the joint responsibil- 
ity of the Ministers of Public Works and of Communications 
to complete the project on schedule, with final completion 
and official opening in 1989 and with some form of limited 
opening to the public in 1988. 

(b) Construction 

In February 1983, the Government approved the construc- 
tion sites and architects and in November 1983, the building 
concepts as developed by the architects and the long-term 
forecast of the building schedule and funding requirements 
for each museum. No provision was made for the cost of the 
sites. Major portions of the sites for the two museums are 
federally owned with the legal title to the lands currently 
belonging to the National Capital Commission. In keeping 
with the intent of the projects, which includes the eventual 
transfer of the completed buildings to Her Majesty in right of 
Canada, the Commission disclaims title to the construction in 
progress. On March 26, 1986, the Treasury Board approved 
the transfer of the lands of CMC and NGC currently owned 
by the Commission to Department of Public Works. The 
transfer is subject to Governor in Council approval. Negotia- 
tions by Public Works and the National Capital Commission 
to acquire parts of the sites that are not federally owned are 
underway. 

2. Significant accounting policies 

(a) Basis of accounting 

These financial statements account for the costs incurred by 
the Corporation in the construction of the museums. They do 
not account for costs incurred by the National Capital Com- 
mission for sites or by the National Museums of Canada for 
accommodations planning and fit-ups. 

(b) Capitalization 

All expenditures, including those for site evaluation, design, 
construction and administration, will be capitalized until the 
museums are completed. Interest and other income are cred- 
ited to construction in progress. Costs are allocated direct to 
each museum when they can be specifically identified. All 
other costs are allocated equally to the two museums. 



w 



PUBLIC ACCOUNTS, 1986-87 



CANADA MUSEUMS CONSTRUCTION CORPORATION INC— Continued 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \9%1— Concluded 

3. Capital stock 

The Corporation is authorized to issue three shares which shall 
not be transferred without the approval of the Governor in Coun- 
cil. 

The Corporation acknowledges past services rendered as full 
consideration for the value of the shares issued. 

4. Contributed capital 

During the year funding of $66.0 million was provided through 
Vote 20 of the Department of Public Works for the expenditures 
of the Corporation (1986— $46.5 million, Vote 20 of the Depart- 
ment of Communications). 



1987 



1986 



(in thousands 
of dollars) 



Opening balance 91,347 44,847 

Funds provided during the year 66,000 46,500 

Ending balance 157,347 91,347 



5. Pension plans 

(a) The Corporation has instituted, with a private sector organi- 
zation, a contributory pension plan covering all its regular 
employees. The employees and the Corporation contribute 
equally to the cost of the plan. The Corporation's contribu- 
tions represent its total liability and are recognized in the 
accounts on a current basis. Pension costs for the plan 
amounted to $69,850 for the year ended March 31, 1987 
(1986— $70,244). 

(b) The Corporation has fully discharged its obligations to pro- 
vide an annual pension of $35,000, inclusive of pension funds 
transferred from previous employment, under an agreement 
with one of its former officers upon termination of employ- 
ment on March 31, 1987. 

6. Contractual obligations 

As at March 31, 1987, commitments for construction and 
related costs amounted to approximately $41.7 million as follows: 

(in 
thousands 

of 
dollars) 



National Gallery of Canada 

Canadian Museum of Civilization. 



18,596 

23,132 



41,728 



7. Lease commitment 

The Corporation has renewed its lease agreement until March 
31, 1988, for office space. Under the terms of the lease the Corpo- 
ration is responsible for payment of operating expenses and taxes 
to the lessor and the amount of future minimum annual rental 
payments for 1987-88 is $267,847. 

8. Contingencies and claims 

(a) The Corporation has received claims from contractors, archi- 
tects, and engineers and has made provision for costs which 
may be incurred in settling some of these claims. However, 
the Corporation is unable to determine the likelihood of its 
having to make payments in respect of claims amounting to 
$8.5 million and no provision has been made for this amount 
in the financial statements. 

The Corporation has filed various claims against its archi- 
tects under professional liability insurance policies. These 
claims are under review by the insurers and no provision for 
amounts to be recovered has been made in these financial 
statements. 



(b) The City of Hull is seeking building permit fees from the 
Corporation in the amount between $480,000 and $720,000 
relating to the construction of Canadian Museum of Civiliza- 
tion. It is anticipated that payment for permit fees will be 
resolved on behalf of the Corporation by the Department of 
Public Works and accordingly no provision has been made in 
these financial statements. 

On May 28, 1987, the Minister of Public Works obtained 
Governor in Council approval for the settlement, on an ex- 
gratia basis, with the City of Ottawa of building permit fees 
and redevelopment charges amounting to $1.2 million relat- 
ing to the construction of the National Gallery of Canada. 

(c) As of March 31, 1987, grants in lieu of taxes for the sites and 
construction of the two Museums amounted to approximately 
$2.4 million. Management is of the opinion that the payment 
of grants in lieu of taxes, if necessary, will be resolved on 
behalf of the Corporation by the Department of Public 
Works and accordingly no provision has been made in these 
financial statements. 

9. Related party transactions 

The Corporation had the following transactions with related 
parties. 

(a) During the year the Department of Public Works has pro- 
vided technical and engineering support amounting to 
approximately $108,000 (1986— $122,000). The Department 
also provided without charge the services of a senior officer 
to the Corporation on a full-time basis from May 16, 1985 
till July 14, 1986. 

(b) Under an arrangement with the National Museums of 
Canada, the Corporation will be reimbursed for costs 
incurred up to $600,000 in connection with building work 
required estimated at $870,000 in the Rideau Street Chapel 
space in the new National Gallery. At March 31, 1987, total 
costs incurred amounted to $391,661 of which $295,845 is 
included in accounts receivable. 

10. Administration expenditures 

The Corporation incurred the following administration expendi- 
tures which have been allocated equally to each museum on the 
schedule of construction in progress: 

1987 1986 



Salaries and employee benefits 

Office accommodation 

Professional and special services 

Rental of equipment 

Communications 

Utilities, material and supplies 

Travel and transportation 

Public information 

Other 

Office furniture and equipment, net of proceeds from dis- 
posal 



(in thousands 


of dollars) 


1,354 


1,299 


702 


692 


115 


218 


76 


87 


47 


92 


44 


53 


21 


38 


19 


15 


15 


17 


(7) 


7 


2,386 


2,518 



1 1 . Subsequent event 

On May 14, 1987, the Corporation entered, on behalf of the 
National Museums of Canada, into a contract amounting to 
$410,000 with a consultant for interior design and fit-up of the 
public spaces and staff offices related to the new National Gallery 
of Canada. The funding of the contract will be provided by the 
National Museums of Canada. 



PUBLIC ACCOUNTS, 1986-87 

CANADA MUSEUMS CONSTRUCTION CORPORATION INC.— Concluded 

SCHEDULE OF CONSTRUCTION IN PROGRESS 
FOR THE YEAR ENDED MARCH 31, 1987 
(in thousands of dollars) 



99 



National Gallery of Canada 



Canadian Museum of Civilization 



Total 



Cumu- 




Cumu- 


Cumu- 




Cumu- 


Cumu- 




Cumu- 


lative 




lative 


lative 




lative 


lative 




lative 


to 




to 


to 




to 


to 




to 


March 31, 




March 31, 


March 31, 




March 31, 


March 31, 




March 31, 


1986 


1987 


1987 


1986 


1987 


1987 


1986 


1987 


1987 



Site evaluation 108 108 108 108 216 216 

Architects and consultants 8,797 1,632 10,429 9,221 5,650 14,871 18,018 7,282 25,300 

Construction managers 2,359 1,852 4,211 2,251 1,256 3,507 4,610 3,108 7,718 

Other construction costs 43,309 42.528 85.837 21,815 17,332 39.147 65,124 59,860 124,984 

54,573 46,012 

Administration (Note 10) 

Z^^j; interest income 

58.567 46.978 105.545 37.390 25,203 62,593 95,957 72,181 168,138 



54,573 
4,744 


46,012 
1,193 


100,585 
5,937 


33,395 
4,744 


24,238 
1,193 


57,633 
5,937 


87,968 
9,488 


70,250 
2,386 


158,218 
11,874 


59,317 


47,205 


106,522 


38,139 


25,431 


63,570 


97,456 


72,636 


170,092 


750 


227 


977 


749 


228 


977 


1,499 


455 


1.954 



100 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
CANADA PORTS CORPORATION 



MANDATE 



Planning and coordinating the development of the 1 5 ports and harbours, previously administered by the National 
Harbours Board, to achieve the objectives of the national ports policy and support Canadian international trade 
objectives, as well as other social and economic objectives. The corporation is also responsible for the direct 
administration, management and control of the ports and harbours not granted local port corporation status. 

BACKGROUND 

The corporation was established in 1983 with responsibility for the 15 ports and harbours across Canada that 
previously fell under the jurisdiction of the National Harbours Board. Subsequently, local port corporations were 
established at Montreal and Vancouver (in July 1983), at Halifax, Quebec and Prince Rupert (in June 1984), at St. 
John's (in June 1985), and at Saint John (in December 1986). These corporations are now operating with a high 
degree of local autonomy. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



99 Metcalfe Street 
Ottawa, Ontario 
KIA 0N6 

—Schedule C, Part II 

— an agent of Her Majesty 

The Honourable John Crosbie, P.C, Q.C., M.P. 

Transport 

1983; pursuant to the National Harbours Board Act (R.S.C. 1970, 
N-8, s. 3); reconstituted by the Canada Ports Corporation Act, 
(S.C. 1980-81-82-83, C. 121, s. 1), proclaimed February 24, 1983. 

Jean- Michel Tessier 

The Honourable Ronald Huntington, P.C. 
Coopers & Lybrand 



FINANCIAL SUMMARY* ($ million) The financial year is the calendar year. 

1986 1985 1984 1983 
(restated) 

At the end of the year 

Total Assets 100.0 231.3 246.5 445.8 

Obligations to the private sector nil nil nil nil 

Obligations to Canada** 19.5 85.0 85.1 182.7 

Equity of Canada 67.2 92.8 106.9 185.9 

Cash from Canada in the year 

—budgetary*** 13.0 14.1 35.0 23.8 

— non-budgetary (7.0) 2.6 4.9 7.1 

* Assets and related liabilities of this corporation have been transferred to new local port corporations. 

** Excludes $5.5 million in accrued interest owed to Canada. 

*** Takes no account of special contributions to Canada in 1986 of $26.7 million. 



PUBLIC ACCOUNTS, 1986-87 



101 



CANADA PORTS CORPORATION 

AUDITORS' REPORT 

TO THE HONOURABLE JOHN C. CROSBIE, P.C, M.P. 
MINISTER OF TRANSPORT 

We have examined the balance sheet of Canada Ports Corporation 
as at December 31,1 986 and the statements of income, surplus, con- 
tributed capital and changes in financial position for the year then 
ended. Our examination was made in accordance with generally 
accepted auditing standards and accordingly included such tests and 
other procedures as we considered necessary in the circumstances. 

In our opinion, these financial statements present fairly the financial 
position of the Corporation as at December 31, 1986 and the results of 
its operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in our opinion, the transactions of the Corporation that 
have come to our notice during our examination of the financial state- 
ments have, in all significant respects, been in accordance with the 
Financial Administration Act and regulations, the Canada Ports Cor- 
poration Act and the by-laws of the Corporation. 



Ottawa, Canada 
February 18, 1987 



Coopers & Lybrand 
Chartered Accountants 



BALANCE SHEET AS AT DECEMBER 31, 1986 
(in thousands of dollars) 



ASSETS 



1986 1985 



Current 

Cash 225 641 

Investments (Note 4) 27,864 61,740 

Accounts receivable 2,252 4,237 

Due from Canada 458 2,645 

Materials and supplies 352 514 

31,151 69,777 

Long-term investments (Note 4) 18,225 19,102 

Investment in Ridley Terminals Inc. (Note 5) 1 1,137 16,227 

Fixed assets (Note 7) 39,528 126,147 



LIABILITIES 

Current 
Accounts payable and accrued liabilities (Note 8) .... 
Grants in lieu of municipal taxes 

Long-term 

Accrued employee benefits ....,, 1,303 1,554 

Financing provided by a province (Note 9) 19,696 

Loans from Canada (Note 10) 24,893 103,144 



1986 


1985 


6,158 
491 


13,539 
480 


6,649 


14,019 



26,196 124,394 



100,041 231,253 



EQUITY OF CANADA 

Contributed capital 55,896 130,734 

Contribution from (to) Canada (Note 12) (5,589) 20,072 

Surplus (deficit) 16.889 (57.966) 

67,196 92,840 



100.041 231.253 



On behalf of the Board: 

THE HONOURABLE A.R. HUNTINGTON 

Chairman 

DENIS DE BELLEVAL 

President and Chief Executive Officer 



It2 



PUBLIC ACCOUNTS, 1986-87 



CANADA PORTS CORFORATION— Continued 

STATEMENT OF INCOME 

FOR THE YEAR ENDED DECEMBER 31, 1986 

(in thousands of dollars) 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED DECEMBER 31, 1986 
(in thousands of dollars) 



1986 


1985 


14,959 


12,295 


11,510 

2,877 
1,255 


10,857 
3,169 
1,286 


15,642 


15,312 


(683) 
5,149 
(128) 


(3,017) 
6,864 
(132) 


4,338 

(988) 
(5,090) 


3,715 

(536) 
(4,797) 



Revenue from operations 

Operating and administrative expenses — Net 

Depreciation 

Grants in lieu of municipal taxes 

Net loss from operations 

Investment income 

Interest expense 

Net income before the undernoted items 

Net loss of ports established as local port corporations 

(Note 3) 

Share in loss of Ridley Terminals Inc. (Note 5) 

Net loss (1,740) (1,618) 



STATEMENT OF SURPLUS (DEFICIT) 

FOR THE YEAR ENDED DECEMBER 31, 1986 

(in thousands of dollars) 



1986 1985 

Deficit at beginning of the year 

As previously reported (57,966) (56,775) 

Adjustment of prior year's share in loss of Ridley Ter- 
minals Inc. (Note 5) 1,291 

As restated (57,966) (55,484) 

Net loss (1,740) (1,618) 

(59,706) (57,102) 
Surplus (deficit) transferred to local port corporations 

(Note 3) (76,595) 864 

Surplus (deficit) at end of the year 16,889 (57,966) 



STATEMENT OF CONTRIBUTED CAPITAL 
FOR THE YEAR ENDED DECEMBER 31. 1986 
(in thousands of dollars) 



1986 



1985 



Contributed capital at beginning of the year 130,734 142,319 

Forgiveness of deferred interest on loans from Canada 
(Note 10) 4,371 

Contributed capital transferred to local port corpora- 
tions (Note 3) (79,209) (11.585) 

Contributed capital at end of the year 55,896 1 30,734 



1986 1985 

Operating Activities 

Net loss (1,740) (1,618) 

Items not affecting cash 

Depreciation 5,433 6,078 

Deferred interest 609 

Share in loss of Ridley Terminals Inc 5,090 4.797 

Other 127 122 

Increase in operating components of working capital (2.727) (245) 

Cash provided by operating activities 6.233 9,743 

Financing Activities 

Capital grants 12.993 14.127 

Loans from Canada (6,993) 2,570 

Decrease (increase) in current portion of Loans from 

Canada 1,459 (1,712) 

Decrease (increase) in current portion of Tmancing pro- 
vided by a province (175) 1,100 

Repayment of deferred interest (486) 

Contribution to Canada (26,694) 

Cash provided (required) by financing activities (19,400) 15,599 

Investing Activities 

Additions to fixed assets 16,379 17.310 

Proceeds on disposal of fixed assets (187) (12) 

Cash required by investing activities 16,192 17,298 

Increase (decrease) in cash and short-term investments (29,359) 8,044 

Cash and short-term investments at beginning of the year 62.381 60,028 
Cash and short-term investments transferred to local port 

corporations (Note 3) (4,933) (5,691) 

Cash and short-term investments at end of the year 28,089 62,381 



NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, 1986 

1. Canada Ports Corporation Act 

Canada Ports Corporation is established under the Canada 
Ports Corporation Act. The Act provides for the establishment of 
local port corporations to manage and operate selected ports. The 
Corporation is named in Part II of Schedule C of the Financial 
Administration Act and is exempt from income tax. 

2. Significant accounting policies 

(a) Financial statements 

The financial statements of the Corporation include the 
accounts of all the ports and other facilities under its 
administration. The activities of the local port corporations 
are excluded from the financial statements from the date of 
their establishment. 

(b) Investments 

The investments are shown at amortized cost whereby premi- 
ums or discounts from par value are amortized over the peri- 
ods to maturity. 

(c) Investment in Ridley Terminals Inc. 

The investment in Ridley Terminals Inc. is accounted for on 
the equity basis. 



PUBLIC ACCOUNTS, 1986-87 



103 



CANADA PORTS CORPORATION— Continued 

NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, \9&6— Continued 

(d) Fixed assets 

Fixed assets are recorded at cost except for those transferred 
to the Corporation from Canada, which are recorded at 
appraised or fair market value established at the time of 
transfer. Grants towards capital projects received from 
Canada and from third parties are deducted from the cost of 
the related fixed assets. 

Depreciation is calculated on the straight-line basis for the 
full year, commencing with the year the asset becomes opera- 
tional, using rates based on the estimated useful lives of the 
assets. 

(e) Pension costs 

All permanent employees of the Corporation are covered by 
the Public Service Superannuation Plan administered by 
Canada. Contributions to the plan are required from both the 
employees and the Corporation. The annual contributions 
represent the liability of the Corporation for pensions and are 
recognized in the accounts on a current basis. 

(0 Insurance 

The Corporation assumes substantially all risks against fire 
and general perils, as well as for workers' compensation 
claims. Any costs arising from these risks are recorded in the 
accounts in the year they can be reasonably estimated. 

(g) Grants in lieu of municipal taxes 

The expense for grants in lieu of municipal taxes is based on 
estimated municipal assessments adjusted in accordance with 
the Municipal Grants Act. Grants are paid after the amounts 
have been audited by the Municipal Grants Division of Pub- 
lic Works Canada. Any adjustments upon finalization are 
reflected in the accounts in the year of settlement. 

(h) Employee benefits 

The Corporation accrues in its accounts, annually, the 
estimated liabilities for severance pay, annual leave, sick 
leave and overtime compensatory leave, which are payable to 
its employees in subsequent years under its collective agree- 
ments, or in accordance with its policy. 

3. Local Port Corporations 

At the closing of business on December 31, 1986, the Port of 
Saint John, New Brunswick was established as a local port corpo- 
ration under the name of Saint John Port Corporation. The Port 
of St. John's, Newfoundland was established as a local port corjx)- 
ration on June 1, 1985, under the name of St. John's Port Corpo- 
tation. 

In accordance with the Canada Ports Corporation Act, the 
assets, liabilities and equity were transferred to the local port cor- 
porations on the dates of their establishment at their carrying 
value in the accounts of the Corporation. As a result, the carrying 
value of the assets, liabilities and equity of the Corporation has 
been reduced as follows: 



1986 1 985 

(in thousands 

of dollars) 

Assets 

Cash and short-term investments 4,933 5,691 

Other working capital (309) (303) 

Long-term investments 949 944 

Fixed 84.368 8.135 

89.941 14.467 



Liabilities 

Long-term accrued employee benefits 483 69 

Financing provided by a province 19.521 

Loans from Canada 68.356 L949 

88.360 2.018 

Equity 

Contributed capital 79,209 1 1.585 

Contribution to Canada (1,033) 

Surplus (deficit) (76.595) 864 

89,94! 14.467 



The statement of income includes the results of operations of 
the Port of Saint John for the years ended December 31, 1986 and 
1985, and the results of operations of the Port of St. John's for the 
five month period ended May 31, 1985 as follows: 

1986 1985 
(in thousands 
of dollars) 

Revenue from operations 1 1,562 12,228 

Operating and administrative expenses 7.098 7.297 

Depreciation 2.606 2.909 

Grants in lieu of municipal taxes 801 808 

10.505 11.014 

Net income from operations 1.057 1.214 

Investment income 1.268 1.900 

interest expense (3.313) (3.650) 

Net loss of ports established as local port corpora- 
tions (988) (536) 



4. Investments 

Investments, which are direct and guaranteed securities of 
Canada, are: 



1986 



1985 



Amortized Market Amortized Market 
Cost Value Cost Value 



(in thousands of dollars) 
Currem 27,864 27,874 61,740 61,726 



Long-term 18.225 22.050 19.102 21.830 



Investments in Ridley Terminals Inc. 

Ridley Terminals Inc. (RTI) was incorporated on December 
18, 1981, under the Canada Business Corporations Act to 
develop, manage and operate a coal terminal on Ridley Island at 
the Port of Prince Rupert. 



104 



PUBLIC ACCOUNTS, 1986-87 



CANADA PORTS CORPORATION— Continued 

NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, \9S6— Continued 

At December 31, 1986, Canada Ports Corporation (the Corpo- 
ration) had acquired, at a cost of $23,021,400, 90% of the issued 
common shares ($900) and 100% of the Class A preference shares 
($23,020,500) of RTI. As of that date, Fednav Limited had 
acquired, at a cost of $23,020,600, 10% of the issued common 
shares ($100) and 100% of the Class B preference shares 
($23,020,500) of RTI. 

The Corporation's investment in RTI is accounted for on the 
equity basis. Application of this method in years in which RTI has 
a deficit requires that the Corporation recognize a share of the 
results of operations of RTI equal to its participation in the total 
equity in RTI which, at December 31, 1986, was 50%. In years in 
which RTI has retained earnings, the Corporation's share of the 
results of operations will be proportionate to its shareholding in 
common shares, after recognizing the dividend requirements of 
the two classes of preference shares. 

As a result of RTI's successful appeal of the assessment of the 
1983 and 1984 property taxes $2,582,000 was refunded to RTI in 
March 1985. The Corporation's deficit balance at January 1, 
1985, was adjusted accordingly by $1,291,000 representing the 
Corporation's 50% share of the amount received. 

The investment in Ridley Terminals Inc. is composed of: 

1986 1985 

(in thousands 

of dollars) 

Balance at beginning of the year 16,227 21,024 

Share in loss (5,090) (4.797) 

Balance at end of the year 1 1,137 16,227 

A summary of the balance sheet of RTI as at December 3 1 , as 
reported in its audited financial statements shows: 

1986 1985 

(in thousands 

of dollars) 

Assets 

Current 3,640 4,580 

Fixed 224,792 230,540 

Other 83 92 

228,515 235,212 

Liabilities 

Current 1,225 1,941 

Long-term debt 203.835 199,636 

205.060 201,577 

Equity 23,455 33.635 

228.515 235,212 



m 



RTI has two long-term financing agreements with a major 
Canadian bank as follows: 

(a) A construction credit loan agreement which is guaranteed 
unconditionally by Canada and is further secured by a 
$250,000,000 subordinate fixed and floating charge collat- 
eral demand debenture. On July 1, 1985, all borrowings con- 
verted to a fifteen year term loan with specified semi-annual 
repayments commencing July 31, 1991 through January 31, 
2000. Interest on the bank loans is at the bank's prime rate, 
payable monthly. The Bankers' Acceptance fee is currently 
'/i% per annum. 

(b) A revolving credit loan agreement which provides an 
$80,000,000 credit facility for advances on a revolving basis 
until June 30, 1989 at which time all borrowings will convert 
to a term loan repayable in specified semi-annual instalments 
commencing July 31, 1989 through January 31, 1992. Inter- 
est on the bank loans is at the bank's prime rate plus '/4% per 
annum, payable monthly. The Bankers' Acceptance fee is 
currently %% per annum. 



This agreement is secured by a $350,000,000 first fixed and 
floating charge collateral demand debenture with the termi- 
nal facility as security and an assignment of the lease with 
the Prince Rupert Port Corporation. 

As at December 31, 1986, drawings under these agreements 
were as follows: 

1986 1985 

(in thousands 

of dollars) 

(a) Construction credit loan agreement — 

Bank loans 65,000 

Bankers' acceptances, net of unamortized 

interest charges 197.940 134.036 

197.940 199.036 

(b) Revolving credit loan agreement — 

Bank loans 1,900 600 

Bankers' acceptances, net of unamortized 

interest charges 3,995 

5,895 66o~ 
203,835 199,636 



Based on the amounts borrowed under the credit facilities as at 
December 31, 1986, annual principal repayments over the next 
five years amount to $738,000 in 1989, $1,918,000 in 1990 and 
$7,200,000 in 1991. 

The Class A preference shares carry a fixed cumulative divi- 
dend at a rate of 18% per annum on their stated value. The Class 
B preference shares carry a fixed cumulative dividend at a rate 
sufficient to net 20% after tax per annum on their stated value. 
The Class B preference shares annual dividend of 20% is a net 
sum after deducting an amount equal to the prevailing aggregate 
federal and provincial corporate income and profit taxes appli- 
cable to the dividend. 

Holders of the Class A and B preference shares are entitled to 
interest at the respective dividend rates in the event that dividends 
accrued are not paid. Unpaid interest compounds annually at the 
same respective rates. Interest has accrued since April 30, 1982. 
The preference shares are redeemable at any time at their stated 
value plus accrued dividends and unpaid interest thereon. Prefer- 
ence dividends and related interest in arrears at December 31, 
1986, calculated at tax rates prevailing as at that date with 
respect to the Class B shares amount to: 

1986 1985 



(in thousands 
of dollars) 



Class A preference shares held by Canada Ports Cor- 
poration 

Class B preference shares held by Fednav Limited ... 



19.745 
46,567 



12,930 
29,764 



66,312 42.694 



The results of operations of RTI for the year ended December 
31, 1986, in comparison with the year ended December 31, 1985, 
are as follows: 

1986 1985 

(in thousands 

of dollars) 

Revenue from operations 28,793 30,855 

Operating and administrative expenses 12,408 12,943 

Depreciation 6,594 7,212 

Interest expense 19,971 20,294 

38,973 40,449 

Net loss (10.180) (9.594) 



PUBLIC ACCOUNTS, 1986-87 



105 



CANADA PORTS CORPORATION— Concluded 

NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, \9i6— Concluded 

6. Debentures of Saint John Harbour Bridge Authority 

The Saint John Harbour Bridge Authority is indebted in the 
amount of $14,153,000 (1985— $14,257,000) to the Corporation 
which in turn is indebted to Canada in the same amount, in 
accordance with the provisions of Vote LI06B, Appropriation Act 
No. 7, 1967, 1967-68, c. 8. The interest and repayment terms of 
the parliamentary advances to the Corporation are identical to 
those of the debentures of the Authority. Under the terms of the 
agreement between Canada and the Authority, Canada has, in 
effect, guaranteed the repayment of both principal and interest on 
the debentures. Accordingly, the debentures received have been 
offset against the advances and loans payable to Canada such that 
they are not reflected as an asset and a liability on the balance 
sheet. Interest income and expense of $971,000 (1985— $978,000) 
have been similarly offset and do not appear in the statement of 
income. 

On July 9, 1981, Treasury Board agreed to the transfer of the 
responsibility for the administration of the indebtedness of Saint 
John Harbour Bridge Authority as well as the equivalent loan 
payable to Canada from the accounts of the Corporation to those 
of Transport Canada. As at December 31, 1986, this transfer had 
not been completed. 

7. Fixed assets 
(a) Summary 







1986 




1985 






Accu- 






Depre- 




mulated 






ciation 




depre- 






rates 


Cost 


ciation 


Net 


Net 



(in thousands of dollars) 



Land 

Dredging 2.5-6.7 

Berthing struc- 
tures 2.5-10 

Buildings 2.5-10 

Utilities 3.3-10 

Roads and sur- 
faces 2.5-10 

Machinery and 
equipment. 5-100 

Office furni- 
ture and 
equipment... 20 

Works under 
construction . 



5,591 
9,330 

35,128 

15,911 

2,884 

2,139 

18,640 

2,161 
997 



5,101 

17,835 

11,982 

1,282 

1,706 

13,598 

1,749 



5,591 35,647 

4,229 5,187 

17,293 56,090 

3,929 12,728 

1,602 6,405 



433 
5,042 

412 
997 



1,729 
6,337 

462 
1,562 



92,781 53,253 



39,528 126,147 



(b) Capital grants 

During the year, the Corporation received capital grants 



totalling $12,993,000 (1985- 
struction of capital projects. 



-$14,127,000) towards the con- 



(c) Capital expenditure commitments 

Contractual obligations for the completion, construction and 
purchase of fixed assets are estimated at $232,000, of which 
most will be expended in the year ending December 31, 1987. 



8. Accounts Payable and Accrued Liabilities 

Included in accounts payable and accrued liabilities are the fol- 
lowing: 

1986 1985 



Deferred revenues 

Current portion of long-term liabilities 



(in thousands 
of dollars) 

192 749 

70 1,712 



9. Financing Provided by a Province 

The Province of New Brunswick advanced $25,000,000 to par- 
tially finance the construction of Rodney Terminal, Saint John. 
As at December 31, 1986, both the asset and the remaining debt 
were transferred to the Saint John Port Corporation. 

10. Loans from Canada 

1986 1985 
(in thousands 
of dollars) 
Loans bearing interest at 6.44% and 9.09% with 
blended annual principal and interest repayment 
requirements of $193,000 and maturing on Decem- 
ber 31, 2000 1,632 29,362 

Deferred interest 4,371 

Le.M.- current portion (70) (1,712) 

1,562 32,021 

Non-interest bearing loans with indefinite due date 17,841 55,609 

Accrued interest on loans not due and payable 5,490 15,514 

24,893 103,144 



Deferred interest on loans of $19,737,000 for the construction 
of terminal facilities at the Port of Saint John amounted to 
$4,371,000 as at December 31, 1985. In 1986, the deferred inter- 
est was forgiven by the Minister of Finance and was treated as 
contributed capital. 

Principal repayment requirements over the next five years 
amount to $70,000 in 1987, $75,000 in 1988, $81,000 in 1989, 
$87,000 in 1990 and $93,000 in 1991. 

1 1 . Contingencies 

Claims aggregating approximately $500,000 in respect of law- 
suits, guarantees, employee agreements, damage allegedly suf- 
fered on the Corporation's property and sundry other matters in 
dispute have been received by the Corporation but are not 
reflected in the accounts. In the opinion of the Corporation, the 
final outcome of such claims should not result in any material 
financial liability. 

12. Contribution from (to) Canada 

In 1982, the Corporation received a contribution from Canada 
of $20,072,000 for the purchase of shares in Ridley Terminals 
Inc. The terms and conditions of repayment of the contribution 
were to be determined by Treasury Board and the Corporation 
prior to April 1, 1989. 

In 1985, Canada requested from various Crown Corporations a 
portion of cash identified as surplus to their requirements. As part 
of this cash recovery exercise, a request was made for a contribu- 
tion of $133,000,000 from the Ports Canada system which, at that 
time, consisted of the Canada Ports Corporation and the six local 
port corporations. 

The Corporation's share of the contribution, excluding the Port 
of Saint John's share, was in the amount of $25,661,000 of which 
$20,072,000 has been applied against Contribution from Canada 
as authorized by the Minister of Transport. The balance of 
$5,589,000 has been treated as a Contribution to Canada. 

13. Comparative Figures 

The 1985 figures have been reclassified in order to conform 
with this year's presentation. 



106 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
CANADA POST CORPORATION 



MANDATE 

To operate a postal service on a self-sustaining financial basis while providing a standard of service that will meet the 
needs of Canadians. 

BACKGROUND 

The Canada Post Corporation Act requires the corporation to fulfill its mandate while "improving and extending its 
products and services," having regard to "the need to conduct its operations on a self-sustaining financial basis." The 
corporation is also called upon to manage its human resources "in a manner that will both attain the objects of the 
corporation and ensure the commitment and dedication of its employees." Canada pays subsidies to the corporation 
in support of the publishing industry, for Northern parcel mails, parliamentary free mail, and blind persons' free 
mail. The actual operating subsidy today is about 4 per cent of the corporation's operating expenses. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



Sir Alexander Campbell Building 
Confederation Heights 
Ottawa, Ontario 
KlAOBl 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable Harvie Andre, P.C., M.P, 

Consumer and Corporate Affairs 

1981; by the Canada Post Corporation Act (S.C. 1981, C. 54), 
proclaimed October 16, 1981. 

Donald H. Lander 

Sylvain Cloutier 

Maheu Noiseux and the Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 

1986-87 1985-86 1984-85 1983-84 

At the end of the period 

Total Assets 2,629 2,451 2,370 2,403 

Obligations to the private sector nil nil nil nil 

Obligations to Canada nil nil nil nil 

Equity of Canada 1,598 1,576 1,602 1,645 

Cash from Canada in the period 

— budgetary* 232 184 347 306 

— non-budgetary nil nil nil nil 

* Budgetary amounts do not include the special payments for cultural and other mails. 



PUBLIC ACCOUNTS, 1986-87 



107 



CANADA POST CORPORATION 

RESPONSIBILITY FOR FINANCIAL REPORTING 

The Board of Directors is responsible for the financial statements 
and all other information presented in this annual report in accordance 
with the Financial Administration Act and regulations. The financial 
statements have been prepared by management in accordance with 
generally accepted accounting principles and, where appropriate, 
include amounts based on management's estimates and judgment. 

Management has developed and maintains books of account, 
records, financial and management control and information systems 
and management practices. These are designed to provide reasonable 
assurance that assets are safeguarded and controlled, and transactions 
are in accordance with the Financial Administration Act and regula- 
tions as well as the Canada Post Corporation Act and by-laws of the 
Corporation. Internal audits are conducted to assess these systems and 
practices. 

The Board of Directors ensures that management fulfills its respon- 
sibilities for financial reporting and internal control through the Audit 
Committee which is composed of five directors, three of whom are not 
employees of the Corporation. The Audit Committee meets at least 
annually to review, and advise the Board of Directors with respect to, 
the financial statements and the auditors' annual report. The Audit 
Committee also oversees the internal audit activities of the Corpora- 
tion and performs such other functions as are assigned to it. 

The Corporation's external auditors, the Auditor General of Canada 
and Maheu Noiseux, examine the financial statements and report to 
the Minister Responsible for Canada Post Corporation. 



AUDITORS' REPORT 

TO THE MINISTER RESPONSIBLE FOR CANADA POST CORPORA- 
TION 

We have examined the balance sheet of Canada Post Corporation as 
at March 31, 1987 and the statements of equity of Canada, operations 
and extraordinary restructuring costs and changes in financial position 
for the year then ended. Our examination was made in accordance 
with generally accepted auditing standards, and accordingly included 
such tests and other procedures as we considered necessary in the cir- 
cumstances. 

In our opinion, these financial statements present fairly the financial 
position of the Corporation as at March 31, 1987 and the results of its 
operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in our opinion, the transactions of the Corporation that 
have come to our notice during our examination of the financial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, the Canada 
Post Corporation Act and the by-laws of the Corporation. 

Kenneth M. Dye, F.C.A. 
Auditor General of Canada 



Maheu Noiseux 
Chartered Accountants 



Ottawa, Canada 
June 10, 1987 



BALANCE SHEET AS AT MARCH 31 

(in thousands of dollars) 



ASSETS 



1987 



1986 



LIABILITIES AND EQUITY OF CANADA 



1987 



1986 



Current 

Cash 608,248 481,008 

Accounts receivable 

Government of Canada 5,534 9,389 

Foreign postal administrations 78,829 80,456 

Other 10,298 8,731 

Prepaid expenses 37,833 35,821 

740.742 615,405" 

Fixed (Notes 3 and 8a) 

Land, buildings and equipment 1,913,668 1,800,238 

Less: accumulated depreciation 412,829 321,821 

1.500,839 1,478,417" 

Other 

Deferred employee termination benefits 386.939 357,606 

National Postal Museum (Note 4) 1 1 



386,940 357,607 
2,628,521 2,451,429 



Current liabilities 
Accounts payable and accrued liabilities 

Government of Canada 140,020 101,510 

Foreign postal administrations 6,408 8,51 1 

Other 98,610 63,928 

Salaries and benefits 183.186 144,200 

Deferred revenues 145,973 133,506 

Outstanding money orders 61,362 59,217 

Deposits 7,683 7.033 

643,242 517,905 

Employee termination benefits (Note 5) 386,939 357,606 

EQUITY OF CANADA 

Contributed capital 1,739,388 1,678,218 

Accumulated unfunded losses from operations (102,300) (102,300) 

Accumulated extraordinary restructuring costs, 

recoverable in future postal rates (Note 6) (38,748) 

1.598,340 1,575.918 

2.628.521 2,451,429 



Contingent liabilities (Note 7) 

Approved by the Board: 

SYLVAIN CLOUTIER 
Chairman of the Board 

DANIEL J. SCANLAN 
Chairman. Audit Committee 



108 



PUBLIC ACCOUNTS, 1986-87 



CANADA POST CORPORATION— Co/i/mw^J 

STATEMENT OF EQUITY OF CANADA 
YEAR ENDED MARCH 31 

(in thousands of dollars) 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
YEAR ENDED MARCH 31 

(in thousands of dollars) 



1987 



1986 



1987 



1986 



526 



1,678,218 



Contributed capital 

At beginning of year 1,678,218 1,677,692 

Parliamentary appropriations for capital, extraordi- 
nary restructuring costs and special purposes 
(Note 8a) 61,170 

At end of year 1,739,388 

Accumulated unfunded losses from operations 

At beginning of year 102,300 

Unfunded loss from operations 

At end of year 102,300 

Accumulated extraordinary restructuring costs, recov- 
erable in future postal rates 

At beginning of year 

Additions during the year (Note 6) 38,748 

Amortization for the year 

At end of year 38,748 

Equity of Canada 1,598,340 



76,157 
26,143 



102,300 



1,575,918 



STATEMENT OF OPERATIONS AND 
EXTRAORDINARY RESTRUCTURING COSTS 
YEAR ENDED MARCH 31 
(in thousands of dollars) 



1987 



1986 



Revenues 
Mail 

Postage 2,500,129 

Subsidies on behalf of postal user (Note 8b) 254,093 

2,754,222 

International settlements 136,917 

Post office box rentals 23,019 

Philatelic and retail sales 20,986 

Money order fees 17,273 

Other 17,639 

2,970,056 

Expenses 

Salaries and benefits 2,243,224 

Transportation 317,979 

Accommodation 191,170 

Depreciation 85,690 

International settlements 70,175 

Materials and supplies 54,339 

Travel and communications 43,599 

Computer, security and professional services 35,718 

Commissions and fees 28,129 

Rentals, repairs and maintenance 9,936 

Advertising and publications 7,808 

Other 11,270 

3,099,037 

Loss from operations 128,981 

Amortization of extraordinary restructuring costs 

Government funding (Note 8c) 128,981 

Unfunded loss from operations 

Extraordinary restructuring costs, recoverable in 

future postal rates (Note 6) 38,748 



2,340,887 
225,093 



2,565,980 
119,387 
18,602 
21,760 
15,936 
16,009 



2,757,674 



2,208,379 

306,612 

136,088 

79,534 

66,663 

45,633 

35,435 

32,402 

31,293 

9,066 

7,593 

9,403 



2,968.101 



210,427 
184,284 



26,143 



Cash from operations 

Loss from operations (128,981) (210,427) 

Items not requiring cash 

Depreciation 85,690 79,534 

Loss on disposal of fixed assets 4,369 883 

(38,922) (130,010) 

Government funding 128,981 184,284 

Changes in non-cash working capital items 

Accounts receivable 3,915 (10,495) 

Accounts payable and accrued liabilities 71,089 83,414 

Deferred revenues 12,467 9.469 

Outstanding money orders 2,145 (3.950) 

Other 37.624 13.379 



Cash for extraordinary restructuring 

Extraordinary restructuring costs, recoverable in 
future postal rates 

Cash from financing 

Parliamentary appropriations for capital, extraordi- 
nary restructuring costs and special purposes 

Cash invested 

Land and buildings acquisitions 

Equipment acquisitions 

Parliamentary appropriation for special purposes 

Proceeds on disposal of fixed assets 

Cash increase 

Cash at beginning of year 

Cash at end of year 

Represented by 

Cash 549.997 

Money order funds in trust 58.251 



217.299 


146,091 


(38,748) 


61,170 


526 


(42,185) 
(72,828) 


(15,394) 
(40,529) 


(115,013) 
502 
2,030 


(55,923) 
435 
688 


(112,481) 


(54,800) 


127,240 


91,817 


481,008 


389,191 


608,248 


481,008 



423,696 

57,312 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, 1987 

1. Incorporation 

The Corporation was established by the Canada Post Corpora- 
tion Act on October 16, 1981 to operate a postal service on a self- 
sustaining financial basis while providing a standard of service 
that will meet the needs of the people of Canada. The Corporation 
is a Crown corporation included in Part I of Schedule C to the 
Financial Administration Act and is an agent of Her Majesty. 
The Corporation is exempt from income taxes. 

The Canada Post Corporation Act provided that all the prop- 
erty, assets, rights, obligations and liabilities of the Post Office 
Department be transferred to the Corporation from the Govern- 
ment of Canada. 

2. Significant accounting policies 

These financial statements have been prepared in accordance 
with generally accepted accounting principles. A summary of the 
significant accounting policies of the Corporation follows: 

(a) Rate regulation 

The Canada Post Corporation Act provides that the Corpora- 
tion may make regulations prescribing rates of postage that 
are fair and reasonable so as to provide revenue together with 
any revenue from other sources, sufficient to defray the costs 



PUBLIC ACCOUNTS, 1986-87 



109 



CANADA POST CORPORATION— Continued 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \9%1— Continued 

incurred by the Corporation in the conduct of its operations. 
The Corporation is required to publish each proposed regula- 
tion for interested persons to make representations to the 
Minister Responsible for the Corporation, who thereafter 
submits the regulation to the Governor in Council for con- 
sideration and subsequent approval or refusal. 

With the approval of the Governor in Council, as rate regula- 
tor, the Corporation may include certain costs in its future 
operating cost base for purposes of establishing postal rates 
at that time. This may result in the deferral of costs which 
otherwise would be charged to current operations. All such 
costs are amortized and recovered in future postal rates on 
the basis specified by the rate regulator. 

(b) Fixed assets and depreciation 

Land, buildings and equipment transferred from the Govern- 
ment of Canada on October 16, 1981 were recorded at their 
fair value at that date, determined as follows: 



Land 

Buildings 

Plant equipment, 
vehicles, and sales 
counter and office 



— Market value based on existing 

use 

— Depreciated replacement cost 

— Depreciated replacement cost 

or original cost less 
estimated depreciation 



furniture and equipment 

The market value of land and the depreciated replacement 
cost of buildings transferred by the Government of Canada 
was determined by independent appraisals. Acquisitions sub- 
sequent to October 16, 1981 are recorded at cost. 

Minor equipment was recorded at estimated depreciated 
replacement cost at October 16, 1981. Subsequent additions 
to the base amount are recorded at cost. Replacement of 
mailbags and lockboxes are expensed as purchased. 

Depreciation is provided on the straight-line basis over the 
estimated useful lives of the following assets: 

Buildings 30 and 40 years 

Plant equipment 4 to 30 years 

Vehicles (other than passenger 

and light duty commercial) 6 to 10 years 

Sales counter and office furniture 

and equipment 5 to 20 years 

Minor equipment — Street furniture 

and monotainers 5 to 1 5 years 

Depreciation is provided on the diminishing balance basis at 
an annual rate of 30 per cent for all passenger and light duty 
commercial vehicles. 

(c) Employee termination benefits 

Employees of the Corporation are entitled to specified termi- 
nation benefits, calculated at salary levels in effect at the 
time of termination, as provided for under collective agree- 
ments and conditions of employment. 

With the approval of the rate regulator, the Corporation 
defers the costs of unpaid employee termination benefits 
accruing to employees until such time as the Corporation 
becomes self-sustaining (anticipated to be the year ending 
March 31, 1989). Accordingly, the present value of the pro- 
jected costs of unpaid employee termination benefits is 
recorded in the accounts as a long-term liability offset by a 
deferred charge, since such costs will be recovered from 
future postal revenues and/or Government funding (Notes 5 
and 8c). The deferred costs are amortized and charged to 
operations on the same basis as the liability is paid and recov- 
ered from revenues and/or Government funding. 



(d) Revenue recognition 

Amounts received for which services have not been rendered 
prior to the end of the year are deferred. 

(e) Parliamentary appropriations 

Parliamentary appropriations representing Government con- 
tributions are credited to equity of Canada when costs are 
incurred. However, when capital items are funded under a 
Government assistance program, the funding is applied to 
reduce the capital cost. As outlined in Note 8a, unexpended 
amounts are set up as a current liability due to the Govern- 
ment of Canada. 

Parliamentary appropriations representing subsidies on 
behalf of postal users and Government funding are credited 
to operations in the year to which they relate, as outlined in 
Note 8b and c. 

(0 Workers' compensation 

The Corporation assumes all risks for workers' compensation 
claims. The estimated costs of such claims, as a result of inju- 
ries on duty, are recorded as expenses in the year of injury. 
All payments for injuries suffered by employees prior to 
October 16, 1981 are the responsibility of the Government of 
Canada, since they are the liability of the Department of 
Labour. 

(g) Pension plan 

Employees of the Corporation are covered by the Public Ser- 
vice Superannuation Plan administered by the Government 
of Canada. Under present legislation, contributions made by 
the Corporation to the Plan are limited to an amount equal to 
the employees' contributions on account of current service. 
These contributions, which amounted to $96,265,000 
(1986 — $96,360,000), represent the total pension obligations 
of the Corporation and are charged to operations on a cur- 
rent basis. The Corporation is not required under present 
legislation to make contributions with respect to actuarial 
deficiencies of the Public Service Superannuation Account 
and/or with respect to charges to the Consolidated Revenue 
Fund for indexation payments under the Supplementary 
Retirement Benefits Act. 

(h) Extraordinary restructuring costs, to be recovered in future 
postal rates 

The Corporation has undertaken certain programs which 
form part of a major restructuring of the current postal sys- 
tem to meet specified operating and service performance 
standards. The costs of these programs are of an unusual, 
non-recurring and strategic nature. 

With the approval of the rate regulator, these costs are to be 
recovered in future postal rates and, as such, are amortized 
on a straight-line basis over the ensuing five years. Pending 
the amortization and recovery of such costs in future postal 
rates, these costs are refiected in the statement of operations 
and extraordinary restructuring costs as incurred, and are 
accumulated as a reduction of the equity of Canada. 

In the event that the Corporation determines there is no 
reasonable assurance that particular amounts will be recov- 
ered, such unrecoverable costs will be charged to current 
operations. 

(i) Foreign currency translation 

Revenues and expenses relating to transactions with foreign 
postal administrations are translated into Canadian dollars at 
the exchange rates at the time of transaction. Amounts due 
to or from foreign postal administrations at the balance sheet 
date are translated at the then prevailing exchange rates. 



lie 



PUBLIC ACCOUNTS, 1986-87 



CANADA POST CORPORATION— Continued 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \9S1— Continued 

Gains or losses arising from translation of foreign currencies 
are included in operations. 

3. Fixed assets 





1987 




1986 




Accu- 






Cost or 


mulated 






fair 


deprecia- 






value 


tion 


Net 


Net 



237,564 

810,046 

301,103 

26,774 



(in thousands of dollars) 

Land 241,704 241,704 

Buildings 1,013,603 195,520 818,083 

Plant equipment 431,095 148,351 282,744 

Vehicles 71,431 35,801 35,630 

Minor equipment 

mail bags and lock 
boxes 24,325 24,325 27,251 

street furniture and 

monotainers 40,174 12,232 27,942 14,450 

Sales counter and 

office furniture and 

equipment 91,336 20,925 70,411 



61,229 



1,913,668 412.829 1,500,839 1,478,417 

4. National Postal Museum 

The Corporation operates a museum which contains philatelic 
material, postal artifacts, a postal library, exhibits that trace the 
history of the mail and other postal memorabilia. Since these col- 
lections, exhibits and books are not for resale and are of undeter- 
mined value, they have been recorded at a nominal amount of 
$1,000. 

5. Employee termination benefits 

At the time of incorporation on October 16, 1981, the Corpora- 
tion assumed the liability related to termination benefits which 
had accrued to employees of the Post Office Department. In addi- 
tion, the Corporation recognizes in the accounts the liability for 
benefits accruing to employees of the Corporation since October 
16, 1981. The present value of these projected liabilities and the 
corresponding deferred charge remaining to be amortized and 
charged to operations at March 3 1 , amounted to: 



1987 



1986 



(in thousands 
of dollars) 

Accumulated to October 16, 1981 240,949 239,643 

Accumulated subsequent to October 16, 1981 145,990 1 17,963 



386,939 357,606 



The total charge to operations for employee termination ben- 
efits amounted to $15,633,900 (1986 — $29,788,690). 

6. Extraordinary restructuring costs, recoverable in future postal 
rates 

During the year, the Corporation incurred costs which contrib- 
ute to the restructuring of the current postal system to meet speci- 
fied operating and service performance standards. These costs, 
totalling $38,748,000, relate to personnel downsizing and develop- 
ing and implementing management and operating systems, and 
are to be recovered in future postal rates. These costs will be 
amortized on a straight-line basis over the next five years. 

7. Contingent liabilities 

(a) Two complaints have been filed with the Canadian Human 
Rights Commission, alleging discrimination by the Corpora- 
tion concerning work of equal value. A settlement with no 
retroactive effect has been reached with one claimant. The 



Commission now has this settlement before it for approval. 
The Commission's investigation of the second complaint is 
continuing and the outcome is not presently determinable. 
Settlement, if any, arising from resolutions of these matters, 
will be recovered in future postal rates (as determined in 
accordance with the Canada Post Corporation Act) and/or 
from the Government of Canada. 

(b) Employees are permitted to accumulate unused sick leave. 
However, such leave entitlements do not vest and are depend- 
ent on future illness. The amount of accumulated sick leave 
entitlements which will become payable cannot reasonably be 
determined. Sick leave benefits are expensed as paid. 

8. Parliamentary appropriations 

(a) Parliamentary appropriations for capital, extraordinary 
restructuring costs and special purposes 

The Government of Canada provides contributions towards 
the acquisition of fixed assets and the extraordinary restruc- 
turing costs in the form of a parliamentary appropriation for 
capital and extraordinary cost requirements. In previous 
years, the Corporation also received appropriations for other 
special purposes. Appropriations have been allocated as fol- 
lows: 

1987 1986 



(in thousands 
of dollars) 



Unexpended balance at beginning of year 2,261 2,492 

Parliamentary appropriations 

Capital and extraordinary cost requirements 103,000 

Special purposes 730 

Total available 105,261 3,222 

Credited to 
Equity of Canada 
Capital and extraordinary restructuring costs . 59,963 

Special purposes 1,207 526 

Fixed asset acquisitions (Government assist- 
ance) 502 435 

Expended during the year 61,672 961 

Unexpended balance at end of year (in current 
liabilities) 43,589 2,261 



(b) Subsidies on behalf of postal users 

The Government of Canada provides assistance to the pub- 
lishing industry by making payments which compensate the 
Corporation for reduced postal revenue from that source. In 
accordance with Government policy, the Corporation also 
receives compensation to subsidize postal rates for govern- 
ment free mail, literature for the blind and northern air stage 
services. Subsidies received are as follows: 



1987 



1986 



(in thousands 
of dollars) 



Department of Consumer and Corporate 

Affairs 199,000 170,000 

Department of Communications 55,093 55,093 



254,093 225,093 



It is anticipated that where Government policy requires the 
Corporation to provide postal services at rates less than cost, 
the Corporation will continue to receive subsidies as compen- 
sation for foregone postage revenue. 



PUBLIC ACCOUNTS, 1986-87 



111 



CANADA POST CORPORATION— Conc/w^e^/ 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \9%1— Concluded 

(c) Government funding 

The Canada Post Corporation Act provides that where the 
annual revenues of the Corporation are insufficient to permit 
the Corporation to pay ail its operating and income charges, 
the amount of the insufficiency shall be included in the form 
of a deficit appropriation in the next Estimates laid before 
Parliament. 

By arrangement with the Government of Canada, the annual 
deficit appropriation in respect of the loss from operations is 
$ 1 28,98 1 ,000 ( 1 986 — $ 1 84,284,000). 

9. Lease commitments 

The Corporation leases certain facilities under operating leases 
which expire at various dates between 1988 and 2001 . The Corpo- 
ration's future minimum rental payments required under operat- 
ing leases that have terms in excess of one year, are as follows: 

(in thousands 
of dollars) 



1988 

1989 

1990 

1991 

1992 

1993 to 2001 



32,883 
28,561 
22,421 
16,759 
13,357 
31,013 



(c) Money orders 

Funds received from the issue of money orders are held in 
trust to the credit of the Corporation in the Consolidated 
Revenue Fund of the Government of Canada until required 
for redemption of the money orders and/or settlement with 
foreign postal administrations. Interest is not received on the 
funds on deposit, nor is there a charge by the Government of 
Canada for expenses relating to the redemption of money 
orders. 

(d) Other 

In the normal course of business, the Corporation enters into 
various other transactions, such as the provision of postal ser- 
vices and the purchase of air and rail transportation, with the 
Government of Canada, its agencies and other Crown corpo- 
rations. 

Labour negotiations 

Labour agreements between the Corporation and all of its bar- 
gaining units have expired. Negotiations, begun prior to expiry 
dates, are in progress. 



144,994 



10. Related party transactions 

The Corporation had the following transactions with related 
parties in addition to those disclosed elsewhere in these financial 
statements. 

(a) Property management 

The Corporation has a property management arrangement 
with the Department of Public Works to manage substan- 
tially all the Corporation's real property. Operating, mainte- 
nance, leasing and other accommodation costs including 
grants in lieu of taxes, incurred by the Department of Public 
Works, plus a management fee charged to operations 
amounted to $176,200,000 (1986— $130,840,000 excluding 
grants in lieu of taxes). Rental income from third parties of 
$10,130,000 (1986— $6,320,000) is included in other reve- 
nues. Capital expenditures including a management fee 
amounted to $31,240,000 (1986— $13,270,000). 

(b) Financing 

At the present time, the Corporation's receipts are deposited 
to the credit of the Corporation in the Consolidated Revenue 
Fund of the Government of Canada and its expenditures are 
paid out of the amounts held to its credit in this Fund. 
Where, at any time, the available revenues of the Corpora- 
tion are not sufficient to pay all the operating and income 
charges as and when due, the Minister of Finance may, with 
approval, place at the disposal of the Corporation such 
amounts as may be required to enable the Corporation to 
meet all such charges. The Corporation is not charged inter- 
est, nor does it receive interest, on its balance in the Con- 
solidated Revenue Fund. 



n2 PUBLIC ACCOUNTS, 1986-87 

SUMMARY PAGE 
CANADIAN ARSENALS LIMITED 



MANDATE 

To provide an industrial base to fulfill the requirements of Canada's national defence for large calibre ammunition 
and complimentary products, with the assistance of the private sector to every extent possible. 



BACKGROUND 

The corporation's initial responsibilities had been the rationalization and the scaling-down of operations and facilities 
used in World War II and in the Korean conflict. Its only large purchaser was the Department of National Defence 
and its selling prices were related to its costs. The Canadian Arsenals Limited Divestiture Authorization Act was 
proclaimed on May 1, 1986 and on May 9, the corporation was sold for $92.2 million to the SNC Group. 



CORPORATION DATA 

STATUS Sold to private sector interests 

YEAR AND MEANS 1945; by letters patent - under Part I, Companies Act 1934. 

OF INCORPORATION Continued under the Canada Business Corporations Act, October 

20, 1980. 

FINANCIAL SUMMARY ($ million) The financial year ends March 31. 

1985-86 1984-85 1983-84 1982-83 

At the end of the period 

Total Assets 135.9 

Obligations to the private sector 11.5 

Obligations to Canada 4.7 

Equity of Canada 62.0 

Cash from Canada in the period 

— budgetary nil 

— non-budgetary nil 



126.0 


88.9 


83.5 


11.0 


1.7 


0.2 


4.7 


4.7 


4.7 


52.7 


43.9 


38.2 


nil 


nil 


nil 


nil 


nil 


nil 



PUBLIC ACCOUNTS, 1986-87 

CANADIAN ARSENALS LIMITED 

(Since the audited financial statements are not available in English, 
here is the French version) 

RAPPORT DES VfeRIFICATEURS 

AUX ADMINISTRATEURS DE 

LES ARSENAUX CANADIENS LIMITfeE 

Nous avons verifie le bilan de Les Arsenaux Canadiens limitee au 9 
mai 1986 ainsi que les etats des resultats et des benefices non repartis, 
du surplus d'apport et de revolution de la situation financiere pour 
I'exercice de six semaines termine a cette date. Notre verification a ete 
effectuee conformement aux normes de verification generalement 
reconnues, et a comporte par consequent les sondages et autres proce- 
des que nous avons juges necessaires dans les circonstances. 

La Societe impute I'amortissement des immobilisations cedees par le 
Canada au surplus d'apport plutot qu'aux resultats, puisque le Canada 
ne reconnait pas cet amortissement comme un element de cout lors de 
la negociation des prix de vente. A cet egard, les etats financiers ne 
sont pas conformes aux principes comptables generalement reconnus. 
Si Ton avait impute cet amortissement aux resultats, le benefice net 
pour I'exercice aurait ete inferieur de $215,287 et le solde des benefices 
non repartis et du surplus d'apport aurait ete respectivement inferieur 
et superieur de $9,843,810. 

A notre avis, a I'exception des effets de la non-comptabilisation de 
I'amortissement aux resultats indiques au paragraphe precedent, ces 
etats financiers presentent fidelement la situation financiere de la 
Societe au 9 mai 1986 ainsi que les resultats de son exploitation et 
revolution de sa situation financiere pour I'exercice de six semaines 
termine a cette date selon les principes comptables generalement 
reconnus, appliques de la meme maniere qu'au cours de I'exercice pre- 
cedent. 



113 



Comptables agrees 
Maheu Noiseux 



Montreal, le 2 juillet 1986 



BILAN AU 9 MAI 1986 



ACTIF 



1986 



PASSIF 



1986 



A court terme 

Encaissc 407,602 

Bon du trcsor, au cofit 10,941,489 

Debiteurs 

Canada 16,729,624 

Autres 548,594 

Facturation proportionneile des fournisseurs 1,508,651 

Stocks (note 3) 62,552,457 

Frais imputablcs au prochain exercice 158,366 

92,846,783 

Immobilisations (note 4) 43,308,940 

Frais rcportes (note 5) 4,007.587 



140,163,310 



A court terme 

Creditcurs 22,838,675 

Facturation proportionneile aux clients 

Canada 38,150,086 

Autres 1,459,762 

Montant du au Canada (note 6) 4,724,941 

Portion a court terme de I'obligation decoulant de contrats 

de location-acquisition (note 7) 2,375,474 

69,548.938 

A long terme (note 7) 9,072,614 

78.621,552 

AVOIR DU CANADA 

Capital-actions (note 8) 30 

Surplus d'apport 14,530,379 

Benefices non repartis 47,01 1 ,349 



61.541,758 
140.163.310 



Nom du Conseil d'administration: 

Administrateur 
LAURENT BERGERON 

Administrateur 
JEAN-PAUL GOURDEAU 



114 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN ARSENALS LIMITED— Continued 

£TAT DES RfeSULTATS ET DES BfeNfePICES NON REPARTIS 
POUR L'EXERCICE DE SIX SEMAINES 
TERMINfe LE 9 MAI 1986 



1986 



Ventes(note 10) 4,562,352 

Cout des produits vendus 3,47 1 ,030 

Benefice brut 1,091,322 

Autres revenus 44,965 

1.136,287 

Depenses d'administration 1,267,358 

Frais de rinancement, dette i long terme 135,341 

1,402,699 

Pertenette (266,412) 

Benefices non repartis au debut de I'exercice 47,277,761 

Benefices non repartis a la fin de i'exercice 47,01 1,349 



ETAT DU SURPLUS D'APPORT 
POUR L'EXERCICE DE SIX SEMAINES 
TERMINE LE 9 MAI 1986 



1986 



Solde au debut de I'exercice 14,745,666 

Immobilisations cedees par ie Canada 

Amortissement (note 5) (215,287) 

Solde a la fin de I'exercice 14,530,379 



ETAT DE L'EVOLUTION DE LA SITUATION FINANClfeRE 
POUR L'EXERCICE DE SIX SEMAINES 
TERMINE LE 9 MAI 1986 



1986 



Activites d'exploitation 

Pertenette (266,412) 

Postes n'affectant pas I'encaisse 

Amortissement des frais reportes 100,379 

Amortissement des immobilisations 144,472 

(21,561) 
Variation nette des postes hors caisse du fends de roulement 

concernant I'exploitation (1,652,897) 

Encaisse utilisee pour des activites d'exploitation « (1,674,458) 

Activites d'investissement 

Acquisition d'immobilisations (330,234) 

Produit de I'alienation d'immobilisation 2,025 

Augmentation des frais reportes (14,151) 

Encaisse utilisee pour des activites d'investissement (342,360) 

Activites de financement 
Remboursement des obligations decoulant de contrats de 

location-acquisition (30,346) 

Encaisse utilisee pour des activites de financement (30,346) 

Diminution de I'encaisse (2,047,164) 

Encaisse au debut de I'exercice 2,454,766 

Encaisse a la fin de I'exercice 407,602 



NOTES COMPLEMENTAIRES 
AU 9 MAI 1986 

1. Statut et activit6s 

Les Arsenaux Canadiens limitee, constituee le 20 septembre 
1945 et continuee en vertu de la Loi sur les societes commerciales 
canadiennes, est une Societe d'Etat inscrite presentement a la par- 
tie I de I'annexe C de la Loi sur I'administration financiere. 

La Societe manufacture des munitions de moyen et gros 
calibres ainsi que des produits militaires complementaires. 

2. Conventions comptables importantes 

a) Immobilisations et amortissement 

Les immobilisations achetees ou acquises par le biais de con- 
trats de location-acquisition sont comptabilisees au prix cou- 
tant. Celles cedees par le Canada au cours de I'exercice ter- 
mine le 31 mars 1982 sont comptabilisees a leur coiit de 
reconstitution actuel a cette date qui a ete etabli par le minis- 
tere des Travaux publics en ce qui concerne les biens 
immeubles, et une firme d'evaluateurs independants en ce qui 
concerne les biens meubles. Les depenses, qui augmentent de 
beaucoup la valeur des biens ou qui en prolongent la duree 
d'utilisation, sont capitalisees. Les depenses courantes 
d'entretien, de reparation et de renouvellement sont imputees 
aux resultats de I'exercice au cours duquel elles sont 
engagees. 

Les immobilisations en service sont amorties d'apres la 
methode de I'amortissement lineaire, a des taux etablis selon 
la duree estimative d'utilisation des biens, sauf celles de la 
division St-Augustin acquises par le biais de contrats de loca- 
tion-acquisition qui sont amorties d'apres la methode de 
I'amortissement a interets composes (dotation croissante) 
afin de tenir compte des modalites d'un contrat de vente a 
long terme et ainsi assurer I'appariement des revenus et des 
depenses. L'amortissement des immobilisations achetees ou 
acquises par le biais de contrats de location-acquisition est 
impute aux resultats de I'exercice. L'amortissement des 
immobilisations cedees par le Canada est impute au surplus 
d'apport puisque le Canada ne reconnait pas cet amortisse- 
ment comme un element de coiit lors de la negociation des 
prix de vente. 

b) Stocks 

Les matieres premieres et les fournitures sont evaluees au 
moindre du prix coutant et du coiit de remplacement au 
Canada. Les contrats en voie de fabrication et les produits 
finis sont evalues au moindre du prix coiitant et de la valeur 
nette de realisation. 

Les achats de brevets et de licences, d'outillage de fabrication 
ainsi que les frais de developpement engages pour le compte 
de clients sont imputes aux stocks et sont portes au cout des 
produits vendus au moment de la vente. 

c) Frais reportes 

Les frais de demarrage de la division St-Augustin sont amor- 
tis d'apres la methode de l'amortissement lineaire sur la peri- 
ode de cinq ans commen9ant le 1" avril 1985, la date du 
debut de la production commercials 

Les frais de developpement de nouveaux produits sont amor- 
tis d'apres la methode de l'amortissement lineaire sur une 
periode de trois ans a compter du debut de la fabrication du 
produit a I'echelle commerciale ou sont radies lorsque la 
commercialisation du produit est improbable. 



PUBLIC ACCOUNTS, 1986-87 



115 



CANADIAN ARSENALS LIMITED— Continued 

NOTES COMPLEMENTAIRES 

AU9MAI I9i6— Suite 

d) Constatation du benefice 

Les ventes sont constatees au moment de la livraison de biens 
et de leur acceptation par le client, selon les dispositions des 
contrats de vente, et lorsque la Societe a acquis un droit 
inconditionnel au paiement complet. Elles sont comptabili- 
sees a des prix fermes ou, les cas echeants, a des prix qui tien- 
nent compte des clauses d'echelles mobiles prevues dans les 
contrats. Dans ces derniers cas, les prix definitifs demeurent 
cependant sujets a negociation entre la Societe et ses clients 
et tout redressement Hnal est comptabilise sur une base cou- 
rante. 

e) Regime de retraite 

Les employes participent au regime de retraite administre 
par le gouvernement du Canada. Les employes et la Societe 
partagent egalement le cout du regime. Cette contribution 
represente la responsabilite totale de la Societe. Les contribu- 
tions, pour services courants et pour services anterieurs 
admissibles, sont imputees aux resultats de Texercice au 
cours duquel les paiements sont effectues. 

f) Prestations d'anciennete 

Les employes ont droit depuis le 1" avril 1985 a des presta- 
tions d'anciennete, payables a leur gre, egales aux prestations 
de cessation d'emploi impayees auxquelles ils avaient droit en 
vertu de leurs conventions collectives et leurs conditions 
d'emploi en vigueur le 31 mars 1985. Toute augmentation 
dans la valeur de ces prestations est imputee aux resultats de 
I'exercice au cours duquel elle est gagnee par les employes et 
la valeur des prestations impayees est comprise dans les 
crediteurs. 

3. Stocks 



Matieres premieres et fournitures 3,036,761 

Contrats en vole de fabrication 50,678,413 

Produits finis 5,099,266 

Frais de developpement 890,424 

Brevets et licences 229,198 

Outiliage de fabrication 2.618,395 



62,552,457 



L'outillage de fabrication represente une estimation du montant 
que la Societe entend recevoir en vertu d'un contrat de vente a 
long terme. 

Cet outiliage de fabrication comprend de l'outillage detenu en 
vertu d'un contrat de location-acquisition a un cout de 
$2,044,342. La Societe remboursera I'obligation decoulant de ce 
contrat au moment de la vente de cet outiliage. 

4. Immobilisations 

Amortis- 

Valcur sement Cout non 

comptable accumule amorti 
S S $ 

Terrains 1,612,025 1,612,025 

Batiments et amenagement 23,253,800 3,817,031 19,436,769 

fequipcment 24,430,101 6,836,832 17,593,269 

Mobilieretequipementdc bureau.. 2,988,884 1,114,344 1.874,540 

Materiel roulant 736,821 336,453 400,368 

Immobilisations en cours 2,391,969 2,391,969 

55,413,600 12,104,660 43.308,940 



Les immobilisations comprennent celles detenues en vertu de 
contrats de location-acquisition a un cout de $11,986,605 et 
$523,465 a titre d'amortissement accumule. 

L'amortissement des immobilisations achetees ou acquises par 
le biais de contrats de location-acquisition, impute aux resultats, 
est de $144,472. L'amortissement des immobilisations cedees par 
le Canada, impute au surplus d'apport est de $215,287. 

Les durees utiles prevues pour chacune des principales catego- 
ries d'immobilisations aux fms du calcul de l'amortissement sont 
les suivantes: 



Batiments et amenagements 

Equipement 

Mobilier et equipement de bureau 

Materiel roulant 

5. Frais reportes 

Frais de demarrage de la division St-Augustin, au coQt 
non amorti 

Frais de developpement de nouveaux produits, au cout 
non amorti 



6. Montant du au Canada 



Solde de credits parlementaires 

Emprunts du gouvernement du Canada, sans interet et 
sans mode prevu de remboursement 



Nombre 
d'annees 

20 a 40 

10al5 

5a 10 

3 a 10 

S 

1,588,040 

2,419,547 
4,007.587 

$ 

1,224,941 

3,500,000 
4,724,941 



7. Dette a long terme 



Obligations d6coulant de contrats de location-acquisition 
remboursables jusqu'au 1" mars 2001 par vcrscments 
mensuels a un taux d'interet calcule a '/i% au dessus du 
taux d'interet demande par le bailleur sur ses billets 
garantis 

Versements echeant au cours du prochain exercice 



11.448,088 
2,375,474 
9,072,614 



La valeur actuelle de I'obligation decoulant de contrats de loca- 
tion-acquisition est determinee comme suit: 

Versements a effectuer au cours des exercices: 

$ 

1987 3,335,822 

1988 1,250,731 

1989 1,248,733 

1990 1,241,044 

1991 1,240,635 

1992 et par la suite 12,025,999 

20,342,964 
Moins: portion representant les interets a des 
taux variables qui seront imputes aux resul- 
tats des exercices auxquels ils s'appliquent 8,894.876 

11,448,088 



116 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN ARSENALS LIMITEB— Continued 

NOTES COMPLEMENTAIRES 
AU9MAI 1986— Fm 



1 ,000 actions sans valeur nominate 

30 actions 

$30 



8. Capital-actions 

Autorise 

Emis et entierement libere 

Paye 

9. Ventes 

Les ventes au gouvernement du Canada, au cours de I'exercice 
termine le 9 mai 1986, se chiffrent a $4,199,409 soit 92,0% du 
chiffre d'affaires de la Societe. 

10. Representants et agents commerciaux 

Au cours de I'exercice, la Societe a verse $576 a titre de remu- 
neration et de depenses aux representants et agents commerciaux 
suivants: Cormorant Limited, Pakistan; Matren Ltd, Grece; Seri 
Mechan Products Sdn Bhd, Malaisie; Unicorn International Pte 
Ltd, Singapour; Vetecin S.A., Venezuela; S. Kittivat, Thailande; 
Ubem Ltd, Turquie et Donald Kimmel, Etats-Unis. 

1 1 . Engagements 

Au 9 mai 1986, le cout estimatif pour completer les projets en 
immobilisations prevus et en cours s'eleve a environ $1,770,000 
pour lesquels la Societe a des engagements contractuels au mont- 
ant d'environ $690,000. 

12. Licence pour fabrique d'explosifs 

Le ministere de I'Energie, Mines et Ressources n'a renouvele la 
licence pour la fabrique d'explosifs dans un secteur particulier de 
I'usine de la Societe que jusqu'au 31 aout 1986. Un programme de 
modernisation, qui comporte des depenses en immobilisations 
d'environ 24 millions de dollars etalees sur les trois prochaines 
annees, au niveau actuel de production, a ete propose en vue de 
satisfaire les exigences du Ministere. La direction s'attend a ce 
que cette licence soit renouvelee avant son expiration. 

13. Evenements subsequents 

a) Privatisation de la Societe 

Le 24 avril 1986, le Parlement a adopte une Loi visant a 
autoriser I'alienation de la Societe Les Arsenaux Canadiens 
limitee et visant la modification d'autres lois en consequence, 
laquelle a re9u la sanction royale le 1" mai 1986. En vertu de 
cette Loi, le ministre des Approvisionnements et Services est 
autorise a vendre, aux conditions que le gouverneur en conseil 
approuve, toutes ou une partie des actions de la Societe dete- 
nues en fiducie pour le compte de Sa Majeste. Pour la reali- 
sation de cette vente, les biens et les droits de Sa Majeste 
utilises pour I'exploitation avant I'entree en vigueur du para- 
graphe 3(2) de la Loi sont transferes a la Societe, sauf ceux 
soustraits par decret du gouverneur en conseil. 

Une entente a ete signee en date du 9 mai 1986 pour la vente 
de toutes les actions en circulation de la Societe a les Produits 
de Defense SNC inc. pour une contrepartie au comptant de 
$87,500,000 et pour le remboursement au Canada de ses 
prets a la Societe d'environ $4,725,000. 

b) Fusion 

Le 12 mai 1986, la Societe et les Produits de Defense SNC 
inc. se sont regroupes sous la raison sociale Les Arsenaux 
Canadiens limitee. A cette date, les Produits de Defense 
SNC inc. a pour principal actif le placement dans Les 
Arsenaux Canadiens limitee, un passif d'environ $62,765,000 
et un avoir des actionnaires de $30,000,000. 



c) Amission d'actions 

Le 23 mai 1986, la Societe resultante de la fusion a requ un 
certificat de modiHcation de ses statuts autorisant la creation 
d'un nombre illimite d'actions privilegiees; 10% non cumula- 
tif de la valeur de rachat, non participantes, sans droit de 
vote, rachetables a un montant egal a la juste valeur mar- 
chande de la contrepartie re9ue lors de remission, sans valeur 
nominate. 

Le 3 juin 1986, cette Societe a emis une (1) action privilegiee 
et a re^u en contrepartie un montant de $57,000,000 et le 4 
juin 1986, elle a procede au rachat de cette action pour le 
meme montant. 

14. Chiffres comparatifs 

Les chiffres comparatifs n'ont pas ete presentes parce que les 
chiffres de la periode de six (6) semaines de I'exercice precedent 
ne sont pas disponibles. 



PUBLIC ACCOUNTS, 1986-87 



117 



CANADIAN ARSENALS LIMITED— Continued 

AUDITOR'S REPORT 

TO THE MINISTER OF SUPPLY AND SERVICES 

I have examined the balance sheet of Canadian Arsenals Limited as 
at March 31, 1986 and the statements of income and retained earn- 
ings, contributed surplus and changes in fmancial position for the year 
then ended. My examination was made in accordance with generally 
accepted auditing standards, and accordingly included such tests and 
other procedures as I considered necessary in the circumstances. 

The Corporation charges depreciation of fixed assets transferred 
from Canada to contributed surplus rather than to operations, on the 
grounds that Canada does not recognize such depreciation as an ele- 
ment of cost when negotiating sales prices. In this respect, the financial 
statements are not in accordance with generally accepted accounting 
principles. If depreciation had been charged to operations, net income 
for the year would have been decreased by $2,159,1 17 ($2,358,582 in 
1985) and the closing balances of retained earnings and contributed 
surplus would have been decreased and increased by $9,628,523 
($7,469,406 in 1985) respectively. 



In my opinion, except for the effects of the failure to charge 
depreciation to operations as described in the preceding paragraph, 
these financial statements present fairly the financial position of the 
Corporation as at March 31, 1986 and the results of its operations and 
the changes in its financial position for the year then ended in accord- 
ance with generally accepted accounting principles applied on a basis 
consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the financial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, as well as the 
charter and by-laws of the Corporation. 



Kenneth M. Dye, F.C.A. 
Auditor General of Canada 



Ottawa, Canada 
May 9, 1986 



BALANCE SHEET AS AT MARCH 31, 1986 



ASSETS 



1986 



1985 



h 



Current 

Cash 2,454,766 

Accounts receivable 

Canada 32,358.796 

Others 324,242 

Progress billings from suppliers 3,431 

Inventories (Note 3) 53,317,061 

88,458,296 

Fixed (Note 4) 43,340,490 

Deferred charges (Note 5) 4,093,815 



5,108,538 

20,719,759 
3,488,745 
5,346,606 

42,375,959 



77,039,607 

44,894,652 
4,499,439 



135,892,601 126,433,698 



LIABILITIES 

Current 

Accounts payable 

Progress billings to customers 

Canada 

Others 

Due to Canada (Note 6) 

Current portion of obligation under capital 

leases (Note 7) 

Long-term (Note 7) 



EQUITY OF CANADA 

Capital stock (Note 8) 

Contributed surplus 

Retained earnings 



1986 



1985 



s 


S 


23,335,144 


22,125.780 


32,765,393 
1.565.232 
1.224.941 


33.757.484 

527,686 

1,224,941 


2,380,963 


50,090 


61.271,673 


57,685,981 


12,597,471 


15,892,674 


73,869,144 


73,578,655 


30 

14,745,666 

47,277,761 


30 

16,904,783 
35,950,230 


62,023,457 


52,855,043 



135,892,601 126,433,698 



Approved by the Board: 

LAURENT A. BERGERON 
Director 

JEAN-PAUL GOURDEAU 
Director 



lit 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN ARSENALS LIMITED — Continued 

STATEMENT OF INCOME AND RETAINED EARNINGS 
FOR THE YEAR ENDED MARCH 31, 1986 



1986 1985 

S $ 

Sales (Note 9) 128,025,132 103,752,140 

Cost of goods sold 103,437,143 84.439,498 

Gross profit 24.587,989 19,312,642 

Other income 504,308 726,788 

25,092.297 20.039,430 

Administrative expenses 12,633,104 8,721,357 

Financing costs 1,131,662 19.804 

13.764.766 8.741.161 

Net income for the year 11.327.531 1 1,298.269 

Retained earnings at beginning of the year 35,950,230 24,651,961 

Retained earnings at end of the year 47,277,761 35,950,230 



STATEMENT OF CONTRIBUTED SURPLUS 
FOR THE YEAR ENDED MARCH 31, 1986 



1986 1985 

S $ 

Balance at beginning of the year 16,904,783 19,263,365 

Fixed assets transferred from Canada 

Depreciation (2,159,117) (2,358,582) 

Balance at end of the year 14,745,666 16,904,783 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED MARCH 31, 1986 



1986 1985 

Operating activities 

Net income for the year 

Items not affecting cash 

Depreciation of fixed assets 

Amortization of deferred charges 

— Development costs 

— Start-up costs 

Increase (decrease) in the provision for 
employee termination benefits 

Net change in non-cash working capital bal- 
ances related to operations 

Cash provided by (used in) operating activi- 
ties 

Investing activities 

Acquisition of fixed assets 

Increase in deferred charges 

Proceeds from disposal of fixed assets 

Cash used in investing activities 

Financing activities 

Advances under leasing agreement 

Reimbursement of obligation under capital 
leases 

Cash provided by financing activities 

Increase (decrease) in cash during the year 

Cash at beginning of the year 

Cash at end of the year 2,454,766 5,108,538 



$ 


$ 


11,327,531 


11,298,269 


1,376,835 


599.259 


905,302 
407,575 


633,163 




232,556 


14,017,243 


12,763,247 


14,246,116 


(2,267,368) 


(228,873) 


10,495,879 


(2,044,429) 
(907,253) 
62,639 


(13,765,490) 
(4,480,777) 


(2,889,043) 


(18,246,267) 


905,327 


9,348,464 


(441,183) 


(60,186) 


464,144 


9,288,278 


(2,653,772) 
5,108,538 


1,537,890 
3,570,648 



NOTES TO THE FINANCIAL STATEMENTS 
MARCH 31, 1986 

1 . Authority and activities 

Canadian Arsenals Limited, incorporated on September 20, 
1945 and continued under the Canada Business Corporations Act, 
is a Crown corporation named in Part I of Schedule C to the 
Financial Administration Act. 

The Corporation manufactures medium and large caliber 
ammunitions and other complementary military products. 

2. Significant accounting policies 

(a) Fixed assets and depreciation 

Fixed assets acquired by purchase or by way of capital leases 
are recorded at cost. Fixed assets transferred from Canada 
during the year ended March 31, 1982 are recorded at their 
current reproduction cost as at that date as determined by 
the Department of Public Works for immoveable assets and a 
firm of independent appraisers for moveable assets. Expendi- 
tures which significantly increase the value or extend the use- 
ful lives of fixed assets are capitalized. Routine expenditures 
for maintenance, repairs and renewals are charged against 
income as incurred. 

Depreciation of fixed assets in service is calculated at rates 
based on the estimated useful lives of the assets using the 
straight-line method except for that of fixed assets at the St- 
Augustin division acquired by way of capital leases, which is 
calculated using the sinking fund method to take into account 
the terms of a long-term sales contract and thus match reve- 
nues and expenses. 

Depreciation of fixed assets acquired by purchase or by way 
of capital leases is charged to operations. Depreciation of 
fixed assets transferred from Canada is charged to con- 
tributed surplus on the grounds that Canada does not recog- 
nize it as an element of cost when negotiating sales prices. 

(b) Inventories 

Raw materials and supplies are stated at the lower of cost 
and replacement cost in Canada. Work in process and fin- 
ished goods are stated at the lower of cost and net realizable 
value. 

Costs of patents and licences purchased and development 
costs incurred for customers' accounts are included in inven- 
tories and are charged to cost of goods sold at time of sale. 

(c) Deferred charges 

Development costs of new products are amortized using the 
straight-line method over three years from the start of com- 
mercial production of the related product or are written-off 
when the product is unlikely to be saleable. 

Start-up costs of the St-Augustin division are amortized 
using the straight-line method over the five year period from 
April 1, 1985, the starting date of commercial production. 

(d) Revenue recognition 

Sales are recognized as goods are delivered and accepted in 
accordance with contractual agreements and the right to full 
payment has become unconditional. They are recorded at 
firm prices or, where applicable, at prices which take into 
account effects of cost escalation clauses contained in sales 
contracts. In the latter condition, definitive prices are never- 
theless subject to negotiation between the Corporation and its 
customers and all final adjustments are recorded on a current 
basis. 



PUBLIC ACCOUNTS, 1986-87 



119 



CANADIAN ARSENALS LIMITED— Continued 

NOTES TO THE FINANCIAL STATEMENTS 
MARCH 31, \9%6— Continued 

(e) Seniority benefits 

Employees are entitled since April 1, 1985 to seniority ben- 
efits, payable on request, equal to the unpaid termination 
benefits to which they were entitled on March 31, 1985 
under their collective agreements and their conditions of 
employment. Any increase in the value of these benefits is 
expensed in the year in which it is earned by the employees 
and the value of unpaid benefits is included in accounts pay- 
able. 

(0 Pension plan 

Employees participate in the Superannuation Plan adminis- 
tered by the Government of Canada. The employees and the 
Corporation contribute equally to the cost of the Plan. This 
contribution represents the total liability of the Corporation. 
Contributions in respect of current service and of admissible 
past service are expensed when paid. 

3. Inventories 



1986 



1985 



Raw materials 

Work in process 

Finished goods 

Development costs. .. 
Patents and licences . 
Production tooling... 



Production tooling constitutes the estimated amount that the 
Corporation expects to receive under a long-term sales contract in 
respect of the following: 



$ 


$ 


32,103,518 


27,442,036 


17,665,683 


12,483,802 


157,032 


655,861 


668,175 


1,287,494 


229,198 


506,766 


2,493,455 




53,317,061 


42,375,959 



Base level production tooling 

Replacement production tooling less provision for wear.... 
Wear and maintenance of production tooling 



1,563,380 
487,435 
442.640 

2,493,455 



Negotiations are underway to determine the terms for the 
recovery of these items. Any difference between the recorded 
amounts and those that shall be received, which may not be deter- 
mined with accuracy at the time of preparation of these financial 
statements, shall be accounted for when known. 

Production tooling includes tooling held under a capital lease 
with a cost of $2,044,342. The Corporation shall reimburse the 
obligation under this lease upon the sale of this tooling. 

Fixed assets 

1986 1985 

Accu- 
mulated 
Recorded depre- 
value ciation Net Net 

s $ s s 

Land 1,612,025 1,612,025 1,412,025 

Buildings and surface 

installations 23,229,943 3,712,129 19,517,814 15,075,640 

Equipment 24,191,872 6,577,504 17,614,368 7,783,403 

Office furniture and 

equipment 2,841,543 1,070,257 1,771,286 1,475,450 

Rolling stock 736,821 326,836 409,985 369,650 

Construction in 

progress 2,415,012 2.415,012 18.778.484 

55,027,216 11,686,726 43.340.490 44.894,652 



Fixed assets include those held under capital leases, with a cost 
of $10,367,075 and accumulated depreciation of $431,712 
($10,458,228 and $205,034 as at March 31, 1985). 

Depreciation of fixed assets acquired by purchase or by way of 
capital leases, amounting to $1,376,835 ($599,259 in 1985), has 
been charged to operations. Depreciation of fixed assets trans- 
ferred from Canada, amounting to $2,159,117 ($2,358,582 in 
1985, including $162,291 as a loss on disposal of fixed assets) has 
been charged to contributed surplus. 

The estimated useful lives of the principal classes of fixed assets 
for purposes of calculating depreciation are as follows: 

Number of 
years 



Buildings and surface installations 

Equipment 

Office furniture and equipment 

Rolling stock 

5. Deferred charges 



Start-up costs of the St-Augustin division 
New products development costs 



20 to 40 

10 to 15 

Sand 10 

3 to 10 



1986 



1985 



1,630,496 
2,463,319 



2,038,070 
2,461,369 



4,093,815 4,499,439 



Research and development costs charged to operations 
amounted to $4,315,831 ($2,229,747 in 1985). 

6. Due to Canada 

The amount due to Canada represents remaining balances of 
parliamentary appropriations. 



7. Long-term liabilities 



1986 



1985 



Obligation under capital leases 1 1,478,434 1 12,691 

Loan from Canada 3,500,000 3,500,000 

Provision for employee termination benefits . 1,638,474 

Advances under leasing agreement 10,901,599 

14,978,434 16,152,764 
Leii.- current portion of the provision 

for employee termination benefits 

included in accounts payable 21 0,000 

current portion of obligation under 

capital leases 2,380,963 50,090 



12,597,471 15,892,674 



Advances received under a leasing agreement and interest 
thereon were converted during the year to capital leases. 

The obligation under these contracts carries interest at the rate 
of 0.5% per annum over the lessor's guaranteed note rate of the 
term not exceeding 60 months selected by the Corporation. This 
obligation is repayable by March 1, 2001 by monthly instalments. 
In anticipation of the change in the voting control of the Corpora- 
tion resulting from its privatization described in Note 1 2, the les- 
sor and the Corporation have agreed to renegociate certain provi- 
sions of the leasing agreement by December 31, 1986, to the 
satisfaction of the lessor who shall otherwise be entitled to exer- 
cise the rights and remedies already provided in its favour in the 
leasing agreement. 



120 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN ARSENALS LIMITED— Concluded 

NOTES TO THE FINANCIAL STATEMENTS 
MARCH 31, \9S6— Concluded 

The present value of the obligation under all capital leases at 
March 31, 1986 has been determined as follows: 

Payments to be made in subsequent years: 

S 

1987 3,344,163 

1988 1,250,727 

1989 1,248,729 

1990 1,241,040 

1991 1,240,632 

1992 and subsequent years 12,129,408 

20,454.699 
Less: portion thereof representing interest at variable 
rates to be charged to operations in the years to 

which it applies 8,976,265 

11,478,434 



1,000 shares without par value 

30 shares 

$30 



The loan from Canada, to provide working capital, does not 
bear interest and has no fixed repayment date. 

8. Capital stock 

Authorized 

Issued and fully paid 

Paid-up 

9. Sales 

Sales to Canada during the year ended March 31, 1986 
amounted to $119,838,229 or 93.6% of the Corporation's sales 
($95,516,433, or 92.1% in 1985). 

Sales to Canada include $7,699,438 ($3,355,123 in 1985) for 
sales at cost of purchased goods. 

1 0. Sales agents and representatives 

During the year, the Corporation paid $13,257 ($76,066 in 
1985) as remuneration and expenses to the following sales agents 
and representatives: Cormorant Limited, Pakistan; Matren Ltd., 
Greece; Seri Mechan Products Sdn Bhd, Malaysia; Unicorn 
International Pte Ltd., Singapore; Vetecin S.A., Venezuela; Hol- 
land Arma B.V., Holland; S. Kittivat, Thailand; Ubem Ltd., Tur- 
key; Byron, United States and Donald Kimmel, United States. 



1 1 . Licence for manufacturing of explosives 

The Department of Energy, Mines and Resources has renewed 
the licence for manufacturing explosives in a specific section of 
the Corporation's plant only to August 31, 1986. An upgrading 
program involving capital expenditures of approximately $24 mil- 
lion over the next three years, at the current level of production, 
has been proposed to satisfy the requirements of the Department. 
Management expects that this licence will be renewed prior to its 
expiry. 

1 2. Privatization of the Corporation 

On April 24, 1986, Parliament passed an Act to authorize the 
divestiture of Canadian Arsenals Limited and to amend other 
Acts in consequence thereof, which received the Royal Assent on 
May 1, 1986. Under this Act, the Minister of Supply and Services 
is authorized to sell, on such terms and conditions as are approved 
by the Governor in Council, any or all of the shares of the Corpo- 
ration held in trust for Her Majesty. For the purposes of effecting 
this sale, all property, rights and interests of Her Majesty used in 
the business immediately prior to the coming into force of Subsec- 
tion 3(2) of the Act are transferred to the Corporation, except 
those exempted by order of the Governor in Council. 

An agreement has been made as at May 9, 1986 for the sale of 
all the outstanding shares of the Corporation to SNC Defence 
Products Inc. for a cash consideration of $87,500,000 and for the 
reimbursement to Canada of its loans to the Corporation of 
$4,725,000. 



PUBLIC ACCOUNTS, 1986-87 



121 



SUMMARY PAGE 
CANADIAN BROADCASTING CORPORATION 



MANDATE 

Develop and provide a national broadcasting service for all Canadians in both official languages, in television and 
radio, and provide an international service. 

BACKGROUND 

Established in 1936 by the Broadcasting Act; major amendments were made to this Act in 1958 and 1968. In May 
1985, the government appointed a task force to review broadcasting in Canada. Its report was presented in 1986 and 
is being considered by the government. The Broadcasting Act is currently under study and revisions are 
contemplated. 



CORPORATION DATA 

HEAD OFFICE 



STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHAIRMAN AND CHIEF 
EXECUTIVE OFFICER 

AUDITOR 



1 500 Bronson Avenue 
P.O. Box 8478 
Ottawa, Ontario 
K1G3J5 

— an agent of Her Majesty 

— exempt from Divisions I to IV of Part XII of the Financial 
Administration Act; subject to Part VIII of this Act as it read 
immediately before the 1984 repeal thereof 

The Honourable Flora MacDonald, P.C., M.P. 

Communications 

1936, by the Broadcasting Act (R.S.C. 1970, B-1 1) 

The Honourable Pierre Juneau, P.C., O.C. 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 

1986-87 

At the end of the period 

Total Assets 755 

Obligations to the private sector 1 

Obligations to Canada 33 

Equity of Canada 461 

Cash from Canada in the period 

— budgetary 855 

— non-budgetary nil 



1985-86 


1984-85 


1983-J 


(restated) 






731 


691 


639 


nil 


nil 


nil 


33 


33 


33 


448 


413 


381 


857 


905 


815 


nil 


nil 


nil 



122 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN BROADCASTING CORPORATION 

AUDITOR'S REPORTS 

TO THE CANADIAN BROADCASTING CORPORATION 

AND 
THE MINISTER OF COMMUNICATIONS 



1987 AUDITOR'S REPORT 

I have examined the balance sheet of the Canadian Broadcasting 
Corporation as at March 31, 1987 and the statements of income and 
expense and reconciliation to government funding basis, proprietor's 
equity account and cash flow for the year then ended. My examination 
was made in accordance with generally accepted auditing standards, 
and accordingly included such tests and other procedures as I con- 
sidered necessary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the Corporation as at March 31, 1987 and the results of its 
operations and the changes in its financial position for the year then 
ended, in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

As explained in Note 13, the Corporation has addressed the matters 
that had prevented the maintenance of proper books of account. In my 
opinion, proper books of account had been re-established by March 31, 
1987, and the March 31, 1987 financial statements are in agreement 
therewith, and the transactions that have come to my notice during my 
current examination have, in all significant respects, been in accord- 
ance with the former Part VIII of the Financial Administration Act 
and regulations as they apply to the Corporation, the Broadcasting Act 
and the by-laws of the Corporation. 



1986 AUDITOR'S REPORT (REVISED) 

In my repwrt dated August 19, 1986, I denied an audit opinion on 
the March 31, 1986 financial statements and did not report on compli- 
ance with authority because it was impracticable to complete my 
audit. As discussed in Note 1 3, the Corporation subsequently restated 
the March 31, 1986 financial statements. I have examined the 1986 
restated amounts, except that it remains impracticable to verify 
whether the restated expense amounts are properly classified among 
the various expense categories. As a result, I am now able to express 
the following opinion on the 1986 restated financial statements. In my 
opinion, except for the effect of adjustments, if any, regarding the clas- 
sification of expense amounts on the restated statement of income and 
expense and reconciliation to government funding basis, the restated 
financial statements present fairly the financial position of the Corpo- 
ration as at March 31, 1986 and the results of its operations and the 
changes in its financial position for the year then ended, in accordance 
with generally accepted accounting principles. 



Kenneth M. Dye, F.C.A. 
Auditor General of Canada 



Ottawa, Canada 
June 19, 1987 



BALANCE SHEET AS AT MARCH 31, 1987 
(in thousands of dollars) 



ASSETS 



1987 



1986 



LIABILITIES 



1987 



1986 



Restated 
(Note 13) 

Current 

Cash 1 1,932 17,714 

Accounts receivable 70,020 65,666 

Engineering and production supplies and merchandise... 12,544 1 1,808 

Programs completed and in process of production 84,125 76,862 

Prepaid film and script rights and other expenses 23,172 20,870 

~20"l.793 192,920~ 

Investments (Note 3) 557 4,521 

Fixed (Note 4) 552,224 533,059 



754,574 730,500 



Restated 
(Note 13) 

Current 

Accounts payable and accrued liabilities 121,121 1 12,758 

Accrued vacation pay 42,864 41,541 

Refundable balance of parliamentary appropriations — 
Capital (Note 5) 589 421 

Long-term 

Provision for employee termination benefits 

Advances from Government of Canada (Note 6) 

Obligations under capital leases (Note 7) 



EQUITY OF CANADA 

Proprietor's Equity Account . 



164,574 


154,720 


95,355 

33,000 

1,164 


94,951 

33,000 

311 


129,519 


128,262 


460,481 


447.518 



754,574 730,500 



The accompanying notes are an integral part of the financial statements. 

Approved on behalf of the Board of Directors: 

PAUL FRASER 
Director 

PIERRE JUNEAU 
Director 

STEVE COTSMAN 
Vice-President, Finance 



PUBLIC ACCOUNTS, 1986-87 



123 



CANADIAN BROADCASTING CORPORATION— Continued 



STATEMENT OF INCOME AND EXPENSE 
AND RECONCILIATION TO GOVERNMENT 
FUNDING BASIS 

FOR THE YEAR ENDED MARCH 31, 1987 
(in thousands of dollars) 



1987 1986 

Restated 
(Note 13) 

Expense 
National Broadcasting Service, program and distri- 
bution costs 956,711 925,164 

Radio Canada International, broadcasting service ... 17,269 16,093 

Corporate engineering services 9,969 9,118 

Corporate management and services 46,478 45,219 

Commissions to agencies 33,681 31,156 

Selling and merchandising 42,677 34,614 

1,106,785 1.061.364" 

Income 

Advertising 238,668 218,295 

Miscellaneous 27,641 21.727 

Parliamentary operating appropriation (Note 5) 782,673 789,638 

Excess of expense over income before income tax and 

extraordinary item 

Income tax (Note 11) 

Excess of expense over income before extraordinary 

item 

Extraordinary item, income tax reduction (Note 1 1) 

Excess of expense over income 

Reconciliation to Government Funding Basis 
Deduct: net items not requiring current oper- 
ating funds (Note 5) 

Surplus (deficit) for the year 

Surplus (deficit) carried over, beginning of the year 

Surplus (deficit), end of the year (10,191) 1,755 

The accompanying notes are an integral part of the financial statements. 



1,048.982 


1,029,660 


57.803 


31,704 
10,694 


57.803 


42,398 
(10,694) 


57,803 
45,857 


31,704 
43.310 


(11,946) 
1,755 


11,606 
(9,851) 



STATEMENT OF PROPRIETOR'S EQUITY ACCOUNT 
FOR THE YEAR ENDED MARCH 31, 1987 
(in thousands of dollars) 



1987 1986 
Restated 
(Note 13) 

Balance, beginning of the year 

As previously reported 458,075 412,535 

Prior year's adjustments (Note 13) (10.557) 

As restated 447,518 412,535 

Add (Deduct): parliamentary appropriations — Capi- 
tal— Net (Note 5) 68,260 64,788 

parliamentary appropriations — Working 

capital (Note 5) 4,000 2,500 

loss on disposal of fixed assets (1,494) (601) 

surplus (deficit) for the year (11,946) 11,606 

net items not requiring current 

operating funds (Note 5) (45.857) (43.310) 

Balance, end of the year 460,481 447,518 

The accompanying notes are an integral part of the financial statements. 



STATEMENT OF CASH FLOW 

FOR THE YEAR ENDED MARCH 31, 1987 

(in thousands of dollars) 



1987 



1986 



(9,746) 


6.117 


68,260 


64,788 


(69.036) 
776 
3,964 


(65,034) 

343 

1,067 


(64.296) 


(63.624) 


(5,782) 
17.714 


7.281 
10.433 



Restated 
(Note 13) 

Operating Activities 

Parliamentary operating appropriation 782,673 789.638 

Advertising and miscellaneous income 266.309 240.022 

Expense (1,106.785) (1.061,364) 

Adjustments not involving cash 

Depreciation and amortization 48.455 47,800 

Employee termination benefits 404 6.091 

Parliamentary working capital appropriation...... 4,000 2,500 

Net change in non-cash working capital bal- 
ances (4,802) (18,570) 

Financing Activities 
Parliamentary capital appropriation 

Investing Activities 

Expenditures on fixed assets 

Disposal of fixed assets 

Decrease in investments 

Increase (decrease) in cash 

Cash, beginning of year 

Cash, end of year 11.932 17,714 

The accompanying notes are an integral part of the financial statements. 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, 1987 

1 . Authority and objective 

The Canadian Broadcasting Corporation was established by the 
1936, 1958 and 1968 Broadcasting Acts. The Corporation is an 
agent of Her Majesty and all property acquired by the Corpora- 
tion is the property of Her Majesty. 

The objective of the Corporation is to develop and provide a 
national broadcasting service for all Canadians in both official 
languages, in television and radio, and to provide an international 
service. Both services should be primarily Canadian in content 
and character. 

2. Significant accounting policies 

The financial statements of the Corpwration have been prepared 
by management in accordance with generally accepted accounting 
principles, consistently applied. Because a precise determination 
of many assets and liabilities is dependent upon future events, the 
preparation of periodic financial statements necessarily involves 
the use of estimates and approximations. The financial statements 
have, in management's opinion, been properly prepared within 
reasonable limits of materiality and within the framework of the 
accounting policies summarized below: 

(a) Engineering and production supplies and merchandise 

The inventory of engineering and production supplies is 
stated at the lower of average cost and replacement cost. The 
inventory of merchandise is stated at the lower of cost and 
net realizable value. 

(b) Programs completed and in process of production 

The inventory of programs completed and in process of pro- 
duction produced directly by the Corporation is stated at 
cost. Cost includes the cost of goods and services, and the 
share of labour and overhead expenses applicable to each 
program. The inventory of programs completed and in pro- 
cess of production, co-produced and co-financed with third 
parties, are stated at their cost to the Corporation. 



124 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN BROADCASTING CORPORATION— Continued 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \9%1— Continued 

The program cost is charged to operations as the programs 
are broadcast or when programs are determined unusable. 

(c) Film rights 

The Corporation enters into contracts for film broadcasting 
rights. As payments are made under the terms of each con- 
tract they are reflected in the accounts as prepaid film rights. 
The film rights are charged to operations as the films are 
broadcast or determined unusable. 

(d) Investments 

The investment in a joint venture is accounted for by the 
equity method with the Corporation's share of profit or loss 
credited or charged to operations. Other investments are car- 
ried at cost. 

(e) Fixed assets 

Fixed assets are recorded at cost. Cost includes material, 
engineering services, direct labour and related overhead. 
Depreciation is calculated on thfe straight-line method based 
on the estimated useful life of the assets, as follows: 



Buildings 
Technical equipment 

Transmitters and towers 

Other 
Furnishings and office equipment 
Automotive 



33 years 

20 years 

10 years 

10 years 

5 years 



Major leasehold improvements are capitalized and amortized 
over the term of the lease to a maximum period of five years. 
Amounts included in uncompleted capital projects are trans- 
ferred to the appropriate fixed asset classification upon com- 
pletion, and are then depreciated according to the Corpora- 
tion's policy. Gains and losses on disposals of fixed assets are 
credited or charged to the Proprietor's Equity Account. 

(0 Capital leases 

The assets and related obligations for capital leases are 
recorded at an amount equal to the present value of future 
lease payments. Assets recorded under capital leases are 
amortized on the straight-line method over the estimated use- 
ful life of the assets or based on the lease term as appropriate. 
Obligations under capital leases are reduced by rental pay- 
ments net of implicit interest. 

(g) Employee termination benefits and vacation pay 

Employee termination benefits and vacation pay are exp- 
ensed as benefits accrue to employees under their respective 
terms of employment. 

(h) Pension plan 

The cost of funding current service pension benefits is 
charged to operations as incurred. Unfunded liabilities as 
determined by actuarial valuation are funded by payments 
which are charged to operations over periods recommended 
by the actuaries and in accordance with regulatory require- 
ments. Additional payments are charged to operations as 
made. 

(i) Parliamentary appropriations 

Parliamentary appropriations for operating expenditures are 
recorded as income. Net parliamentary appropriations for 
capital and working capital are credited to the Proprietor's 
Equity Account. 



3. Investments 



"Hockey Night in Canada" — Joint venture, at equity . 
Television St. Fran9ois Inc. — Preferred shares, at cost 
Master FM Limited — Common shares, at cost 



1987 1986 
(in thousands 
of dollars) 
Restated 



555 



4,309 
210 
2 2 



557 4.521 



4. Fixed assets 



1987 



1986 



Land 

Buildings 

Technical equipment 

Furnishings and 

office equipment ... 

Automotive 

Leasehold improve- 
ments 

Property under capi- 
tal leases 

Uncompleted capital 
projects 



5. Parliamentary appropriations 



Cost 


Accu- 
mulated 
depreci- 
ation and 

amor- 
tization 


Net 
book 
value 


Net 
book 
value 




(in thousands of dollars) 


Restated 


35.807 
247,687 
616,854 


101,797 
308.420 


35.807 
145.890 
308.434 


35.244 
146,623 
284,994 


27,287 
12,441 


10.786 
8,183 


16.501 
4.258 


16,719 
3,215 


5,397 


3.584 


1.813 


2,941 


1,391 


96 


1.295 


408 


38,226 




38.226 


42,915 


985.090 


432.866 


552.224 


533,059 





Operat- 
ing 


Capital 


Working 
Capital 


Total 


Payments to the Cor- 
poration in provid- 
ing a broadcasting 
service 

Refundable to Gov- 
ernment of Canada 


782,673 


(in thousands of dollars) 

68,428 4,000 
168 


855,101 
168 


Retained —1987 


782,673 


68,260 


4,000 


854,933 


— 1986 


789,638 


64,788 


2,500 


856,926 



The following summarizes the net items not requiring current 
operating funds. 

1987 1986 
(in thousands 
of dollars) 
Restated 

Depreciation and amortization 48,455 47,800 

Provision for employee termination benefits and vaca- 
tion pay 1.727 8.253 

Program inventory costs funded from current operating 

funds (4.325) (12.743) 

45.857 43,310 



PUBLIC ACCOUNTS, 1986-87 

CANADIAN BROADCASTING CORFORATION— Continued 



125 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31,1 m— Continued 

6. Advances from Government of Canada 

Advances from the Government of Canada are made for work- 
ing capital purposes and are free of interest. These advances 
become repayable when cash and treasury bills exceed the Corpo- 
ration's requirements for working capital. 

7. Lease obligations 

As at March 31, 1987, the Corporation's obligations related to 
significant capital and operating leases for terms in excess of one 
year are as follows: 

Capital Operating 

Leases Leases 

(in thousands 

of dollars) 

1988 480 35,617 

1989 506 34,232 

1990 258 21,346 

1991 8,494 

1992 4,695 

1993-2061 4,911 

Total future payments 1,244 109,295 

Z)e</Mcr; amount representing interest 80 

Long-term obligations under capital leases 1,164 

8. Commitments 

As at March 31, 1987, commitments for film rights amounted 
to $32.0 million (1986— $36.8 million). 

9. Pension plan 

The Corporation's pension plan covers substantially all continu- 
ing employees. The charge to operations for the cost of the plan 
for the year ended March 31, 1987 was $37.1 million (1986— 
$39.7 million). 

The last actuarial valuation was made at December 31, 1985 by 
William M. Mercer Limited. Like the preceding valuations, it was 
made on a "going concern basis" and in accordance with standard 
actuarial practice and legal requirements. The December 31, 1985 
actuarial valuation indicated a surplus of $62,383,000. 

In accordance with the Pension Benefits Standards Act and 
Regulations, the Corporation has applied a portion of the surplus 
to increase the benefits under the Plan, to reduce the contribution 
of the employer to the normal cost of the Plan and left the balance 
in the Fund. 

10. Contingencies 

In the ordinary course of business, various claims and lawsuits 
have been brought against the Corporation. In the opinion of 
management, the losses, if any, which may result from the settle- 
ment of these matters are not likely to be material and accord- 
ingly no provision has been made in the accounts of the Corpora- 
tion. 

11. Income tax 

The Corporation is a prescribed federal Crown corporation 
under Part LXXI of the Income Tax Regulations and is subject to 
the provisions of the federal Income Tax Act. Neither deprecia- 
tion nor capital cost allowance are allowed in determining the 
Corporation's taxable income and in spite of an excess of expense 
over income determined for accounting purposes, the Corporation 
can have taxable income in any one year. 

The Corporation has incurred a loss for income tax purposes in 
the current year. In the year ended March 31, 1986, the Corpora- 
tion has recorded in its restated statement of Income and Expense 
and Reconciliation to Funding Basis the benefits related to the 
utilization of prior years losses as an extraordinary item. 



As at March 31, 1987, losses which can be carried forward for 
income tax purposes and can be applied against possible taxable 
income in future years amount to $17.9 million which, if unused, 
would expire as follows: 

(in 
millions 

of 
dollars) 



March 3 1 

1992 

1994 



9.0 
8.9 



17.9 



12. Related party transactions 

The Corporation is related in terms of common ownership to all 
Government of Canada created departments, agencies and Crown 
corporations and is mainly financed by Parliament of Canada. 
Transactions with Canada are outlined in Notes 5 and 6. 

During the year, transactions with these related departments, 
agencies and Crown corporations were normal business transac- 
tions on normal trade terms applicable to all individuals and 
enterprises. 

13. Restatement of prior year's financial statements 

During fiscal 1986, serious problems were experienced in imple- 
menting the initial phase of the National Finance System. As a 
result, proper books of account and an adequate degree of internal 
control were not maintained during the initial implementation 
period, which extended into fiscal 1987. 

In fiscal 1987, the Corporation took major steps to restore 
internal control, re-establish and maintain proper books of 
account and restated the March 31, 1986 financial statements. 
The restatement resulted mainly from: recording bank and reve- 
nue transactions in the appropriate accounting period; adjusting 
accounts receivable and the provision for doubtful accounts; revis- 
ing the indirect costs of program inventories; adjusting the 
accounts payable and accrued liabilities and the provision for 
employee termination benefits; and reclassifying amounts between 
balance sheet accounts. The impact of these adjustments on the 
major financial statement captions may be summarized as fol- 
lows: 

Previously Increase As 

Reported (Decrease) Restated 
(in thousands of dollars) 

Balance Sheet 

Assets 

Current 204,750 (11,830) 192.920 

Investments 4,521 4,521 

Fixed 533.524 (465) 533.059 

742.795 (12.295) 730.500 

Liabilities 

Current 160.607 (5,887) 154.720 

Long-term 124.113 4.149 128.262 

284.720 (1.738) 282.982 

Proprietor's Equity Account 458.075 (10.557) 447.518 

742.795 (12.295) 730,500 



126 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN BROADCASTING CORPORATION— Conc/w^e^ 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \9%1— Concluded 



Previously 
Reported 



Increase 
(Decrease) 



As 
Restated 



(in thousands of dollars) 

Statement of Income and Expense 
and Reconciliation to Govern- 
ment Funding Basis 

Expense 1,052,313 9,051 1,061,364 

Income 1,031,118 (1,458) 1,029,660 

Excess of expense over income (21,195) (10,509) (31,704) 

Reconciliation to Government 

Funding Basis 27,503 5,956 33,459 

Surplus (deficit) end of year 6,308 (4,553) 1,755 



The Corporation is confident that all necessary corrections have 
been made, that the problems giving rise to such adjustments have 
been satisfactorily addressed, that by year end internal control has 
been re-established and proper books of account have been res- 
tored. 

14. Change in accounting policy — Revised method of cost allocation 
for indirect program production labour and overhead expense 

Commencing with the beginning of the 1985-86 fiscal year, the 
Corporation as part of its new National Finance System modified 
its method of accounting with respect to the allocation of the indi- 
rect program production labour and overhead expense to pro- 
grams produced and transmitted. These costs are now allocated 
on the basis of a rate for each production centre, equal to the ratio 
of total direct to total indirect program costs, in lieu of basis 
employed in the preceding year. The changed basis has been 
applied prospectively effective April 1, 1985 for both television 
and radio. 

To provide for greater consistency and uniformity, radio pro- 
duction labour and overhead are now accounted for on the same 
basis as television. This change had the effect of allocating a $3.0 
million 1985-86 increase to radio program inventory on the bal- 
ance sheet, with a corresponding decrease in radio programs 
broadcast on the statement of income and expense for 1985-86. 

The impact of this change in policy on operating results of 
1985-86 cannot be determined because of the discontinuance of 
the previous year's accounting systems. 



p 



PUBLIC ACCOUNTS, 1986-87 



127 



SUMMARY PAGE 
CANADIAN COMMERCIAL CORPORATION 

MANDATE 

To assist in the development of trade between Canada and other nations. 

BACKGROUND 

Established in 1946, the corporation serves as prime contractor when other countries wish to purchase goods and 
services from Canada on a government-to-government basis. As well, it assists in sales to international agencies. 



CORPORATION DATA 

HEAD OFFICE 



STATUS 



APPROPRIATE MINISTER 



DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHAIRMAN AND CHIEF 
EXECUTIVE OFFICER 

AUDITOR 



Metropolitan Life Building 
50 O'Connor Street 
Ottawa, Ontario 
K1A0S6 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable Patricia Carney, P.C., M.P., 
Minister for International Trade 

External Affairs 

1946; by the Canadian Commercial Corporation Act (R.S.C. 1970, 
C-6). 

Hugh MuUington 



The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 

1986-87 

At the end of the period 

Total Assets 493.8 

Obligations to the private sector nil 

Obligations to Canada nil 

Equity of Canada 31.4 

Cash from Canada in the period 

— budgetary 16.1 

— non-budgetary nil 



1985-86 



1984-85 



1983-84 



399.5 


380.9 


382.5 


nil 


nil 


nil 


nil 


nil 


nil 


35.7 


36.3 


32.4 


15.8 


17.6 


17.2 


nil 


nil 


nil 



128 

CANADIAN COMMERCIAL CORPORATION 

AUDITOR'S REPORT 

TO THE MINISTER FOR INTERNATIONAL TRADE 

I have examined the balance sheet of the Canadian Commercial 
Corporation as at March 31, 1987 and the statements of operations 
and retained earnings and changes in fmancial position for the year 
then ended. My examination was made in accordance with generally 
accepted auditing standards, and accordingly included such tests and 
other procedures as I considered necessary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the Corporation as at March 31, 1987 and the results of its 
operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied, except for the change in the method of accounting for 
employees' annual leave and termination benefits as explained in Note 
3 to the financial statements, on a basis consistent with that of the 
preceding year. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the financial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, the 
Canadian Commercial Corporation Act and by-laws of the Corpora- 
tion. 

D. L. Meyers, F.C.A. 
Deputy Auditor General 
for the Auditor General of Canada 
Ottawa, Canada 
Junes, 1987 



PUBLIC ACCOUNTS, 1986-87 



BALANCE SHEET AS AT MARCH 31, 1987 
(in thousands of dollars) 



ASSETS 



1987 1986 



LIABILITIES 



1987 



1986 



Cash and short-term deposits 55,008 58,853 

Deposit with Receiver General for Canada (Notes 1 

and 10) 8,000 8,000 

Accounts receivable 

Foreign governments (Note 4) 1 11,141 1 17,228 

Government of Canada — Parliamentary appropriations 

(Note 5) 461 

Other 548 

Advances to suppliers 5,419 

Progress claims paid or due 313,276 



1,089 

229 

10,284 

203,773 



Accounts payable and accrued liabilities 106,034 121,991 

Advances from customers 36,073 32,691 

Progress payments received or due 313,217 202,395 

Due to Government of Canada (Note 5) 2,945 3,525 

Due to Defence Production Revolving Fund 292 539 

Provision for additional costs (Note 6) 3,181 2,660 

461,742 363,801 

Employee termination beneHts (Note 3) 723 



462,465 363,801 



493,853 399,456 



EQUITY OF CANADA 

Paid in capital 10,000 10,000 

Contributed surplus 10,000 10,000 

Retained Earnings 11,388 15,655 



31,388 35,655 
493,853 399,456 



Certified correct: 

F. O. KELLY 

Comptroller 

Approved by the Board: 

H. J. MULLINGTON 
President 

G.S.JUPP 
Director 



PUBLIC ACCOUNTS, 1986-87 



129 



CANADIAN COMMERCIAL CORPORATION— Con///iu£^ 

STATEMENT OF OPERATIONS AND RETAINED EARNINGS 
FOR THE YEAR ENDED MARCH 3 1,1 987 
(in thousands of dollars) 



1987 



1986 



Revenues 

Contract billings 774,879 763,453 

Fees and other income 715 \2 

Interest income 2,763 3,580 

Gain (loss) on foreign exchange (1,235) 405 

777,122 767,450" 

Expenses 

Cost of contract billings 774,879 763,453 

Additional contract costs 2,465 2,1 19 

Bad Debts 142 IQ 

Services provided by Supply and Services Canada 10,354 9,830 

Administrative (Note 9) 7,665 8,249 

Consolidation expenses (Note 9) 493 

Legal fees and expenses charged by Department of Jus- 
tice (Note 7) 505 272 

Other 22 20 

796,525 783,< 

Net cost of operations before extraordinary item 

Extraordinary item (Note 3) 

Net cost of operations 

Parliamentary appropriations 

Retained earnings at beginning of year 

Retained earnings at end of year 1 1,388 15,655 



796,525 


783,953 


19,403 
959 


16,503 


20,362 
16,095 


16,503 
15,826 


(4,267) 
15.655 


(677) 
16,332 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED MARCH 31, 1987 
(in thousands of dollars) 



1987 1986 

Financing Activities 
Parliamentary Appropriations 

Amount drawn down 16,095 15,826 

Adjusted for decrease in receivable from Government 
of Canada 628 441 

16,723 16,267 
Operating Activities 
Operations 

Net cost of operations 20,362 16,503 

Adjustments for 

Extraordinary item (959) 

Operating balances from customers and to sup- 
pliers 10,731 (23.339) 

Advances and progress claims from customers and 

to suppliers (9,566) (7.274) 

Total cash used (provided) 20,568 (14,1 10) 

Increase (decrease) in cash and cash equivalents (3,845) 30,377 

Cash and cash equivalents at beginning of year 66,853 36,476 

Cash and cash equivalents at end of year 63,008 66,853 

Represented by 

Cash and short-term deposits 55,008 58,853 

Deposit with Receiver General for Canada 8,000 8,000 

63,008 66,853 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, 1987 

1 . Authority and operations 

The Corporation was established in 1946 by the Canadian 
Commercial Corporation Act and is an agent Crown corporation 
listed in Part I, Schedule C of the Financial Administration Act. 
The Corporation is not subject to income taxes. 



The Corporation acts as the prime contracting agency when 
other countries and international agencies wish to purchase prod- 
ucts and services from Canada on a government-to-government 
basis. 

Contracts are made with foreign governments and correspond- 
ing contracts are entered into with Canadian firms by the Corpo- 
ration. 

During the year, in accordance with a Cabinet decision, the 
Corporation implemented a policy of charging a fee for its ser- 
vices on contracts signed after June 1, 1986. However, on Decem- 
ber 23, 1986, the Corporation suspended this policy pending fur- 
ther Cabinet review. 

Supply and Services Canada provides contracting services to 
the Corporation at predetermined rates approved by Treasury 
Board, based on the amounts of contracts procured, and provides 
certain administrative functions at cost. 

If the Minister so directs, the Corporation is required to pay to 
the Receiver General for Canada any funds that the Minister con- 
siders to be in excess of requirements. Any such payments are on 
deposit with the Receiver General for Canada and can, on the 
request and in the opinion of the Minister, be returned to the Cor- 
poration when required. During 1983-84, an amount of $8 million 
was paid by the Corporation to the Receiver General for Canada 
and no interest will accrue to the Corporation on such deposit (see 
also Note 10). 

2. Significant accounting policies 

(a) Contract billings 

Revenues from contracts are recorded at the time of delivery 
except in the case of contracts involving progress payments; 
in these cases, revenues are recorded at the time the progress 
payments become due from customers. Since title to work-in- 
progress covered by progress claims has not passed to cus- 
tomers, the Corporation sets up a corresponding liability and 
cost of contract billings. The Corporation records all progress 
claims by its suppliers as assets. These assets and liabilities 
are reduced, in accordance with contract terms, as deliveries 
are accepted. 

(b) Foreign currency translation 

Assets and liabilities denominated in foreign currencies are 
translated into Canadian dollars at the year-end exchange 
rates. Revenues and expenses are translated at the average 
exchange rates for the month in which the transactions occur. 
Gains and losses resulting from translations are shown in the 
statement of operations. 

(c) Parliamentary appropriations 

Parliamentary appropriations are recorded in the year in 
which the corresponding expenses are incurred but are drawn 
upon only as cash disbursements are made. 

(d) Pension plan 

Employees participate in the Public Service Superannuation 
Plan administered by the Government of Canada. Contribu- 
tions to the Plan are required from both the employees and 
the Corporation. These contributions represent the total obli- 
gation of the Corporation and are charged to income on a 
current basis. 

(e) Employee termination benefits 

Employees of the Corporation are entitled to specified termi- 
nation benefits, calculated at salary levels in effect at the 
time of termination, as provided for under collective agree- 
ments and conditions of employment. The liability for these 
benefits is recorded in the account as the benefits accrue to 
employees. 



130 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN COMMERCIAL CORPORATION— Co«c/M^e^ 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \ni— Concluded 



3. Change in accounting policy 

During the year the Corporation adopted the accrual basis for 
accounting for employees' annual leave and termination benefits 
as 93 employees from Supply and Services Canada with benefits 
of $827,000 were consolidated with its Head Office group with 
benefits of $148,000. Previously, annual leave and termination 
benefits were not accrued in the financial statements as they were 
not of a material amount. Instead, they were expensed as dis- 
bursements were made. Therefore, the change has been made 
prospectively. The effect of the change has been to increase the 
cost of operations by the net amount of $959,000 required to set 
up a liability for annual leave and a provision for employee termi- 
nation benefits as at March 31, 1987. 

4. Accounts receivable from foreign governments 

As at March 31, 1987, the Corporation has provided $996,000 
(1986 — $854,000) to cover the possible non-collection of certain 
accounts receivable from a foreign government. 

5. Government of Canada 

As at March 31, 1987, funds to cover expenses of $461,000 
applicable to 1986-87 appropriations had not been drawn and 
$2,945,000 had not been paid to various government departments. 

6. Contractual obligations 

As at March 31, 1987, the Corporation was obligated to fulfill 
contracts with customers amounting to $1,132 billion (1986 — 
$1,127 billion). 

The Corporation is responsible to its customers for the perform- 
ance of its suppliers and thus may incur additional contract costs 
on default of a supplier. A provision of $3,181,000 (1986— 
$2,660,000) has been made for estimated additional contract costs 
which may be incurred if certain suppliers are unable to meet 
their contractual obligations. 

7. Legal fees and expenses charged by the Department of Justice 

The Corporation has been directed by Treasury Board to reim- 
burse the Department of Justice for legal fees and expenses result- 
ing from the action taken against the Corporation related to the 
contract referred to in Note 8(a). These costs amounted to 
$505,000 (1986— $272,000). 

8. Contingencies 

(a) The Corporation has been named as defendant in a lawsuit 
instituted in 1975 alleging losses resulting from the termina- 
tion of a portion of a contract and seeking damages of $6.8 



million plus accrued interest and costs. Based on the advice 
of legal counsel, management is of the opinion that no provi- 
sion for possible loss in respect of this suit is required. 

(b) The Corporation has been named as defendant in legal pro- 
ceedings instituted in 1985, alleging losses resulting from a 
breach of contract by the Corporation and seeking damages 
of $744,000. The action is being contested by the Corpora- 
tion and the ultimate outcome is uncertain. A preliminary 
review of the facts and law by counsel indicates that there is 
no liability on the part of the Corporation. On the basis of 
that opinion, management is of the view that no provision for 
possible loss in respect to these proceedings is required. 

(c) The Corporation has been named as defendant in a lawsuit 
instituted in 1986 seeking damages in an amount of $720,000 
plus interest and costs, resulting from an alleged breach of 
contract by the Corporation. The action is being contested by 
the Department of Justice on behalf of the Corporation. A 
preliminary review of the facts and law by counsel indicates 
that chances of success of this action against the Corporation 
are remote. On the basis of that opinion, the Corporation's 
management is of the view that no provision for possible loss 
in respect of these proceedings is required. 

9. Restatement of 1985-86 financial statements 

During 1986, the Government approved the consolidation of the 
staff of the former Export Supply Branch of Supply and Services 
Canada (SSC) with the Corporation's Head Office group, effec- 
tive April 1, 1986. This integration was aimed at streamlining the 
day-to-day processes involved in carrying out the Corporation's 
work, and achieving substantial economies in terms of reduced 
costs. Consequently, in order to provide pertinent information and 
to enhance comparability with the financial statements of the cur- 
rent year, the administrative cost that was included in services 
provided by SSC is reclassified for 1985-86. Accordingly, SSC 
expenses were reduced by $6,220 million and administrative costs 
for 1985-86 increased by the same amount. This change in group- 
ing of items within relevant categories provides more meaningful 
information to interpret data that are based on comparisons. 

10. Subsequent event 

On April 1, 1987, an amount of $5.0 million of the $8.0 million 
that was deposited with the Receiver General for Canada (Note 
1 ) was returned to the Corporation. In the opinion of the Corpora- 
tion and the Minister, these funds are required to meet funding 
requirements for 1987-88. 



PUBLIC ACCOUNTS, 1986-87 



131 



SUMMARY PAGE 
CANADIAN DAIRY COMMISSION 



MANDATE 



To provide efficient producers of milk and cream with an opportunity of obtaining a fair return for their labour and 
investment and to provide consumers of dairy products with a continuous and adequate supply of dairy products of 
high quality. 

BACKGROUND 

Established in 1966, the corporation administers the following elements of the federal dairy program: calculation of 
Target Price for manufacturing milk and cream; market support for the Target Price through a nationwide offer to 
purchase butter and skim milk powder; payment of subsidy on eligible milk and cream shipments; international 
marketing of dairy products not required for domestic consumption; receipt of levies collected by provinces from 
farmers to finance the cost of exporting products surplus to domestic requirements; and coordination of national 
supply management of industrial milk production. 



§ CORPORATION DATA 
HEAD OFFICE 



STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHAIRMAN AND CHIEF 
EXECUTIVE OFFICER 

AUDITOR 



Pebb Building 
2 1 97 Riverside Drive 
Ottawa, Ontario 
K1A0Z2 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable John Wise, P.C, M.P. 

Agriculture 

1966; by the Canadian Dairy Commission Act 
(R.S.C. 1970, C-7). 

Roch Morin 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends July 31. 

1985-86 

At the end of the period 

Total Assets 259.8 

Obligations to the private sector 89.9 

Obligations to Canada 126.3 

Equity of Canada nil 

Cash from Canada in the period 

— budgetary* 292.2 

— non-budgetary, net (108.0) 

* Includes payments via the Agricultural Stabilization Board. 



1984-85 



1983-84 



1982-83 



333.6 


304.0 


360.5 


58.2 


60.6 


56.5 


234.3 


180.4 


231.8 


nil 


nil 


nil 


314.4 


303.6 


309.9 


53.9 


(51.3) 


24.9 



'^^ PUBLIC ACCOUNTS, 1986-87 

CANADIAN DAIRY COMMISSION 



THE AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED JULY 3 1 1 987 
WERE NOT AVAILABLE AT DATE OF PRINTING 



PUBLIC ACCOUNTS, 1986-87 

CANADIAN DAIRY COMMISSION— Continued 

AUDITOR'S REPORT 

TO THE MINISTER OF AGRICULTURE 

I have examined the balance sheet of the Canadian Dairy Commis- 
sion as at July 31, 1986 and the statements of dairy support program 
operations fmanced by Government of Canada and marketing opera- 
tions and financing by producers for the year then ended. My exami- 
nation was made in accordance with generally accepted auditing 
standards, and accordingly included such tests and other procedures as 
I considered necessary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the Commission as at July 31, 1986 and the results of its 
operations for the year then ended in accordance with generally 
accepted accounting principles applied on a basis consistent with that 
of the preceding year. 

Further, in my opinion, the transactions of the Commission that 
have come to my notice during my examination of the financial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, the 
Canadian Dairy Commission Act and the by-laws of the Commission. 

D. Larry Meyers, F.C.A. 
Deputy Auditor General 
for the Auditor General of Canada 
Ottawa, Canada 
December 12, 1986 



133 



BALANCE SHEET AS AT JULY 31, 1986 
(in thousands of dollars) 



ASSETS 



1986 1985 



LIABILITIES 



1986 1985 



Accounts receivable 

Trade 21,525 23,688 

Government of Canada 53,940 81,981 

Producer levies 94,387 107,515 

Inventories (Note 3) 89,950 1 19,996 

Prepaid expense 382 



259,802 333,562 



Accounts payable and accrued liabilities 34,067 28,827 

Allowance for losses on purchase commitments (Note 4).... 8,595 7,972 

Subsidies payable to producers 53,887 58,164 

Loans from Government of Canada (Note 5) 127,241 238.599 



223,790 333,562 



FINANCING BY PRODUCERS 

Excess of financing over cost of marketing operations 
(Note 6) 



36,012 



259,802 333,562 



Approved: 

ROCH MORIN 
Chairman 

KENNETH McKINNON 
Vice-chairman 

PAULSIMARD 
Director of Finance 



134 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN DAIRY COMMISSIOJ^— Continued 

STATEMENT OF DAIRY SUPPORT PROGRAM OPERATIONS 
FINANCED BY GOVERNMENT OF CANADA 
FOR THE YEAR ENDED JULY 31, 1986 
(in thousands of dollars) 



1986 



1985 



Subsidies to producers of industrial milk and cream 

(Schedule A) 277,311 283.612 

Expenses related to marketing operations 

Interest 6,477 18,267 

Storage 2,000 3,122 

Freight 1,884 3,264 

Handling 286 484 

Miscellaneous 79 277 

10.726 25 

Administrative expenses (Schedule B) 

Research 

Cost of dairy support program operations 

Financing by Government of Canada (Note 6) 

Agricultural Stabilization Board 288,037 309,026 

Parliamentary appropriation 4,1 19 5,177 

Government departments which provided services with- 
out charge 72 152 



10,726 


25,414 


4,191 


3,668 
1,66! 


292,228 


314,355 



292.228 314,355 



1986 


1985 


230,520 
401,654 


338,916 
578,766 


171,134 


239,850 



STATEMENT OF MARKETING OPERATIONS AND 

FINANCING BY PRODUCERS 

FOR THE YEAR ENDED JULY 31, 1986 

(in thousands of dollars) 



Sales 

Cost of goods sold 

Loss on sales 

Expenses and assistance 

Dairy product assistance 60,695 

Carrying charges 4,648 

Agents' commissions (Note 7) 3,517 

Provision for doubtful accounts 2,300 

Promotion 804 

Capital assistance recoveries (615) 

Donation to Mexico and Ethiopia 416 

Transport assistance 359 

Cost of marketing operations before flnancing 

Financing by Producers' levies (Note 6) 

Industrial milk (Schedule C) 

Fluid milk (Schedule D) 

Government of Canada 

Excess (deficiency) of financing over cost of marketing 

operations (Schedule E) 

(Deficiency) at beginning of year 

Deficiency recoverable from producers 

Excess of financing over cost of marketing operations 
at end of year (Note 6) 36,012 



37,855 

10,554 

5,690 

2,300 

(978) 
290 



72,124 


55,711 


243,258 


295,561 


271,400 
7,870 


274,720 
7,497 


279,270 


282,217 
2,564 


279,270 


284,781 


36,012 


(10,780) 
(13,581) 


36,012 


(24,361) 
24,361 



NOTES TO FINANCIAL STATEMENTS 
JULY 31, 1986 

1 . The Commission 

The Canadian Dairy Commission is a Crown corporation 
named in Schedule C, Part I of the Financial Administration Act 
and is not subject to the provisions of the Income Tax Act. The 
objectives of the Commission, as established by the Canadian 
Dairy Commission Act 1966-67, are "to provide efficient pro- 
ducers of milk and cream with the opportunity of obtaining a fair 
return for their labour and investment and to provide consumers 
of dairy products with a continuous and adequate supply of dairy 
products of high quality". 

2. Significant accounting policies 

Foreign currency translation 

Each asset, liability, revenue or expense arising from a foreign 
currency transaction is translated into Canadian dollars at the 
exchange rate in effect at the date of transaction. Monetary items 
denominated in a foreign currency at the balance sheet date are 
adjusted to reflect the exchange rate in effect at that date. Any 
exchange loss or gain, arising on translation or settlement of a for- 
eign currency item, is charged to marketing operations financed 
by producers. Unrealized gains and losses arising from the trans- 
lation of long-term monetary items are deferred and amortized 
over the remaining lives of these items. 

Inventories 

Inventories are valued at the lower of cost and net realizable 
value. 

Fixed assets 

Acquisitions of furniture and equipment are not significant and 
are charged to administrative expenses in the year of purchase. 

Purchase commitments 

Losses on commitments to purchase skim milk powder at 
Canadian support prices and other dairy products at negotiated 
contract prices, which are usually higher than export prices, are 
charged to marketing operations financed by producers at the 
time the commitment is made. 

3. Inventories 

1986 1985 



(in thousands of 
dollars) 



Cost 

Butter 93,063 106,559 

Skim milk powder 39,692 57,257 

Other dairy products 12,803 33,440 

Less allowance for write down 

Butter 

Skim milk powder 

Other dairy products 



Inventories which are recorded at cost have been written down 
to their net realizable value as the prices of surplus dairy products 
are substantially lower on the world market than domestic support 
prices and costs. The decrease in the allowance for inventory write 
down has been credited to marketing operations (cost of goods 
sold) financed by producers. 



145,558 


197,256 


24,749 

26,468 

4,391 


23,457 
38,798 
15,005 


55,608 


77,260 


89,950 


119,996 



PUBLIC ACCOUNTS, 1986-87 



135 



CANADIAN DAIRY COMMISSION— Co/2//>i«e</ 

NOTES TO FINANCIAL STATEMENTS 
JULY 31, \9Se— Concluded 

4. Commitments 

As at July 31, 1986, the Commission was committed to pur- 
chase butter and skim milk powder, produced prior to that date, 
at Canadian support prices and other dairy products at negotiated 
contract prices for approximately $13.7 million (1985 — $1 1.9 mil- 
lion). Losses which may result from these purchases at higher 
than export prices have iseen estimated at approximately $8.6 mil- 
lion (1985 — $7.9 million) requiring an increase in the allowance 
during the year of approximately $0.7 million (1985 — decrease 
$5.6 million) which has been charged to cost of goods sold on the 
statement of marketing operations and fmancing by producers. 

. Loans from Government of Canada 

The loans are raised to finance the purchase of dairy products 
under the dairy support program. There are no specific terms of 
repayment. However, loans are repaid on a regular basis as and 
when funds are available. The Commission is allowed to borrow to 
a maximum of $300 million. The interest is calculated on a simple 
basis and paid at the time of any principal repayment. The inter- 
est rates during the year varied from 8.125% to 1 L875% (1985— 
9.375% to 12.375%). 

Loan transactions are summarized as follows: 



1986 



1985 



(in thousands 
of dollars) 

Balance at beginning of year 238,599 182,516 

Borrowings 289,410 497,236 

Repayments (401,719) (445,452) 

Accrued interest at end of year 951 4,299 

Balance at end of year 127,241 238,599 



6. Financing 

Government of Canada 

The Agricultural Stabilization Board, through Vote 15, pro- 
vides financing to the Commission for the benefit of producers for 
the purpose of stabilizing the price of industrial milk and cream. 
During the year ended July 31, 1986, financing for this purpose 
amounted to $288 million. 

Administrative expenses are financed by Agriculture Votes 40 
and 55. 



(in thousands of 


dollars) 


1,895 


2,401 


631 


2,594 


555 


535 


433 


146 


3 


14 


3,517 


5,690 



Agents' commissions 

The Commission has used the services of sales agents for dairy 
products on the export market. Sales commissions were as follows: 

1986 1985 



Coop F6der6e de Quebec, Canada 

L&M Exports Inc., Canada 

Intercontinental, Mexico 

Gestion Y. Dessarrollo — Commercial S.A., Peru . 
Canada Expa (1980) Inc., Canada 



Financial statement presentation 

A statement of changes in financial position has not been 
included because, in the opinion of management, it would not pro- 
vide any useful additional information. 



SUBSIDIES TO PRODUCERS OF INDUSTRIAL 

MILK AND CREAM 

FOR THE YEAR ENDED JULY 31, 1986 SCHEDULE A 



Eligible Shipments 



Subsidies 



Prince Edward Island. 

Nova Scotia 

New Brunswick 

Quebec 

Ontario 

Manitoba 

Saskatchewan 

Alberta 

British Columbia 



1986 


1985 


1986 


1985 


(in thousands 


(in thousands 


of kilogra 


ms) 


of dollars) 


3,114 


3,108 


5,215 


5.206 


2,079 


2.137 


3,483 


3.578 


2.168 


2,257 


3,632 


3.780 


78,808 


80.962 


1 32,004 


135.611 


51,479 


53.729 


86.227 


89,996 


6,423 


6.594 


10.759 


11,044 


4,298 


4.411 


7.199 


7.388 


11.056 


11.427 


18,518 


19.140 


6,134 


6,229 


10.274 


7.869 



165.559 



170.854 277.311 



283.612 



Producers 

Producers are responsible for the cost of disposal of surplus 
products, including all losses on special export production under 
the export quota program, and for marketing costs attributable to 
surplus production. These costs are financed through producer 
levies which are charged and collected by the provincial market- 
ing boards and agencies and remitted to the Commission. 

Interest expense and carrying charges associated with the pur- 
chase of butter and skim milk powder in excess of the Canadian 
requirement of butterfat are financed by producers. 

Effective April 1, 1986 interest expense and carrying charges 
associated with the purchase of skim milk powder arc being 
financed by the Government of Canada up to a maximum of $10 
million. 

In accordance with Section 36 of the National Milk Marketing 
Plan, the treatment of any excess or deficiency of financing by 
producers in respect of marketing operations is to be determined 
by the Canadian Milk Supply Management Committee. Subse- 
quent to the year end, the Committee has decided that $26 million 
of the $36 million excess financing at July 31, 1986 will be 
refunded to provinces through credits to levy payments to the 
Commission commencing with the payments due in December 
1986. 



ADMINISTRATIVE EXPENSES 

FOR THE YEAR ENDED JULY 31, 1986 

(in thousands of dollars) 



Salaries 

Rentals 

Transportation and communications 

Professional and special services 

Other personnel costs 

Remuneration of members of the Commission . 

Data processing and cheque issue services 

Utilities, materials and supplies 

Furniture and equipment 

Repairs and maintenance 

Miscellaneous 



SCHEDULE B 



1986 1985 



2,283 


2,031 


443 


183 


396 


410 


393 


264 


271 


264 


188 


191 


72 


152 


68 


54 


35 


96 


26 


22 


16 


1 



4,191 3,668 



136 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN DAIRY COMMISSION— Continued 

PRODUCER LEVIES ON INDUSTRIAL MILK 
FOR THE YEAR ENDED JULY 31, 1986 



SCHEDULE C 



Prince Edward Island. 

Nova Scotia 

New Brunswick 

Quebec 

Ontario 

Manitoba 

Saskatchewan 

Alberta 

British Columbia 



Producer Levies 



MilkSh 


ipments 


In Quota 




Over Quota 


Total 




1986 


1985 


1986 


1985 


1986 


1985 


1986 


1985 


(in thousands of litres) 






(in thousands of dollars) 






76,826 


75,998 


4,629 


3,678 


130 




4,759 


3,678 


53,249 


52,930 


3,105 


2,977 


612 


468 


3,717 


3,445 


53,793 


54,905 


3,247 


3,122 




248 


3,247 


3,370 


2,174,677 


2,243,797 


127,749 


128,011 




6.686 


127,749 


134,697 


1,291,746 


1,321,949 


76,385 


74,630 


11,463 


9,780 


87,848 


84,410 


147,709 


153,566 


8,696 


8,680 




1,070 


8,696 


9,750 


100,133 


101,510 


5,775 


5,775 




444 


5,775 


6,219 


287,651 


287,020 


17,162 


16,232 


1,449 


1,880 


18,611 


18,112 


169,961 


175,253 


9,834 


7,177 


1,164 


3,862 


10,998 


11,039 



4,355,745 4,466,928 



256,582 



250,282 



14,818 



24,438 



271,400 274,720 



PRODUCER LEVIES ON FLUID MILK 
FOR THE YEAR ENDED JULY 31, 1986 



Prince Edward Island 

Nova Scotia 

New Brunswick 

Quebec 

Ontario 

Manitoba 

Saskatchewan 

Alberta 

British Columbia 



Sales 



SCHEDULED 



Producer Levies* 



1986 


1985 


1986 


1985 


(in thousands of litres) 


(in thousands of dollars) 


14,198 


13,509 


42 


41 


116,151 


114,916 


350 


347 


70,129 


69,818 


211 


210 


669,151 


655,236 


2,017 


1,980 


970,904 


954,071 


2,927 


2,879 


106,066 


103,814 


320 


314 


97,165 


97,876 


293 


293 


257,321 


253,457 


776 


758 


309,704 


303,183 


934 


675 



2,610,789 2,565,880 



7,870 



7,497 



•Calculated at 5% of subsidy rate of $6.03 per hectolitre of sales. 



PUBLIC ACCOUNTS, 1986-87 

CANADIAN DAIRY COMMISSION— Concluded 

MARKETING OPERATIONS FINANCED BY PRODUCERS 
FOR THE YEAR ENDED JULY 31, 1986 



137 



SCHEDULE E 



Sales 

Cost of goods sold 

Allowance for inventory 
writedown 

Loss (profit) on sales 

Expenses and assistance 
Dairy product assistance.. 951 

Carrying charges 3,316 

Agents' commissions 

Provision for doubtful 

accounts 

Promotion 

Capital assistance recov- 
eries 

Donation to Mexico and 

Ethiopia 

Transport assistance 359 

4,626 
Cost of marketing opera- 
tions before financing 3,345 

Financing by Producers' 

Levies 

Excess (deficiency) of 

financing over cost of 

marketing operations for 

the year 

Sales 16.4 

Purchases 13.2 

*Includes whole milk powder and cheese 







1986 










1985 






Butter 


Skim 

Milk 

Powder 


Evaporated 
Milk 


Other 
Products* 


Total 


Total 


Butter 


Skim 

Milk 

Powder 


Evaporated 
Milk 


Others 
Products* 


77,974 


72,929 


71,027 


8,590 


(in thousands of dollars) 
230,520 338,916 


134,516 


71,916 


119,931 


12,553 


75,401 
1,292 


207,114 
(12,330) 


116,456 
(9,323) 


24,335 
(1,291) 


423,306 
(21,652) 


567,700 
11,066 


131,016 
(6,623) 


212,028 
6,898 


195,113 
8,845 


29,543 
1,946 


76,693 


194,784 


107,133 


23,044 


401,654 


578,766 


124,393 


218,926 


203,958 


31,489 


(1,281) 


121,855 


36,106 


14,454 


171,134 


239,850 


(10,123) 


147,010 


84,027 


18,936 



25,086 

27 

934 


36 
1,242 
2,367 


34,622 

63 

216 


60,695 
4,648 
3,517 


37,855 335 
10,554 
5,690 


16,833 

1,959 

651 


93 
8,176 
4,707 


20,594 
419 
332 


804 


1,700 


600 


2,300 
804 


2,300 




1,700 


600 




(132) 


(483) 


(615) 


(978) 




(495) 


(483; 




416 




416 


290 




290 





26,851 



148,706 



359 



5,629 



35,018 



72,124 55,711 



335 



19,443 14,471 



41,735 



49,472 



243,258 295,561 (9,788) 166,453 98,498 



279,270 284,781 



36,012 (10,780) 



Volume 



Volume 



69.9 
63.4 



4.1 
3.5 



5.1 

4.7 



29.5 
23.5 



75.8 
76.9 



7.1 
7.6 



21,462 



40,398 





(in millions) 






(in millions) 






Kilo- 


Kilo- 




Kilo- 


Kilo- Kilo- 




Kilo- 


grams 


grams 


Cases 


grams 


grams grams 


Cases 


grams 



6.0 
6.7 



138^ 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
CANADIAN FILM DEVELOPMENT CORPORATION 



MANDATE 

To foster and promote the development of a feature film industry in Canada. To administer the Canadian Broadcast 
Program Development Fund and the Feature Film Fund for private sector development of television and feature film 
productions meeting specific standards of Canadian content. 

BACKGROUND 

The scale of the corporation's activities has increased since 1981 with the inception of new government programs in 
support of the domestic television and feature film productions industry. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



National Bank Tower 

600 de la Gauchetiere Street, West 

Montreal, Quebec 

H3B 4L2 

— an agent of Her Majesty 

— exempted from Divisions I to IV of Part XII of the Financial 
Administration Act; subject to Part VIII of this Act as it read 
immediately before the (1984) repeal thereof. 

The Honourable Flora MacDonald, P.C, M.P. 

Communications 

1967; by the Canadian Film Development Corporation Act, (R.S.C. 
1970, C-8) 

Peter Pearson 



Jean Sirois 



The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31, 



At the end of the period 

Total Assets 

Obligations to the private sector 

Obligations to Canada 

Equity of Canada 

Cash from Canada in the period 

— budgetary 

— non-budgetary, net of repayments 



1986-87 



1985-86 



1984-85 



1983-84 



35.7 


13.0 


12.2 


7.9 


nil 


nil 


nil 


nil 


6.3 


6.3 


6.3 


9.0 


28.5 


10.1 


8.2 


2.7 


86.0 


75.9 


46.6 


16.3 


nil 


nil 


(2.7) 


negl. 



PUBLIC ACCOUNTS, 1986-87 



139 



CANADIAN FILM DEVELOPMENT CORPORATION 

AUDITOR'S REPORT 

TO THE MINISTER OF COMMUNICATIONS 

I have examined the balance sheet of the Canadian Film Develop- 
ment Corporation as at March 31, 1987 and the statements of opera- 
tions, equity of Canada and changes in fmancial position for the year 
then ended. My examination was made in accordance with generally 
accepted auditing standards, and accordingly included such tests and 
other procedures as I considered necessary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the Corporation as at March 31, 1987 and the results of its 
operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in my opinion, proper books of account have been kept by 
the Corporation, the financial statements are in agreement therewith 
and the transactions of the Corporation that have come to my notice 
during my examination of the financial statements have, in all signifi- 
cant respects, been in accordance with the Financial Administration 
Act and regulations, the Canadian Film Development Corporation Act 
and the by-laws of the Corporation. 

Raymond Dubois, C.A. 
Deputy Auditor General 
for the Auditor General of Canada 
Ottawa, Canada 
June 9, 1987 



BALANCE SHEET AS AT MARCH 31, 1987 



ASSETS 1987 

Current 
Loans 

Canadian programming 

Feature films 

Interim financing 

Permanent financing 

~ 9,462,822 
Parliamentary appropriation receivable 

(Note 3) 22,983,315 

Accounts receivable 995,769 

Prepaid expenses 696,265 

Long-term loans 
Feature films 

Interim financing 

Permanent financing 

Fixed assets (Note 4) 



1986 



$ 


$ 


3,568,245 


839,600 


3,548,591 
2,345,986 


3,023,855 



3,863,455 

8,186,552 
243,767 
135,513 



34,138,171 


12,429,287 


242,500 
395,000 


637,500 


931,185 


541,990 



35,706,856 12,971,277 



LIABILITIES 



1987 



1986 



Current 

Accounts payable 6,934,431 2,702,054 

Provision for employee termination benefits 276,504 175,500 

7,210.935 2,877,554 

EQUITY OF CANADA 

Equity of Canada 28,495,921 10,093,723 



35,706,856 12,971,277 



Approved by the Board: 

JEAN SIROIS 
President 

Approved by Management: 

PETER PEARSON 
Executive Director 



140 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN FILM DEVELOPMENT CORPORATION— Conf/wwe^ 



STATEMENT OF OPERATIONS 

FOR THE YEAR ENDED MARCH 31, 1987 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED MARCH 31, 1987 



1987 



1986 



1987 



1986 



Canadian 
program- 
ming 



Feature 
nims 



Total 



Total 



45,005,233 
23,397,535 

4,663,493 

3,268,339 



45,967,352 
21,277,073 

3,763,028 

1,387,988 



Assistance expenses 
(Note 5) 

English production 33,121,708 11,883,525 

French production 16,363,098 7,034,437 

Marketing and distribu- 
tion 4,663,493 

Development of the 
industry 3,268,339 

Revenues 
Management fees... 
Interest on loans 



Cost of operations before 
administration expenses . 48,294,871 25,733,500 74,028,371 71,864,885 

Administration expenses 

(Note 6) 3,874,667 1,973,711 

Cost of operations for the 

year 77,903,038 73,838,596 



49,484,806 26,849,794 


76,334.600 


72,395,441 


1,023,607 655,433 
166,328 460,861 


1,679,040 
627,189 


30,099 
500,457 


1,189,935 1,116,294 


2,306,229 


530,556 



Operating activities 

Cost of operations for the year (77,903,038) (73,838,596) 

Items not affecting liquidity 

Write-offs 444,510 218,200 

Depreciation 301,196 126,246 

Increase (decrease) in the provision for 
employee termination benefits 101,004 (26,500) 

(77,056,328) (73 
Net change in non liquidity items of working 
capital related to operations 

Investing activities 
Loans 

Investments 

Reimbursements 

Acquisition of fixed assets 

Financing activities 

Parliamentary appropriation 

Parliamentary appropriation receivable 

Increase for the year 

Balance at beginning of the year 

Balance at end of the year 22,983,315 8,186,552 



(77,056,328) 
2,919,623 


(73,520,650) 
(977,804) 


(74,136,705) 


(74,498,454) 


(9,369,445) 
2,688,068 


(3,753,500) 
4,483,934 


(6,681,377) 
(690,391) 


730,434 
(97,053) 


(7,371,768) 


633,381 


96,305,236 


75,722,307 


14,796,763 
8,186,552 


1,857,234 
6,329,318 



STATEMENT OF EQUITY OF CANADA 
FOR THE YEAR ENDED MARCH 31, 1987 



1987 1986 

$ $ 

Balance at beginning of the year 10,093,723 8,210,012 

Parliamentary appropriation 96,305,236 75,722,307 

106,398,959 83,932,319 

Cost of operations for the year 77,903,038 73,838,596 

Balance at end of the year 28,495,921 10,093,723 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, 1987 

1 . Authority and activities 

The Corporation was established in 1967 by the Canadian Film 
Development Corporation Act with the objective of fostering and 
promoting the development of a feature film industry in Canada. 
The Corporation has since been charged with the administration 
of the Canadian Broadcast Program Development Fund, estab- 
lished on July 1, 1983, within the framework of the Broadcasting 
Strategy for Canada as well as with the management of various 
new programs established under the National Film and Video 
Policy of May 1984. 

The Corporation is a Crown corporation subject to the provi- 
sions of Part VIII of the Financial Administration Act as it read 
before its repeal and as if it continued to be named in Schedule C 
of the Act. 

2. Significant accounting policies 

(a) Liquidity 

The financial operations of the Corpwration are processed 
through the Consolidated Revenue Fund of Canada, thus the 
absence of bank accounts. For the purposes of the statement 
of changes in financial position, its liquidity consists of a par- 
liamentary appropriation receivable. 

(b) Loans 

Loans are shown on the balance sheet at their face value, less 
an allowance for losses. 

(c) Investments 

Funds advanced for feature films and Canadian program- 
ming, in return for a share in the proceeds, are expensed as 
assistance expenses in the year in which the advances are 
made. 

All proceeds, up to the amount of the related investment, are 
credited to expenses as a reduction of assistance expenses 
made during the year. Any amount in excess thereof is 
accounted for as revenues. 



PUBLIC ACCOUNTS, 1986-87 

CANADIAN FILM DEVELOPMENT CORPORATION 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, im— Concluded 

(d) Fixed assets 

Fixed assets are recorded at cost. 

Depreciation is provided for using the diminishing-balance 
method, at the annual rate of 30% for the automobile and 
20% for furniture and equipment and for the computer 
installations. Leasehold improvements are amortized, using 
the straight-line method, based on the terms of the leases. 

(e) Parliamentary appropriation 

The parliamentary appropriation voted to the Corporation 
for its objectives comprises a non lapsing amount for the 
development of a feature film industry and another lapsing 
amount for the production of Canadian programming. The 
unlapsed parliamentary appropriation is credited to the 
Equity of Canada. The admissible unlapsed amount not used 
at the end of the year is presented on the balance sheet as a 
parliamentary appropriation receivable. 

(f) Employee termination benefits 

On termination of employment, employees of the Corpora- 
tion are entitled to certain benefits provided for under their 
conditions of employment. The cost of these benefits is ex- 
pensed in the year in which they are earned. 

(g) Pension plan 

All employees of the Corporation participate in the superan- 
nuation plan administered by the Government of Canada. 
The employees and the Corporation contribute equally to the 
cost of the plan. This contribution represents the total liabil- 
ity of the Corporation. Contributions in respect of current 
service and admissible past service are expensed during the 
year in which payments are made. The terms of payment for 
past service are set by the applicable purchase conditions in 
effect, generally over the number of years of service remain- 
ing prior to retirement. 

3. Parliamentary appropriation receivable 



1987 1986 

S $ 

Development of the feature film industry 19,300,768 5,1 53,899 

Canadian programming production 3,473,638 2,056,508 

Interim financing to producers and distributors 

of feature films 208,909 976,145 

22,983,315 8,186,552 



141 



4. Fixed assets 





1987 




1986 




Accu- 








mulated 








depre- 






Cost 


ciation 


Net 


Net 



Furniture and equipment 955,538 440,039 515,499 302,358 

Computer installations 480,244 156.158 324,086 120,172 

Leasehold improvements 199,155 121,448 77,707 119,460 

Automobile 19,847 5,954 13,893 



1,654,784 723,599 931,185 541,990 



— Concluded 



5. Assistance expenses 



1987 



1986 



Canadian 
program- 
ming 



Feature 
films 



Total 



Total 



s s s s 

Investments 52,851,490 23,680,962 76,532,452 70,479,139 

Proceeds from invest- 
ments (5,350,441) (1,564,192) (6,914,633) (3,262,967) 

Loans written-off 70,000 374.510 444,510 218,200 

Reimbursements of 
loans previously 

written-off (43,318) (43.318) (72.628) 

47,571,049 22,447,962 70,019,011 67,361,744 

Operating expenses 
(Note 6) 1.913.757 4,401,832 6,315.589 5,033,697 



49,484.806 26,849,794 76,334.600 72.395,441 



6. Operating expenses 



1987 1986 

S $ 

Salaries and employee benefits 4.507.156 3,297.920 

Rent, taxes, heating and electricity 1.100,546 884,671 

Professional services 1,058,176 392,926 

Printing, postage and office expenses 992.137 609!l65 

Travel 750,434 412.153 

Advertising and hospitality 637,576 467.913 

Telephone and telex 319,978 234.51 1 

Depreciation 301.196 126^246 

Consultants' fees 293,035 373,147 

Relocation expenses 114.613 113,010 

Films and subtitling of films 1 1 2,938 92.726 

Financing costs 2,471 3,020 

10,190,256 7,007,408 
Portion applicable to assistance expenses 

(Note 5) 6,315,589 5.033,697 

Portion applicable to administration expenses 3,874.667 1.973,71 1 



7. Commitments 

As at March 31, 1987, the Corporation is contractually com- 
mitted to advance funds totalling $22,452,834 as loans and invest- 
ments, of which $10,648,738 are for French productions and 
$ 1 1 ,804,096 are for English productions. Further, it has accepted 
financing projects that may call for disbursements of approxi- 
mately $19.3 million of which $8.1 million are for French produc- 
tions and $1 1.2 million are for English productions. 

The Corporation has entered into long-term leases for the 
rental of office space and equipment used in its operations. The 
aggregate minimum annual rentals payable during subsequent 
years are as follows: 

S 

1988 685,385 

1989 1,133,731 

1990 1,102.611 

1991 1.095.791 

1992 1,030,444 

1993-97 4,488.585 

9.536.547 



142 PUBLIC ACCOUNTS, 1986-87 

SUMMARY PAGE 
CANADIAN INSTITUTE FOR INTERNATIONAL PEACE AND SECURITY 

MANDATE 

To increase knowledge and understanding of the issues relating to international peace and security from a Canadian 
perspective, with particular emphasis on arms control, disarmament, defence and conflict resolution, 

BACKGROUND 

The corporation was established in 1984 by special Act of Parliament. That Act was amended (S.C. 1985, c. 43) to 
give the corporation status under the Financial Administration Act resembling that of the cultural Crown 
corporations, being exempt from most provisions of Part XII of the Act. The corporation is authorized to fulfill its 
mandate by the following means: 

(a) foster, fund and conduct research; 

(b) promote scholarship; 

(c) study and prepare ideas and policies; and 

(d) collect and disseminate information on, and encourage public discussion as they relate to matters of international 
peace and security. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



307 Gilmour Street 
Ottawa, Ontario 
K2P 0P7 

— not an agent of Her Majesty 

— exempt from divisions I to IV of Part XII of the FAA by s. 96(1) 
of that Act. 

The Right Honourable Joe Clark, P.C., M.P. 

External Affairs 

1984; by the Canadian Institute for International Peace and 
Security Act, (S.C. 1983-84, C-37) 

Geoffrey Pearson 

William H. Barton 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 



At the end of the period 

Total Assets 

Obligations to the private sector 

Obligations to Canada 

Equity of Canada 

Cash from Canada in the period 

— budgetary 

— non-budgetary 



1986-87 1985-86 



1.6 


1.9 


nil 


nil 


nil 


nil 


1.4 


1.7 


3.0 


2.5 


nil 


nil 



6 months to 
March 31, 1985 

1.3 
nil 
nil 
1.2 

1.5 
nil 



PUBLIC ACCOUNTS, 1986-87 



143 



CANADIAN INSTITUTE FOR INTERNATIONAL PEACE AND SECURITY 

AUDITOR'S REPORT 

TO THE CANADIAN INSTITUTE FOR INTERNATIONAL 
PEACE AND SECURITY 

AND 
SECRETARY OF STATE FOR EXTERNAL AFFAIRS 

I have examined the balance sheet of the Canadian Institute for 
International Peace and Security as at March 31, 1987 and the state- 
ments of operations and equity of Canada and changes in financial 
position for the year then ended. My examination was made in accord- 
ance with generally accepted auditing standards, and accordingly 
included such tests and other procedures as I considered necessary in 
the circumstances. 

In my opinion, these fmancial statements present fairly the fmancial 
position of the Institute as at March 31, 1987 and the results of its 
operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

D. Larry Meyers, F.C.A. 
Deputy Auditor General 
for the Auditor General of Canada 
Ottawa, Canada 
June 10. 1987 



BALANCE SHEET AS AT MARCH 31, 1987 



ASSETS 1987 

$ 

Current 

Cash and term deposits 1,368,743 

Canada treasury bills 

Accrued interest 11,227 

Prepaid expenses 15,557 

" 1.395.527 

Fixed (Note 3) 160,718 

1,556,245 

Approved by: 

WILLIAM H. BARTON 

Chairman of the Board 

GEOFFREY AH. PEARSON 
Executive Director 



1986 



1.124.197 

499,789 

11,692 

75,896 



LIABILITIES 

Current 
Accounts payable and accrued charges. 



1987 



1986 



1,711,574 



140,994 



EQUITY OF CANADA 

Equity of Canada 



1,852,568 



S $ 

154.297 111,223 

1,401,948 1,741,345 

1,556,245 1.852,568 



144 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN INSTITUTE FOR INTERNATIONAL PEACE AND SECURITY— Continued 



STATEMENT OF OPERATIONS AND EQUITY OF CANADA 
FOR THE YEAR ENDED MARCH 31, 1987 



1987 1986 

S $ 
Expenses (Schedule) 

Programmes 

Public programmes 1,126,729 683,478 

Research 1,054,975 547,381 

Information services 245,567 1 17,267 

Awards and scholarships 1 2,600 

2,439,871 1,348,126 

Administration and support 

Administration 582,778 544,187 

Executive 320,425 195,268 

Board of Directors 63,655 132,774 

966.858 872,229 

3,406,729 2,220,355 



Revenue 

Interest income 67,332 225,745 

Net cost of operations 3,339,397 1,994,610 

Parliamentary appropriation 3,000,000 2,500,000 

Excess of (net cost of operations over parliamentary 

appropriation) parliamentary appropriation over net 

cost of operations (339,397) 505,390 

Equity of Canada at the beginning of the year 1,741,345 1,235,955 

Equity of Canada at the end of the year 1,401,948 1,741,345 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED MARCH 31, 1987 



1987 1986 

$ $ 

Operating activities 
Cash used by operations 

Net cost of operations 3,339,397 1,994,610 

Item not requiring an outlay of funds 

Depreciation of fixed assets (50,684) (35,472) 

3,288,713 1,959,138 

Accounts payable and accrued charges (43,074) (15,040) 

Accrued interest (465) (14,455) 

Prepaid expenses (60,339) 24,067 

3,184.835 1,953,710~ 

Investing activities 
Acquisition of office furniture, equipment and 

leasehold improvements 70,408 172,881 

Financing activities 

Parliamentary appropriation (3,000,000) (2.500,000) 

(Decrease) increase during the year (255,243) 373.409 

Balance at the beginning of the year 1.623.986 1.250.577 

Balance at the end of the year 1.368.743 1,623,986 

The balance includes cash, term deposits and Canada treasury bills. 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, 1987 

1 . Authority and operations 

The Institute was established in June 1984 under the Canadian 
Institute for International Peace and Security Act which was 
amended by Bill C-69. It is an exempted Crown corporation as 
defined in the Financial Administration Act. 

The purpose of the Institute is to increase knowledge and 
understanding of the issues relating to international peace and 
security from a Canadian perspective with particular emphasis on 
arms control, disarmament, defence and conflict resolution, and 
to: 

(a) foster, fund and conduct research on matters relating to 
international peace and security; 

(b) promote scholarship in matters relating to international 
peace and security; 

(c) study and propose ideas and policies for the enhancement of 
international peace and security; and 

(d) collect and disseminate information on, and encourage public 
discussion of, issues of international peace and security. 

2. Significant accounting policies 

These financial statements have been prepared in accordance 
with generally accepted accounting principles. The significant 
accounting policies followed are: 

(a) Fixed assets 

Fixed assets are recorded at cost. Office furniture and equip- 
ment are depreciated on the straight-line basis at an annual 
rate of 20%. Leasehold improvements are amortized, using 
the straight-line method, based on the duration of the lease. 

(b) Pension plan 

Employees participate in the Public Service Superannuation 
Plan administered by the Government of Canada. The Insti- 
tute's contributions are equal to the contributions paid by its 
employees in respect of current services. These contributions 
represent the total liability of the Institute in respect of the 
pension plan and are recorded as expenses in the same period 
as the employees' services are rendered. 

(c) Income taxes 

The Institute is exempt from any liability for income taxes. 

(d) Parliamentary appropriation 

Parliamentary appropriation is recorded in the accounts on 
an accrual basis. Furthermore, the Act states that the Insti- 
tute shall be paid from the Consolidated Revenue Fund the 
following sums: 

$ 

1987-88 4 million 

1988-89 5 million 

thereafter 5 million or such greater 

amount as may be appropriated 
by Parliament. 

(e) Grants and transfer payments 

The Institute recognizes its liability for a grant or transfer 
payment upon the conditions of the agreement being met by 
the recipient of the grant or transfer payment. 



PUBLIC ACCOUNTS, 1986-87 



145 



CANADIAN INSTITUTE FOR INTERNATIONAL PEACE AND SEC\5Vi\T\— Concluded 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \9%1— Concluded 



3. Fixed assets 




1987 




1986 




Cost 


Accumulated 
depreciation 

and 
amortization 


Net 
book 
value 


Net 
book 
value 


Office furniture 


$ 

147.339 
54,560 

45,872 


$ 

53.592 
18.502 

14,959 


S 

93.747 
36.058 

30.913 


S 

94.754 
27.619 

18,621 


Equipment 

Leasehold improve- 
ments 




247,771 


87,053 


160,718 


140,994 



4. Commitments 

Leases 

The Institute has entered into lease agreements for the rental of 
office premises. The Institute can renew in 1990 the main lease 
agreement for an additional five-year period. The minimum 
annual rent for the next three years is $133,000. 

Grants and transfer payments 

The Institute is committed to make payments totalling approxi- 
mately $569,200 in subsequent years subject to compliance by the 
recipients with the terms of the agreements. Payments totalling 
approximately $551,000 are to be made during the next fiscal 
year. 

S 

Research 274,625 

Public programmes 172,175 

Awards and scholarships 112.400 

Information services 10.000 

569.200 



SCHEDULE OF EXPENSES 

FOR THE YEAR ENDED MARCH 31, 1987 



Programmes 

Awards 
Public and 

Pro- Information Scholar- 

grammes Research Services ships 
$ $ S $ 

Grants and transfer pay- 
ments 585.276 538,093 50,129 12,600 

Personnel 275,164 258,792 129,413 

Publications 226,851 127,607 

Rentals 

Transportation and com- 
munications 17,782 24.047 14,147 

Conferences, workshops and 
seminars 19.642 91,775 10,248 

Materiel and supplies 32.696 

Professional and special ser- 
vices 2.014 14.661 8.934 

Depreciation of fixed assets . 

Purchased repair and 
upkeep 

Directors' fees 

Miscellaneous ^ 

1,126.729 1.054.975 245.567 12.600 



Administration and Support 



Total 


Admini- 
stration 


Executive 


Board 

of 

Directors 


Toul 


1987 


1986 


S 


S 


S 


S 


S 


S 


S 


1.186.098 
663.369 
354,458 


145.891 
184.713 


295.511 




441.402 
184.713 


1,186,098 

1,104,771 

354,458 

184.713 


705.449 

761.623 

80.547 

169.868 


55.976 


66,177 


20,056 


35.955 


122.188 


178.164 


172.018 


121.665 
32.696 


45.604 






45,604 


121.665 
78.300 


42.161 
83.173 


25.609 


46.606 
50.684 


4.858 




51,464 
50,684 


77.073 
50.684 


62.317 
35,472 




42.951 
152 




27,700 


42.951 

27.700 

152 


42,951 

27.700 

152 


45.527 

60.185 

2.015 



2.439.871 582,778 320.425 63,655 966,858 3,406,729 2,220,355 



146 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
CANADIAN LIVESTOCK FEED BOARD 



MANDATE 

To ensure: availability of adequate feed grain to meet the needs of livestock feeders; availability of adequate storage 
for feed grain in eastern Canada; reasonable stability in prices for feed grain in eastern Canada, British Columbia 
and the Yukon and Northwest Territories; and fair equalization of feed grain prices in those regions. 

BACKGROUND 

Established in 1967, the Board executes its mandate by subsidizing the transportation costs of feed grains; by 
assessing requirements for feed grains and storage space and by collecting and disseminating related information; and 
by negotiating and coordinating with respect to storage, handling, transportation and cost of feed grains. Its programs 
are financed by budgetary payments from Canada. 



CORPORATION DATA 

HEAD OFFICE 



STATUS 



APPROPRIATE MINISTER 



DEPARTMENT 

YEAR AND MEANS OF 
INCORPORATION 

CHAIRMAN AND CHIEF 
EXECUTIVE OFFICER 

AUDITOR 



Suite 400 

5180 Queen Mary Road 

P.O. Box 177, Snowdon Station 

Montreal, Quebec 

H3X 3T4 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable Charles Mayer, P.C, M.P. 
Minister of State for Grains and Oilseeds 

Agriculture 

1967; pursuant to the Livestock Feed Assistance Act, (R.S.C. 1970, 
L-9). 

Denis Ethier 



The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 



At the end of the period 

Total Assets 

Obligations to the private sector 

Obligations to Canada 

Equity of Canada 

Cash from Canada in the period 

— budgetary 

— non-budgetary 



1986-87 

2.4 
nil 
nil 
0.3 

17.2 
nil 



1985-86 

2.5 
nil 
nil 
0.5 

16.8 
nil 



1984-85 

2.9 

nil 
nil 
0.7 

18.7 
nil 



1983-84 

2.4 
nil 
nil 
0.4 

16.8 
nil 



PUBLIC ACCOUNTS, 1986-87 

CANADIAN LIVESTOCK FEED BOARD 

AUDITOR'S REPORT 

TO THE MINISTER OF AGRICULTURE 

AND THE 
CANADIAN LIVESTOCK FEED BOARD 

I have examined the balance sheet of the Canadian Livestock Feed 
Board as at March 31, 1987 and the statements of operations, equity 
of Canada and changes in flnancial position for the year then ended. 
My examination was made in accordance with generally accepted 
auditing standards, and accordingly included such tests and other 
procedures as I considered necessary in the circumstances. 

In my opinion, these fmancial statements present fairly the fmancial 
position of the Board as at March 31, 1987 and the results of its opera- 
tions and the changes in its fmancial position for the year then ended 
in accordance with generally accepted accounting principles applied on 
a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Board that have 
come to my notice during my examination of the fmancial statements 
have, in all significant respects, been in accordance with Part XII of 
the Financial Administration Act and regulations, the Livestock Feed 
Assistance Act and regulations and the by-laws of the Board. 

Raymond Dubois, C.A. 
Deputy Auditor General 
for the Auditor General of Canada 
Ottawa, Canada 
May 29, 1987 



147 



BALANCE SHEET AS AT MARCH 3 1 , 1 987 



ASSETS 1987 1986 

S S 

Current 

Accounts receivable 6,038 10,982 

Parliamentary appropriations receivable 1,968,320 1,848,414 

1,974,358 1,859,396 

Amounts recoverable under the new inland elevator 

construction assistance program (Note 3) 459,879 61 1,207 



LIABILITIES 



1987 



1986 



Current 

Accounts payable 59,095 81,732 

Contributions payable 1,933,994 1.806.266 

1,993,089 1,887,998 

Provision for employee termination benefits 127,716 108.100 

2,120,805 1.996,098 
EQUITY OF CANADA 

Equity of Canada 313,432 474.505 



2,434,237 2,470,603 



2.434,237 2.470.603 



Approved by Management: 

PIERRE MORIN 
Director of Finance 

Approved by the Board: 

DENIS ETHIER 
Chairman 



148 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN LIVESTOCK FEED BOARD— Continued 

STATEMENT OF OPERATIONS 

FOR THE YEAR ENDED MARCH 31, 1987 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED MARCH 31, 1987 



1987 1986 

Contributions 

Feed freight assistance 

New inland elevator construction assistance 
(Note 3) 

Administrative expenses 

Salaries and employee benefits 

Rentals 

Travel 

Stationery and office supplies 

Telephone 

Professional and special services 

Publication of reports 

Postage 

Equipment and office furniture 

Electricity 

Accounting and cheque issue services 

Advisory committee fees 

Miscellaneous 

Cost of operations for the year 17,157,627 16,780,573 



STATEMENT OF EQUITY OF CANADA 
FOR THE YEAR ENDED MARCH 31, 1987 



1987 1986 

$ $ 

Balance at beginning of the year 474,505 694,500 

Parliamentary appropriations 16,993,554 16,557,578 

Services provided without charge by a government 

department 3,000 3,000 

17,471,059 17,255,078 

Cost of operations for the year 17.157,627 16,780,573 

Balance at end of the year 313,432 474,505 



$ 


$ 


15,834,547 


15,430,226 


13,000 


13,000 


15,847,547 


15,443,226 


883,696 


903,842 


89,759 


83,449 


79,380 


76,760 


52,130 


57,750 


48,180 


54,223 


41,092 


35,968 


40,649 


43,981 


39,727 


43,942 


11,023 


14,234 


10,507 


9,848 


3,000 


3,000 


2,375 


3,250 


8,562 


7,100 


1,310,080 


1,337,347 



S 


S 


17,157,627 


16,780,573 


(13,000) 


(13,000) 


(3,000) 


(3,000) 


(19,616) 


(6,291) 


17,122,011 
(4,944) 
22,637 
(127,728) 


16,758,282 

(7,744) 

30,618 

231,253 


17,011,976 


17,012,409 


(16,993,554) 


(16,557,578) 


(138,328) 


(187,219) 


119,906 
1,848,414 


(267,612) 
2,116,026 



1987 1986 

Operating activities 

Cost of operations for the year 

Items not affecting liquidity 
Provision for losses in respect of amounts 
recoverable under the new inland eleva- 
tor construction assistance program 

Services provided without charge by a gov- 
ernment department 

Increase in the provision for employee ter- 
mination benefits 

Decrease in accounts receivable 

Decrease in accounts payable 

Decrease (increase) in contributions payable... 

Financing activities 

Parliamentary appropriations 

Investing activities 

Amounts recovered under the new inland 

elevator construction assistance program 

Parliamentary appropriations receivable 

Increase (decrease) for the year 

Balance at beginning of the year 

Balance at end of the year "" 1,968,320 1,848,414 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, 1987 

1 . Authority and objectives 

The Board, a Crown corporation named in Part I of Schedule C 
to the Financial Administration Act, was established in 1967 
under the Livestock Feed Assistance Act with the objective of 
ensuring: 

— the availability of feed grain to meet the needs of livestock 
feeders; 

— the availability of adequate storage space in Eastern Canada 
for feed grain to meet the needs of livestock feeders; and 

— reasonable stability in, and fair equalization of, feed grain 
prices in Eastern Canada, British Columbia, the Yukon Ter- 
ritory and the Northwest Territories. 

2. Significant accounting policies 

(a) Liquidity 

The financial operations of the Board are processed through 
the Consolidated Revenue Fund of Canada, thus the absence 
of bank accounts. For the purposes of the statement of 
changes in financial position, the liquidity consists of parlia- 
mentary appropriations receivable or payable. 

(b) Contributions 

Feed freight assistance is charged to operations in the year in 
which shipments are made. 

Write-offs or provisions for losses of amounts recoverable 
under the new inland elevator construction assistance pro- 
gram are charged to operations in the year in which collec- 
tion is considered doubtful. 

(c) Capital expenditures 

Purchases of equipment, office furniture, vehicles and costs 
of office renovations are expensed in the year of acquisition. 

(d) Parliamentary appropriations 

Parliamentary appropriations are recorded in the Statement 
of Equity of Canada for the year to which they apply. 



PUBLIC ACCOUNTS, 1986-87 149 

CANADIAN LIVESTOCK FEED BOARD— Concluded 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \9il— Concluded 

(e) Services provided without charge 

An estimated amount for services provided without charge by 
a government department is included in expenses with an off- 
set to the equity of Canada. 

(0 Employee termination benefits 

On termination of employment, employees are entitled to cer- 
tain benefits provided for under their collective agreements 
and their conditions of employment. The cost of these ben- 
efits is expensed in the year in which they are earned. 

(g) Pension plan 

All employees participate in the superannuation plan admin- 
istered by the Government of Canada. The employees and 
the Board contribute equally to the cost of the plan. This con- 
tribution represents the total liability of the Board. Contribu- 
tions in respect of current service and of admissible past ser- 
vice are expensed when paid. The terms of payment of past 
service contributions are set by the applicable purchase con- 
ditions, generally over the number of years of service remain- 
ing prior to retirement. 

3. Amounts recoverable under the new inland elevator construction 
assistance program 

Under the new inland elevator construction assistance program, 
the Board contributed towards certain construction cost. As at 
March 31, 1983, all contributions by the Board had been paid to 
operators of the elevators. These operators are called upon to 
reimburse, without interest, part of the contributions received. 
Reimbursements are based on stored quantities from the fourth to 
the tenth year of operation of the new facility without exceeding 
40% of the contribution received. 

As at March 31, 1987, the Board estimates that the amounts 
that will be recovered, net of a provision for losses, total $459,879 
($61 1,207 as at March 31, 1986). Because of the basis for the cal- 
culation of reimbursements, it is not possible to determine the 
amounts that will be recovered during each applicable year. 



ISO 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
CANADIAN NATIONAL RAILWAY COMPANY 



MANDATE 

To operate a national railway system and other transportation and related services, including water transportation, 
trucking, telecommunications and hotels. 

BACKGROUND 

The corporation was created out of more than 200 companies, many of them insolvent. Its creation avoided the 
emergence of a monopoly in railway transport. The corporation's role was to mold a number of railway companies 
into one strong and commercially-competitive system, serving the entire nation. It was recapitalized in 1937, in 1952 
and again in 1978. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN (ACTING) 

AUDITOR 



935 de la Gauchetiere Street West 
Montreal, Quebec 
H3B 2M9 

—Schedule C, Part II 

— not an agent of Her Majesty 

The Honourable John Crosbie, P.C, Q.C., M.P. 

Transport 

1919; by the Canadian National Railway Act 1919 which was 
superseded by the 1955 Act of the same name (R.S.C. 1970, C-10). 

Ronald Lawless 

Brian Gallery 

Coopers & Lybrand and Touche Ross & Co. 



FINANCIAL SUMMARY ($ million) The financial year is the calendar year. 

1986 1985*** 1984 1983 

At the end of the year 

Total Assets 7,843 8,139 7,467 6,790 

Obligations to the private sector 3,380 3,217 2,696 2,269 

Obligations to Canada 209 266 274 283 

Equity of Canada* 3,005 3,418 3,324 3,113 

Cash from Canada in the year 

—budgetary** 19.8 9 7 175 

— non-budgetary nil nil 18 102 

*$328 million of capital stock cancelled as CN Marine Inc. was transferred to the Crown. 

**Does not include payments of a kind made to a general class of recipients. 

***1985 data and 1984 budgetary cash exclude CN Marine Inc. data which previously were consolidated within 
those of CNR. 



PUBLIC ACCOUNTS, 1986-87 



151 



t 



CANADIAN NATIONAL RAILWAY SYSTEM 

AUDITORS' REPORT 

TO THE MINISTER OF TRANSPORT 

We have examined the consolidated balance sheets of the Canadian 
National Railway System as at December 31, 1986 and 1985 and the 
consolidated statements of income, retained earnings and changes in 
fmancial position for each of the years in the three-year period ended 
December 31, 1986. Our examinations were made in accordance with 
generally accepted auditing standards, and accordingly included such 
tests and other procedures as we considered necessary in the circum- 
stances. 

In our opinion, these consolidated financial statements present fairly 
the financial position of the System as at December 31, 1986 and 1985 
and the results of its operations and the changes in its financial posi- 
tion for each of the years in the three- year period ended December 3 1 , 
1986 in accordance with generally accepted accounting principles 
applied on a consistent basis. 

Coopers & Lybrand 
Chartered Accountants 
(For the years ended December 31, 1986, 1985 and 1984) 

Touche Ross & Co. 

Chartered Accountants 

(For the years ended December 31, 1986 and 1985) 



Montreal, Canada 
February 24, 1987 



CONSOLIDATED BALANCE SHEET DECEMBER 31 

(in thousands of dollars) 



ASSETS 



1986 



1985 



LIABILITIES 



1986 



1985 



Current Assets 

Accounts receivable 494,597 486,922 

Material and supplies 377,132 406,184 

Other 252.915 234.849 

1.124.644 1.127,955 

Insurance Fund 8,905 9,176 

Investments 75,270 380,011 

Properties 6,248,505 6,193,468 

Other Assets and Deferred Charges 385,290 428,171 



7,842.614 8.138.781 



Current Liabilities 

Bank indebtedness 106.894 

Accounts payable and 

accrued charges 899. 1 89 

Current portion of long- 
term debt 305.812 

Other 186.273 

1.498.168 

Provision for Insurance 8.905 

Other Liabilities and 

Deferred Credits 274.097 

Long-Term Debt 3,052,486 

Minority Interest in Sub- 
sidiary Companies 4,345 

SHAREHOLDER'S 
EQUITY 

Capital stock 2.278,867 

Retained earnings 725.746 3.004.613 

7.842.614 



152.719 

954,235 

223,885 
155.732 



2.606.425 
812.026 



1,486,571 
9.176 

271.891 
2.948.347 

4,345 



3.418.451 



8.138.781 



See accompanying notes to consolidated fmancial statements. 

On behalf of the Board: 

BRIAN ON. GALLERY 
Director 

RONALD E. LAWLESS 
Director 



152 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN NATIONAL RAILWAY SYSTEM— Continued 



CONSOLIDATED STATEMENT OF INCOME 
YEAR ENDED DECEMBER 31 
(in thousands of dollars) 



CONSOLIDATED STATEMENT OF RETAINED EARNINGS 
YEAR ENDED DECEMBER 31 
(in thousands of dollars) 



1986 



1985 



1984 



1986 



1985 



1984 



CN Rail 

Revenues 3,652,655 3,753,190 3,787,251 

Expenses* 3.663,826 3,647.658 3,568,384 

Income (loss) 

Grand Trunk Corporation 

Revenues 

Expenses 

Income (loss) 

Enterprises group 
CN Communications 

Revenues 

Expenses 

Income 

CN Hotels 

Revenues 

Expenses 

Loss 

CN Exploration 

Revenues 

Expenses 

Income 

CN Real Estate 

Revenues 

Expenses 

Income 

Other 

Income (loss) 

Total Enterprises group 

Total CN Rail, Grand Trunk Corpo- 
ration, Enterprises 35,402 203,534 288,811 

Imposed public duty: TerraTransport 

Loss (41,291) (39,908) (34.621) 

Total continuing operations (5,889) 163,626 254,190 

Discontinued operations* 
CN Route 

Loss (70.961) (42.590) (31.938) 

Dockyard 

Loss (9.430) (2.933) (1,796) 

CN Marine Inc. 

Income 21,888 

Total discontinued operations (80,391) (45,523) (11,846) 

Income (loss) before income taxes and 

extraordinary item (86,280) 118,103 242,344 

Income taxes 57,823 1 17,123 

Income (loss) before extraordinary 

item (86,280) 60,280 125,221 

Reduction in income taxes on 
application of prior years' losses... 57,359 116,730 

Net income (loss) (86,280) 117,639 241,951 

*See Note 2. 

See accompanying notes to consolidated financial statements. 



(11,171) 


105,532 


218,867 


531,399 
545,556 


551,782 
538,200 


524,035 
512.347 


(14,157) 


13,582 


11.688 


303,384 
267,145 


303,930 
260,882 


287.786 
255,398 


36,239 


43,048 


32.388 


146,911 
147,570 


129,846 
133,289 


102,186 
107,489 


(659) 


(3,443) 


(5,303) 


33,869 
29,368 


56.730 
26.123 


31,873 
15,973 


4,501 


30,607 


15,900 


35,157 
16,330 


29,582 
14,885 


30,544 
16,481 


18,827 


14,697 


14,063 


1,822 


(489) 


1,208 


60,730 


84,420 


58,256 



Balance, beginning of year 812,026 717,915 

Net income (loss) (86,280) 117,639 

725,746 835,554 

Dividend 23,528 

Balance, end of year 725,746 812,026 

See accompanying notes to consolidated fmancial statements. 



CONSOLIDATED STATEMENT OF CHANGES 
IN FINANCIAL POSITION 
YEAR ENDED DECEMBER 31 

(in thousands of dollars) 



1986 



1985 



524,354 
241,951 



766,305 
48,390 



717,915 



1984 



Cash provided from (used for) 
Operating activities 
Net income (loss) (86,280) 117,639 241,951 

Non-cash charges to income 
Depreciation and amortization . 311 ,807 282,8 17 26 1 ,444 

Loss (income) of equity inves- 

tees less dividends 1,055 308 (16,207) 

Loss on disposal of investment.. 737 

Loss on disposal of CN Route .. 45,320 

Changes in working capital 

items* (21,194) (73.273) 11,017 

Other 9,928 (72) 38,740 

260,636 328,156 536,945 

Investing activities 

Additions to properties (484,072) (744,475) (713,149) 

Net proceeds from disposal of 

properties 48,094 39,670 31,874 

Investments (5,202) (23,010) (19,569) 

Proceeds from sale of CN Marine 

Inc. and related assets 327,558 

Redemption of capital stock (327,558) 

Proceeds from sale of investment . 1 ,57 1 

Proceeds from sale of CN Route.. 23,000 
Working capital of previously 

consolidated entities (7,633) (15.855) 

(425.813) (726.244) (716.699) 

Dividend (23.528) (48.390) 

Cash used before financing activities... (165,177) (421,616) (228,144) 

Cash (bank indebtedness) beginning 

of year (152,719) (91,687) 58,944 

(317,896) (513,303) (169,200) 
Financing activities 

Issuance of long-term debt 435,492 597,060 132,140 

Reduction of long-term debt (224,490) (236,476) (72,827) 

Issuance of capital stock 18,200 

~2 11,002 360,584 77,513 

Bank indebtedness end of year (106,894) (152,719) (91,687) 

*Excluding cash, bank indebtedness, and current portion of long-term debt. 
See acco.Tipanying notes to consolidated financial statements. 



PUBLIC ACCOUNTS, 1986-87 



153 



CANADIAN NATIONAL RAILWAY SYSTEM— Continued 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 



Note 1 : Summary of Significant Accounting Policies 

Introduction 

All references in these Notes to the "Company" refer to Canadian 
National Railway Company which is wholly-owned by the Govern- 
ment of Canada and, unless the context otherwise requires, its con- 
solidated subsidiaries, and all references to the "System" mean 
Canadian National Railway Company and its consolidated subsidiar- 
ies together with the lines of railway, telecommunications and other 
property entrusted by the Government of Canada to the Company for 
management and operation. A division designated in the Consolidated 
Statement of Income as an "Imposed public duty", as is TerraTrans- 
port, is one whose operations are continued by the Company in accord- 
ance with directions from the Government of Canada despite the fact 
that such continued operations are contrary to the economic interests 
of the Company. 

(a) Principles of Consolidation 

With the exception of Coastal Transport Limited, the con- 
solidated flnancial statements include the accounts of all subsidi- 
aries and the Company's share of the assets, liabilities, revenues 
and expenses of CNCP Telecommunications which is accounted 
for by the proportionate consolidation method; CN's share in the 
activities of CNCP Telecommunications represents slightly less 
than 60 percent of the activities of CN Communications. Also, 
consistent with the legislation governing the System, the accounts 
of the Canadian Government Railways entrusted to the Company 
by the Government of Canada are included in the consolidated 
fmancial statements. Coastal Transport Limited and the net 
assets of the Company's dockyard operation in Newfoundland, 
which formerly formed part of the consolidation, have been 
included in investments in anticipation of their forthcoming dives- 
titure. 

Investments in entities in which the Company has less than a 
majority interest are accounted for by the equity method, where 
appropriate. 

(b) Reporting by Division 

In presenting the results by division, charges for services per- 
formed by one division for another, which are made generally at 
market value, have not been eliminated. Consolidated net income 
is not affected by this practice. 

(c) Material and Supplies 

The inventory is valued at laid down cost based on weighted aver- 
age cost for ties and rails, latest invoice price for fuel and new 
materials in stores, and at estimated utility or sales value for 
usable second hand, obsolete and scrap materials. 

(d) Properties 

Accounting for railway and telecommunications properties is car- 
ried out in accordance with rules issued by the Canadian Trans- 
port Commission and the Canadian Radio-television and Tele- 
communications Commission respectively (Canadian properties), 
and the Interstate Commerce Commission (United States proper- 
ties). Generally, major additions and replacements are capitalized 
and interest costs are charged to expense. 

The cost of depreciable railway and telecommunications assets 
retired or disposed of, less salvage, is charged to accumulated 
depreciation, in accordance with the group plan of depreciation. 
Other depreciable assets retired or disposed of are accounted for 
in accordance with the unit plan whereby gains or losses are taken 
into income as they occur. 

The Company follows the successful efforts method of accounting 
for its oil and gas operations whereby the acquisition costs of oil 
and gas properties, the costs of successful exploratory wells and 
the costs of drilling and equipping development wells are capital- 
ized. 



(e) Depreciation 

Depreciation is calculated at rates sufficient to write off proper- 
ties over their estimated useful lives, generally on a straight-line 
basis. For railway and telecommunications prop)erties, rates are 
authorized by the Canadian Transport Commission, the Canadian 
Radio-television and Telecommunications Commission and the 
Interstate Commerce Commission. The rates for significant 
classes of assets are as follows: 



Annual Rate 

Tics 2.89% 

Rails 1.87% 

Other track material 2.23%-2.83% 

Ballast 2.76% 

Road locomotives 5.23% 

Freight cars 1.73%-3.18% 

Commercial communication systems 6.40% 

Hotel properties are depreciated at annual rates of 1% to 10%. 

Acquisition costs of oil and gas properties are amortized on a 
straight-line basis over the term of the lease until such time as 
they are determined to be productive or judged to be impaired. 
Acquisition costs of productive properties and costs of successful 
exploratory drilling and of drilling and equipping development 
wells are charged against income on the unit-of-production 
method based upon proven reserves of oil and gas. Exploratory 
dry hole and acquisition costs judged to be impaired are charged 
against income in the current period. Other exploratory expendi- 
tures are charged against income as incurred. 

(0 Transportation Revenues 

Transportation revenues are generally recognized on completion 
of movements, with interline movements being treated as com- 
plete when the shipment is turned over to the connecting carrier. 
Costs associated with uncompleted movements are generally 
deferred. 

(g) Pensions 

Current service costs are charged to operations as they accrue. 
Past service costs are charged to operations in annual amounts 
covering principal and interest over varying periods. 
The funding payments are determined in accordance with the 
accrued benefit actuarial cost method. 

(h) Foreign Exchange 

The Company's foreign operations are classified as integrated and 
are translated and accounted for on the following bases. Current 
assets (excluding material and supplies), current liabilities and 
long-term debt are translated at the rates in effect at the balance 
sheet date, whereas other assets and liabilities are translated at 
historical rates. Revenues and expenses are translated at average 
rates during the year except for depreciation which is translated 
at exchange rates prevailing when the related properties were 
acquired. The Company's own foreign denominated assets and 
liabilities are accorded similar treatment. Revenues and expenses 
are translated at rates prevailing at the time of the transactions 
except for revenues designated as a hedge against repayment of 
foreign denominated long-term debt which are translated at the 
rate in effect at the inception of the debt. 

Currency gains and losses are reflected in net income for the year, 
except for unrealized foreign currency losses on long-term debt. 
The Company has designated future U.S. dollar revenue streams 
as a hedge against the repayment of long-term debt denominated 
in U.S. dollars, and has thus deferred reflecting the related 
unrealized foreign currency translation losses in net income until 



154 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN NATIONAL RAILWAY SYSTEM— Con// nwe J 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS— Co/in«Merf 

the earlier of the debt repayment or the expiry of the hedge. Such 
deferred amounts are included in the Consolidated Balance Sheet 
as part of Other Assets and Deferred Charges. 



(i) Leases 

Leases which satisfy the criteria for capital leases and which have 
been entered into after 1981 have been capitalized. Other leases, 
satisfying the criteria for capital leases but which were entered 
into prior to 1982, have been recorded as operating leases. 

Note 2: Special charge and Discontinued Operations 

(a) Special Charge 

CN Rail expenses include a special charge of $60.2 million 
(1985 — $40.4 million) relating to a provision for rationalization 
costs in connection with an ongoing program to reduce the size of 
the CN Rail work force. 

(b) Discontinued Operations 

During 1986 the Company disposed of its former division CN 
Route and its investment in CN Marine Inc. (see Note 6a)) and 
entered into negotiations for the disposition of its dockyard opera- 
tions in Newfoundland. Details of the charges (income) incurred 
on these operations are as follows: 



CN Route 

Operating loss 

Loss arising from disposal 

Dockyard 

Operating loss 

Provision for loss arising from dis- 
posal 

CN Marine Inc. — Income 

Total discontinued operations 



Note 3: Investments 



Year ended December 3 1 



1986 



1985 



1984 



Entities accounted for by equity method 

CNCP Niagara-Detroit Partnership 

The Toronto Terminals Railway Com- 
pany 

Dockyard (see Note la)) 

Other 



(in thousands of dollars) 



25,641 
45,320 



42,590 



31,938 



70,961 



42,590 



31,938 



4,530 
4,900 



2.933 



1.796 



9,430 


2,933 


1,796 


(21,888) 


80,391 


45,523 


11.846 



Percentage 



December 3 1 



of Voting 
Interest 


1986 


1985 




(in thousands 
of dollars) 


50% 


17,834 


23,741 


50% 


10,682 
26,417 
11,253 


10,682 
16,528 




66,186 


50,951 



Note 4: Properties 



Other companies and investments, at cost 
less provisions for impairment where 
applicable 
CN Marine Inc. (see Note 6a)) 

Other 

Total 



9,084 



324,136 
4,924 



75,270 380,011 



December 3 1 



CNRail 

Grand Trunk Corporation 

Enterprises group 

CN Communications 

CN Hotels 

CN Exploration 

CN Real Estate 

Other 

TerraTransport 

Discontinued operations 

CN Route 

Dockyard 

Amounts included above with respect to Canadian Government Railways 
entrusted to the Company by the Government of Canada 





1986 






1985 




Cost 


Accumu- 
lated 

Deprecia- 
tion 


Net 


Cost 


Accumu- 
lated 

Deprecia- 
tion 


Net 






(in thousands of dollars) 






7,978,729 
557,864 


2,869,139 
153,150 


5,109,590 
404,714 


7.755,679 
561,570 


2,766,643 
153,718 


4,989,036 
407,852 


742,175 

236,247 

85,728 

63,279 

89,919 


312,045 
75,551 
25,261 
13,861 

56,429 


430,130 
160,696 
60,467 
49,418 

33,490 


708,538 

217,059 

74,947 

72,750 

17 

95,484 


288,916 
72,351 
12,211 
18,221 
4 
52,430 


419.622 

144,708 

62,736 

54,529 

13 

43,054 








95,284 
34,555 


55,257 
2,664 


40,027 
31,891 


9,753,941 


3,505,436 


6,248,505 


9,615,883 


3,422,415 


6,193,468 


1,060,097 


569,633 


490,464 


1,037,108 


556,142 


480,966 



At December 31, 1986 the gross value of assets under capital leases included above was $1 19.4 million (1985- 
thereon amounted to $9.3 million (1985 — $5.5 million). 



-$108.4 million) and related accumulated amortization 



PUBLIC ACCOUNTS, 1986-87 

CANADIAN NATIONAL RAILWAY SYSTEM— Continued 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS— Co/i/J/iue</ 
Note 5: Long-Term Debt 



155 



Maturity 



Bonds, Debentures and Notes 

Canadian National 8%%, 10 Year Bonds Nov. 15, 1986 

Canadian National 8%%, 10 Year Bonds (b) Mar. 1, 1987 

Canadian National 5%, 27 Year Bonds (a, b) Oct. 1, 1987 

Canadian National 14%%, 10 Year Notes Dec. 1, 1991 

Canadian National 11%%, 8 Year Notes June 11, 1993 

Canadian National 9'/!%, 8 Year Notes Mar. 18, 1994 

Canadian National 12'/i%, 10 Year Notes Apr. 15, 1995 

Canadian National 6'/i%, 10 Year Japanese Yen Notes (c) Mar. 26, 1996 

Canadian National 9%%, 10 Year Notes Oct. 1, 1996 

Canadian National 9'/4%, 20 Year Sinking Fund Debentures Mar. 15, 1998 

Canadian National 5y8%, 15 Year Swiss Franc Bonds (d) Aug. 22, 2000 

Canadian National 8%%, 15 Year Notes May 21, 2001 

Canadian National 8%%, 25 Year Sinking Fund Debentures July 1, 2002 

Canadian National 9.70%, 25 Year Sinking Fund Debentures July 1 5, 2004 

Canadian National 1 3%, 20 Year Sinking Fund Debentures Nov. 1 5, 2004 

Canadian National 12i/4%, 20 Year Sinking Fund Debentures May 1, 2005 

Canadian National 14%, 25 Year Sinking Fund Debentures Jan. 15, 2006 

Canadian National 1 5%, 25 Year Sinking Fund Debentures June 1,2006 

Canadian National 16'/4%, 25 Year Sinking Fund Debentures Mar. 1, 2007 

Canadian National 14%%, 30 Year Sinking Fund Debentures Sept. 1,2012 

Canadian National 12%, 30 Year Sinking Fund Debentures Mar. 15, 2013 

Buffalo and Lake Huron 5'/i%, 1st Mortgage Bonds Perpetual 

Buffalo and Lake Huron 5'/i%, 2nd Mortgage Bonds Perpetual 

Total Bonds, Debentures and Notes 

Government of Canada Loan and Advances (e) 

Government of Canada loan 

Canadian Government Railways advances for working capital 

Total Government of Canada Loan and Advances 

Other 

Amounts owing under equipment purchase agreements (0 

Swiss borrowings (g) 

Syndicated loan (h) 

Capital lease obligations (i) 

Promissory note 9%% (j) 

Income debenture (k) 

Adjustment to current exchange rate (see Note 1(h)) 

Total Other 

Less: current portion oftong-term debt 

miscellaneous 

Long-Term Debt 



Currency in 
which payable 


December 


31 


1986 


1985 




(in thousands of dollars) 


United Sutes 




83.232 


Canadian 


45.947 


46.007 


Canadian 


93.596 


95,475 


United States 


117,817 


117.817 


Canadian 


100.000 


100.000 


Canadian 


100,000 




Canadian 


100.000 


100.000 


Canadian 


70.000 




Canadian 


100.000 




United States 


106,826 


115.729 


Canadian 


98.617 


98.617 


Canadian 


150,000 




United States 


84,748 


90.045 


United States 


174,940 


174.940 


Canadian 


100.000 


100.000 


Canadian 


125.000 


125.000 


United States 


178.783 


178,783 


United States 


181.238 


181.238 


United States 


183.053 


183.053 


United States 


247.984 


247,984 


United States 


122.548 


122.548 


Sterling 


795 


795 


Sterling 


1.228 


1.228 




2.483.120 


2.162,491 


Canadian 


195.169 


251.565 


Canadian 


13.918 


14.004 




209.087 


265,569 


United States 


162.736 


187,613 


Swiss Francs 


64.684 


64,684 


Canadian 


42.610 


42,610 


Various 


108.895 


99,405 


Canadian 


778 


1,116 


Canadian 


8.065 


8,065 




285.794 


356,277 



673.562 


759,770 


3.365.769 


3,187.830 


305,812 
7,471 


223.885 
15,598 


313,283 


239,483 


3,052.486 


2,948,347 



(a) Guaranteed by the Government of Canada. 

(b) These bonds are subject to repurchase arrangements. 

(c) The Company borrowed $70.0 million at an all-in cost of 10.25% 

by means of a Euro-yen public note issue and a currency swap. 

(d) The Company borrowed $98.6 million at an all-inclusive cost of 

1 1 . 1 7% by means of a public bond issue in Switzerland and a cur- 
rency swap. 

(e) $195.2 million of the Government of Canada loan bears interest at 

%V4% per annum and is payable in equal semi-annual payments of 
$13.63 million covering principal and interest to June 30. 1998. 
The weighted average interest rate on the $195.2 million loan and 
the advances outstanding at December 31, 1986 and 1985, was 
approximately 8.2% per annum. 

(0 Secured by rolling stock and payable by semi-annual or quarterly 
instalments over various periods to 1995 at interest rates ranging 
from 8% to 17y4%. As at December 31, 1986, the principal 



amounts are payable as U.S. $144.4 million (December 31, 
1985— U.S. $167.6 million). 

(g) A private placement of 100 million Swiss Francs bearing interest 
at 5'/8%, due on March 16, 1988, will be repaid on March 16, 
1987. 

(h) The Company borrowed $42.6 million at an all-inclusive cost of 
1 1 .535% by means of a yen syndicated loan and currency swap. 

(i) Interest rates for these leases range from approximately 8^8% to 
15^8% with expiry dates occurring during the years 1987 through 
2004. The imputod interest on these leases amounts to $1 16.2 mil- 
lion (1985— $113.4 million). 

(j) Repayable by semi-annual instalments of $218,503, including 
principal and interest, to August 1, 1988. 

(k) Payment of non-cumulative annual interest at 16.55% and repay- 
ment of principal during the term and at maturity of the deben- 
ture in 2008 are subject to certain conditions. 



156 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN NATIONAL RAILWAY SYSTEM— Continued 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS— Continued 



(1) Principal repayments, including sinking fund repayments, repur- 
chase arrangements and capital lease repayments, on debt out- 
standing at December 31, 1986, are as follows: 

Year ending 

December 3 1 

(in thousands 

of dollars) 

1987 305,812 

1988 75,244 

1989 76,913 

1990 79,437 

1991 242,330 

1992-1996 1,128,031 

1997-2001 808,928 

2002-2006 446 553 

2007-2011 103i537 

2012-2013 47,627 

Note 6: Shareholder's Equity 

(a) Capital stock 

The capital stock of Canadian National Railway 
Company is as follows: 

(in thou- 
N umber sands of 
of Shares dollars) 

Commons Shares of No Par Value Authorized, 
Issued and Outstanding 

December 31, 1985 6,523,902 2,606,425 

Less: shares cancelled in December 1986 in con- 
sideration of transfer of all the common shares 
of CN Marine Inc. and certain assets held by 
the Company to the Government of Canada 
pursuant to the enactment on June 27, 1986 of 
the Marine Atlantic Inc. Acquisition Authori- 
zation Act which Act also changed the name 
CN Marine Inc. to Marine Atlantic Inc 655,116 327,558 

December 31, 1986 5,868,786 2,278.867 

(b) Retained Earnings 

Under its governing legislation, the Company is required to pay to 
the Receiver General for Canada a dividend equal to 20% of net 
income for the year or such greater percentage as the Governor in 
Council may direct. 

Note 7: Major Commitments 
(a) Leases 

(i) The Company's commitments as at December 31, 1986, under 
leases, excluding those which have been capitalized and for which 
the lease obligations are recorded as long-term debt (see Note 5), 
are as follows: 

Non-Cancellable Leases 

Pre- 1982 Operat- 

Capital ing 

Leases Leases 

Year ending 

December 3 1 

(in thousands 

of dollars) 

1987 45,003 78,264 

1988 41,850 73,039 

1989 33,786 64,956 

1990 14,099 40,678 

1991 6,073 35,867 

1992-1996 10,265 135,667 

1997-2001 3,385 26,309 

thereafter 853 5,152 

Total minimum lease payments 155,314 459,962 

Le55 amount representing imputed interest 31,368 

Present value of net minimum lease payments under 
capital leases 123,946 



A significant portion of the leases is in respect of railway rolling 
stock and many of them provide renewal options and an option to 
purchase the property at fair market value at the end of the lease 
term. 

(ii) Rental expenses under all lease arrangements which have not 
been capitalized were: 



Year ended December 3 1 



1986 



1985 



1984 



(in thousands of dollars) 
Total expenses 178,034 187.949 197.041 



Expenses under pre- 1982 capital leases 
included in total expenses 46,825 



50,863 49,380 



(iii) Increases in income, assets and liabilities in the consolidated 
flnancial statements, which would have arisen if leases entered 
into prior to 1982 and which satisfied the criteria for capital 
leases had been capitalized, are as follows: 

Year ended December 3 1 
1986 1985 1984 

(in thousands of dollars) 
Net increase in income 11,609 10,776 3,036 

Increase in Assets 
Properties 
Leased properties under capital 

leases 194,092 238,429 266,384 

Ie5s accumulated amortization 128,565 156,672 165,731 

65,527 81,757 100,653 
Other assets and deferred charges 
Unamortized deferred exchange 
loss 3,869 17,689 23,323 

69,396 99,446 123,976 



Increase in Current Liabilities 
Present value of obligations under 
capital leases 33,935 33,387 33,954 

Increase in Non-Current Liabilities 
Present value of obligations under 

capitaileases 101,622 127,180 154,832 

Adjustment to current exchange rate 

(see Note 1(h)) 22,324 30,699 31,097 

123,946 157,879 185,929 
Lew current portion 33,935 33,387 33,954 

90,011 124,492 151,975 



(b) Other 



The Company has commitments at December 31, 1986, for capi- 
tal expenditures of $29.3 million for railway ties and $50.4 million 
for rolling stock. 



PUBLIC ACCOUNTS, 1986-87 



157 



CANADIAN NATIONAL RAILWAY SYSTEM— Continued 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS— Continued 



Note 8: Subsidies 

Revenues include the following subsidies: 



Year ended December 3 1 



1986 



1985 



1984 



(in thousands of dollars) 



Government of Canada 

(a) Payments under the Railway Act paid 
under authority of that Act and the 
related Appropriation Act in respect of 
certain uneconomic operations, services 
and prescribed rates which railways are 
required by the Railway Act to main- 
tain 39,641 

(b) Interim payments to partially offset 
revenue shortfalls associated with the 
cost of carrying grain at uneconomic 
statutory rates 

(c) Maritime Freight Rates Act and Atlan- 
tic Region Freight Assistance Act sub- 
sidies 18,735 

(d) Sundry 2,502 

Other assistance 163 



37,151 



48,762 



8,660 



20,460 


20,727 


6,074 


2,433 


167 


168 



61,041 



63,852 



80,750 



Note 9: Pensions 

The Company has retirement benefit plans covering substantially all 
its employees under which they are entitled to benefits at retirement 
age generally based on compensation and length of service and/or con- 
tributions. Annual pension costs were: 

Year ended December 3 1 



1986 



1985 



1984 



(in thousands of dollars) 
194,425 139,956 167,156 



The effect of the most recent actuarial valuations reduced 1 986 pen- 
sion costs by $0.8 million (1985— $58.6 million, 1984— $46.4 million). 

Total past service costs (surplus) remaining to be charged to opera- 
tions based on the latest actuarial valuation at the time adjusted for 
subsequent changes, were: 

December 31 



1986 



1985 



1984 



(in thousands of dollars) 



Canadian plans 1,530,194 1,528,639 

U.S. plans (1 1,155) 13,281 



1,480,297 
13,347 



1,519.039 1,541,920 1,493,644 



The past service costs relating to the Canadian plans at December 
31, 1986 will be charged to operations in annual amounts, including 
principal and interest, as follows: 

Annual Cost 

(in thousands 

of dollars) 

1987 126.204 

1988 124,169 

1989 123,982 

1990 124.422 

1991 130.060 

1992 135.970 

1993 118.168 

1994 120,102 

1995 126,244 

1996 126,980 

1997 125.610 

1998 123.825 

1999 126.436 

2000 136,757 

2001 154,847 

2002 163,364 

2003 172,349 

2004 181,828 

2005 191,828 

2006 202,379 

In 1986 the new recommendations on Employers' Accounting for 
Pensions from the Financial Accounting Standards Board were 
adopted for the U.S. plans. This resulted in a surplus of approximately 
$11.2 million which is amortized at an annual rate of $0.8 million 
including principal and interest to the year 2000 inclusive. 

For the year 1986 and 1985 funding exceeded the charge to opera- 
tions by $16.8 million and $88.5 million respectively, whereas in 1984 
charges to operations exceeded funding by $36.6 million. The cumula- 
tive excess of charges to operations over funding requirements amounts 
to $12.9 million (1985— $29.7 million) and is included in Other 
Liabilities and Deferred Credits. 

Note 10: System Interest Expense 

Year ended December 3 1 

1986 1985 1984 

(in thousands of dollars) 

Interest 

Total interest on long-term debt 380.977 333,574 281.097 

Amortization of foreign exchange on 

long-term debt* 65,427 

Interest on short-term borrowings 6,889 5,381 15.907 

Interest income (5.567) (2,713) (13,320) 

382,299 336,242 349,111 



* Pursuant to the hedging of foreign currency long-term debt (Note 1(h)), the 
reduction of the deferred foreign exchange loss, which in 1986 amounted to 
$30.9 million (1985 — $12.8 million), has been shown as a reduction of CN 
Rail revenues. 

Note 1 1 : Income Taxes 

(a) The Company has timing differences of approximately $500 mil- 
lion which are available to reduce taxable income of future years. 
Of that amount, about $268 million is due to the excess of the 
undepreciated capital cost for income tax purposes over the net 
book value of depreciable assets. 



158 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN NATIONAL RAILWAY SYST^EM— Continued 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS— Co/i/mwerf 



(b) Investment tax credits are also available to reduce future income 
taxes otherwise payable until the related year of expiry: 



(in millions 

Year of Expiry of dollars) 

1987 32.0 

1988 4.2 

1990 25.7 

1991 33.6 

1992 29.7 

1993 17.2 

The Company is eligible for a refund of 20% of the current year's 
investment tax credits in respect of qualified expenditures and has 
recognized the resulting benefit as a reduction of such expendi- 
tures. 

(c) The Company's provision for income taxes is made up as follows: 

Year ended December 3 1 

1986 1985 1984 

(in thousands of dollars) 

Provision for (recovery oV) income 

taxes based on combined basic 

Canadian federal and provincial tax 

rate of 49.8% (1985—48.9%, 

1984—48.0%) (42,967) 57,752 116,325 

Increase (decrease) in taxes resulting 
from 

Non-allowable scientific research 
expenditures, net of proceeds from 
sale of related tax credits 5,469 

Non-taxable portion of capital gain 
on disposals of discontinued oper- 
ations (21,631) 

Non-allowable foreign exchange loss 
on conditional sale agreements 1,535 437 

Refundable investment tax credits .... (4,224) 

Profit on sale of land (2,528) (2,874) (4,076) 

Unapplied losses 62,256 

Other 3.335 2,508 3,629 

Actual provision for income taxes 

resulting in an effective tax rate of 

nil(1985— 49.0%, 1984— 48.3%) 57,823 117,123 



Note 12: Segmented Information 

(a) Geographic Areas 

Virtually all of the System's operations and assets are within 
Canada with the exception of Grand Trunk Corporation which 
operates in the United States. 

(b) International Traffic 

In addition to the revenue generated by Grand Trunk Corpora- 
tion, the System derives revenue from traffic originating or ter- 
minating on railroads in the United States. In 1986, such revenues 
approximated $587 million (1985— $628 million, 1984 — $662 
million). 

(c) Revenues by Division 



December 3 1 

1986 1985 1984 
(in thousands of dollars) 

CNRail 3,652,655 3,753,190 3,787,251 

Grand Trunk Corporation 531,399 551,782 524,035 

Enterprises group: 

CN Communications 303,384 303,930 287,786 

CN Hotels 146,911 129,846 102,186 

CN Exploration 33,869 56,730 31,873 

CN Real Estate 35,157 29,582 30,544 

Other 20,989 11,224 13,355 

TerraTransport 25,002 25,919 33,365 

Discontinued operations: 

CN Route 123,643 144,681 163,427 

Dockyard 8.786 10,906 13,702 

4,881,795 5,017,790 4,987.524 



(d) Identifiable Assets by Division 



December 3 1 

1986 1985 1984 

(in thousands of dollars) 

CNRail 6,301.242 6,496.422 5,887,685 

Grand Trunk Corporation 630,428 633.296 605,774 

Enterprises group 

CN Communications 506,242 498,873 502,858 

CN Hotels 196,443 179,954 163,682 

CN Exploration 68,583 73,401 42,522 

CN Real Estate 79,253 81.982 69,140 

Other 8,119 4,898 5,417 

TerraTransport 52,304 56,906 60,326 

Discontinued operations 

CN Route 76,493 92,513 

Dockyard 36,556 36,694 

7,842,614 8,138,781 7,466,611 



PUBLIC ACCOUNTS, 1986-87 



159 



CANADIAN NATIONAL RAILWAY SYSTEM— Concluded 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS— Concluded 
(e) Capital Expenditures and Depreciation by Division 



Year ended December 3 1 



Capital Expenditures' 



Depreciation 



1986 



CNRail 356,746 

Grand Trunk Corporation 21,990 

Enterprises group 

CN Communications 58,152 

CN Hotels 22,734 

CN Exploration 10,859 

CN Real Estate 13,720 

Other 

TerraTransport 5 

Discontinued operations 

CN Route 

Dockyard 



1985 



1984 



1986 



1985 



(in thousands of dollars) 



1984 



594,303 


597,270 


212,305 


196,297 


184.416 


20,903 


18,231 


18,773 


13,593 


12.772 


64,658 


54,061 


47.492 


46,192 


42.323 


20,562 


14,728 


6,728 


6,219 


5.725 


33,283 


16,987 


13,093 


6,994 


2.992 


5,687 


231 


815 


1,026 


709 


13 


4 


3 


4 


5 


3.037 


2,912 


5.964 


5.443 


5.237 



(134) 


925 
1,104 


8,223 
502 


5.174 
1.004 


5.490 
1.061 


5.741 
1.030 


484,072 


744,475 


713.149 


311,351 


282.319 


260.950 



'Represents additions to property, plant and equipment. 



Note 1 3: Other Matters 

(a) The Company carries on ordinary business transactions with vari- 
ous entities controlled by the Government of Canada on the same 
terms and conditions as current transactions with unrelated par- 
ties. 

In addition, the Company provides, under contractual arrange- 
ments, rail transportation and maintenance services to the Gov- 
ernment of Canada and to entities controlled by the latter. The 
revenue derived from such services rendered in 1986 aggregated 
$203.0 million (1985— $320.0 million, 1984— $351.8 million). 

(b) Following enactment of the Western Grain Transportation Act, 
which became effective on January 1, 1984, the Government of 
Canada, in order to minimize the cost to grain shippers, pays a 
portion of the cost of shipping grain. Amounts received from the 
Government of Canada under the Western Grain Transportation 
Act amounted to $378.0 million in 1986 (1985— $278.9 million, 
1984 — $331.9 million), a reflection of the volume of grain han- 
dled. 

(c) Commencing in 1977, the Government of Canada has agreed to 

pay to the Company, by way of capital grants not exceeding 
$557.9 million, certain amounts with respect to expenditures 
incurred in carrying out rehabilitation programs for branch lines 
in Western Canada. Total payments received up to December 31, 
1986, amounted to $431.4 million of which $34.5 million was 
received in 1986 (1985— $43.7 million). 

(d) As part of a program commenced in 1981 for the testing and 
evaluation of railway operations in Newfoundland, the Govern- 
ment of Canada reimbursed CN for certain costs. Total billings 
under this program amounted to $5.3 million in 1986 (1985 — 
$7.6 million). 

Note 14: Reclassification of Comparative Figures 

During 1986, changes were made to improve the classification of 
certain items and for comparative purposes the 1985 and 1984 figures 
have been reclassified. 



160 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
CANADIAN NATIONAL (WEST INDIES) STEAMSHIPS, LTD. 

MANDATE 

To collect monies due to it from the sale of eight steamships to Cuban interests. 

BACKGROUND 

The corporation, which provided a steamship service to the West Indies, has been inactive since 1958 when its fleet of 
ships was sold to Banco Cubana of Havana. In 1959, the corporate management was transferred to federal 
government officials for the purpose of collecting the proceeds from the sale. An irrevocable letter of credit issued 
through the Bank of America to cover the final principal payment was not honoured because of the imposition of the 
Cuban Assets Control Regulations by the U.S. government on July 3, 1963. The sole purpose of maintaining the 
company has been to collect the outstanding principal plus interest, totalling $1.1 million as of December 31, 1986. 
Authority to dissolve the corporation was given in the Crown Corporations Dissolution Authorization Act, which 
received Royal Assent on October 29, 1985. The corporation will not be dissolved until the Bank of America provides 
assurances that payment would be made to Her Majesty in right of Canada. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS OF 
INCORPORATION 



CHIEF EXECUTIVE 
OFFICER 

AUDITOR 



Tower C 
Place de Ville 
Ottawa, Ontario 
K1A0N5 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable John Crosbie, P.C, Q.C., M.P. 

Transport 

1927; created by CNR in 1927 under the Dominion Companies Act 
and continued under the Canada Business Corporations Act, 
November 21, 1978. 

N. Van Duyvendyk 



The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year is the calendar year. 



1986 



At the end of the year 

Total Assets 

Obligations to the private sector 

Obligations to Canada 

Equity of Canada 

Cash from Canada in the year 

— budgetary 

— non-budgetary 



1985 



1984 



1983 



1.1 


1.1 


1.0 


0.9 


nil 


nil 


nil 


nil 


0.3 


0.3 


0.3 


0.3 


0.8 


0.7 


0.6 


0.6 


nil 


nil 


nil 


nil 


nil 


nil 


nil 


nil 



PUBLIC ACCOUNTS, 1986-87 

CANADIAN NATIONAL (WEST INDIES) STEAMSHIPS LTD, 

AUDITOR'S REPORT 

TO THE MINISTER OF TRANSPORT 

I have examined the balance sheet of Canadian National (West 
Indies) Steamships Ltd. as at December 31, 1986 and the statement of 
income and retained earnings for the year then ended. My examination 
was made in accordance with generally accepted auditing standards, 
and accordingly included such tests and other procedures as I con- 
sidered necessary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the corporation as at December 31, 1986 and the results of 
its operations for the year then ended in accordance with generally 
accepted accounting principles applied on a basis consistent with that 
of the preceding year. 

Further, in my opinion, the transactions of the corporation that have 
come to my notice during my examination of the financial statements 
have, in all significant respects, been in accordance with Part XII of 
the Financial Administration Act and regulations, the Canada Busi- 
ness Corporations Act and the by-laws of the corporation. 

D. Larry Meyers, F.C.A. 
Deputy Auditor General 
for the Auditor General of Canada 
Ottawa, Canada 
March 9, 1987 



161 



BALANCE SHEET AS AT DECEMBER 31, 1986 



ASSETS 1986 1985 

S S 

Cash 1,465 1,452 

Deposit with Receiver General for Canada 95,000 95,000 

Blocked funds (Note 2) 1,074,430 976,889 



LIABILITIES 


1986 


1985 


Matured bonds — Unclaimed (Note 3) 

Due to Canada (Note 4) 


S 

14,025 

324,024 


S 

14,025 
324,024 




338,049 


338,049 



1,170,895 1,073,341 



EQUITY OF CANADA 

Capital stock 
Authorized and issued 

10 Class A shares without nominal or par value . 

Retained earnings 



976 
831,870 



976 
734,316 



832,846 735,292 
1,170,895 1,073,341 



Approved by the Board of Directors: 

NICK VAN DUYVENDYK 
Chairman 

LARRY MARKS 
Director 



1«2 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN NATIONAL (WEST INDIES) STEAMSHIPS LTD.— Concluded 



STATEMENT OF INCOME AND RETAINED EARNINGS 
FOR THE YEAR ENDED DECEMBER 31, 1986 



1986 1985 

$ $ 

Interest income 97 534 93 351 

Filing fee and bank charges 30 40 

Net income for the year 97^554 98,311 

Retained earnings at beginning of the year 734,3 16 636,005 

Retained earnings at end of the year 831,870 734,316 



NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, 1986 

1 . Authority and activities 

The Corporation is continued under the Canada Business Cor- 
porations Act and is a parent Crown corporation named in 
Schedule C Part I to the Financial Administration Act. It ceased 
all active operations in 1957, at which time it sold its fleet of eight 
vessels to Cuban interests. 

On October 29, 1985, Parliament passed the Crown Corpora- 
tions Dissolution Authorization Act which authorized the Minis- 
ter of Finance to dissolve the Corporation. 

An assignment has been prepared in which the Corporation 
transfers to Her Majesty in Right of Canada all its rights and 
interests in, to or arising out of the letter of credit referred to in 
Note 2 below. However, this document has not yet been executed 
since the consent from BankAmerica International to this assign- 
ment and their acknowledgement that payment under the letter of 
credit will be made to Her Majesty in Right of Canada, have not 
yet been received. 

Accordingly, the Corporation remains to be dissolved and as 
such the blocked funds are still recorded as an asset of the Corpo- 
ration. 

The dissolution process will be completed when the consent and 
acknowledgement are received from BankAmerica International. 



2. Blocked funds 

The final installment of $470,400 on the sale of the eight vessels 
to Cuban interests was due to be paid August 19, 1963 by an 
irrevocable letter of credit issued through BankAmerica Interna- 
tional (then known as Bank of America). However, on July 3, 
1963, the United States Cuban Assets Control Regulations 
became effective and prohibited the Bank from honouring pay- 
ment of the draft. Amendments to the Regulations, effective 
March 2, 1979 required blocked funds to be held in an interest- 
bearing account. At December 31, 1986, accrued interest 
amounted to $604,030 (1985— $506,489). 

Negotiations to obtain a preferred status in order to receive the 
blocked funds have not been successful. In the opinion of manage- 
ment, based on legal counsel, these funds will be collected when 
the Regulations are repealed by the United States. A waiver of 
the application of the statute of limitations has been obtained 
until January 1, 1989, and further extensions will be obtained as 
required. 

Since 1984, the BankAmerica International has withheld 15% 
of interest earned on the funds blocked at the Bank by the Cuban 
Asset Regulations as a tax on non-resident earnings. To date 
$46,518 has been withheld including interest of $8,069. In man- 
agement's opinion, the tax exempt status of the Corporation is 
preserved in the United States by the Tax Convention of 1984. 
Therefore, amounts withheld and the interest forgone thereupon 
have been included in income and assets and accordingly no liabil- 
ity recorded. 

3. Matured bonds — Unclaimed 

The matured bonds have been unclaimed since March 1, 1955 
and as a result of the statute of limitations there is no legal obliga- 
tion to redeem them. However, the Corporation intends to honour 
any of the outstanding bonds should they be presented. 

4. Due to Canada 

The advances from Canada bear no interest and are repayable 
when the blocked funds are received. 



PUBLIC ACCOUNTS, 1986-87 



163 



SUMMARY PAGE 
CANADIAN PATENTS AND DEVELOPMENT LIMITED 



MANDATE 



To secure optimum benefits to Canada from commercially utilizable technology accruing to the Crown from 
expenditure of federal funds. 

BACKGROUND 

The corporation makes available to the public the industrial and intellectual property resulting from government- 
funded research and development. It makes licensing arrangements with industry and monies received thereby are 
used to cover most of its operating expenses. Awards are paid to inventors under the Public Service Inventors Act. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS OF 
INCORPORATION 

CHIEF EXECUTIVE 
OFFICER (ACTING) 

CHAIRMAN 

AUDITOR 



275 Slater Street 
Ottawa, Ontario 
K1A0R3 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable Robert R. de Cotret, P.C, M.P. 

Regional Industrial Expansion and Science and Technology 

1947; by letters patent under the Companies Act; continued under 
the Canada Business Corporation Act in 1979. 

W. Dallas Gordon 

Jacques A. Leger 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 

1986-87 

At the end of the period 

Total Assets 0.8 

Obligations to the private sector nil 

Obligations to Canada nil 

Equity of Canada negl. 

Cash from Canada in the period 

— budgetary 0.5 

— non-budgetary nil 



1985-86 



1984-85 



1983-84 



1.1 


1.3 


1.7 


nil 


nil 


nil 


nil 


nil 


nil 


0.4 


0.7 


0.9 


0.4 


0.4 


0.4 


nil 


nil 


nil 



164 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN PATENTS AND DEVELOPMENT LIMITED 

AUDITOR'S REPORT 

TO THE MINISTER OF REGIONAL INDUSTRIAL EXPANSION 

I have examined the balance sheet of Canadian Patents and 
Development Limited as at March 31, 1987 and the statements of 
operations and surplus (deficit) and changes in cash resources for the 
year then ended. My examination was made in accordance with gener- 
ally accepted auditing standards, and accordingly included such tests 
and other procedures as I considered necessary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the Corporation as at March 31, 1987 and the results of its 
operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the financial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, the Canada 
Business Corporations Act and by-laws of the Corporation. 



D. L. Meyers, C.A. 

Deputy Auditor General 
for the Auditor General 



Ottawa, Canada 
Junes, 1987 



BALANCE SHEET AS AT MARCH 31, 1987 



ASSETS 

Current 

Cash 

Term deposits 

Accounts receivable 

Accrued interest 

Prepaid expenses 

Investment in Canada bonds (market value: 

1986— $241,250) 

Industrial and intellectual property rights (Notes 2, 3 
and 5) 

Experimental equipment on loan to a licensee (Note 2 
and 4) 



1987 


1986 


LIABILITIES 

Current 
Accounts payable and accrued liabilities 


1987 


1986 


$ 
322.832 


$ 

121,844 
200,000 
523,933 
3,530 
10,924 
860,231 

247,500 

1 
I 


$ 

529,183 


$ 
405,329 


512,102 
1,212 


Royalties received in advance 

Provision for employee termination benefits 


124,226 
653,409 
211,954 


102,675 
508,004 
193,774 


13,623 
849,769 

1 


EQUITY (DEFICIENCY) OF CANADA 

Capital stock 
Authorized — 10,000 shares of no par value 
Issued — 5,000 shares fully paid 


865,363 
296,199 


701,778 
296,199 


1 


Surplus (deficit) 


(311,791) 

(15,592) 


109,756 
405,955 



849,771 1,107,733 



849,771 1,107,733 



Approved by the Board: 

J. A. LEGER 
Director 

W. FGRAYDON 
Director 



PUBLIC ACCOUNTS. 1986-87 



165 



CANADIAN PATENTS AND DEVELOPMENT LIMITED— Continued 



s 

1,640,384 

36,103 

53,976 

3,564 

7,642 


S 

1,567,442 

66,220 

32,823 

27,010 

5,466 


1,741,669 


1,698,961 



STATEMENT OF OPERATIONS AND SURPLUS (DEFICIT) 
FOR THE YEAR ENDED MARCH 31, 1987 



1987 1986 

Revenue 

Royalties 

Interest on investments 

Service charges under agency agreements 

Interest on overdue accounts 

Miscellaneous 

Expenses 

Salaries and employee benefits 1,221,757 1,205,956 

Industrial and intellectual property agents' fees and 

related expenses, for obtaining and maintaining 

proprietary protection (Note 5) 

Accommodation, equipment and other rentals 

Amounts paid or owed to third parties in respect of 

royalty revenue 

Awards to inventors 

Provision for doubtful accounts 

Office supplies, printing, furnishings and equipment 

Professional and special services 

Communications 

Legal fees 

Travel and removal 

Miscellaneous 

Cost of operations 

Parliamentary appropriation 

Excess of cost of operations over parliamentary appro- 
priation for the year 

Surplus at beginning of the year 

Surplus (deficit) at end of the year (31 1,791) 109,756 



STATEMENT OF CHANGES IN CASH RESOURCES 
FOR THE YEAR ENDED MARCH 31, 1987 



576,030 


479,417 


210,995 


206.809 


198,809 


111.103 


107,169 


104.606 


89,301 


2.771 


63,284 


58.527 


57,865 


37.275 


41.134 


36.016 


38.403 


59.517 


34.654 


34.291 


1.815 


1.488 


2.641.216 


2,337,776 


899,547 


638,815 


478,000 


350,000 


(421,547) 


(288,815) 


109,756 


398,571 



1987 



1986 



S S 

Cash used in operating activities 

Cost of operations 899,547 638,815 

Items not requiring cash 

Provision for employee termination benefits (18.180) (20.147) 

Loss on disposal of Canada bonds (3,750) 

877,617 618,668 
Cash used in (provided by) non-cash working capital 
components 

Accounts receivable (1 1.831) 175,469 

Other current assets 381 (4.147) 

Accounts payable and accrued liabilities (123,854) (3,864) 

Royalties received in advance (21,551) (49,1 13) 

Payment of employee termination benefits 

Cash used in operating activities 

Cash provided by financing activities 

Parliamentary appropriation 

Cash provided by investing activities 

Proceeds from sale of Canada bonds 

Increase (decrease) during the year 

Cash and term deposits at beginning of year 

Cash and term deposits at end of year 322,832 321,844 



(156,855) 


118,345 


2,375 


720,762 


739.388 


478,000 


350.000 


243,750 


988 
321,844 


(389.388) 
711.232 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, 1987 

1 . Authority and operations 

Canadian Patents and Development Limited is a Crown corpo- 
ration named in Part I of Schedule C to the Financial Adminis- 
tration Act and is incorporated under the Canada Business Cor- 
porations Act. The Corporation was established to make available 
to the public, through licensing arrangements with industry, the 
industrial and intellectual property which results from publicly- 
funded research and development. 

The Corporation receives and processes industrial and intellec- 
tual property under arrangements with federal government 
departments, Crown corporations and agencies, universities, and 
other publicly-financed institutions. Suitable protection is sought 
in Canada and other countries for such property in instances 
where there is a promise of commercial use. In respect of money 
received from the exploitation of such property, the Corporation 
pays awards to public servants under the Public Servants Inven- 
tions Act and makes payments to other originators of such prop- 
erty in accordance with the agreements entered into with them. 

2. Significant accounting policies 

Industrial and intellectual property rights 

Industrial and intellectual property rights are recorded at a 
nominal value of $1. The net cost of acquisition, protection and 
maintenance of industrial and intellectual property rights is 
charged to operations as incurred (Notes 3 and 5). 

Experimental equipment on loan to a licensee 

Experimental equipment on loan to a licensee is recorded at a 
nominal value of $1. The cost of this equipment is charged to 
operations in the year of acquisition. 

Employee termination benefits 

Employees are entitled to specified benefits on termination as 
provided for under labour contracts and conditions of employ- 
ment. The liability for these benefits is recorded as the benefits 
accrue to the employees. 

Pension plan 

Employees of the Corporation are covered by the Public Service 
Superannuation Plan administered by the Government of Canada. 
The Corporation's contributions to the cost of the Plan under 
present legislation are limited to an amount equal to the 
employees' contributions on account of current service. These con- 
tributions represent the total pension obligations of the Corpora- 
tion and are recognized in the accounts on a current basis. The 
Corporation is not required under present legislation to make con- 
tributions with respect to actuarial deficiencies of the Public Ser- 
vice Superannuation Account or with respect to charges to the 
Consolidated Revenue Fund for indexation payments under the 
Supplementary Retirement Benefits Act. 

3. Industrial and intellectual property rights 

The accumulated cost of current inventory of unexpired patent 
and other rights in respect of industrial and intellectual property 
amounts to $3,399,799 (1986—52,884,259). 

4. Experimental equipment on loan to a licensee 

The accumulated cost of experimental equipment purchased 
under active development contracts and held by a licensee 
amounts to $ 1 23,500 ( 1 986—$ 1 23,500). 



166 

CANADIAN PATENTS AND DEVELOPMENT LIMITED— Concluded 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \m— Concluded 

5. Industrial and intellectual property agents' fees and related 
expenses, for obtaining and maintaining proprietary protection 



PUBLIC ACCOUNTS, 1986-87 



1987 



1986 



Fees and related expenses 793,838 661 ,420 

L^55; recoveries 217,808 182,003 



576,030 479,417 



Lease commitments 

Under a lease agreement dated September 30, 1983 the Corpo- 
ration pays an annual rent of $169,425 for accommodation. The 
period covered by this agreement is November 1, 1983 to October 
31, 1988. 



PUBLIC ACCOUNTS, 1986-87 



167 



SUMMARY PAGE 
CANADIAN SALTFISH CORPORATION 



MANDATE 



To regulate interprovincial and export trade in saltfish from participating provinces (Quebec - Lower North Shore, 
and Newfoundland) to improve earnings of primary producers of cured cod fish. 

BACKGROUND 

By its enabling legislation, the corporation must buy all saltfish offered to it which is of reasonable quality, and must 
conduct its operations on a self-sustaining basis without appropriations. 



CORPORATION DATA 

HEAD OFFICE 



STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS OF 
INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



Saltfish Building 

Torbay Road 

P.O. Box 6088 

St. John's, Newfoundland 

A1C5X8 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable Thomas E. Siddon, P.C., M.P. 

Fisheries and Oceans 

1970; by the Saltfish Act (R.S.C. 1970, 1st supplement, C.37). 

W.R. Moyse 

James G. Barnes 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31, 



1986-87 



At the end of the period 

Total Assets 

Obligations to the private sector 

Obligations to Canada 

Equity of Canada 

Cash from Canada in the period 

— budgetary 

— non-budgetary, net 



1985-86 



1984-85 



1983-84 



24.4 


16.6 


14.5 


18.3 


nil 


nil 


nil 


nil 


24.0 


17.4 


12.3 


14.1 


(4.2) 


(5.4) 


(3.3) 


0.4 


nil 


nil 


nil 


nil 


6.6 


5.1 


(1.8) 


5.7 



168 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN SALTFISH CORPORATION 

AUDITOR'S REPORT 

TO THE MINISTER OF FISHERIES AND OCEANS 

I have examined the balance sheet of the Canadian Saltfish Corpo- 
ration as at March 31, 1987 and the statements of operations, deficit 
and changes in financial position for the year then ended. My exami- 
nation was made in accordance with generally accepted auditing 
standards, and accordingly included such tests and other procedures as 
I considered necessary in the circumstances. 

In my opinion, these fmancial statements present fairly the financial 
position of the Corporation as at March 31, 1987 and the results of its 
operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the fmancial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, the Saltfish 
Act and the by-laws of the Corporation, except for the activities 
involving frozen fish products described in Note 1 to the financial 
statements. In my opinion, these activities are not within the powers of 
the Corporation under the Saltfish Act. 



Kenneth M. Dye, F.C.A. 
Auditor General of Canada 



Ottawa, Canada 
May 29, 1987 



BALANCE SHEET AS AT MARCH 31, 1987 



ASSETS 



1987 



Current 

Cash 542,565 

Accounts receivable 8,202,256 

Inventories (Note 3) 12,898,236 

Advances to frozen fish producers (Note 4) 451 ,575 

Long-term (Note 5) 

Long-term receivable 

Fixed (Note 6) 

Land, buildings and equipment 

Less: accumulated depreciation 



1986 



630,486 
8,043,817 
5,684,365 

118,304 



22,094,632 


14,476,972 


972,600 


1,080,973 


3,382,286 
2,084,361 


2,929,824 
1,893,218 


1,297,925 


1,036,606 



24,365,157 16,594,551 



LIABILITIES 1987 

S 

Current 
Working capital loans from Canada (Note 7) ... 23,500,000 

Accounts payable and accrued liabilities 4,275,725 

Current portion of capital asset loans from 
Canada 

Long-term 
Capital asset loans from Canada, net of current 

portion (Note 7) 

Accrued employee termination benefits 



1986 



16,750,000 
4,364,408 



DEFICIT OF CANADA 

Deficit 



150,000 


150,000 


27,925,725 


21,264,408 


350,000 
307,081 


500,000 

257,024 


657,081 


757,024 


(4,217,649) 


(5,426,881) 



24,365,157 16,594,551 



Approved by the Board: 

J. BARNES 
Director 

W. R. MOYSE 
Director 



PUBLIC ACCOUNTS, 1986-87 

CANADIAN SALTFISH CORPORATION— Co/ir/ViMe^ 

STATEMENT OF OPERATIONS 

FOR THE YEAR ENDED MARCH 31, 1987 



169 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED MARCH 31. 1987 



1987 



1986 



1987 



1986 



37,440,597 


26,900,848 


30,057,154 
1,744,357 
1,067,821 


23,649,233 

1,473,439 

910,895 


32,869,332 


26,033,567 


4,571,265 


867.281 


36,411,944 
36,411,944 


18.639.624 
18,639,624 




4,571,265 


867,281 


63,500 

1,083,285 


84,878 
732,656 



Saltfish products 

Sales 39,338,151 28,944,764 

Less: freight and insurance 1,897,554 2,043,916 

Cost of goods sold 

Production costs 

Transportation, storage and packaging 

Other buying costs 

Gross profit on saltfish products 

Frozen fish (Note 1) 

Sales 

Cost of goods sold 

Gross profit on frozen fish 

Gross profit before expenses 

Expenses 

Interest — Long-term 

— Current (Net of recoveries of 
$663,031; 1986— $663,336) (Note 1)... _ 

Net interest expense 1,146,785 817,534 

Loss (gain) on foreign exchange 201,430 (207,750) 

Selling (Net of recoveries of $1,083,234; 1986— 

$646,567) (Note 1) 658,609 714,351 

Administrative (Net of recoveries of $152,627; 

1986— $97,082) (Note 1) 735,209 656,955 

2.742,033 1,981,090 

Net profit (loss) on operations 1,829,232 (1,1 13,809) 

Additional contributions to primary producers of 

cured codfish 620,000 

Unusual item 

Bad debt allowance 1,000,000 

Net profit (loss) for the year 1 ,209.232 (2.1 1 3,809) 



STATEMENT OF DEFICIT 

FOR THE YEAR ENDED MARCH 31. 1987 



1987 1986 

$ $ 

Balance at beginning of the year (5,426,88 1 ) (3,3 1 3,072) 

Net loss for the year 1,209,232 (2,113,809) 

Balance at end of the year (4,217,649) (5,426,881) 



Funds were provided by (used for) 
Financing activities 
Increase in working capital loans from 

Canada 6,750,000 5,250,000 

Repayment of capital asset loans from 

Canada (150,000) (185.000) 

6,600,000 5,065.000 
Operating activities 

Net profit (loss) for the year 1,209,232 (2,113,809) 

Adjustments for non-cash items 

Depreciation 196.954 147.812 

(Gain) loss on sale of fixed assets (3.234) 4,264 

Employee termination benefits 50,057 25,078 

1,453,009 (1,936,655) 

(Increase) in trade balances (472,020) (132,728) 

(Increase) in inventories (7.213,871) (2.276.316) 

(6,232,882) (4,345,699) 
Investing activities 

Purchase of fixed assets (455,039) (78,492) 

Net funds provided (used) (87,921) 640,809 

Cash (bank overdraft) at beginning of the year 630,486 (10,323) 

Cash at end of the year 542,565 630,486 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, 1987 

1 . Authority, objectives and operations of the Corporation 

The Canadian Saltfish Corporation was established by the Salt- 
fish Act in 1 970. to improve the earnings of the primary producers 
of cured codfish. The Corporation is a Crown corporation of 
Canada without share capital, named in Schedule C, Part I to the 
Financial Administration Act, is an agent of Her Majesty, and is 
required to conduct its operations in a self-sustaining financial 
basis. The Corporation is dependent on the Government of 
Canada for working capital and capital asset loans and is not sub- 
ject to income taxes. 

The Corporation has the exclusive right to trade in and market 
cured fish and its by-products in the Province of Newfoundland 
and the Lower North Shore of Quebec and is required to buy all 
cured codfish of an acceptable standard of quality offered for sale 
therein. Fish is purchased from fishermen, processed through 
agents of the Corporation and is subsequently marketed by the 
Corporation, primarily to foreign countries. 

Traded fish and frozen fish products 

The Corporation is involved in the role of marketing frozen fish 
products (traded fish) on behalf of independent producing compa- 
nies for a commission. These transactions are recorded as sales 
and cost of goods sold in the statement of operations. 

The Corporation also markets frozen fish products under con- 
tractual arrangements with a number of companies. Under these 
agreements, the Corporation may make advances based on the 
projected market value to the producer. The balance of the mar- 
ket value received by the producing company is determined by the 
ultimate selling price and all related expenses. For providing this 
service the Corporation recovers its direct costs, certain overhead 
expenses and charges interest on advances. 



17* 



PUBLIC ACCOUNTS, 1986-87 



CANADIAN SALTFISH CORPORATION— Concluded 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \m— Concluded 

In certain instances, in order to secure the Corporation's posi- 
tion against any possible third party claims against the producer, 
the Corporation takes title to the product when it leaves the plant. 
These sales and related cost of goods sold are recorded as offset- 
ting amounts in the statement of operations. The agreement with 
the producing company attributes any gain or loss on the ultimate 
sale of the product to the producer. 

The total frozen fish sales that the Corporation was involved in 
marketing are as follows: 



1987 



1986 



Traded frozen fish products 1,870,859 1,879,214 

Frozen fish products 34,541,085 16,760,410 



36,411,944 18,639,624 



In addition, the Corporation was involved in the marketing of 
$9,730 (1986— $1,318,805) of frozen fish products where title did 
not pass. These sales and related cost of goods sold were not 
recorded in the statement of operations. 

2. Significant accounting policies 

Depreciation 

Depreciation is calculated on the straight-line method and is 
based on the estimated useful lives of the assets as follows: 

Buildings 20 years 

Equipment 3 to 10 years 

Furniture and fixtures 5 years 

Foreign currency translation 

Monetary assets and liabilities are translated at exchange rates 
in effect at the balance sheet date. Revenues and expenses are 
translated at the rate of exchange prevailing on the transaction 
date. The resulting foreign currency translation gains and losses 
are included in the results of operations. 

Pension plan 

Employees are covered by the Public Service Sup>erannuation 
Plan administered by the Government of Canada. Contributions 
to the plan are required from both the employee and the Corpora- 
tion. Contributions with respect to current services are expensed 
in the current period. 

Employee termination benefits 

Employees are entitled to specific benefits on termination as 
provided for under labour contracts and conditions of employ- 
ment. The liability for these benefits is recorded in the accounts as 
the benefits accrue to the employees. 

Additional contributions to primary producers of cured codfish 

The Corporation purchases saltfish at initial prices established 
by the Board of Directors and obtains processing services at nego- 
tiated rates. Additional contributions, if any, to primary pro- 
ducers of cured codfish are determined by the Board based on the 
results of operations for the year. Contributions are charged to 
operations in the year in which they are approved for distribution. 

3. Inventories 

Inventories are made up of the following categories: 

1987 1986 

$ S 

Saltfish, at lower of cost and net realizable 

value 1,723,546 3,407,328 

Packages and supplies, at cost 468,235 390,516 

Salt, at cost 247.739 228,870 

2,439,520 4,026,714 
Frozen fish, at lower of cost and net realiz- 
able value 10.458,716 1.657,651 

12.898.236 5,684,365 



4. Advances to frozen fish producers 

Advances are secured by mortgages on plant and equipment 
and fioating charges on other assets. 

5. Long-term receivable 

This receivable (net of a bad debt allowance of $ 1 ,000,000) has 
been outstanding since April 1984. During 1986 the Corporation 
secured a first mortgage on property owned by this account for 
the appraised value of the property, which was approximately 
$1,000,000. The Corporation has commenced legal proceedings to 
foreclose on this mortgage. Management is of the opinion that no 
further write-down is required at this time. 

6. Fixed assets 





1987 




1986 




Accu- 








mulated 








depre- 


Net book 


Net book 


Cost 


ciation 


value 


value 



s 

Land 117,274 

Buildings 1,027,213 

Equipment 1,981,864 

Furniture and fixtures 255,935 

3,382,286 





117,274 


117,274 


422,651 


604,562 


604,031 


1,494,132 


487,732 


227,913 


167,578 


88,357 


87,388 



2,084,361 1,297,925 1,036,606 



7. Loans from Canada 

Working capital loans are interest bearing (based upon current 
rates as set by the Bank of Canada) and are repayable within one 
year. 

Total loans outstanding from Canada and banks shall not 
exceed $50 million. 

Loans obtained to finance capital expenditures bear interest 
and are subject to repayment in ten equal annual instalments. 
Outstanding capital asset loans are as follows: 



Due date 

March 27, 1989 

September 28, 1989.. 
September 30, 1990.. 

Less: current portion . 



Repayment requirements over the next five fiscal years are 
$150,000 in 1988 and 1989; $140,000 in 1990 and $60,000 in 
1991. 

8. Related party transactions 

The Corporation sold approximately $5.6 million of saltfish 
products to the Canadian International Development Agency. 
These transactions were in the normal course of business and at 
regular commercial rates. 

9. Remuneration to foreign sales agents 

During the year $115,021 (1986— $166,652) was paid to five 
foreign sales agents with whom the Corporation has commission 
agents' agreements. For reasons of commercial confidentiality the 
Corporation does not publish the names of its foreign sales agents. 

1 0. Comparative figures 

Certain comparative figures have been restated to conform to 
the current year's presentation. 



Interest 
rate 


1987 


1986 


% 


S 


$ 


10'/8 

10 

121/8 


20,000 
240,000 
240,000 


30,000 
320,000 
300,000 




500,000 
150,000 


650,000 
150,000 




350,000 


500,000 



PUBLIC ACCOUNTS, 1986-87 



171 



SUMMARY PAGE 
THE CANADIAN WHEAT BOARD 



MANDATE 



The Board's mandate is to market wheat, oats and barley grown in western Canada in the best interests of western 
Canada's grain producers. It administers the Prairie Grain Advance Payments Act. 

BACKGROUND 

The Board was established in 1935 by Act of Parliament and is now responsible for all exports of wheat, oats, and 
barley grown in a designated area which includes the prairie provinces and small parts of British Columbia. It is also 
responsible for sales of these grains for human consumption in Canada. The Board may sell domestic feed grains, but 
in general these sales are handled by producers themselves or by the private trade. The Board does not own or operate 
grain handling facilities. Co-operative and private companies handle Board grain as agents. The Board issues a 
government-guaranteed initial payment when the producer delivers grain. Receipts are pooled, and a final payment 
net of marketing costs is made after the full year's returns, by grain and grade, have been calculated. Deficits are rare 
but, if they occur they are, by statute, a charge upon the Consolidated Revenue Fund of Canada. The Board 
negotiates directly with customers, or through Accredited Exporters. Most sales are cash, but the Board does offer 
credit at commercial rates for up to three years if the credit is guaranteed by the Federal Government. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 



YEAR AND MEANS 
OF INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

AUDITOR 



423 Main Street 
P.O. Box 816 
Winnipeg, Manitoba 
R3C 2P5 

An agent of Her Majesty; exempted from the provisions of divisions I 
to IV of Part XII of the Financial Administration Act. 

The Honourable Charles J. Mayer, P.C, M.P. 
Minister of State for Grains and Oilseeds. 

1935; by The Canadian Wheat Board Act (R.S.C. 1970, C-12). 



W. Esmond Jarvis 



Deloitte Haskins & Sells 



HNANCIAL SUMMARY ($ million) The financial year ends July 31. 

1985-86 

At the end of the period 

Total Assets 5,234 

Obligations to the private sector 5,060 

Obligations to Canada nil 

Equity of Canada nil 

Cash from Canada in the period 

— budgetary 58 

— non-budgetary nil 



1984-85 



1983-84 



1982-83 



5,210 


5,030 


4,297 


4,694 


4,259 


3,816 


nil 


nil 


nil 


nil 


nil 


nil 


131 


121 


119 


nil 


nil 


nil 



172 



PUBLIC ACCOUNTS, 1986-87 



THE CANADIAN WHEAT BOARD 

AUDITORS' REPORT 

TO THE CANADIAN WHEAT BOARD 

We have examined the balance sheet of The Canadian Wheat Board 
as at July 31, 1986, and the statements of operations for the 1985-86 
pool accounts for amber durum wheat, designated oats, barley and des- 
ignated barley for the period August 1, 1985 to completion of opera- 
tions on October 31, 1986, the statements of operations for the 1985- 
86 pool accounts for wheat and oats for the period August 1, 1985 to 
completion of operations on November 30, 1986, the statement of 
administrative and general expenses and allocations to operations for 
the year ended July 31, 1986, the statement of advance payments to 
producers under the Prairie Grain Advance Payments Act as at July 
31, 1986, and the statement of special account transactions for the 
year ended July 31, 1986. Our examination was made in accordance 
with generally accepted auditing standards, and accordingly included 
such tests and other procedures as we considered necessary in the cir- 
cumstances. 



In our opinion, these financial statements present fairly the financial 
position of the Board as at July 31, 1986 and the results of operations 
for the periods shown, in accordance with generally accepted account- 
ing principles consistently applied. 



Winnipeg, Canada 
March 13, 1987 



Deloitte, Haskins & Sells 
Chartered Accountants 



BALANCE SHEET AS AT JULY 31, 1986 
(with prior year figures for comparison) 



EXHIBIT I 



ASSETS 



1986 



1985 



LIABILITIES 



1986 



1985 



Stocks of grain 

Wheat 983,030,499 1,162,910,405 

Durum 69,281,906 80,190,344 

Oats 10,643,612 3,556,023 

Designated Oats 216,145 109,682 

Barley 159,086,431 98,237,385 

Designated Barley 13,809,239 10,117.349 

1,236,067,832 

Bills of exchange plus accrued interest 

(Note 2) 3,552,049,345 

Accounts receivable (Note 3) 

Amounts due on completed sales 102,178,934 

Sundry 43,108,832 

Prairie Grain Advance Payments Act .... 16,101,510 

Due from the Government of Canada re 
deficit on Pool Account Operations 
1985-86 Pool Account 

Wheat 22,994,777 

Oats 6,919,810 

Barley 171,370,689 

The Canadian Wheat Board Building, 

Winnipeg, at cost less depreciation 1,941,914 2,052,051 

Covered hopper cars, at cost less deprecia- 
tion (Note 4) 69,904,057 73,137,536 

Office furniture, equipment and automo- 
biles, at cost less depreciation 1,084,679 1,048,458 

Deferred and prepaid expenses 10,682,075 12,430,376 



1,355,121,188 

3,691,148,705 

20,182,068 

49,498,523 

5,438,408 



Liability to Banks (Note 5) 3,884,278,500 3,908,353,974 

Debentures payable (Note 6) 69,015,000 67,480,000 

Liability to agents for grain purchased 

from producers (Note 7) 962,178,232 570,996,143 

Liability to agents for deferred cash tick- 
ets (Note 8) 144,884,269 146,494,799 

Accrued expenses and accounts payable 

(Note 9) 1 14,614,257 1 18,394,334 

Outstanding adjustment and final pay- 
ment cheques to producers 

Wheat 355,645 595,517 

Durum 55,415 37,847 

Oats 2,186 5,639 

Designated Oats 391 1,426 

Barley 73,752 26,462 

Designated Barley 15,955 21,831 

Special Account — Net balance of undis- 
tributed payment accounts (Note 10) 4,174,428 5,171,556 

Provision for final payment expenses 

(Note 11) 7,439,828 7,197,503 

Surpluses resulting from operations 
Pool Account 

Wheat 298,637,686 

Durum 25,466,720 41,422,294 

Oats 675,422 

Designated Oats 635,944 813,196 

Barley 19,066,956 

Designated Barley 21,213,932 24,664,728 



5,234,404,454 5,210,057,313 



5,234,404,454 5,210,057,313 



W. E. JARVIS 
Chief Commissioner 

R. L. KRISTJANSON 
Assistant Chief Commissioner 

F. M. HETLAND 

Commissioner 

W.H.SMITH 
Commissioner 



PUBLIC ACCOUNTS, 1986-87 

THE CANADIAN WHEAT BOARjy— Continued 

STATEMENT OF OPERATIONS 

1985-86 POOL ACCOUNT— WHEAT 

FOR THE PERIOD AUGUST 1, 1985, TO COMPLETION OF OPERATIONS ON NOVEMBER 30, 1986 

(with prior year figures for the 1984-85 Pool Account for comparison) 



173 



EXHIBIT II 



1985-86 



1984-85 



Wheat acquired 
Purchased from Producers at Board initial prices basis in store Thunder Bay or Vancouver .... 
Net tonnes acquired from the adjustment of overages and shortages, etc., at country and ter- 
minal elevators at Board initial prices basis in store Thunder Bay or Vancouver 

Purchased from prior year Pool Account — Wheat 



Wheat sold 
Completed sales to July 3 1 basis in store Thunder Bay, Vancouver or Churchill 

Domestic 

Export 

Weight losses in transit and in drying 



Tonnes 


Amount 


Tonnes 


Amount 


18,931,918 

153,256 
2,643,047 


S 

2,762,203,255 

22,701,518 

485,321,721 

3.270,226,494 

2,436.669.118 


16,192,572 

93,765 

482,460 

16,768,797 


S 

2.722.955.091 

15.823.780 
84,511.290 


21,728,221 


2,823,290,161 


1,356,661 

12,522,048 

96,067 

13,974,776 


1,171,699 

9,316,116 

5,672 

10,493.487 


2,119.100,423 



Wheat stocks — Being Wheat stocks on hand at July 31 stated at the ultimate value received 
from the sale thereof, basis in store Thunder Bay, Vancouver or Churchill 
Completed sales for the period subsequent to July 31 

Domestic 

Export 

Sale to the subsequent Pool Account — Wheat 

Surplus on Wheat transactions 

Operating costs 
Carrying charges 

Carrying charges on Wheat stored in country elevators 

Storage on Wheat stored in terminal elevators 

Interest, bank charges and net interest on other Board accounts 

Demurrage 

Additional freight — Wheat shipped from country stations to terminal position 

— Freight rate changes 

Handling and stop-off on Wheat warehoused at interior terminals 

Drying charges 

Interest and depreciation on Wheat Board hopper cars 

Wheat Board administrative and general expenses 

(Deficit) Surplus on operations of the Board on the Pool Account — Wheat, for the period from 
August 1, 1985, to November 30, 1986 (1984-85 September 30, 1985) 



470,329 




258,172 




5.421,659 




3,374,091 




1.861,457 




2,643,047 




7.753,445 


983,030,499 

3,419,699,617 

149,473,123 

80,147.712 


6,275,310 
16,768,797 


1,162,910.405 


21,728,221 


3.282,010,828 






458,720,667 




88,292,322 




27,039,928 
107,187,640 




28,079,232 




116,371,554 




(2,674,500) 




12.300,778 




6.530.228 




(2,416,042) 




8.087,425 




5,606,478 




(126,518) 




(2,608,292) 




508,282 




1.055.877 




23,113.388 




767.681 




10.681.214 




10.170.355 




19.160.741 
172,467,900 

(22,994,777) 




18.834,592 




160,082,981 




298,637,686 



i 



174 



PUBLIC ACCOUNTS, 1986-87 



THE CANADIAN WHEAT BOARD— Continued 

STATEMENT OF OPERATIONS 

1985-86 POOL ACCOUNT— AMBER DURUM WHEAT 

FOR THE PERIOD AUGUST 1, 1985, TO COMPLETION OF OPERATIONS ON OCTOBER 31, 1986 

(with prior year figures for the 1984-85 Pool Account for comparison) 



EXHIBIT III 



1985-86 



1984-85 



Durum acquired 

Purchased from Producers at Board initial prices basis in store Thunder Bay or Vancouver 

Net tonnes acquired from the adjustment of overages and shortages, etc., at country and terminal 

elevators at Board initial prices basis in store Thunder Bay or Vancouver 

Purchased from prior year Pool Account — Durum 



Durum sold 
Completed sales to July 31 basis in store Thunder Bay, Vancouver or Churchill 

Domestic 

Export 

Weight losses in transit and in drying 



Tonnes 


Amount 


Tonnes 


Amount 




S 




$ 


1,685,977 


256,984,980 


1,786,421 


319,040,593 


7,299 
119,646 


990,521 

22,440,181 

280,415,682 


8,270 


1,434,938 


1,812,922 


1,794,691 


320,475,531 


131,955 

1,158,296 

20,075 




98,269 

1,276,828 

3,247 




1,310,326 


250,864,551 


1,378,344 


297,296,259 



Durum stocks — Being Durum stocks on hand at July 3 1 stated at the ultimate value received from 
the sale thereof, basis in store Thunder Bay, Vancouver or Churchill 
Completed sales for the period subsequent to July 3 1 

Domestic 

Export 

Sale to the subsequent Pool Account — Durum 

Surplus on Amber Durum Wheat transactions 

Operating costs 
Carrying charges 

Carrying charges on Durum stored in country elevators 

Storage on Durum stored in terminal elevators 

Interest and bank charges 

Demurrage 

Additional freight — Durum shipped from country stations to terminal position 

— Freight rate changes 

Handling and stop-off on Durum warehoused at interior terminals 

Drying charges 

Interest and depreciation on Wheat Board hopper cars 

Wheat Board administrative and genera! expenses 

Surplus on operations of the Board on the Pool Account — Durum, for the period from August 1, 
1985, to October 31, 1986 (1984-85 September 30, 1985) 



26,635 




25,348 




286,396 




271,353 




189,565 




119,646 




502,596 


69,281,906 


416,347 


80,190,345 


1,812,922 


320,146,457 


1,794,691 


377,486,604 




39,730,775 




57,011,073 




6,528,593 




7,863,782 




2,763,732 




4,096,695 




9,292,325 




11,960,477 




(1,439,525) 




2,045,742 




888,837 




(1,748,659) 




201,681 




239,158 




(1,024) 




(115,901) 




916,763 








1,819,147 




8,037 




951,213 




1,122,027 




1,634,638 




2,077,897 




14,264,055 




15,588,778 




25,466,720 




41,422,295 



PUBLIC ACCOUNTS, 1986-87 

THE CANADIAN WHEAT BO\R\y— Continued 

STATEMENT OF OPERATIONS 

1985-86 POOL ACCOUNT— OATS 

FOR THE PERIOD AUGUST 1, 1985, TO COMPLETION OF OPERATIONS ON NOVEMBER 30, 1986 

(with prior year figures for the 1984-85 Pool Account for comparison) 



175 



EXHIBIT IV 



1985-86 



Tonnes 



Amount 



1984-85 



Tonnes 



Amount 



Oats acquired 

Purchased from Producers at Board initial prices basis in store Thunder Bay or Vancouver .... 
Net tonnes acquired from the adjustment of overages and shortages, etc., at country and ter- 
minal elevators at Board initial prices basis in store Thunder Bay or Vancouver 

Purchased from prior year Pool Account — Oats 

Oats sold 

Completed sales to July 3 1 basis in store Thunder Bay or Vancouver 

Weight losses in transit and in drying 

Oats stocks — Being Oats stocks on hand at July 3 1 stated at the ultimate value received from 
the sale thereof, basis in store Thunder Bay or Vancouver 

Completed sales for period subsequent to July 31 

Sale to subsequent Pool Account — Oats 

(Deficit) Surplus on Oats transactions 

Operating costs 
Carrying charges 

Carrying charges on Oats stored in country elevators 

Storage on Oats stored in terminal elevators 

Interest and bank charges 

Demurrage 

Additional freight — Oats shipped from country stations to terminal position 

— Freight rate changes 

Drying charges 

Interest and depreciation on Wheat Board hopper cars 

Wheat Board administrative and general expenses 

(Deficit) Surplus on operations of the Board on the Pool Account — Oats, for the period from 
August 1, 1985, to November 30, 1986 (1984-85 November 15, 1985) 



198.411 


19,614,453 


54,639 


234 
4,310 


23.774 
440,331 


16,369 


202,955 


20.078,558 


71,008 



59,640 



5,044,472 



38.487 



5,416,401 



1,785,902 



7,202,303 



4,921,612 



114,325 
28,990 


8,443,804 
2,199,808 
15,688,084 


28,211 
4,310 


3,115,692 
440.331 


202,955 


71,008 


8.477.635 




(4,390,474) 

1,056,922 
538,960 

1,595,882 
236,658 
37,344 
147,068 
17,206 
171,454 
111,942 
211,782 

2,529,336 

(6,919,810) 




1.275.332 






285.692 
194.177 






479.869 
3.410 

98,106 
(84,660) 

34,318 
68,867 






599.910 






675.422 



176 



PUBLIC ACCOUNTS, 1986-87 



THE CANADIAN WHEAT BOARD— Continued 
STATEMENT OF OPERATIONS 



1 985-86 POOL ACCOUNT— DESIGN ATED OATS 

FOR THE PERIOD AUGUST 1, 1985, TO COMPLETION OF OPERATIONS ON OCTOBER 31, 1986 

(with prior year figures for the 1984-85 Pool Account for comparison) 



EXHIBIT V 



1985-86 



1984-85 



Designated Oats acquired 
Purchased from Producers at Board initial prices basis in store Thunder Bay or Vancouver .... 

Designated Oats sold 

Completed sales to July 31 basis in store Thunder Bay or Vancouver 

Designated Oats stocks — Being Designated Oats stocks on hand at July 31 stated at the ulti- 
mate value received from the sale thereof, basis in store Thunder Bay or Vancouver 
Completed sales for the period subsequent to July 31 

Surplus on Designated Oats transactions 

Operating costs 

Interest 

Interest and depreciation on Canadian Wheat Board hopper cars 

Wheat Board administrative and general expenses 

Surplus on operations of the Board on the Pool Account — Designated Oats, for the period from 
August 1, 1985, to October 31, 1986 (1984-85 September 30, 1985) 



Tonnes 


Amount 


Tonnes 


Amount 


36,714 


$ 
4,644,373 


44,219 


$ 
6,061,679 


34,968 
1,746 


5,052,964 

216,145 
5,269,109 


43,504 
715 


6,749,003 
109,682 


36,714 


44,219 


6,858,685 




624.736 

(67,518) 
20,714 
35,596 

(11,208) 




797,006 






(95,397) 

27,773 
51,434 






(16,190) 



635,944 



813,196 



PUBLIC ACCOUNTS, 1986-87 



177 



THE CANADIAN WHEAT BOARD— Continued 
STATEMENT OF OPERATIONS 

1985-86 POOL ACCOUNT— BARLEY 

FOR THE PERIOD AUGUST 1, 1985, TO COMPLETION OF OPERATIONS ON OCTOBER 31, 1986 

(with prior year figures for the 1984-85 Pool Account for comparison) 



EXHIBIT VI 



1985-86 



1984-85 



Barley acquired 

Purchased from Producers at Board initial prices basis in store Thunder Bay or Vancouver 

Net tonnes acquired from the adjustment of overages and shortages, etc., at country and terminal 

elevators at Board initial prices basis in store Thunder Bay or Vancouver 

Purchased from prior year Pool Account — Barley 

Barley sold 

Completed sales to July 31 basis in store Thunder Bay, Vancouver or Churchill 

Weight losses in transit and in drying 

Barley stocks— Being Barley stocks on hand at July 31 stated at the ultimate value received from 
the sale thereof, basis in store Thunder Bay, Vancouver or Churchill 

Completed sales for the period subsequent to July 31 

Sales to subsequent Pool Account — Barley 

(Deficit) Surplus on Barley transactions 

Operating costs 
Carrying charges 

Carrying charges on Barley stored in country elevators 

Storage on Barley stored in terminal elevators 

Interest and bank charges 

Demurrage 

Additional freight — Barley shipped from country stations to terminal position 

— Freight rate changes 

Handling and stop-off on Barley warehoused at interior terminals 

Drying charges 

Interest and depreciation on Wheat Board hopper cars 

Wheat Board administrative and general expenses 

(Deficit) Surplus on operations of the Board on the Pool Account — Barley, for the period from 
August 1. 1985, to October 31, 1986 (1984-85 September 30, 1985) 



Tonnes 


Amount 


Tonnes 


Amount 




$ 




S 


4,947,005 


539,124,215 


3.068.472 


382,262,408 


18,862 


2,411,708 


17.053 


2,105,090 


480.853 


53,604,187 
595,140,110 






5.446,720 


3.085.525 


384.367.498 


3.156,990 


303,417,269 


2.235.067 


318.598.608 


21,463 




2,545 




2.268,267 


159,086,431 


367,060 


44.633.198 






480,853 
3,085,525 


53.604.187 


5,446,720 


462,503,700 


416.835.993 




(132,636,410) 




32.468.495 




10,622,501 




4.724.253 




3,957.268 




3.356.581 




14,579,769 




8.080,834 




5,593,975 




(1,306,516) 




975.328 




(449,348) 




2,165.184 




1,897,338 




19.309 




(893,639) 




1.703.300 




(52.098) 




6.109.994 




628.571 




2.791.055 




1.927.267 




4.796.365 




3,569.130 




38.734.279 




13,401,539 




(171.370.689) 




19,066,956 



STATEMENT OF OPERATIONS 

1985-86 POOL ACCOUNT— DESIGNATED BARLEY 

FOR THE PERIOD AUGUST 1, 1985, TO COMPLETION OF OPERATIONS ON OCTOBER 31, 1986 

(with prior year figures for the 1984-85 Pool Account for comparison) 



EXHIBIT VII 



1985-86 



1984-85 



Designated Barley acquired 
Purchased from Producers at Board initial prices basis in store Thunder Bay or Vancouver 

Designated Barley sold 

Completed sales to July 31 basis in store Thunder Bay or Vancouver 

Designated Barley stocks — Being Designated Barley stocks on hand at July 31 stated at the ulti- 
mate value received from the sale thereof, basis in store Thunder Bay or Vancouver 
Completed sales for the period subsequent to July 31 

Surplus on Designated Barley transactions 

Operating costs 

Interest 

Interest and depreciation on Canadian Wheat Board hopper cars 

Wheat Board administrative and general expenses 

Surplus on operations of the Board on the Pool Account — Designated Barley, for the period from 
August 1, 1985. to October 31, 1 986 ( 1 984-85 September 30, 1985) 



Tonnes 


Amount 


Tonnes 


Amount 




$ 




S 


645,255 


101,758,993 


712,195 


111,703,201 


574,947 


108,116,420 


661,381 


124,998,887 


70,308 


13,809,239 


50,814 


10,117,349 


645,255 


121,925,659 
20,166,666 


712,195 


135,116,236 






23,413,035 




(2,036,919) 
364,047 
625,606 




(2,527,411) 
447,320 
828,398 




(1,047,266) 




(1,251.693) 




21.213.932 




24,664,728 



178 



PUBLIC ACCOUNTS, 1986-87 



THE CANADIAN WHEAT BOARD— Continued 

STATEMENT OF ADMINISTRATIVE AND GENERAL 
EXPENSES AND ALLOCATIONS TO OPERATIONS 
FOR THE YEAR ENDED JULY 31, 1986 
(with prior year figures for comparison) 



EXHIBIT VIII 



1985-86 



1984-85 



1985-86 1984-85 



Administrative and General Expenses 

Salaries — Board members, officers and staff 15,339,013 

Unemployment insurance, pension, group insur- 
ance, medical and other employee benefits 2,022,676 

Manitoba Health and Education Tax 225,074 

Advisory Committee — Travelling expenses and 

per diem allowances 77,769 

Rental and lighting of offices including mainte- 
nance of The Canadian Wheat Board Build- 
ing 1,590,643 

Telephones — Exchange service and long dis- 
tance calls 347,095 

Telegrams, cables and telex expense 145,468 

Postage 636,982 

Printing, stationery and supplies 595,479 

Annual report, mini report and "Grain 

Matters", etc 139,041 

District meetings 13,564 

Office expense 566,028 

Travelling and transfer of staff 893,265 

Travelling expenses — Inspectors 162,716 

Legal fees and court costs 47,586 

Audit fees 91,000 

Computing equipment — Rental and sundries 3,48 1 ,523 

Repair and upkeep of office machines and 

equipment 47,889 

Grain market publications and services 88,272 

The Canadian Wheat Board share of operating 
expenses of Canadian International Grains 

Institute 997,623 

Bonds and insurance 40,408 

Winnipeg Commodity Exchange dues 10,370 

Depreciation on building, furniture, equipment 

and automobiles 339,715 



15,131,273 

1,964,496 
235,956 

79,197 



1,424,092 

354,578 
141,293 
583,765 
642,392 

156,284 

19,452 

505,709 

847,801 

184,653 

31,629 

91,000 

2,383,997 

49,545 
80,635 



882,131 
29,993 
12,820 

274,440 



Allocations to Operations 



1. Marketing of 
1985-86 Pool 
1985-86 Pool 
1985-86 Pool 
1985-86 Pool 
1985-86 Pool 
1985-86 Pool 
1984-85 Pool 
1984-85 Pool 
1984-85 Pool 
1984-85 Pool 
1984-85 Pool 
1984-85 Pool 



Producers 
Account- 
Account— 
Account- 
Account — 
Account — 
Account — 
Account — 
Account 
Account 
Account 
Account 
Account 



Grain 

Wheat 10,430,547 

Durum 925,901 

Oats 108,963 

Designated Oats 20,162 

Barley 2,716,785 

Designated Barley... 354,360 

Wheat 8,888,637 

Durum 980,625 

Oats 35,307 

Designated Oats 24,273 

Barley 1,684,385 

Designated Barley .... 390,947 



2. Distributing Final Payments to Producers 

(a) Wheat and Durum 

1984-85 Pool Account— Wheat 

1984-85 Pool Account— Durum 

1983-84 Pool Account— Wheat 

1983-84 Pool Account— Durum 

1982-83 Pool Account— Wheat 

1982-83 Pool Account— Durum 

1981-82 Pool Account— Wheat 

1981-82 Pool Account— Durum 

1980-81 Pool Account— Wheat 

1980-81 Pool Account— Durum 

1979-80 Pool Account— Wheat 

1979-80 Pool Account— Durum 

(b) Coarse Grains 

1984-85 Pool Account— Oats 

1984-85 Pool Account — Designated Oats .... 

1984-85 Pool Account— Barley 

1984-85 Pool Account — Designated Barley. 

1983-84 Pool Account— Oats 

1983-84 Pool Account — Designated Oats .... 

1983-84 Pool Account— Barley 

1983-84 Pool Account — Designated Barley . 

1982-83 Pool Account— Oats 

1982-83 Pool Account— Designated Oats .... 
1982-83 Pool Account— Designated Barley . 
1981-82 Pool Account— Designated Oats .... 

1981-82 Pool Account— Barley 

1981-82 Pool Account— Designated Barley . 

1980-81 Pool Account— Oats 

1980-81 Pool Account— Barley 

1980-81 Pool Account— Designated Barley. 

1979-80 Pool Account— Barley 

1979-80 Pool Account— Designated Barley . 



26,560,892 24,658,035 



163,784 

27,298 

25,397 

3,749 

4,425 

604 

2,435 

329 

2,874 

394 

2,210 

302 



233,801 



10,553 

1,799 

55,965 

8,434 

2.233 

384 

12,170 

2,025 

1,025 

183 
3.071 

664 
1,437 

252 

783 
1,698 

297 
1,304 

229 



308,135 



104,506 



140,961 



27,899,199 26,107,131 



3. Allocation authorized by Order-in-Council 
from Special Account — Undistributed Pay- 
ment Accounts in partial payment of 
Administrative and General Expense 
incurred in respect of the Prairie Grain 
Advance Payments Act 



1,000.000 1,000,000 
27,899,199 26,107,131 



PUBLIC ACCOUNTS, 1986-87 

THE CANADIAN WHEAT BOARD— Continued 

STATEMENT OF ADVANCE PAYMENTS TO PRODUCERS 
UNDER THE PRAIRIE GRAIN ADVANCE PAYMENTS ACT 
AS AT JULY 31, 1986 



179 



EXHIBIT IX 



Cash Advances Balance to 

Advances to Repaid by be Refunded 
Producers Producers by Producers 



1957-58 
1958-59 
1959-60 
1960-61 
1961-62 
1962-63 
1963-64 
1964-65 
1965-66 
1966-67 
1967-68 
1968-69 
1969-70 
1970-71 
1971-72 
1972-73 
1973-74 
1974-75 
1975-76 
1976-77 
1977-78 
1978-79 
1979-80 
1980-81 
1981-82 
1982-83 
1983-84 
1984-85 
1985-86 



Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 
Crop Yea 



35,203.467 

34,369,653 

38,492,505 

63,912,550 

16,656,713 

29,251,526 

62,136,418 

32,961,844 

40,600,386 

36,668,270 

47,280,533 

151,852,319 

272,777,516 

91,105,890 

68,142,360 

20,754,104 

35,259,387 

46,635,399 

20,236,528 

130,592,220 

119,090,916 

151,316,450 

99,146,581 

61,640,150 

333,688,190 

309,022,755 

286,736,519 

201,289,320 

340,670,596 



35,200,848 

34,366,768 

38,490.056 

63,904,499 

16,651,472 

29,245,974 

62,129,676 

32,955.723 

40,596,508 

36,664,915 

47,277,574 

151,772,155 

272,476,405 

91,076,240 

68,108,551 

20,743,229 

35,219,656 

46,604,087 

20,208,199 

130,475,756 

118,918.678 

151,195,641 

99,073,930 

61,600,876 

333,194,187 

308,039,815 

285,598,650 

199,198,047 

317,090,565 



2,619 

2,885 

2.449 

8.051 

5.241 

5,552 

6,742 

6,121 

3,878 

3,355 

2,959 

80,164 

301,111 

29,650 

33,809 

10,875 

39.731 

31,312 

28,329 

116,464 

172,238 

120,809 

72,651 

39,274 

494,003 

982,940 

1,137,869 

2,091.273 

23.580,031 



3,177,491,065 3,148,078,680 



Balance to be refunded by Producers as at July 31, 1986 

Add: bank interest to July 3 1 , 1 986, payable by the Government of Canada . 
Z^55.- amount paid to July 31, 1986 



Deduct: balance of funds received to cover advance payments in default 

Government of Canada 

Line Elevator Companies 

Interest received on default payments 

Owing to the Canadian Wheat Board as at July 31, 1986 



117,015,857 
116,798,341 



1,114,724 

70,537 

12,343,130 



29,412,385 



217,516 



29.629.901 



13.528.391 



16,101,510 



180 



PUBLIC ACCOUNTS, 1986-87 



THE CANADIAN WHEAT BOARD— Continued 

STATEMENT OF SPECIAL ACCOUNT TRANSACTIONS 
FOR THE YEAR ENDED JULY 31, 1986 



EXHIBIT X 



Balance of Special Account as at July 31, 1985 

Transfer to Special Account authorized by Ordcr-in-Counci! P.C. 1986-1872 from the following 

1978 Wheat Payment Account 

1978 Durum Payment Account 

1978 Oats Payment Account 

1978 Barley Payment Account 

1978 Designated Barley Payment Account 



701,856 

92,360 

(17,069) 

218,721 

95,065 



Expenditures 

Unexpended Authorized Unexpended Expended 

Authorized by as at Crop Year as at Crop Year 

Order-in-Council No. Description of Purpose July 3 1,1 985 1 985-86 July 3 1 , 1 986 1 985-86 

S S $ $ 

P.C. 1986-1874 Market Development 359,167 650,000 461,972 547,195 

P.C. 1986-1873 General Promotion and Overseas Advertising 36,009 150,000 133,086 52,923 

P.C. 1986-1058 Prairie Grain Advance Payment Act — Administra- 
tion 3,000,000 2,000,000 1,000,000 

P.C. 1985-2262 Remote Sensing Crop Monitoring Project 33,000 33,000 

P.C. 1985-1946 General Promotion and Overseas Advertising — 50th 

Anniversary 140,000 140,000 

P.C. 1985-1945 Customer Mission Program— 50th Anniversary 292,880 220,678 72,202 

P.C. 1984-2690 Customer Mission Program 275,635 266,137 9,498 

P.C. 1983-2007 Canadian International Grains Institute — Capital 

Expenditures 69,539 45,048 24,491 

P.C. 1 983-2003 Joint Policy Coordinating Committee of Canada and 

United States Wheat Producers 88,133 88,133 

P.C. 1981-3436 Scholarship and Assistantship Program 30,142 249,858 44,118 235,882 

1,324,505 4,049,858 3,292,172 

Less: payments to producers against old payment accounts 

Balance of Special Account as at July 31, 1986 

As at July 31, 1986, there were unexpended authorizations totalling $3,292,172 leaving an unexpended balance of $882,256 in the Account. 



PUBLIC ACCOUNTS, 1986-87 



181 



¥ 



THE CANADIAN WHEAT BOARD— Continued 

FINANCIAL RESULTS AND NOTES TO FINANCIAL STATEMENTS 

The Financial Statements of the Canadian Wheat Board including Supplies of Wheat 
notes thereto for the crop year consist of the Balance Sheet (Exhibit I), 
which sets forth the financial position of the Board as at July 31, 1986, 
together with other statements (Exhibits II to X) showing the results 
of Board operations for the year. 

The practice of the Board is to include in its accounts at July 3 1 , the 
final operating results of pool accounts when marketing operations 
have been completed before the issuance of the annual report. Opera- 
tions on the 1985-86 Pool Accounts for Amber Durum Wheat, Desig- 
nated Oats, Barley and Designated Barley were completed on October 
31, 1986, and for Wheat and Oats on November 30, 1986. Details of 
the final operating results of these pool accounts with commentary 
thereon are presented in this section of the report. 



Although the basic measurement for grain has been the "tonne" 
since February 1, 1978, for your information a tonne equals 36.74371 
bushels of Wheat, 64.84183 bushels of Oats or 45.92963 bushels of 
Barley. 

Pool Account — Wheat 

Initial Payments 

During the crop year the Board was authorized to purchase wheat 
from producers at a fixed initial price of $160.00 per tonne for No. 1 
Canada Western Red Spring. 



Supplies of wheat in the 1985-86 Pool were 21,728,221 tonnes, com- 
prised of 18,931,918 tonnes delivered by producers, 153,256 tonnes 
acquired from other than producers and 2,643.047 tonnes purchased 
from the previous pool. 

Grade Pattern 



Deliveries of grain to the 1985-86 Pool Account were of substan- 
tially lower quality compared with receipts in the previous pool. Deliv- 
eries of Nos. 1 and 2 Canada Western Red Spring totalled 9.659 mil- 
lion tonnes or 51.02 per cent of total receipts, while No. 3 Canada 
Western Red Spring receipts of 5.524 million tonnes amounted to 
29.18 per cent of total receipts. Deliveries of Utility grades including 
Canada Feed amounted to 2.026 million tonnes or 10.70 per cent of 
total producer deliveries. Approximately 19.32 per cent of producer 
deliveries graded tough while 3.92 per cent graded damp. 

Final Statement of Operations — Wheat — Table A 

Marketing operations on the Pool Account for Wheat resulted in a 
deficit of $22,994,777 which is recoverable from the Government of 
Canada with funds provided by Parliament. The total payment real- 
ized by producers is therefore equal to the initial payments as shown in 
Table B. 



STATEMENT OF OPERATIONS ON THE 1985-86 POOL ACCOUNT — WHEAT 
FOR THE PERIOD AUGUST 1, 1985, TO NOVEMBER 30, 1986 
(with prior year figures for the 1984-85 Pool Account for comparison) 



TABLE A 



1985-86 Pool Account 



1984-85 Pool Account 



Receipts from producers 

Sales value , 

Initial payments to producers 

Gross Surplus 

Deduct Operating Costs 
Carrying charges 

Country elevators 

Terminal storage 

Total Carrying Charges 

Bank interest and net interest on other Board accounts.. 

Demurrage 

Additional freight — To terminals 

— Freight rate changes 

Handling and stop-off 

Drying 

Interest and depreciation on Wheat Board hopper cars.. 

Wheat Board administrative expenses 

Total Operating Costs 

Surplus (Deficit) on Operations 

Add: interest earned after September 30 

Deduct: cost of issuing final payment 

Surplus for Distribution to Producers 



Amount 


Rate per 
tonne 


Amount 


Rate per 
tonne 


18.931.918 tonnes 


16.192.572 tonnes 


$ 

2,911.676.378 
2.762.203.255 


$ 

153.797 
145.902 


$ 

3.181.675.758 
2,722.955.091 


S 

196.490 
168.161 


149.473.123 


7.895 


458,720.667 


28.329 



80.147.712 


4.233 


88.292.322 


5.453 


27.039.928 


1.428 


28.079.232 


1.734 


107.187.640 


5.661 


116.371.554 


7.187 


(2.674.500) 


(.141) 


12,300.778 


.760 


6.530.228 


.345 


(2.416.042) 


(.149) 


8.087.425 


.427 


5.606.478 


.346 


(126.518) 


(.006) 


(2.608.292) 


(.161) 


508.282 


.027 


1.055.877 


.065 


23.113.388 


1.221 


767.681 


.047 


10.681.214 


.564 


10.170.355 


.628 


19.160.741 


1.012 


18.834.592 


1.163 


172.467.900 


9.110 


160,082.981 


9.886 


(22.994.777) 


(1.215) 


298,637.686 


18.443 






7.590.715 


.469 






144,422 


.009 




306.083.979 


18.903 



182 



PUBLIC ACCOUNTS, 1986-87 



THE CANADIAN WHEAT BOARD— Continued 

FINANCIAL RESULTS AND NOTES TO FINANCIAL ST ATEMET^TS— Continued 



PAYMENT RECEIVED BY PRODUCERS FOR PRINCIPAL GRADES OF WHEAT 
BASIS IN STORE THUNDER BAY OR VANCOUVER 



TABLE B 



Grade 

Red Spring Wheat Grades 

No. 1 Canada Western Red Spring 

No. 2 Canada Western Red Spring 

No. 3 Canada Western Red Spring 

No. 1 Canada Utility 

No. 2 Canada Utility 

Canada Feed 

No. 1 Canada Western Red Winter 

No. 2 Canada Western Red Winter 

No. 1 Canada Western Soft White Spring. 
No. 2 Canada Western Soft White Spring. 



Initial 
payments 



(dollars per tonne) 

160.00 
154.21 
146.21 
142.21 
128.21 
121.00 
145.21 
143.21 
132.00 
129.00 



Operating Costs 

Operating costs incurred applicable to the pool were $172,467,900 
or $9,110 per tonne. Details of the principal costs and comment 
thereon follow: 

Carrying Charges — $107,187,640 

Total carrying charges incurred by the Board, including storage and 
interest charges on wheat in country elevators and storage on wheat in 
terminal elevators amounted to $107,187,640 or $5,661 per tonne. 

Bank Interest and Net Interest on Other Board Accounts — 
($2,674,500) 

This consists mainly of bank interest and interest paid to or received 
from other Board accounts. Interest earned, exceeded interest paid by 
$2,674,500 or $.141 per tonne. 

Additional Freight — To Terminals — $8,087,425 — Freight Rate 
Change — ($126,518) 

During the crop year the Board paid $8,087,425 of additional 
freight arising out of the movement of grain in adverse direction. 

With the abolition of the Crows Nest Pass Freight rate on Decem- 
ber 31, 1983, freight rates are reviewed annually under the Western 
Grain Transportation Act. On August 1, 1986, freight rates declined 
by approximately $.02 per tonne and the Board collected the resulting 
freight saved on the country stocks held by its agents on August I, 
1986, amounting to $126,518 in the Wheat Account. 

Drying Charges — $23,1 1 3,388 

Drying charges for 1985-86 totalled $23,1 13,388, a very significant 
increase from the previous year, reflecting the substantial quantities of 
tough and damp grain delivered to the pool under review. 

Interest and Depreciation on Wheat Board Hopper Cars — 
$10,681,214 

Costs for the use of the Board's 2,000 hopper cars include deprecia- 
tion and interest. Hopper car expenses attributable to the 1985-86 
Wheat Account totalled $10,681,214 compared to $10,170,355 for the 
previous pool. 

Pool Account — Amber Durum Wheat 

Initial Payments 

During the crop year the Board was authorized to purchase Amber 
Durum Wheat from producers at a fixed initial price of $160.00 per 
tonne for No. 1 Canada Western Amber Durum Wheat. 



Supplies of Amber Durum Wheat 

Supplies of Amber Durum Wheat in the 1985-86 Pool were 
1,812,922 tonnes, comprised of 1,685,977 tonnes delivered by pro- 
ducers, 7,299 tonnes acquired from other than producers and 1 19,646 
tonnes purchased from the previous pool. 

Grade Pattern 

Receipts of Nos. 1 , 2 and 3 Canada Western Amber Durum totalled 
1.414 million tonnes or 83.85 per cent of total producer deliveries. 
Approximately 19.09 per cent of producer deliveries graded tough 
while 2.29 per cent graded damp. 

Final Statement of Operations and Surplus for Distribution to Pro- 
ducers — Amber Durum Wheat — Table C 

Table C shows the operating results of the Pool Account for the crop 
year. Marketing operations resulted in a surplus of $25,466,720. Oper- 
ating expenses totalled $14,264,055 for the year or $8,460 per tonne. 
The principal cost was carrying charges amounting to $9,292,325 or 
$5.51 1 per tonne. After allowing for the cost of issuing the final pay- 
ment and estimated interest earnings subsequent to October 31, 1986, 
the net surplus for distribution to producers was $26,008,379. This 
represents an overall average of $15,426 per tonne on producer deliv- 
eries of 1 ,685,977 tonnes. Table D shows the total payment received by 
producers for the principal grades of Amber Durum Wheat delivered 
during the crop year. This table shows the total price realized by pro- 
ducers for No. I Canada Western Amber Durum Wheat of $181,302 
per tonne, compared to $204,853 per tonne for the previous pool. 



PUBLIC ACCOUNTS. 1986-87 

THE CANADIAN WHEAT BOARD— Continued 

FINANCIAL RESULTS AND NOTES TO FINANCIAL STATEMENTS— Continued 

STATEMENT OF OPERATIONS AND SURPLUS FOR DISTRIBUTION TO PRODUCERS 
ON THE 1985-86 POOL ACCOUNT— AMBER DURUM WHEAT 
FOR THE PERIOD AUGUST 1, 1985, TO OCTOBER 31, 1986 
(with prior year figures for the 1984-85 Pool Account for comparison) 



183 



TABLE C 



1985-86 Pool Account 



1984-85 Pool Account 



Receipts from producers 

Sales value 

Initial payments to producers 

Gross Surplus 

Deduct Operating Costs 

Carrying charges 

Country elevators 

Terminal storage 

Total carrying charges 

Interest 

Demurrage 

Additional freight — To terminals 

— Freight rate changes 

Handling and stop-off 

Drying 

Interest and depreciation on Wheat Board hopper cars 

Wheat Board administrative expenses 

Total Operating Costs 

Surplus on Operations 

Add: interest earned after October 31 (1984-85 September 30) 

Deduct: cost of issuing final payment 

Surplus for Distribution to Producers 





Rate per 




Rate per 


Amount 


tonne 


Amount 


tonne 


1,685,977 tonnes 


1,786,421 


tonnes 


S 


S 


S 


S 


296.715,755 


175.990 


376,051,666 


210.506 


256.984,980 


152.425 


319.040.593 


178.592 


39.730,775 


23.565 


57,011,073 


31.914 


6,528,593 


3.872 


7.863.782 


4.402 


2,763,732 


1.639 


4.096.695 


2.293 


9.292,325 


5.511 


11.960.477 


6.695 


(1,439,525) 


(.854) 


2,045.742 


1.145 


888.837 


.527 


(1,748,659) 


(.979) 


201.681 


.120 


239,158 


.134 


(1,024) 


(.001) 


(115.901) 


(.065) 


916,763 


.544 






1,819,147 


1.079 


8.037 


.005 


951,213 


.564 


1,122,027 


.628 


1,634.638 


.970 


2.077.897 


1.163 


14,264,055 


8.460 


15.588.778 


8.726 


25.466.720 


15.105 


41.422.295 


23.188 


576.261 


.342 


1.052.864 


.589 


34,602 


.021 


26.164 


.015 



26,008,379 



15.426 



42,448.995 



23.762 



TOTAL PAYMENTS RECEIVED BY PRODUCERS FOR 

PRINCIPAL GRADE OF AMBER DURUM WHEAT 

BASIS IN STORE THUNDER BAY OR 

VANCOUVER TABLE D 



Grade 



Initial 
payments 



Final 
payments 



Total 



Amber Durum Wheat Grades 
No. I Canada Western Amber 

Durum 160.00 

No. 2 Canada Western Amber 

Durum 157.21 

No. 3 Canada Western Amber 

Durum 155.21 

No. 4 Canada Western Amber 

Durum 139.21 

No. 5 Canada Western Amber 

Durum 121.00 



(dollars per tonne) 

21.302 

19.092 

16.092 

.216 



181.302 
176.302 
171.302 
139.426 
121.000 



Pool Account — Oats 

Commencing August 1, 1981, as authorized by Order-in-Council, 
oats selected and accepted from producers for use in processing and 
milling for human consumption has been set up in a separate pool 
under the caption "Designated Oats". As a result, the transactions 
described herein consist mainly of marketing results related to feeding 
grades of oats. 

Initial Payments 

During the crop year the Board was authorized to purchase oats 
from producers at a fixed initial price of $1(X).(X) per tonne for No. I 
Feed Oats. 

Grade Pattern 

Deliveries of Nos. 1 and 2 Canada Western Oats comprised .16 per 
cent of producer deliveries with feeding grades constituting the 
remaining 99.84 per cent of total receipts. Board receipts of tough and 
damp oats made up 1 1 .20 per cent of deliveries. 

Final Statement of Operations — Oats — Table E 

Table E shows the operating results of the Pool Account for the 
1985-86 crop year. Marketing operations resulted in a deficit of 
$6,919,810 which is recoverable from the Government of Canada with 
funds provided by Parliament. The total payment realized by pro- 
ducers is therefore equal to the initial payments as shown in Table F. 
Operating expenses totalled $2,529,336 or $12,748 per tonne. The 
principal cost was carrying charges amounting to $1,595,882 or $8,043 
per tonne. 



184 



PUBLIC ACCOUNTS, 1986-87 



THE CANADIAN WHEAT BO ART>— Continued 

FINANCIAL RESULTS AND NOTES TO FINANCIAL ST MEMEJ^TS— Continued 

STATEMENT OF OPERATIONS 

ON THE 1985-86 POOL ACCOUNT— OATS 

FOR THE PERIOD AUGUST 1, 1985, TO NOVEMBER 30, 1986 

(with prior year figures for the 1984-85 Pool Account for comparison) 



TABLE E 



Receipts from producers 

Sales value 

Initial payments to producers 

Gross Surplus (Deficit) 

Deduct Operating Costs 
Carrying charges 

Country elevators 

Terminal storage 

Total Carrying Charges 

Interest 

Demurrage 

Additional freight — To terminals 

— Freight rate changes 

Drying Charges 

Interest and depreciation on Wheat Board hopper cars. 

Wheat Board administrative expenses 

Total Operating Costs 

Surplus (Deficit) on Operations 

Add: interest earned after November 15 

Deduct: cost of issuing final payment 

Surplus for Distribution to Producers 



1985-86 Pool Account 


1984-85 Pool Account 


Amount 


Rate per 
tonne 


Amount 


Rate per 
tonne 


198,41! tonnes 




54.639 tonnes 




S 

15.223.979 
19.614.453 


S 

76.729 
98.857 


S 

6.691.733 
5.416.401 


S 

122.472 
99.131 


(4,390,474) 


(22.128) 


1.275.332 


23.341 


1.056.922 
538.960 


5.327 
2.716 


285,692 
194,177 


5.229 
3.554 



1,595,882 
236.658 
37,344 
147.068 
17.206 
171.454 
111,942 
211.782 



2,529.336 



(6.919.810) 



8.043 
1.193 
.188 
.741 
.087 
.864 
.564 
1.068 



12.748 



(34.876) 



479.869 
3.410 

98,106 
(84,660) 

34.318 
68,867 



599,910 



675,422 

17,168 
4,218 



8.783 
.062 

1.796 
(1.550) 

.628 
1.260 



10.979 



12.362 

.314 
.077 



688,372 



12.599 



PAYMENT RECEIVED BY PRODUCERS FOR PRINCIPAL GRADES OF OATS 
BASIS IN STORE THUNDER BAY OR VANCOUVER 



TABLE F 



Grade 

No. 1 Canada Western . 
No. 2 Canada Western . 

Extra No. 1 Feed 

No. 1 Feed 

No. 2 Feed 



Initial 
payments 



(dollars per tonne) 

106.00 
104.00 
102.00 
100.00 
95.92 



Pool Account — Designated Oats 

Beginning with the crop year commencing on August 1, 1981, oats 
that have been delivered to the Board to be sold by the Board to pur- 
chasers who have selected and accepted the oats for use in processing 
and milling for human consumption, have been set up in a separate 
account. This account has been labeled "Designated Oats" and the 
results of operations on this account with comment thereon are con- 
tained in this section of the report. 

Initial Payments 

During the crop year the Board was authorized to purchase Desig- 
nated Oats from producers at fixed initial prices of $130.00 and 
$128.00 per tonne for Nos. I and 2 Canada Western Oats respectively 
and $1 24.00 per tonne for No. 1 Feed Oats. 



Supplies and Grade Pattern 

Supplies of oats in the designated pool were 36,714 tonnes represent- 
ing deliveries to the Board by producers during the crop year of oats 
which were selected and accepted by purchasers for use in processing 
and milling for human consumption. Receipts of Nos. 1 and 2 Canada 
Western Oats totalled 21,064 tonnes or 57.37 per cent of total deliver- 
ies. Feeding grades totalled 1 5,650 tonnes or 42.63 per cent of total 
receipts. 



PUBLIC ACCOUNTS, 1986-87 



185 



THE CANADIAN WHEAT BOARD— Continued 

FINANCIAL RESULTS AND NOTES TO FINANCIAL STATEMENTS— Commwe^ 



Final Statement of Operations and Surplus for Distribution to Pro- 
ducers — Designated Oats — Table G 

Table G shows the operating results of this pool account for the crop 
year. Marketing operations resulted in a surplus of $635,944. As to 
operating costs, it should be noted that the Designated Oats Pool, by 
its very nature, does not incur the handling expenses normally related 
to feeding grades of oats. It is not stored by the Board, being selected 
by the purchaser and shipped at his request from farm to processing 
plant via the country elevator. As a result, the only expenses incurred 



attributable to such oats were costs related to hopper cars owned by 
the Wheat Board and administrative charges totalling $56,310 or 
$1,534 per tonne. These expenses were more than offset by interest 
earnings of $67,518 or $1,839 per tonne on the accumulating surplus 
in the pool. After providing for the cost of issuing the final payment 
and adding estimated interest earnings subsequent to October 31, 
1986, the net surplus for distribution to producers was $649,496 or 
$17,691 per tonne on producer deliveries of 36,714 tonnes. Table H 
shows the total payment received by producers for the principal grades 
of Designated Oats delivered during the crop year. 



STATEMENT OF OPERATIONS AND SURPLUS FOR DISTRIBUTION TO PRODUCERS 
ON THE 1985-86 POOL ACCOUNT— DESIGNATED OATS 
FOR THE PERIOD AUGUST 1, 1985, TO OCTOBER 31, 1986 
(with prior year figures for the 1984-85 Pool Account for comparison) 



TABLE G 



Receipts from producers 

Sales value 

Initial payments to producers 

Gross Surplus 

Deduct Operating Costs 

Interest and bank charges 

Interest and depreciation on Wheat Board hopper cars 

Wheat Board administrative expenses 

Total Operating Costs 

Surplus on Operations 

Add: interest earned after October 31 (1984-85 September 30) 

Deduct: cost of issuing final payment 

Surplus for Distribution to Producers 



1985-86 Pool Account 


1984-85 Pool Account 


Amount 


Rate per 
tonne 


Amount 


Rate per 
tonne 


36,714 tonnes 




44,219 tonnes 




$ 

5,269,109 

4,644,373 


$ 

143.518 
126.502 


$ 

6,858,685 
6,061,679 


$ 

155.108 
137.084 


624,736 


17.016 


797,006 


18.024 


(67,518) 
20,714 
35,596 


(1.839) 
.564 
.970 


(95,397) 
27,773 
51,434 


(2.157) 
.628 
1.163 


(11,208) 


(.305) 


(16,190) 


(.366) 


635,944 

14,390 

838 


17.321 
.392 
.022 


813,196 

20,670 

664 


18.390 
.468 
.015 



649,496 



17.691 



833,202 



18.843 



TOTAL PAYMENTS RECEIVED BY PRODUCERS 
FOR PRINCIPAL GRADES OF DESIGNATED OATS 
BASIS IN STORE THUNDER BAY OR 
VANCOUVER 



TABLE H 



Grade 



Initial 
payments 



Final 
payments 



Total 



Oats Grades 

No. I Canada Western 130.00 

No. 2 Canada Western 1 28.00 

Extra No. 1 Feed 126.00 

No. I Feed 124.00 



(dollars per tonne) 

20.249 
20.249 
15.749 
13.749 



150.249 
148.249 
141.749 
137.749 



Pool Account — Barley 

Since August I, 1975, as authorized by Order-in-Council, barley 
selected and accepted from producers for the use of malting, pot or 
pearling, has been set up in a separate pool under the caption "Desig- 
nated Barley". As a result, the transactions remaining in the Barley 
Pool Account described here consist mainly of marketing results 
related to feeding grades of barley. 



Initial Payments 

At the beginning of the crop year the Board was authorized to pur- 
chase barley from producers at a fixed initial price of $110.00 per 
tonne for No. 1 Feed Barley. 

Supplies and Grade Pattern 

Supplies in the regular Feed Barley ix)ol were 5,446,720 tonnes com- 
prised of 4,947,005 tonnes delivered by producers, 18,862 tonnes 
acquired from other than producers and 480,853 tonnes purchased 
from the previous pool. Deliveries of Nos. 1 and 2 Feed Barley com- 
prised 93.23 per cent of the producer deliveries in the pool. Board 
receipts of tough and damp barley made up 4.40 per cent of deliveries. 

Final Statement of Operations — Barley — Table I 

Table I shows the operating results of the Pool Account for the crop 
year. Marketing operations resulted in a deficit of $171,370,689 which 
is recoverable from the Government of Canada with funds provided by 
Parliament. The total payment realized by producers is therefore equal 
to the initial payments as shown in Table J. Operating expenses 
totalled $38,734,279 for the year or $7,830 per tonne. The principal 
cost was carrying charges amounting to $14,579,769 or $2,947 per 
tonne. 



186 



PUBLIC ACCOUNTS, 1986-87 



THE CANADIAN WHEAT BOARD— Continued 

FINANCIAL RESULTS AND NOTES TO FINANCIAL STATEMENTS— Continued 

STATEMENT OF OPERATIONS ON THE 1985-86 POOL ACCOUNT— BARLEY 
FOR THE PERIOD AUGUST 1, 1985, TO OCTOBER 31, 1986 
(with prior year figures for the 1984-85 Pool Account for comparison) 



TABLE I 



Receipts from producers 

Sales value 

Initial payments to producers 

Gross Surplus (Deficit) 

Deduct Operating Costs 
Carrying charges 

Country elevators 

Terminal storage 

Total Carrying Charges 

Interest 

Demurrage 

Additional freight — To terminals 

— Freight rate changes 

Handling and stop-off 

Drying 

Interest and depreciation on Wheat Board hopper cars. 

Wheat Board administrative expenses 

Total Operating Costs 

Surplus (Deficit) on Operations 

Add: interest earned after September 30 

Deduct: cost of issuing final payment 

Surplus for Distribution to Producers 



1985-86 Pool Account 


1984-85 Pool Account 


Amount 


Rate per 
tonne 


Amount 


Rate per 
tonne 


4,947,005 tonnes 


3,068,472 tonnes 


$ 

406,487,805 
539,124,215 


S 

82.169 
108.980 


$ 

414,730,903 
382,262,408 


S 

135.159 
124.578 


(132,636,410) 


(26.811) 


32.468,495 


10.581 


10,622,501 
3,957,268 


2.147 
.800 


4,724,253 
3,356,581 


1.540 
1.094 



14,579,769 
5,593,975 
975,328 
2,165,184 
19,309 
1,703,300 
6,109,994 
2,791,055 
4,796,365 



38,734,279 



(171,370,689) 



2.947 
1.131 
.197 
.438 
.004 
.344 
1.235 
.564 
.970 



7.830 



(34.641) 



8,080,834 
(1,306,516) 
(449,348) 
1,897,338 
(893,639) 
(52,098) 
628,571 
1,927,267 
3,569,130 



13,401,539 



19,066,956 

484,640 
53,892 



2.634 

(.426) 

(.147) 

.618 

(.291) 

(.017) 

.205 

.628 

1.163 



4.367 



6.214 

.158 
.018 



19,497.704 



6.354 



PAYMENT RECEIVED BY PRODUCERS FOR PRINCIPAL GRADES OF BARLEY 
BASIS IN STORE THUNDER BAY OR VANCOUVER 



TABLE J 



Grade 

Barley Grades 

No. 1 Canada Western Six-Row ... 
No. 2 Canada Western Six-Row ... 
No. 2 Canada Western Two-Row . 

No. I Feed 

No. 2 Feed 



Initial 
payments 



(dollars per tonne) 



112.93 
111.93 
111.93 
110.00 
107.43 



Pool Account — Designated Barley 

As stated previously, since August 1, 1975, barley that has been 
delivered to the Board to be sold by the Board to purchasers who have 
selected and accepted the barley for the use of malting, pot or pearling, 
has been set up in a separate pool account. This account has been 
labelled "Designated Barley" and the results of operations on this 
account with comment thereon are contained in this section of the 
report. 

Initial Payments 

At the beginning of the crop year the Board was authorized to pur- 
chase Designated Barley from producers at a fixed initial price of 
$155.00 per tonne for No. 2 Canada Western Six-Row and $165.00 
per tonne for No. 2 Canada Western Two-Row. 



Supplies and Grade Pattern 

Supplies of barley in the designated pool were 645,255 tonnes repre- 
senting deliveries to the Board by producers during the crop year of 
barley which has been selected and accepted by purchasers for the use 
of malting, pot or pearling. Of these receipts 342,421 tonnes or 53.07 
per cent were row grades and 302,834 tonnes or 46.93 per cent were 
feeding grades. Receipts of tough and damp grades totalled 46,921 
tonnes or 7.27 per cent of total. 

Final Statement of Operations and Surplus for Distribution to Pro- 
ducers — Designated Barley — Table K 



PUBLIC ACCOUNTS, 1986-87 



187 



THE CANADIAN WHEAT BOARD— Continued 

FINANCIAL RESULTS AND NOTES TO FINANCIAL SJATEME^^TS— Continued 



Table K shows the operating results of this pool account for the crop 
year. Marketing operations resulted in a surplus of $21,213,932. As to 
operating costs, it should be noted that the Designated Barley Pool by 
its very nature does not incur the handling expenses normally related 
to feeding grades of barley or other grains. It is not stored by the 
Board, being selected by the processor (buyer) from a producer's sam- 
ple and is shipped on buyer's call directly from farm to processing 
plant via the country elevator. As a result the only expenses incurred 
attributable to such barley were costs related to hopper cars owned by 
the Wheat Board and administrative charges totalling $989,653 or 
$1,534 per tonne. These expenses were more than offset by interest 
earnings of $2,036,919 or $3,157 per tonne on the accumulating sur- 



plus in the pool. After allowing for the cost of issuing the fmal pay- 
ment and estimated interest earnings subsequent to Ocotber 31, 1986, 
the net surplus for distribution to producers was $21,683,836 or 
$33,605 per tonne on producer deliveries of 645,255 tonnes. This is 
compared to $25,284,020 or $35,501 per tonne for the previous year. 

Table L shows the total payment received by producers for the prin- 
cipal grades of Designated Barley. The fmal return to producers for 
deliveries of No. 2 Canada Western Six-Row and No. 2 Canada West- 
ern Two- Row was $183,395 and $203,395 respectively, compared to 
$188,937 and $199,401 for these two grades respectively in the previ- 
ous |X)Ol. 



STATEMENT OF OPERATIONS AND SURPLUS FOR DISTRIBUTION TO PRODUCERS 
ON THE 1985-86 POOL ACCOUNT— DESIGNATED BARLEY 
FOR THE PERIOD AUGUST 1, 1985, TO OCTOBER 31, 1986 
(with prior year figures for the 1984-85 Pool Account for comparison) 



TABLE K 



Receipts from producers 

Sales value 

Initial payments to producers 

Gross Surplus 

Deduct Operating Costs 

Interest 

Interest and depreciation on Wheat Board hopper cars 

Wheat Board administrative expenses 

Total Operating Costs 

Surplus on Operations 

Add: interest earned after October 31 (1984-85 September 30) 

Deduct: cost of issuing final payment 

Surplus for Distribution to Producers 



1985-86 Pool Account 


1984-85 Pool Account 


Amount 


Rate per 
tonne 


Amount 


Rate per 
tonne 


645,255 tonnes 


712,195 tonnes 


S 

121,925,659 
101,758,993 


$ 

188.957 
157.703 


$ 

135,116.236 
111,703,201 


$ 

189.718 
156.844 


20,166,666 


31.254 


23,413,035 


32.874 


(2,036,919) 
364,047 
625,606 


(3.157) 
.564 
.970 


(2,527,411) 
447,320 
828,398 


(3.549) 

.628 

1.163 


(1,047,266) 


(1.623) 


(1,251,693) 


(1.758) 


21,213,932 

480,029 

10,125 


32.877 
.744 
.016 


24,664,728 

626,923 

7,631 


34.632 
.880 
.011 



21,683,836 



33.605 



25,284,020 



35.501 



TOTAL PAYMENTS RECEIVED BY PRODUCERS FOR 

PRINCIPAL GRADES OF DESIGNATED BARLEY 

BASIS IN STORE THUNDER BAY OR 

VANCOUVER TABLE L 



Grade 



Designated Barley Grades 
No. 1 Canada Western Six-Row . 
No. 2 Canada Western Six-Row 
No. 1 Canada Western Two-Row 
No. 2 Canada Western Two-Row 

No. 1 Feed Six-Row 

No. I Feed Two-Row 

No. 2 Feed Six-Row 

No. 2 Feed Two-Row 



initial 


Final 




payments 


payments 


Total 


(doll 


ars per tonne] 




156.27 


28.125 


184.395 


155.00 


28.395 


183.395 


166.27 


38.125 


204.395 


165.00 


38.395 


203.395 


151.77 


29.125 


180.895 


161.77 


39.125 


200.895 


149.77 


27.725 


177.495 


159.77 


37.725 


197.495 



188 



PUBLIC ACCOUNTS, 1986-87 



THE CANADIAN WHEAT BOARD— Continued 

FINANCIAL RESULTS AND NOTES TO FINANCIAL STATEMENTS— Co/i//>iMerf 



NOTES TO FINANCIAL STATEMENTS 
The following are an integral part of the financial statements. 
1 . Accounting policies 

(a) Operating results and valuation of stocks of grain 

The annual accounts at July 31 include the final operating 
results of all pool accounts for the crop year ended July 31 
when marketing operations have been completed before the 
issuance of the annual report for that year. In determining 
the financial results for such pools the accounts of the Board 
at July 31 include: 

(i) the stocks of such grains on hand at that date at the val- 
ues which were ultimately received from the sale thereof 
basis in store Thunder Bay, Vancouver or Churchill; and 

(ii) provision for all expenses incurred or to be incurred 
before the sales proceeds are realized in cash or in bills of 
exchange, including a charge for the portion of administra- 
tive and general expenses to be incurred subsequent to July 
31 but relating to the marketing and accounting for the 
grains in the various pools before they are closed. 

For pool accounts for which marketing operations have not 
been completed before the issuance of the annual report, the 
unsold stocks at July 31 are valued at cost, which is the initial 
price paid to producers, and no provision is made for carrying 
costs, interest, and administrative expenses beyond that date. 
Any debit or credit balance in these accounts is carried on 
the balance sheet. 

(b) Foreign currency translations 

Bills of exchange receivable in United States funds which are 
covered by forward exchange contracts are translated at the 
contract rates. In all other cases, bills of exchange receivable 
and bank loans payable in United States funds are translated 
at the rate of exchange in effect as at the balance sheet date, 
as is also the liability for debentures repayable in United 
States funds. 

Foreign exchange adjustments arising from conversion of 
bills of exchange and bank loans are included in operating 
results. Adjustments arising from conversion of debenture 
debt are amortized over the term of the debentures. 

(c) Depreciation 

The rates of depreciation being applied are intended to fully 
depreciate assets over their expected lives and are as follows: 



Hopper cars 

Office building 

Office furniture and equipment 

Automotive equipment 

(to '/3 residual value) 



30 years 

40 years 

10 years 

2 years 



(d) Administration and general expenses 

Administration and general expenses, except for that portion 
of such expenses attributable to distributing final payments 
to producers, are allocated to the various pool account opera- 
tions to which the services relate on the basis of the relative 
tonnage. Expenses attributable to final payments are 
allocated on the basis of the number of producers receiving 
payments from the various pool accounts. 

2. Bills of exchange plus accrued interest 

Of the total bills of exchange receivable, $1,348,265,483 
(1985 — $1,499,477,966) represents the Canadian equivalent of 
$976,791,627 (1985— $1,1 1 1,053,626) repayable in United States 
funds. 



The balances receivable arise from sales of grain to Brazil, 
Egypt, German Democratic Republic, Haiti, Iraq, Israel, 
Jamaica, Mexico, Peru, Poland and Zambia. The terms call for 
payment in full within 36 months or less from time of shipment, 
except for Brazil, Haiti, Jamaica, Peru, Poland and Zambia 
where the Board, together with the Canadian Government, have 
agreed to reschedule certain receivables beyond their original 
maturity dates. Terms of such reschedulings call for payment of 
interest and the rescheduled debt within ten years. As at July 31, 
total reschedulings amounted to $459,164,319 including 
$35,913,045 which is the Canadian equivalent of $26,032,957 
receivable in United States currency. 

As at July 31, 1986, amounts due and unpaid from Poland total 
$1,927,274,624 which includes the Canadian equivalent of 
$761,301,738 receivable in U.S. funds. Subsequent to the year 
end, the Board together with the Government of Canada con- 
cluded a bilateral rescheduling agreement with the Government of 
the Polish People's Republic, rescheduling all amounts matured 
and unpaid together with interest accrued thereon for the period 
January 1, 1982, to December 31, 1984, amounting to 
$1,453,356,541 which includes the Canadian equivalent of 
$539,059,681 receivable in U.S. funds. In accordance with a mul- 
tilateral arrangement reached between Poland and official credi- 
tors, Poland is presently in the process of negotiating a further 
rescheduling for amounts matured and unpaid during calendar 
year 1985 amounting to $181,851,468 which includes the 
Canadian equivalent of $121,752,728 receivable in U.S. funds. 
The balance of amounts due and unpaid totalling $292,066,615 
which includes the Canadian equivalent of $100,489,329 receiv- 
able in U.S. funds represents accrued interest and principal 
unpaid on the 1981 rescheduled debt, interest accrued and unpaid 
on the 1982-84 and 1985 debt. While certain repayment terms are 
specified in the 1982-84 bilateral Rescheduling Agreement with 
respect to the interest accrued in 1985 and 1986 on this debt, this 
interest is not included in the principal portion of the rescheduled 
debt. 

During the crop year the Government of Canada and other 
creditor nations agreed to a further deferral of certain Zambian 
obligations that had earlier been rescheduled. The bilateral agree- 
ment to reschedule payments due and not paid as at December 3 1 , 
1985, and due and not paid for the period January 1, 1986, to 
December 31, 1986, has yet to be negotiated. The accounts of the 
Board at July 31, 1986, include $10,312,331 which may be sub- 
ject to this rescheduling. 

Subsequent to the year-end the Government of Canada and 
other creditor nations agreed with Brazil to reschedule over a six- 
year period certain obligations due and unpaid for the period 
January 1, 1985, to December 31, 1986. The accounts of the 
Board at July 31, 1986, include $173,699,989 which will be sub- 
ject to the rescheduling. 

Subsequent to the year-end the Government of Canada and 
other creditor nations agreed to reschedule over a nine-year period 
certain obligations owing by Mexico. The accounts of the Board 
at July 31, 1986, include $6,683,517 which is the Canadian 
equivalent of $4,842,076 receivable in United States funds which 
would be subject to such a rescheduling agreement. 

Credit sales are made within limits established by the Govern- 
ment of Canada which guarantees the Board's borrowings 
incurred to finance such sales, both as to principal and interest. 
Because of these Guarantees the Board does not consider itself to 
be at risk should any of the unpaid amounts prove to be uncollect- 
able; therefore, no provision is made in its accounts with respect to 
the possibility of debtors defaulting on their obligations. 



PUBLIC ACCOUNTS, 1986-87 



189 



THE CANADIAN WHEAT BOARD— Concluded 

FINANCIAL RESULTS AND NOTES TO FINANCIAL STATEMENTS— Conc/wrf^rf 
NOTES TO FINANCIAL STATEMENTS— Co«c/urfe(/ 



3. Accounts receivable 

Settlement on amounts due on sales completed as at July 31 
were received shortly after that date. Sundry accounts receivable 
consists mainly of freight costs which are recovered on completed 
sales. 

4. Covered hopper cars 

The Board purchased 2,000 covered hopper cars in 1979-80 
having an original cost of $90,555,623. Of these 2,000 cars, 29 
cars have been wrecked and dismantled leaving 1,971 still in the 
fleet having an original cost of $89,242,566 with accumulated 
depreciation of $19,338,509 to July 31, 1986. The Board is reim- 
bursed for destroyed cars under an operating agreement with the 
Canadian National Railway. 

5. Liability to banks 

Details of liability to banks are as follows: 

July 31 



1986 



1985 



Ordinary operations 367,538,849 

Loans to finance credit sales 3,516,739,651 



224,554,171 
3,683,799,803 



3,884,278,500 



3,908,353,974 



Of the total liability $1,344,002,480 (1985— $1,498,429,431) 
represents the Canadian equivalent of $973,703,166 (1985 — 
$1,1 10,276,698) repayable in United States funds. 

The Board's borrowings are guaranteed by the Government of 
Canada. 

6. Debentures payable 

The debentures with a face value of U.S. $50,000,000 were 
issued on December 1, 1982, at a price of $99.50 per $100, and 
bear interest at 1 1 V* per cent per annum payable each December 
1 . No principal repayments are required until maturity on Decem- 
ber 1, 1990. Under certain circumstances the Board may redeem 
the debentures in whole or in part prior to maturity. Depending 
upon the particular circumstances giving rise to any early redemp- 
tion, a premium may be payable on the principal amount 
redeemed. 

The debentures are secured by a charge against grain held by 
the Board. 

7. Liability to agents for grain purchased from producers 

Grain companies acting in the capacity of agents of the Board 
accept deliveries from producers at country elevators and pay the 
producers on behalf of the Board based on the Board's initial price 
in effect. Settlement is not made by the Board for these purchases 
until delivery to the Board is completed by its Agents at terminal 
or mill position. Liability to agents amounting to $962,151,232 



(1985— $570,996,143) represents the amount payable by the 
Board to its agents for 6,961,181 (1985—3,600,606) tonnes of 
wheat, amber durum wheat, oats and barley on hand at country 
elevator points and in transit at July 31 for which delivery to and 
settlement by the Board is to be completed subsequent to year-end 
date. 

Liability to agents for deferred cash tickets 

Grain companies as agents of the Board deposit with the Board 
in trust the proceeds of deferred cash tickets issued for Board 
grain. These monies are returned to the grain companies to cover 
producer deferred cash tickets maturing predominately during the 
first days of the following calendar year. 

Accrued exp>enses and accounts payable 

This item principally comprises accrued carrying charges, stor- 
age, interest and transportation charges to July 31, 1986, together 
with all other unpaid sundry accounts as at the foregoing date. It 
also includes provisions for all charges relating to the marketing 
of Pool Accounts for Amber Durum Wheat, Designated Oats, 
Barley and Designated Barley for the period from August 1, 1986, 
to completion of operations on October 31, 1986, and for Wheat 
and Oats for the period from August 1, 1986, to completion of 
operations on November 30, 1986. 



10. Special account 
accounts 



Net balance of undistributed payment 



In accordance with the provision of Section 30 of the Canadian 
Wheat Board Act the Governor in Council may authorize the 
Board to transfer to a Special Account the unclaimed balances 
remaining in payment accounts which have been payable to pro- 
ducers for a period of six years or more. In addition to providing 
for payment of proper claims from producers against these old 
payment accounts, the Section further provides that these funds 
shall be used for purposes as the Governor in Council upon the 
recommendations of the Board may deem to be for the benefit of 
producers. 

1 1 . Provision for final payment expenses 

This represents the balance of the Board's reserve for final pay- 
ment expenses of pool accounts that have been closed. Six years 
after particular accounts have been closed, the remaining reserves 
for these pools are transferred to the special account by Order-in- 
Council. 

12. Lease commitments 

The Board, as an agent of Her Majesty in Right of Canada, is 
the lessor of 2,000 covered hopper cars for the Government of 
Canada. All lease costs are recoverable from the Government and 
are not a charge to the operations of the Board. Total payments 
associated with leases in the year ended July 31, 1986, amounting 
to $16,809,962 (1985— $16,728,906) have been recovered by the 
Board. Lease terms are for 20 and 25 years. 



I 



190 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
CANAGREX 



MANDATE 

To promote, facilitate and, when specifically requested, to engage in the export of agricultural and food products 
from Canada. 

BACKGROUND 

Incorporated in 1983, the corporation began operations in 1984, The government plans to dissolve the corporation 
and transfer its operations to other government departments and agencies. Legislation (S.C. 1987, C. 38) to authorize 
dissolution of Canagrex was given Royal Assent on October 8, 1987. 



CORPORATION DATA 

HEAD OFFICE 



STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS OF 
INCORPORATION 

CHAIRMAN AND CHIEF 
EXECUTIVE OFFICER 

AUDITOR 



c/o Crown Corporations Directorate 

Treasury Board of Canada 

8th Floor, East Tower 

140 O'Connor Street 

Ottawa, Ontario. 

K1A0R5 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable John Wise, P.C, M.P. 

Agriculture 

The Canagrex Act (S.C. 1980-81-82-83, C.152). 

Glenn Flaten 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 



At the end of the period 

Total Assets 

Obligations to the private sector 

Obligations to Canada 

Equity of Canada 

Cash from Canada in the period 

— budgetary 

— non-budgetary 



1986-87 



1985-86 



1984-85 



1983-84 



0.2 


0.3 


2.3 


0.3 


nil 


nil 


nil 


nil 


nil 


nil 


nil 


nil 


0.2 


0.2 


1.8 


0.2 


nil 


nil 


5.4 


0.7 


nil 


nil 


nil 


nil 



PUBLIC ACCOUNTS, 1986-87 
CANAGREX 

AUDITOR'S REPORT 

TO THE MINISTER OF AGRICULTURE 

I have examined the balance sheet of Canagrex as at March 31, 
1987 and the statements of operations and surplus and changes in 
fmancial position for the year then ended. My examination was made 
in accordance with generally accepted auditing standards, and accord- 
ingly included such tests and other procedures as I considered neces- 
sary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of Canagrex as at March 31, 1987 and the results of its opera- 
tions and the changes in its financial position for the year then ended 
in accordance with generally accepted accounting principles applied on 
a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the financial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, the Cana- 
grex Act and the by-laws of the Corporation. 

D. Larry Meyers, F.C.A. 
Deputy Auditor General 
for the Auditor General of Canada 
Ottawa, Canada 
June 12, 1987 



191 



BALANCE SHEET AS AT MARCH 31, 1987 



ASSETS 



Cash 

Accounts receivable . 



1987 



1986 



167,323 286,915 
895 14,140 



168,218 301,055 



LIABILITIES 

Accounts payable and accrued liabilities. 
EQUITY OF CANADA 

Surplus 



1987 



1986 



S S 

147,120 

168,218 153,935 
168,218 301,055 



Approved by the Board: 
GLENN FLATEN 
HOWARD MALCOLM 



192 



PUBLIC ACCOUNTS, 1986-87 



CANAGREX— Concluded 

STATEMENT OF OPERATIONS AND SURPLUS 
FOR THE YEAR ENDED MARCH 31, 1987 



1987 



1986 



Revenue 

Interest income 

Guarantee fees 

Expenses 

Directors fees and expenses 

Stationery, supplies and library 

Travel and entertainment 

Office and equipment rentals 

Lease termination 

Salaries and benefits 

Professional fees 

Telephone, telex and postage 

Miscellaneous 

Income from (cost oQ operations 

Adjustment on settlement of termination benefits .. 

Refund of Quebec payroll taxes (Note 3) 

Gain on sale of fixed assets 

Surplus, beginning of year 

Repayment of surplus to the Consolidated Reve- 
nue Fund 

Surplus, end of year 



$ 


S 


12,790 


148,123 




3,450 


12,790 


151.573 


3,600 


7,703 


128 


3,519 


30 


6,040 




136,624 




90,820 




85,596 




11,295 




12,997 




3,412 


3,758 


358,006 


9,032 


(206,433) 


(718) 


136,132 


5,969 






27,958 


14,283 


(42,343) 


153,935 


1,846,278 




(1,650,000) 



168,218 



153,935 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED MARCH 31, 1987 



1987 



1986 



Operating 
Cash provided by (used in) operating activities 

Cost of operations before interest income 

Decrease in accounts receivable 

Decrease in accounts payable 

Refund of Quebec payroll taxes 

Adjustment on settlement of termination ben- 
efits 



Investing 
Cash provided by investing activities 

Interest on bank deposits 

Disposal of fixed assets 



(3,758) 
13,245 
(147,120) 
5,969 

(718) 


(354,556) 

3,081 
(288,506) 

136,132 


(132,382) 


(503,849) 


12,790 


148,123 
102,959 


12,790 


251,082 



Financing 
Cash used in financing activities 
Repayment of surplus to the Consolidated 

Revenue Fund (1,650,000) 

(1.650,000) 

Decrease in cash for the year (1 19,592) (1,902,767) 

Cash, beginning of year 286,915 2,189,682 

Cash, end of year 167,323 286,915 



NOTES TO THE FINANCIAL STATEMENTS 
MARCH 31, 1987 

1 . The Corporation 

The Corporation was established in June 1983 under the 
CANAGREX Act and commenced operations in January 1984. 
It is a Crown corporation named in Part I of Schedule C to the 
Financial Administration Act. 

The purpose of CANAGREX was to assist Canadian producers 
and processors to increase their exports of food and agricultural 
products. The Corporation worked with the private and public 
sectors to promote, facilitate and engage in the export of agricul- 
tural products and services and food products and services. 

It was announced by the Minister of Finance, on November 8, 
1984, that the Canagrex programme was to be discontinued. 
Since then the Corporation has been engaged in winding-up its 
affairs. Bill C-42, "An Act to dissolve Canagrex and to amend 
certain Acts in consequence thereof is presently before Parlia- 
ment and has now undergone second reading in the House of 
Commons. If proclaimed, the Bill will result in the orderly liqui- 
dation of the Corporation. 

Canagrex no longer has any employees. The president of the 
Corporation resigned in September 1985. The Board of Directors 
remains intact to deal with statutory requirements pending the 
dissolution of the Corporation, which is being administered, with- 
out charge, by officials of the Department of Agriculture. 

2. Accounting policies 

Interest income, which relates to bank deposits, is recorded on 
the accrual basis. 

3. Refund of Quebec payroll taxes 

In September 1986, the Quebec Ministry of Revenue deter- 
mined that the Corporation was not subject to certain Quebec 
payroll taxes. Accordingly, amounts paid in 1984 and 1985 have 
been refunded and accounted for as an unusual item in the cur- 
rent year. 

4. Comparative figures 

Certain 1986 comparative amounts have been reclassified to 
conform with the presentation adopted in 1987. 



PUBLIC ACCOUNTS, 1986-87 



193 



SUMMARY PAGE 
CAPE BRETON DEVELOPMENT CORPORATION 



MANDATE 



To operate, reorganize and rationalize coal production from the Sydney coal field. To broaden the economic base and 
develop new job opportunities on Cape Breton Island. 



BACKGROUND 

The corporation's two divisions were established in 1967 by the Cape Breton Development Corporation Act: 

— Originally established to close down the Cape Breton coal mining industry with minimum dislocation, the Coal 
Division is still the major employer in the Sydney/Glace Bay area. A resurgence in coal demand locally for power 
generation has led to an expanded and modernized industry employing approximately 3,600 people. In addition to 
the Prince and Lingan mines, the corporation operates a coal preparation plant, a complete rail transportation 
system and a shipping pier. A new Phalen colliery will be completed in 1987, increasing the corporation's annual 
production capacity to over 4 million tonnes. 

— The Industrial Development Division was created to develop alternative employment opportunities and broaden 
the base of the local economy. In conjunction with the Atlantic Canada Opportunities Agency, Enterprise Cape 
Breton and other federal and provincial initiatives, this Division promotes and assists the financing and 
development of industry on Cape Breton Island through a wide range of assistance instruments. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



P.O. Box 2500 
Sydney, Nova Scotia 
B1P6T7 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable Robert R. de Cotret, P.C., M.P. 

Regional Industrial Expansion and Science and Technology 

1967; by the Cape Breton Development Corporation Act, (R.S.C. 
1970, C-13). 

Derek Ranee 

Teresa MacNeil 
Touche, Ross & Co. 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 

1986-87 

At the end of the period 

Total Assets ^°} 

Obligations to the private sector nil 

Obligations to Canada ' 

Equity of Canada 5^* 

Cash from Canada in the period 

— budgetary ^"^ 

— non-budgetary ^ 



1985-86 



1984-85 



1983-84 



454 


397 


359 


nil 


nil 


nil 


3 


13 


11 


401 


335 


306 


120 


108 


110 


(10) 


2 


11 



194 



PUBLIC ACCOUNTS, 1986-87 



CAPE BRETON DEVELOPMENT CORPORATION 

AUDITORS' REPORT 

TO THE HONOURABLE 

THE MINISTER OF REGIONAL INDUSTRIAL EXPANSION 

We have examined the balance sheet and the statement of equity of 
the Coal Division and of the Industrial Development Division of the 
Cape Breton Development Corporation as at March 31, 1987, and the 
related income and operating statements and the statements of 
changes in financial position for the year then ended. Our examination 
was made in accordance with generally accepted auditing standards, 
and accordingly included such tests and other procedures as we con- 
sidered necessary in the circumstances. 

The financial statements of the Industrial Development Division and 
of its subsidiaries have been presented on a consolidated basis. As 
required by the provisions of the Cape Breton Development Corpora- 
tion Act, the financial statements of the Coal Division and of the 
Industrial Development Division are being presented separately. 

In our opinion, these financial statements present fairly the financial 
position of the Coal Division and of the Industrial Development Divi- 
sion of the Cape Breton Development Corporation as at March 31, 
1987, and the results of their operations and the changes in their finan- 
cial position for the year then ended in accordance with generally 
accepted accounting principles applied on a basis consistent with that 
of the preceding year. 

Further, in our opinion, the transactions of the Corporation that 
have come to our notice during our examination of the financial state- 
ments have, in all significant respects, been in accordance with the 
Financial Administration Act and its regulations, and the Cape Breton 
Development Corporation Act and the by-laws of the Corporation. 



Sydney, Canada 
May 22, 1987 



Touche Ross & Co. 
Chartered Accountants 



COAL DIVISION 

BALANCE SHEET AS AT MARCH 31 



ASSETS 



1987 



1986 



LIABILITIES 



1987 



1986 



Current 

Cash 15,738,103 10,315,194 

Accounts receivable (Note 2) 16,662,237 23,873,285 

Inventories, at the lower of cost and net real- 
izable value 

Coal 17,921,379 22,818,843 

Operating materials and supplies 1 6,999,490 1 2,945,7 1 7 

Prepaid expenses 75,927 44,287 

67,397,136 69,997,326 

Fixed (Note 3) 486,054,365 360,584,821 



553,451,501 430,582,147 



Current 

Accounts payable— Trade 29,139,356 20,419,648 

Accrued wages and vacation pay 13,005,904 12,602,795 

Accrued charges 14,006,335 12,731,1 1 1 

Employees' deductions 5,239,931 3,568,282 

Advances — Government of Canada 7,022,215 2,643,419 

68,413,741 51,965,255 

EQUITY 

Equity of Canada 485,037,760 378,616,892 



553,451,501 430,582,147 



Commitments (Note 4) 
Contingencies (Note 5) 

On Behalf of the Board: 

TERESA MacNEIL 
Director 

MENDEL CHERNIN 
Director 



I 



PUBLIC ACCOUNTS, 1986-87 

CAPE BRETON DEVELOPMENT CORPORATION 

COAL DIVISION 

STATEMENT OF EQUITY 
AS AT MARCH 31 



195 



— Continued 

COAL DIVISION 

STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED MARCH 31 



1987 



1986 



$ $ 

Balance at beginning of year 378,616,892 315,444,720 

Add: payments by Canada in respect of mining 

losses— Vote 35 (Note 1(a)) 17,685,203 16,935,853 

payments by Canada in respect of capital 
expenditures — Vote 40 and 40b 

(Note 1(a)) 135,597,000 93,662.972 

531,899,095 426.043,545 

Deduct: mining losses 17,685,203 16,935,853 

depreciation of fixed assets 29,176,132 30,490,800 

46,861,335 47,426,65~ 

Balance at end of year 485,037,760 378,616,892 



COAL DIVISION 



STATEMENT OF INCOME 

FOR THE YEAR ENDED MARCH 31 



1987 



1986 



Revenue 

Coal sales 184.572,097 183,248.861 

Less: external selling expense 3,838,687 4,295,726 

180,733,410 178,953,135 

Outside railway revenue 3.074.447 2.775.345 

Operating revenue 183.807.857 181.728.480 

Operating expenses 

Wages and salaries 77.267.984 72.218,107 

Holidays and vacations 8.941,733 10.363,224 

Workers' Compensation 8,528,101 8.077,931 

Surcharges 7,266,685 7,470,296 

Materials and supplies 19,912,632 23,667.644 

Repair materials 9,516,682 8,102,346 

Electric power 5,303,090 5,192,866 

Grants in lieu of taxes 2,777,320 2,559,939 

Royalties 605,472 605,285 

Hired heavy equipment 5,993,396 5,916,792 

Other expenses 6.228.579 6.436.665 

Purchased and capital coat 23,499,1 10 1 1,823,656 

Depreciation 29.176.132 30.490,800 

Decrease in coal inventory 4.897.464 15.270,374 

Total operating expenses 209,914,380 208,195,925 

Excess operating expenses over operating reve- 
nue 26,106,523 26,467,445 

Pensions 15,278,791 14,412,457 

Pre-retirement leave 3,466,571 3,650,485 

Workers' Compensation (Note 1(d)) 2,799,996 3.600,000 

Interest and other income (790,546) (703,734) 

46,861,335 47.426,653 
Derf«c-f; depreciation not deductible in determin- 
ing mining losses (Note 1(c)) 29.176.132 30.490,800 

Net mining losses for the year 17,685,203 16,935,853 



1987 



1986 



Cash from (for) operating activities 

Net mining losses 

Decrease in non-cash operating working 
capital* 

Cash from financing activities 
Payments by Canada 

In respect of mining losses 

In respect of capital expenditures 

Increase (decrease) in repayable work- 
ing capital advances 

Cash from (for) investing activities 

Purchase of fixed assets 

Proceeds from sale of fixed assets 

Deferred development costs 

Increase in cash 

Cash at beginning of year 

Cash at end of year 

(Increase) decrease in non-cash operating 
working capital* 

Accounts receivable 

Coal inventory 

Material inventory 

Prepaid expenses 

Accounts payable — Trade 

Accrued wages and vacation pay 

Accrued charges 

Employees' deductions 



s 


$ 


(17,685,203) 


(16,935.853) 


20,092,789 


13,371.407 


2,407,586 


(3.564.446) 


17.685.203 


16.935.853 


135,597,000 


93.662,972 


4,378,796 


(10,798,825) 


157,660,999 


99.800,000 


(155,001,847) 


(94,159,330) 


356,171 


496,358 




612,279 


(154,645,676) 


(93,050,693) 


5,422.909 


3.184.861 


10,315,194 


7.130,333 


15,738,103 


10,315,194 


7,211,048 


(2,060,970) 


4,897,464 


15,270.374 


(4,053,773) 


(1,069,866) 


(31,640) 


87.080 


8,719.708 


6,860.611 


403.109 


(741.154) 


1,275,224 


(3,689,489) 


1,671,649 


(1,285,179) 


20,092,789 


13,371.407 



COAL DIVISION 

NOTES TO THE FINANCIAL STATEMENTS 
MARCH 31, 1987 

I . Significant accounting policies 

(a) Financing 

The Corporation is financed by way of votes of the Parlia- 
ment of Canada. These votes are for the purpose of funding 
mining losses and to finance capital projects. 

(b) Inventories 

Inventoriefs are valued at the lower of cost and net realizable 
value. 

(c) Fixed assets 

Fixed assets are stated at cost. The Corporation has provided 
depreciation on its fixed assets based on their estimated use- 
ful lives. The Treasury Board of Canada has indicated that 
depreciation should not be provided in determining mining 
losses for Parliamentary appropriation. Accordingly, the 
depreciation provision has been eliminated in arriving at this 
amount. 

(d) Workers' Compensation 

Cape Breton Development Corporation is in a single pool 
with respect to the Nova Scotia Workers' plan. Prior to the 
fire at, and closure of. No. 26 Colliery, the expense for 
Workers' Compensation was allocated to the overhead of 
each operating unit on a formula basis. The Corporation has 
continued this accounting treatment with the exception of the 



196 



PUBLIC ACCOUNTS, 1986-87 



CAPE BRETON DEVELOPMENT CORPORATION— Continued 

COAL DIVISION 



NOTES TO THE FINANCIAL STATEMENTS 
MARCH 31, \m— Concluded 

fixed portion of the expense that would have been absorbed 
by No. 26 Colliery. This item is shown separately on the 
Statement of Income as a non-operational expense. 

2. Accounts receivable 



Trade 

Employees 

Less: allowance for doubtful accounts 



3. Fixed assets 

1 

$ $ 

Lingan Colliery 153,454,909 136,690,740 

Prince Colliery 100,781,496 91,690,525 

Donkin-Morien Colliery 80,920,142 72,437,092 

Phalen Colliery 147,997,987 60,522,071 

Coal Preparation Plant 84,247,324 60,464,896 

Devco Railway 74,007,251 67,139,009 

Carbogel 4,082,155 2,719,620 

Other fixed assets 37,461,975 36,643,610 

682,953,239 528,307,563 

Accumulated depreciation (Note 1(c)) 196,898,874 167,722,742 

486,054,365 360,584,821 



1987 


1986 


S 

16,656,770 
105,467 


$ 

23,928,237 
95,048 


16,762,237 
100,000 


24,023,285 
150,000 


16,662,237 


23,873,285 


1987 


1986 



Included in fixed assets above is $80,920,142 of cumulative 
costs to March 31, 1987 on the Donkin-Morien Colliery develop- 
ment project. The Corporation has evaluated the viability of the 
overall project, taking into consideration the economic, commer- 
cial and strategic considerations with regards to the substantial 
costs involved in completion of the underground development of 
the colliery to realize commercial production. It has decided to 
maintain the completed access tunnels to ensure the future benefit 
of the funds expended. As these assets are not presently in use the 
Corporation has decided to provide for nominal depreciation com- 
mencing in the March 31, 1988 fiscal year. 

4. Commitments 

(a) Commitments on capital projects include the following: 
Approximately $14,314,000 for underground mining equip- 
ment 

Approximately $1,563,000 for other facilities 

(b) In May, 1984, the Government of Canada committed to the 
development of the Phalen Colliery. The total development 
costs are anticipated to be approximately $ 1 84,400,000 with 
$36,400,000 anticipated for approval for the 1987-88 fiscal 
year. 

(c) The Corporation leases the General Mining Building which 
houses the offices of the Coal Division. The lease is for a 20- 
year period, commencing June, 1984, with lease payments of 
approximately $1,200,000 per annum, at a current interest 
rate of 10.0%. The annual lease payments fluctuate with 
changes in the lessor's mortgage interest rates. 



5. Contingent liabilities and claims 

(a) On February 13, 1981, an explosion occurred on board a ves- 
sel carrying a shipment of coal supplied by the Corporation. 
As at March 31, 1987, an action has been commenced by the 
claimant which the Corporation intends to oppose as to the 
entire claim, and accordingly no provision for any possible 
claim is included in the financial statements. 

(b) The Corporation self insures against the potential loss of 
underground assets and for a portion of its liability insurance. 

6. Long-term sales agreement 

The Corporation has signed an agreement with the Nova Scotia 
Power Corporation which calls for the delivery of a substantial 
portion of the Corporation's coal production to the Power Corpo- 
ration. The agreement expires in the year 2010. 

7. Pensions 

An actuarial valuation of the Corporation's Non-Contributory 
Pension Plan as at December 31, 1985 indicated an unfunded 
actuarial liability of $62,400,000. No provision for this liability 
was included in the accounts as at March 31, 1987. The minimum 
annual amount required for past and current service, including 
pension payments, will be approximately $1 1,100,000 in each year 
from 1987 to 1992, $6,200,000 in 1993 and $5,500,000 from 1994 
to 1997. 

The Corporation is funding current pension payments of 
approximately $14,800,000. Should current pension payments in 
any year be less than the minimum annual amount required, the 
balance will be funded by the Corporation. 

8. Income taxes 

The Corporation will be applying for refundable investment tax 
credits in respect of qualified expenditures incurred and qualify- 
ing assets purchased after April 19, 1983. The Corporation esti- 
mates the refund to be approximately $13,000,000. This amount 
has not been reflected in these financial statements and will be 
recorded as a reduction to the related expenditures or assets when 
received. 



PUBLIC ACCOUNTS, 1986-87 

CAPE BRETON DEVELOPMENT CORPORATION— Co/in>iMe^ 

INDUSTRIAL DEVELOPMENT DIVISION 

CONSOLIDATED BALANCE SHEET 
AS AT MARCH 31 



197 



ASSETS 1987 1986 

s s 

Current 

Cash 1,413,820 1,476,368 

Accounts and interest receivable 923,735 632,784 

Receivable from Province of Nova Scotia 33,174 

Receivable from Government of Canada 3,800,000 

Inventories (Note 2(d)) 231,607 207,773 

Prepaid expenses 36.238 19,806 

2.638,574 6.136,731 

Loans and investments 

Loans 7,892,993 3,064,858 

InvestmenU 321,891 371,980 

8,214,884 3,436,838 

Fixed (Notes 2(b) and 3) 16,610,323 13,716,405 

Other 

Deferred charges 899 899_ 

27,464,680 23.290,873 

Guarantees (Note 4) 

Commitments and Contingency (Note 5) 

On Behalf of the Board: 

MENDEL CHERNIN 
Director 

TERESA MacNEIL 
Director 



LIABILITIES 



1987 



1986 



$ $ 

1,465,668 652,321 



Current 
Accounts payable 

EQUITY 

Equity of Canada 25,999,012 22,638,552 



27.464.680 23.290.873 



INDUSTRIAL DEVELOPMENT DIVISION 

CONSOLIDATED STATEMENT OF EQUITY 
AS AT MARCH 31 



INDUSTRIAL DEVELOPMENT DIVISION 

CONSOLIDATED OPERATING STATEMENT 
FOR THE YEAR ENDED MARCH 31 



1987 1986 

S $ 

Equity at beginning of year 22.638,552 1 9,655,455 

Payments during year from Government of 

Canada— Vote 45 (Note 1) 10.600.000 9,500,000 

33,238,552 29,155,455 

Deduct: net operating expenses 7,239,540 6.516.903 

Equity at end of year 25,999,012 22,638,552 



1987 1986 



Development and operating expenses 

Industrial operations and assistance 

Tourist operations and grants 

New business development assistance 

Marine farming operations 

Real estate operating costs 

Community planning and projects 

Primary production operations 

Scholarships and apprentice programs 

Loss (Gain) on disposal of fixed assets 

Administration expenses 

Salaries 

Office and miscellaneous expenses 

Professional fees 

Travelling expenses 

Depreciation and amortization 

Provision for unrecoverable loans and receivables 

Total operating expenses for the year 

Revenue 

Tourist operations 

Real estate rentals 

Industrial operations 

Interest 

Marine farming operations 

Primary production operations 

Net operating expenses "" 7,239,540 6,516,903 



s 


S 


1,529,575 


1.777.582 


1,162,652 


1.192.916 


2,497,760 


1.572.405 


38,175 


247.031 


923,387 


773.770 


175,500 


1.815.500 


481,983 


436.319 


28,500 


29.736 


198,442 


(1,966) 


7,035,974 


7,843.293 


736,994 


927.402 


559,373 


312.578 


68,416 


66,933 


34.459 


75.884 


1.399,242 


1.382,797 


1,354,626 


1,535,613 


1,238,875 


(199,805) 


2,593,501 


1,335.808 


11,028,717 


10.561.898 


1,271,082 


1.134.258 


1.104,025 


1.304.552 


S63.S83 


546.970 


763.195 


749.573 




250.225 


87.292 


59.417 


3.789.177 


4,044.995 



198 

CAPE BRETON DEVELOPMENT CORPORATION— Continued 

INDUSTRIAL DEVELOPMENT DIVISION 

CONSOLIDATED STATEMENT OF CHANGES 

IN FINANCIAL POSITION 

FOR THE YEAR ENDED MARCH 31 



PUBLIC ACCOUNTS, 1986-87 



1987 



1986 



$ S 

Cash from financing activities 

Payments by Canada— Vote 45 10,600,000 9,500,000 

Cash for operating activities 

Net operating expenses (7,239,540) (6,516,903) 

Charges (credits) not affecting cash 

Depreciation and amortization 1,354,626 1,535,613 

Loans forgiven 164,683 77i385 

Loss (gain) on sale of fixed assets 198,442 (1,966) 

Provision for (recovery oQ doubtful 

accounts 1,364,696 (317,835) 

(4,157,093) (5,223,706) 
(Increase) decrease in non-cash operating work- 
ing capital* 4,248,956 (2,417.797) 

91,863 (7,641,503) 
Cash for investing activities 

Loan repayments 762,556 988,244 

Loan drawdowns (7,120,551) (2,047,441) 

Purchase of fixed assets (4,868,370) (815,638) 

Proceeds from sale of fixed assets 426,865 380,720 

Purchase of investments 45,089 (4,417) 

(10,754,411) (1,498,532)" 

Increase (decrease) in cash (62,548) 359,965 

Cash at beginning of year 1,476,368 1,116^403 

Cash at end of year 1.413,820 1,476,368 

(Increase) decrease in non-cash operating work- 
ing capital* 

Accounts receivable 3,475,875 (2.919.341) 

Inventories (23.834) 199^939 

Prepaid expenses (16,432) 6.096 

Accounts payable 813.347 295.509 

4.248.956 (2,417.797) 



INDUSTRIAL DEVELOPMENT DIVISION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
MARCH 31, 1987 

1 . General policy 

The mission of the Industrial Development Division, as stated 
in the approved five year plan (1985-86 — 1989-90), is to support 
the establishment and maintenance of viable enterprises on Cape 
Breton Island, thereby improving the economic base and employ- 
ment opportunities on the Island. In accomplishing these objec- 
tives, the Corporation makes loans and investments, the amounts 
of which may be in excess of those which would be available 
through normal commercial sources. The Corporation also makes 
grants to assist enterprises which are considered likely to make a 
substantial improvement to the development of Cape Breton 
Island. 

The Industrial Development Division is financed by way of 
Vote of the Parliament of Canada. Parliament voted $10,600,000 
for this purpose during the fiscal year ended March 31, 1987. 



Corporation 
Interest 


Company 
Year end 


100% 


Dec. 31 


100% 


March 31 


62.5% 


March 31 


100% 


March 31 



2. Significant accounting policies 
(a) (i) Basis of consolidation 

The financial statements of the Industrial Development Divi- 
sion include the results of the Division and all its subsidiaries 
as explained below: 



Darr (Cape Breton) Limited (Real 

Estate) 

Cape Breton Marine Farming Limited 

(Inactive) 

Whale Cove Summer Village Limited 

(Tourist Accommodations) 

Dundee Estates Limited (Tourist 

Accommodations) 



(ii) As the financial statements of Whale Cove Summer Vil- 
lage Limited report a deficit equity position as at March 
31,1 987, and the minority interest in losses to date have 
been absorbed against the total of the minority invested 
capital, the losses of this company are included in the 
consolidated net operating expenses. As a consequence, 
no minority interest for this subsidiary is shown in the 
consolidated balance sheet. 

(b) Fixed assets 

Fixed assets are recorded at cost. The cost and related 
depreciation of items retired or disposed of are removed from 
the books and any gains or losses are included in the con- 
solidated operating statement. Depreciation is provided on 
the straight-line method using rates based on the estimated 
useful lives of the assets generally as follows: 
Buildings Up to 20 years 

Equipment 4 to 10 years 

Vehicles 3 to 4 years 

(c) Accounting policy — Certain subsidiaries 

The statements of Dundee Estates Limited include notes 
indicating that their statements have been prepared on the 
assumption that the company can continue to operate as a 
going concern, which assumption depends on the continued 
financial support of Cape Breton Development Corporation. 

(d) Inventories 

Inventories are valued at the lower of cost and net realizable 
value, with cost determined on a first in, first out basis. 

3. Fixed assets 



1987 



1986 



Rental facilities 9,869,708 6,236,487 

Tourist facilities 6,733,689 8,503,872 

Primary industry facilities 1,735,253 1,730,627 

Secondary industry facilities 7,673,106 7,215,937 

26,011,756 23.686,923 

Le^r accumulated depreciation 9,401,433 9,970,518 



16,610,323 13,716,405 



The four categories of fixed assets shown above each include 
land, buildings and equipment. 



PUBLIC ACCOUNTS, 1986-87 ^^ 

CAPE BRETON DEVELOPMENT CORPORATION— Co/ic/wf/e^ 

INDUSTRIAL DEVELOPMENT DIVISION 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
MARCH 31, im— Concluded 

4. Guarantees 

During the 1976 year, the Corporation guaranteed the repay- 
ment by Sydney Steel Corporation of that corporation's 
$70,000,000 — 11 '/4% Series D Debentures and the repayment of 
interest thereon. These funds were borrowed by Sydney Steel Cor- 
poration for the purpose of financing its plant rehabilitation pro- 
gram. The balance of the outstanding debentures has since been 
reduced to $38,010,000. 

The Corporation in 1971 guaranteed the repayment of bank 
advances to Stora Kopparbergs Bergslags Aktiebolag. This guar- 
antee originally amounted to $30,000,000. The balance of 
advances has since been reduced to $7,500,000. 

The Corporation made the guarantees for and on behalf of Her 
Majesty the Queen in right of Canada; therefore, any amounts 
required to be paid shall be paid out of the Consolidated Revenue 
Fund of Canada and not out of funds of Cape Breton Develop- 
ment Corporation. 

5. Commitments & Contingency 

(a) As at March 31, 1987, the Industrial Development Division 
of the Corporation was committed to expenditures and loans 
over and above the amounts included in the financial state- 
ments at that time, totalling $5,300,000. 

(b) The Corporation entered an agreement to lease premises in 
Commerce Tower, effective May 1, 1987, to provide office 
space for the Industrial Development Division and Enterprise 
Cape Breton. The lease is for a five year period with lease 
payments of approximately $252,000 per annum. 

(c) For the fiscal year ending March 31, 1988, Parliament has 
voted $10,600,000 to the Industrial Development Division 
but has reserved $3,910,000 of this amount pending the com- 
pletion of a formal memorandum of agreement between 
Enterprise Cape Breton and the Corporation, which agree- 
ment must also be approved by Treasury Board. 



200 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
DEFENCE CONSTRUCTION (1951) LIMITED 



MANDATE 



To contract for and supervise major military construction and maintenance projects required by the Department of 
National Defence; to provide technical and administrative assistance concerning construction matters to government 
departments and agencies on a cost-recovery basis. 



BACKGROUND 

The corporation has been in operation since 1951. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHAIRMAN AND CHIEF 
EXECUTIVE OFFICER 

AUDITOR 



Sir Charles Tupper Building 
Riverside Drive 
Ottawa, Ontario 
K1A0K3 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable Stewart Mclnnes, P.C., M.P. 

Public Works 

1951; by the Defence Production Act (R.S.C. 1970, D-2); continued 
under the Canada Business Corporations Act, November 21, 1978 

J.R. Lome Atchison 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 



1986-87 



At the end of the period 

Total Assets 

Obligations to the private sector 

Obligations to Canada 

Equity of Canada 

Cash from Canada in the period 

— budgetary 

— non-budgetary 



1985-86 



1984-85 



1983-84 



1.5 


2.6 


1.2 


1.0 


nil 


nil 


nil 


nil 


0.3 


1.4 


nil 


nil 


(2.9) 


(3.1) 


(3.1) 


(3.2) 


13.2 


14.3 


14.5 


12.9 


nil 


nil 


nil 


nil 



PUBLIC ACCOUNTS, 1986-87 



201 



DEFENCE CONSTRUCTION (1951) LIMITED 

AUDITOR'S REPORT 

TO THE MINISTER OF PUBLIC WORKS 

I have examined the balance sheet of Defence Construction (1951) 
Limited as at March 31, 1987 and the statements of operations and 
deficit and changes in financial position for the year then ended. My 
examination was made in accordance with generally accepted auditing 
standards, and accordingly included such tests and other procedures as 
I considered necessary in the circumstances. 

In my opinion, these fmancial statements present fairly the fmancial 
position of the Corporation as at March 31, 1987 and the results of its 
operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the financial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, the Defence 
Production Act and the by-laws of the Corporation. 



Kenneth M. Dye, F.C.A. 
Auditor General of Canada 



Ottawa, Canada 
May 22, 1987 



BALANCE SHEET AS AT MARCH 31, 1987 



ASSETS 1987 1986 

$ S 

Current 

Cash 1,163,349 

Accounts receivable from government departments 

and agencies 1 1,424 

Other 23,785 

1,198,558 2.293.641 
Fixed, at cost 

Furniture and equipment 1,029,803 920,399 

Less: accumulated depreciation 734,031 618,747 

295,772 301,652 



2,211,938 

21,718 
59.985 



1,494.330 2,595.293 



LIABILITIES 



1987 



1986 



Current 

Accounts payable and accrued liabilities 1.083.149 1.175.249 

Due to Canada 343,074 1.394.606 

Contractors' security deposits (Note 3) 181.784 212.567 

1.608.007 2,782.422 

Provision for employee benefits (Note 4) 2.801.391 2.875.300 



4.409,398 



5.657.722 



CAPITAL STOCK AND DEFICIT 

Capital stock 
Authorized — 1 ,000 shares of no par value 
Issued — 31 shares fully paid 

Deficit (Note 5) 



31 
(2,915,099) 



31 
(3,062.460) 



(2,915,068) (3,062.429) 



1.494.330 



2.595,293 



Approved by the Board: 

J. R. L. ATCHISON 
Director 

L. E. DA VIES 
Director 



202 



PUBLIC ACCOUNTS, 1986-87 



DEFENCE CONSTRUCTION (1951) LIMITED— Continued 



STATEMENT OF OPERATIONS AND DEFICIT 
FOR THE YEAR ENDED MARCH 31, 1987 



1987 1986 

Expenses 

Salaries 

Employee benefits 

Travel and removal 

Office accommodation 

Telephone 

Advertising 

Postage, express and freight 

Office supplies and maintenance 

Depreciation 

Professional services 

Rental of machinery 

Training and professional development 

Other 

Recoveries of expenses (Note 6) 

Cost of operations 

Parliamentary appropriations 

Excess of parliamentary appropriations over cost 

of operations 

Deficit at beginning of the year 

Deficit at end of the year 2,915,099 3,062,460 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED MARCH 31, 1987 



$ 


S 


9,160,516 


10,130,929 


1,146,510 


1,209,093 


672,623 


794,811 


481,239 


494,229 


279,757 


277,750 


208,843 


162,466 


201,620 


179,229 


175,696 


159,417 


129,613 


126,680 


113,523 


118,283 


112,289 


118,843 


109,044 


49,896 


43,359 


35,356 


12,834,632 


13,856,982 


125,067 


168,720 


12,709,565 


13,688,262 


12,856,926 


13,773,125 


147,361 


84,863 


3,062,460 


3,147,323 



1987 1986 

S $ 

Financing activities 
Parliamentary appropriations 12,856,926 13,773,125 

Operating activities 

Reported cost of operations 12,709,565 13,688,262 

Provision for employee benefits (262,818) (582,030) 

Depreciation (129,613) (1 26^680) 

Gain on sale of fixed assets 1,686 

Net increase (decrease) in non-cash 
working capital balances related to 
operations* 1,127,921 (1,833,667) 

Cash applied to operations 13,446,741 11,145,885 

Employee benefits paid 338,425 618,440 

Cash applied to operating activities 13,785,166 11,764,325 

Investing activities 

Acquisition of equipment 124,578 112,289 

Disposal of equipment (4,229) 

Cash invested 120,349 112,289 

(Decrease) increase in cash during the 

year (1,048,589) 1,896,51 1 

Cash at beginning of the year 2,21 1,938 315,427 

Cash at end of the year 1,163,349 2,211,938 

* Consisting of changes in receivables, other assets, accounts payable and 
accrued liabilities, and contractors' security deposits. 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, 1987 

1. Authority, objectives and operations 

The Corporation was incorporated under the Canada Corpora- 
tions Act in 1951 and is continued under the Canada Business 
Corporations Act, pursuant to the authority of the Defence Pro- 
duction Act, to contract for major military construction and 
maintenance projects required by the Department of National 
Defence. The Corporation is a Crown corporation named in Part I 
of Schedule C to the Financial Administration Act. The Corpora- 
tion is not subject to income taxes. 

The Corporation's principal functions in the field of construc- 
tion management are to obtain tenders, make recommendations 
regarding proposed awards and to award and administer con- 
tracts. As an integral part of its responsibility for contract 
administration, the Corporation inspects the work to ensure com- 
pletion in accordance with the contract and certifies contractors' 
progress claims for payment from funds of the Department of 
National Defence. It also engages architectural and engineering 
firms to prepare plans and specifications in accordance with the 
requirements of the Department of National Defence. It may pro- 
vide technical and administrative assistance on construction mat- 
ters to other government departments when required. 

2. Significant accounting policies 
Expenses 

The accounts of the Corporation reflect only the administrative 
expenses incurred in procuring the construction and maintenance 
of defence projects on behalf of the Department of National 
Defence and in procuring the construction of such other projects 
as are approved by Treasury Board. 

Depreciation 

Depreciation is provided by the straight-line method over five 
years. 

Employee benefits 

Employee benefits are expensed when earned by employees. 
Pensions 

During the year, the Corporation made payments of $513,050 
($549,937 in 1986) in respect of current contributions to the Pub- 
lic Service Superannuation Account of the Government of 
Canada. The Account is actuarially valued every five years. The 
Corporation's contributions and recorded liabilities are limited to 
the matching of the current and certain arrears contributions of 
employees. The Corporation is not required to make contributions 
with respect to actuarial deficiencies of the Account. 

Parliamentary appropriations 

The cost of operations is funded by parliamentary appropria- 
tions through the Department of National Defence Vote 1 5 to the 
extent of net annual cash requirements. 

3. Contractors' security deposits 



Bid deposits 

Deposits on plans and specifications. 



1987 


1986 


$ 

144,534 
37,250 


$ 

114,220 
98,347 


181,784 


212,567 



PUBLIC ACCOUNTS, 1986-87 



203 



DEFENCE CONSTRUCTION (1951) LIMITED— Concluded 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \9%1— Concluded 

4. Provision for employee benefits 



1987 



1986 



9. Supplementary information 

The Corporation's contracting activity on behalf of government 
departments and agencies is summarized below: 



Termination benefits 2,503,721 2,594,083 

Life insurance 95.881 79,327 

Furlough benefits 201,789 201.890 



2,801.391 2,875,300 



5. Deficit 

The deficit of the Corporation is comprised primarily of the 
liabilities for employee benefits which will require funding from 
parliamentary appropriations in future years as they are paid. 

6. Recoveries of expenses 

The Corporation provides certain technical and administrative 
assistance to the Department of National Defence and other gov- 
ernment departments and agencies on a cost-recovery basis. As at 
March 31, 1987, accounts receivable for recoveries were $10,999 
(1986— $21,288). 

During the year, in the normal course of ojjerations, the 
Department of National Defence provided office space free of 
charge for 163 employees of the Corporation. 

7. Lease commitments 

The Corporation leases certain equipment and accommodation 
in the performance of its operations. The future aggregate mini- 
mum lease payments are: 

Year ending March 31 $ 

1988 62,372 

1989 53,987 

1990 26.937 

143,296 



1987 1986 

(in thousands of 

dollars) 

Contracts in progress at beginning of the year 491.880 404,755 

Contracts awarded 265,878 253.221 

757,758 657.976 

Contracts completed 235,286 166,096 

Contracts in progress at end of the year 522,472 491,880 

Payments on contracts in progress at end of the year.. 388,303 366,931 
Work outstanding on contracts in progress at end of 

the year 134,169 124,949 



8. Contingencies 

Claims aggregating approximately $5,870,000 in respect of 
contractual obligations have been received by the Corporation, 
but are not reflected in the accounts. In the opinion of manage- 
ment and legal counsel, the position of the Corporation is defen- 
sible, however the final outcome of such claims is not determi- 
nable. Any settlements resulting from the resolution of these 
claims will be funded through parliamentary appropriations of the 
Department of National Defence, in the year in which the settle- 
ments occur. 



2M 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 



EXPORT DEVELOPMENT CORPORATION 



MANDATE 



To facilitate and develop export trade by the provision of insurance, guarantees, loans and other financial facilities. 

BACKGROUND 

Funding from Canada for Corporate Account transactions is provided by loans and equity infusions, but the growth 
of the corporation's business in recent years has been financed mainly by its borrowing in the private markets. Apart 
from its corporate activities, EDC administers for Canada certain export financing transactions considered to be in 
the national interest for Canada, including those made pursuant to section 31 of the Export Development Act. 

CORPORATION DATA 



HEAD OFFICE 



STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



151 O'Connor Street 
P.O. Box 655 
Ottawa, Ontario 
K1P5T9 

—Schedule C, Part I 

— an agent of Her Majesty 

The Honourable Patricia Carney, P.C., M.P., 
Minister for International Trade. 

External Affairs 

1969; by the Export Development Act, (R.S.C. 1970, E-18). 

Robert Richardson 

V.E. Daughney 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year is the calendar year. 

1986 1985 1984 1983 

f rcstfltcd) 
CORPORATE ACCOUNT 

At the end of the year 

Total Assets 7,176 7,296 6,635 6,063 

Obligations to the private sector* 4,727 4,948 4,431 3,697 

Obligations to Canada 80 154 258 376 

Equity of Canada 898 896 855 769 

Cash from Canada in the year 

— budgetary nil nil nil nil 

— non-budgetary nil 37 79 116 

CANADA ACCOUNT 

At the end of the year 
Canada funds administered 880 1,142 1,061 900 

* Obligations to the private sector reported here have been reduced by the amount of EDC's cash and marketable 
securities (1986, $1,094 million). 



PUBLIC ACCOUNTS, 1986-87 



205 



EXPORT DEVELOPMENT CORPORATION 

AUDITOR'S REPORT 

TO THE MINISTER FOR INTERNATIONAL TRADE 

I have examined the balance sheet of Export Development Corpora- 
tion as at December 31, 1986 and the statements of income and 
retained earnings and changes in financial position for the year then 
ended. My examination was made in accordance with generally 
accepted auditing standards, and accordingly included such tests and 
other procedures as I considered necessary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the Corporation as at December 31, 1986 and the results of 
its operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the financial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, the Export 
Development Act and the by-laws of the Corporation. 



Ottawa, Canada 
February 25, 1987 



Kenneth M. Dye, F.C.A. 
Auditor General of Canada 



BALANCE SHEET AS AT DECEMBER 31, 1986 
(in thousands of dollars) 



ASSETS 



1986 



1985 



Loans receivable (Note 2) 

Long-term 4,704,165 

Short-term 1,1 18,842 

5,823,007 
Accrued interest and fees 305,945 

6,128,952 
Less: allowance for tosses on loans 1 36,366 

5,992,586 

Cash and marketable securities 

Cash and short-term deposits 523,212 

Marketable securities (market value: 

1986—5571,138; 1985— $291,465) 

Accrued interest 



Other assets 

Unamortized debt discount and 



5,111,485 
964,741 



6,076,226 
308,691 



6,384,917 
105,257 



6,279,660 



629,021 



issue expenses . 
Other 



570,554 
12,494 


291,275 
10,453 


1,106,260 


930,749 


50,537 
26,756 


56,477 
29,252 


77,293 


85,729 



7,176,139 7,296,138 



LIABILITIES 



1986 



1985 



Loans payable (Note 3) 

Long-term 3,569,766 3,906,655 

Short-term 2,330,999 2,1 15,917 

Accrued interest 214,143 200,764 

Other liabilities and deferred revenues 

Accounts payable 

Deferred revenues and other credits 

Allowance for claims on insurance and guarantees 



6,114,908 


6,223,336 


8,122 

121,752 

33,411 


19,464 

127,030 

30,251 


163,285 


176,745 



SHAREHOLDER'S EQUITY 

Share capital (Note 4) 697,000 697,000 

Reserve for contingencies 25,000 

Retained earnings 175,946 199,057 



897,946 896.057 
7,176,139 7,296,138 



Commitments and contingent liabilities (Note 5) 

Approved by the Board of Directors: 

R. L. RICHARDSON 

President and Chief Executive Officer 

B.A. CULHAM 

Senior Vice-President, Finance and Treasurer 



206 



PUBLIC ACCOUNTS, 1986-87 



EXPORT DEVELOPMENT CORPORATION— Co«r/«Me^ 

STATEMENT OF INCOME AND RETAINED EARNINGS 
FOR THE YEAR ENDED DECEMBER 31, 1986 
(in thousands of dollars) 



1986 1985 

Loans and guarantees 

Interest earned 556,540 573,220 

Fees earned 26,650 23,568 

Investment interest earned 71,313 67,357 

654,503 664,145 
Interest expense 

Long-term 493,131 481,086 

Short-term 104,257 138,273 

Provision for losseson loans 36,265 21,618 

633,653 640,977" 

20,850 23,168 
Insurance and guarantees 

Premiums and fees earned 17,439 16,490 

Investment interest earned 4,909 4,877 

22,348 21,367 

Provision for claims 7,200 6,781 

15.148 14,586 

Income from operations 35,998 37,754 

Administrative expenses 34,109 33,243 

Net income 1,889 4,511 

Retained earnings 

Beginning of year 199,057 194,546 

i-M.v; transfer to reserve for contingencies 25,000 

End of year 175,946 199,057 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED DECEMBER 31, 1986 
(in thousands of dollars) 



1986 



1985 



Operations 

Net Income 1,889 4,511 

Items not affecting cash 

Provision for claims and losses on loans 

Amortization of fees and premiums 

Decrease (increase) in accruals of interest 
and fees 

Rescheduling of interest 

Fees and premiums received 

Other changes 

Loans receivable disbursed 

Loans receivable repaid 

Cash provided from (used in) operations 

Treasury 

Issue of long-term debt 

Repayment of long-term debt 

Increase (decrease) in short-term loans payable . 

Issue of share capital 

Cash provided from (used in) financing 

Increase (decrease) in cash and marketable 
securities 

Cash and marketable securities 

Beginning of year 

End of year 1,093,766 920,296 



43,465 
(36,198) 

13,734 
(53,320) 

47,224 
(40,967) 


28,399 
(33,510) 

(12,437) 
(29,239) 
42,891 
(19,460) 


(24,173) 


(18,845) 


(627,422) 
888,851 


(819,980) 
644,759 


237,256 


(194,066) 


572,104 

(578,956) 

(56,934) 


980,291 

(628,795) 

20,109 

37,000 


(63,786) 


408,605 


173,470 
920,296 


214.539 
705,757 



NOTES TO FINANCIAL STATEMENTS 

1. Summary of significant accounting policies 

These financial statements are prepared in accordance with 
accounting principles generally accepted in Canada, consistently 
applied, and conform in all material respects with international 
accounting standards. A summary of significant accounting poli- 
cies follows: 

Marketable securities 

Marketable securities are valued at the lower of cost and mar- 
ket value as at the balance sheet date. 

Allowance for losses on loans receivable 

The allowance for losses on loans is based on a review of collect- 
ibility of all outstanding loans to sovereign and commercial bor- 
rowers. In respect of this review, the Corporation recognizes that 
the future economic and political conditions in some of the coun- 
tries where the Corporation has made loans are subject to varying 
degrees of uncertainties and pressures. Accordingly, delays in the 
repayment of principal and interest may occur from time to time. 

In the case of loans made to or guaranteed by sovereign borrow- 
ers, that is the governments of countries or their agencies, pay- 
ment delays are not necessarily indicative of a future loss requir- 
ing an allowance. Sovereign entities and their international 
financial obligations do not have commercial mortality, and the 
international system does not allow the unilateral denial of a sov- 
ereign obligation. Furthermore, the international system provides 
several mechanisms and institutions through which countries fac- 
ing repayment difficulties can effect remedial measures in agree- 
ment with their creditors. Therefore, except in the rare instance of 
a write-off of asset value agreed to by creditors, the ultimate col- 
lectibility of a sovereign obligation, and thus its asset value, is not, 
in the opinion of management, subject to question although delays 
may have to be accepted. 

It is the policy of the Corporation to charge to income, in addi- 
tion to any specific provisions made as a result of the review of the 
outstanding loans, an amount sufficient to maintain an 
accumulated non-specific allowance proportionate to the total 
loan principal and interest receivable for which no specific provi- 
sion has been made. 

Allowance for claims on insurance and guarantees 

The Corporation provides for claims based on claims experience 
augmented, if necessary, by a specific provision based on a review 
of contingent liabilities. Claims payments are recorded at 
estimated recoverable values and included with other assets and 
non-recoverable amounts are charged to the allowance. Subse- 
quent net gains or losses on recovery are credited or charged to 
income. 

Reserve for contingencies 

The Corporation has in 1986 established a reserve account, 
through transfers from retained earnings, as a contingency with 
respect to possible unforeseen decreases in the value of loans 
receivable or claims on insurance and guarantees. Subsequent 
reductions, if any, in the reserve for contingencies will be credited 
to retained earnings. 

Loan interest and fees earned 

Interest is accrued on principal receivable until such time as the 
loan becomes non-current. Non-current is defined as any loan 
where there is significant doubt as to collectibility, where signifi- 
cant payments have not been received for a period of two years 
and a rescheduling agreement has not been negotiated, or when a 
rescheduling agreement has been signed and a significant pay- 
ment has not been received for one year. 

Loan fees are taken into income over the disbursement and 
repayment periods of a loan. 



PUBLIC ACCOUNTS, 1986-87 



207 



EXPORT DEVELOPMENT CORPORATION— Co«rmMe^ 

NOTES TO FINANCIAL STATEMENTS— Co/i//>it/erf 
Investment interest earned 

Investment interest, which is substantially earned outside 
Canada, is prorated between loans and guarantees and insurance 
and guarantees on the basis of average funds investment. 
Interest expense 

Interest expense includes the amortization of debt discount and 
issue expenses which is charged over the life of the debt on a 
straight line basis. 

Insurance premiums 

Insurance premiums and fees are earned in Canada. For short- 
term insurance policies, premiums are taken into income at the 
commencement of coverage. Premiums on other export insurance 
policies are taken into income using methods which generally 
reflect the exposures over the terms of the policies. Foreign invest- 
ment insurance premiums are taken into income evenly over the 
terms of coverage, except that the premium in the first year is 
taken into income in its entirety when received. 

Translation of foreign currency 

The Corporation hedges its U.S. dollar assets and liabilities on 
a total portfolio basis. Any net exposure to future changes in the 
U.S. dollar foreign exchange rate is due to short-term timing dif- 
ferences in cash flows. It is the Corporation's policy to manage 
assets and liabilities denominated in U.S. dollars in such a way as 
to minimize this net exposure. Accordingly, assets and liabilities 
denominated in U.S. dollars are translated into Canadian dollars 
at exchange rates prevailing at year-end. 

Gains and losses relating to the translation of any unhedged 
long-term foreign currency assets or liabilities in other than U.S. 
dollars are deferred and amortized on a straight line basis over the 
remaining life of the asset or liability. The unamortized balance of 
the deferred exchange gains or losses is included in deferred reve- 
nues or other assets. 

Income and expenses are translated at average monthly 
exchange rates in effect during the year. Exchange gains and 
losses resulting from the translation of foreign currency balances 
and transactions are reported with investment interest earned. 

2. Loans receivable 

Loans receivable from both sovereign and commercial borrow- 
ers are mostly at fixed interest rates established in competition 
with similar export credit agencies in other countries and gener- 
ally below commercial rates. These loans mature as follows: 

December 3 1 

1986 1985 

(in thousands 

of dollars) 

Within 12 months 

—Fixed 659,039 691,178 

—Floating 64,417 56.625 

Overdue 395,386 216,938 

1987 751,472 

1988 779,624 788,687 

1989 759,469 767,706 

1990 679,787 672,766 

1991 620,294 581.887 

1992 to 1996 1,505,538 1.257,130 

1997 and thereafter 359,453 291,837 

Total 5.823,007 6,076,226 

Commercial loans included above 1,034,291 1,167.519 

Floating rate loans, generally based on Libor 
rates, included in total loans 731,407 568,842 



The geographic distribution of these loans is as follows: 

December 3 1 
~ 1986 1985 

(in thousands 
of dollars) 

Pacific and North Asia 550,064 623,254 

South Asia 310.891 244,429 

Middle East and East Africa 471,345 473,531 

North and West Africa 1,214,101 1,237,147 

Eastern Europe 737,921 707,171 

Western Europe 595,762 648,528 

USA and Caribbean 546,625 771,643 

Mexico and Central America 293,721 337,506 

South America East 539,433 500,939 

South America West 563,144 532,078 

5,823,007 6,076,226 



Interest on non-current loans not recognized as revenue in 1986 
amounted to $71,929 thousand (1985— $43,824 thousand). At 
December 31, 1986, the accumulated interest not accrued on 
loans amounted to $1 14,487 thousand (1985— $49,555 thousand). 

The geographic distribution of the overdue principal and recog- 
nized interest, in the amounts of $395,386 thousand (1985 — 
$216,938 thousand) and $218,588 thousand (1985— $214,322 
thousand) respectively, is as follows: 

December 3 1 

1986 1985 

(in thousands 

of dollars) 

Pacific and North Asia 1,062 1,716 

South Asia 3 820 

Middle East and East Africa 1 5,907 20.420 

North and West Africa 54.225 40.548 

Eastern Europe 105.620 90.540 

Western Europe 16,053 8,442 

USA and Caribbean 122,309 15,006 

Mexico and Central America 49,067 30,199 

South America East 129,978 125,861 

South America West 1 19,750 97,708 

613,974 431,260 



In order to facilitate the collectibility of some loans or portions 
of loans, the Corporation has rescheduled principal and interest 
payments in the following amounts: 

December 3 1 

1986 1985 

(in thousands 

of dollars) 

During the year 

Principal 95.919 52,143 

Interest 53,320 29,239 

149,239 81,382 

Balance of rescheduled loans outstanding 

Sovereign 379,387 289.465 

Commercial 35.552 36.752 

414.939 326.217 

Amounts overdue 28.068 21.806 



208 



PUBLIC ACCOUNTS, 1986-87 



EXPORT DEVELOPMENT CORPORATION— Con/Z/iwe^ 

NOTES TO FINANCIAL STATEMENTS— Continued 
3. Loans payable 

Loans payable mature as follows: 

December 3 1 

1986 1985 

(in thousands 

of dollars) 

Within 12 months 

—Fixed 767,724 480,578 

—Floating 1,563,275 1,635,339 

1987 792,231 

1988 1,144,970 1,180,185 

1989 551,233 538,828 

1990 773,741 781,915 

1991 351,849 355,741 

1992 to 1996 747,973 257,755 

Total 5,900,765 6,022,572 

Commercial loans included above 

Fixed interest rates from 5.38% to 15.55% 

(1985—5.38 to 16.88%) 4,216,407 4,120,221 

Floating rate and short-term fixed rate revolving 

loans 1,604,358 1,747,854 

Canada loans included above 

Fixed interest rates from 8.25% to 8.50% 

(1985— 5.50 to 9. 13%) 80,000 154,497 



The Corporation also had lines of credit and overdraft facilities 
aggregating $3,201 million at December 31, 1986 (1985— $3,211 
million). 

4. Share capital 

The authorized share capital is $1.5 billion consisting of 15 mil- 
lion shares with a par value of $100 each. The number of shares 
issued and fully paid is as follows: 

December 3 1 
1986 1985~ 
(in thousands) 

Beginning of year 6,970 6,600 

Issued 370 

End of year 6,970 6,970 

5. Statutory limits, commitments and contingent liabilities 

The Export Development Act (the Act) allows the Corporation 
to have outstanding loans and commitments to foreign borrowers 
up to a maximum of $15 billion. The position against this limit, 
determined in accordance with the requirements of the Act, is 
$8,370 million (1985— $8,894 million). Of this amount, undis- 
bursed commitments on signed loan agreements at face rates from 
6.94% to 12.5% is $2,549 million (1985— $2,846 million) with the 
balance representing loans receivable and loans with recourse to 
the Corporation. 

The Corporation expects to fund these undisbursed commit- 
ments near the time of their disbursement, typically over a three 
year period, by issuing a combination of debt instruments in world 
capital markets at commercial rates of interest and capital stock. 
The Corporation generally attempts to match debt maturities and 
currencies with those of its average export loans. 



The Act also specifies that the Corporation can incur liabilities 
under contracts of insurance, related guarantees and guarantees 
pertaining to the lending program up to a maxium of $15 billion. 
The position against this limit, determined in accordance with the 
requirements of the Act, is $2,930 million (1985— $2,692 
million). 

Contingent liabilities of the Corporation included in the above 
positions amounted to $2,123 million (1985— $1,875 million). Of 
this amount, $245 million (1985 — $213 million) related to loan 
guarantees and loans with recourse to the Corporation. The bal- 
ance pertained to the Corporation's insurance activities. 

The Act allows the Corporation to borrow up to a maximum of 
ten times the aggregate of its paid-in capital from time to time 
and the retained earnings determined in accordance with the most 
recent audited financial statements. As at December 31, 1986, 
this formula produced a limit of $8,961 million (1985— $8,915 
million) against which borrowings amounted to $5,901 million 
(1985— $6,023 million). 

6. Foreign currency balances 

The Corporation has substantial assets and liabilities in U.S. 
dollars and in other currencies. The Canadian dollar equivalent 
after taking into consideration forward exchange contracts is as 
follows: 

1 

December 3 1 * 

1986 1985 

(in thousands 

of dollars) 

U.S. Dollars 

Assets 5,250,209 5,369,446 

Liabilities 5,389,775 5.560.755 

Net exposure (139,566) (191.309) 

Rate of exchange U.S. $1.00 1.3805 1.3983 

British |x>unds. Deutsche marks, European 
Currency Units, Swiss francs and Yen 

Assets 77,936 42,857 

Liabilities 66,601 36.448 

Net exposure 11,335 6,409 

7. Related party transactions 

Transactions with Canada are summarized as follows: 

Year ended 
December 3 1 
1986 1985 
(in thousands 

of dollars) 

Income and expense items 

Interest expense 8,320 14,853 

Less: administrative expenses recovered 7,101 6,476 

interest earned 472 467 



747 7,910 



December 3 1 

1986 1985 

(in thousands 

of dollars) 

Amounts due to (due from) Canada 
Canada bonds, bearing interest at the rate of 9.50% 

maturing in 1994 (5,038) (5,043) 

Accrued interest receivable (23) (21) 

Accounts administered for Canada (Note 8) 3,085 13,416 

Long-term loans payable 80,000 154,497 

Accrued interest payable 1 ,420 3,647 

79.444 166.496 



PUBLIC ACCOUNTS, 1986-87 209 

EXPORT DEVELOPMENT CORPORATION— Conc/wt/e^/ 

NOTES TO FINANCIAL STATEMENTS— Conc/M</e^ 

The Government of Canada intends to recommend that Parlia- 
ment appropriate such funds as are necessary to cover losses, if 
any, of the Corporation. To date, no such funds have been neces- 
sary. 

The Corporation is not subject to the requirements of the 
Income Tax Act with respect to its earnings. 

The Corporation also enters into transactions with other Crown 
corporations in the normal course of business. 

8. Accounts administered for Canada 

(a) Pursuant to the Act, the Corporation administers for Canada 
certain loans and insurance programs entered into under the 
authority of the Governor in Council for which the Board of 
Directors is not accountable other than in respect of the 
administration of the contracts. These accounts are main- 
tained separately from the Corporation's accounts, and are 
consolidated annually as at March 31 with the financial 
statements of the Government of Canada which are reported 
upon separately by the Auditor General of Canada. The 
assets administered for Canada, mainly loans receivable and 
accrued interest and fees recorded in accordance with 
accounting policies and practices approved by the Govern- 
ment of Canada, amounted to $880 million (1985— $1,142 
million). 

(b) Canada account statutory limits, commitments and contin- 
gent liabilities 

The Act allows the Accounts administered for Canada to 
have outstanding loans and commitments to foreign borrow- 
ers up to a maximum of $6 billion. The position against this 
limit, determined in accordance with the requirements of the 
Act, is $823 million (1985 — $1,438 million), including con- 
tingent liabilities of $9 million (1985 — $13 million). 

The Act also specifies that the Accounts administered for 
Canada can incur liabilities under contracts of insurance, 
related guarantees and guarantees pertaining to the lending 
program up to a maximum of $7 billion. The position against 
this limit, determined in accordance with the requirements of 
the Act, was $430 million (1985— $428 million) including 
contingent liabilities of $376 million (1985— $374 million). 



210 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
FARM CREDIT CORPORATION 



MANDATE 

To assist Canadian farmers to establish and develop viable farm enterprises through the provision of long-term credit 
and other financial services. 

BACKGROUND 

Since 1959, under the authority of the Farm Credit Act, the corporation has made loans to farmers for the purchase 
of farm land, livestock and machinery, for permanent farm improvements and to refinance debt. Under the authority 
of the Farm Syndicates Credit Act, the corporation may make loans to groups of farmers for the joint acquisition of 
agricultural facilities and equipment. The maximum loan for an individual farm is $600,000 and for a syndicate is 
$100,000. As of March 31, 1987 the corporation had 75,487 loans outstanding. The corporation has 573 permanent 
employees stationed at headquarters, seven regional offices and about 90 district and field offices. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHAIRMAN AND CHIEF 
EXECUTIVE OFFICER 

AUDITOR 



P.O. Box 23 14, Station D 
434 Queen Street 
Ottawa, Ontario 
K1P6J9 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable John Wise, P.C, M.P. 

Agriculture 

1959; by the Farm Credit Act (R.S.C. 1970, F-2). Its predecessor 
was the Canadian Farm Loan Board, founded in 1929. 

Eiliv H. Anderson 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 

1986-87 1985-86 1984-85 1983-84 

At the end of the period 

Total Assets 4,914 5,015 4,940 4,901 

Obligations to the private sector 1,600 984 571 306 

Obligations to Canada 3,305 3,896 4,110 4,310 

Equity of Canada (125) 8 129 131 

Cash from Canada in the period 

— budgetary nil nil nil nil 

— non-budgetary, net (591) (214) (171) 378 



PUBLIC ACCOUNTS, 1986-87 



211 



FARM CREDIT CORPORATION 

MANAGEMENT'S RESPONSIBILITY 
FOR FINANCIAL STATEMENTS 

The accompanying financial statements of Farm Credit Corporation 
and all information in this annual report are the responsibility of man- 
agement and have been approved by the Board of Directors. The finan- 
cial statements include some amounts, such as the allowance for losses 
on loans, that are necessarily based on management's best estimates 
and judgement. 

The financial statements have been prepared by management in 
accordance with accounting principles which are generally accepted in 
Canada and which have been consistently applied. Financial informa- 
tion presented elsewhere in the annual report is consistent with that 
contained in the financial statements. 

In discharging its responsibility for the integrity and fairness of the 
financial statements, management maintains financial and manage- 
ment control systems and practices designed to provide reasonable 
assurance that transactions are authorized, assets are safeguarded and 
proper records are maintained. The system of internal control is aug- 
mented by internal audit which conducts periodic reviews of different 
aspects of the Corporation's operations. In addition, the internal and 
external auditors have full and free access to the Audit Committee of 
the Board, which oversees management's responsibilities for maintain- 
ing adequate control systems and the quality of financial reporting. 

The independent auditor, the Auditor General of Canada, is respon- 
sible for auditing the financial statements and for issuing his report 
thereon. 



AUDITOR'S REPORT 



TO THE MINISTER OF AGRICULTURE 



I have examined the balance sheet of Farm Credit Corporation as at 
March 31, 1987 and the statements of operations and deficit and 
changes in cash [wsition for the year then ended. My examination was 
made in accordance with generally accepted auditing standards, and 
accordingly included such tests and other procedures as I considered 
necessary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the Corporation as at March 31, 1987 and the results of its 
operations and the changes in its cash position for the year then ended 
in accordance with generally accepted accounting principles applied on 
a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the financial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, the Farm 
Credit Act and the by-laws of the Corporation. 



Kenneth M. Dye, F.C.A. 
Auditor General of Canada 



Ottawa, Canada 
June 10, 1987 



Eiliv H. Anderson 
Chairman and Chief Executive Officer 

William G. Mann, C.A. 
Chief Financial Officer 



BALANCE SHEET AS AT MARCH 31, 1987 
(in thousands of dollars) 



ASSETS 



1987 



1986 



LIABILITIES 



1987 



1986 



Cash and short-term investmenU 88,494 1 1 2,348 

Accounts receivable 1,678 192 

Loans receivable (Note 3) 4.961,385 4,984,298 

Less: allowance for losses on loans (Note 4) 219,000 155,800 

4,742,385 4,828,498 

Real estate 53,771 45.805 

Fixed assets 2.957 1,983 

Unamortized debt discount and issue expenses 24,799 26,210 



4,914,084 5,015.036 



Accounts payable and accrued liabilities 9,223 6,842 

Short-term notes 271.571 237.497 

Provision for employee termination benefits 4.190 4,583 

Loans payable (Note 5) 4,753,891 4.758,415 



EQUITY (DEFICIENCY) OF CANADA 

Contributed capital (Note 6) 

Deficit 



5.038,875 5,007.337 



218,333 
343.124 



218.333 
210.634 



(124.791) 7.699 

4,914,084 5,015.036 



The accompanying notes are an integral part of the financial statements. 

Approved by: 

EILIV H. ANDERSON 

Chairman and Chief Executive Officer 

WILLIAM G. MANN. C.A. 
Chief Financial Officer 



212 



PUBLIC ACCOUNTS, 1986-87 



FARM CREDIT CORPORATION— Continued 

STATEMENT OF OPERATIONS AND DEFICIT 
FOR THE YEAR ENDED MARCH 31, 1987 
(in thousands of dollars) 



1987 



1986 



479,107 


485,974 


462,102 
21,985 


452,978 
21,727 


484,087 


474,705 


(4,980) 
98,322 


11,269 
99,351 


(103,302) 
3,885 


(88,082) 
1,637 


(99,417) 


(86,445) 



Interest income 

Loans receivable 465,380 474,876 

Investments 13,727 1 1,098 

i 

Interest expense 

Loans payable 

Short-term notes 

Net interest income 

Provision for losses on loans 

Loan fees and charges 

Administrative expenses 

Salaries and employee benefits 23,947 26,298 

Travel 2,358 2,494 

Office accommodation 2,445 2,429 

Other 4,323 3.740 

33,073 34.961 

Loss for the year (132,490) (121,406) 

Deficit at beginning of the year 210,634 89,228 

Deficit at end of the year 343,124 210,634 

The accompanying notes are an integral part of the financial statements. 



STATEMENT OF CHANGES IN CASH POSITION 
FOR THE YEAR ENDED MARCH 31, 1987 
(in thousands of dollars) 



1987 



1986 



Operating activities 

Loss for the year (132,490) (121,406) 

Items not involving cash 

Provision for losses on loans 98,322 99,351 

Increase in interest due on loans receivable (71,594) (61,450) 

Net change in accrued interest 23.435 3,800 

Other 11,053 6,640 

(71,274) (73,065) 

Loans to farmers (315,060) (235,268) 

Loans receivable repaid 323,198 207,201 

Proceeds from disposal of real estate 19,465 16,566 

Other (1,080) 3.903 

Cash used in operating activities (44,751) (80,663) 

Financing activities 

Loans from Canada 42,500 

Loans repaid to Canada (591,155) (256,868) 

Loans from capital markets 581.554 273,459 

Debt issue expenses (3,576) (6,083) 

Net increase in short-term notes 34.074 140,164 

Cash provided by financing activities 20.897 193,172 

Net increase (decrease) in cash and short-term 

investments (23,854) 1 12,509 

Cash and short-term investments (bank indebted- 
ness) at beginning of the year 1 12,348 (161) 

Cash and short-term investments at end of the 

year 88,494 1 12.348 

The accompanying notes are an integral part of the financial statements. 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, 1987 

1 . The Corporation 

Farm Credit Corporation was established in 1959 by the Farm 
Credit Act as the successor to the Canadian Farm Loan Board 
and is a Crown corporation named in Schedule C. Part I of the 
Financial Administration Act. The Corporation's prime objective 
is to assist Canadian farmers to establish and develop viable farm 
enterprises through the use of long-term credit as provided for by 
the Farm Credit Act. 

The Corporation also administers the lending program author- 
ized under the Farm Syndicates Credit Act which was originally 
introduced as the Farm Machinery Syndicates Credit Act in 
1964. It provides for loans to groups or syndicates of farmers 
organized to share in the purchase and use of farm machinery, 
buildings and installed equipment. 

In addition, the Corporation also administers certain programs 
assigned to it by the government. In the February 26, 1986 
Budget, the government directed the Corporation to establish a 
$700.0 million Commodity-based Loan Program for existing cli- 
ents who are experiencing financial difficulty and who meet the 
eligibility criteria. Under this program, reduced interest rates are 
available to borrowers and the loan principal is indexed to 
changes in commodity prices. The resulting net cash fiow defici- 
encies are made up by the government to a maximum of $20.0 
million for 1986-87 and $50.0 million for 1987-88. 

In view of Canada's deficiency of equity in the Corporation and 
FCC's current financial condition, discussions are underway with 
the government to develop a financial recovery plan. A wide range 
of options is being considered. However, the government has yet 
to make a decision in this regard. 

The Corporation operates in one business segment, providing 
long-term loans to Canadian farmers. 

2. Significant accounting policies 

(a) Allowance for losses on loans 

The allowance for losses on loans represents an estimate of 
probable losses on the accounts outstanding at the end of the 
year and is based on a review of collectability of outstanding 
loans. Attention is focused on loans which are in arrears. 
With respect to this estimate, the Corporation recognizes 
that future economic and agricultural conditions are not pre- 
dictable and, therefore, their impact on the collectability of 
loans is uncertain. 

Actual losses on loans and write-downs of acquired real 
estate to net realizable value are charged to the allowance 
while recoveries of losses on loans are credited to the allow- 
ance. The adjustment of the allowance to the appropriate 
level is charged to operations as a provision for losses on 
loans. In addition to a specific allowance made as a result of 
the review of the outstanding loans in arrears, a general 
allowance is established to provide for losses on loans which 
have not yet been specifically identified. 

(b) Revenue recognition 

Interest income is recorded on an accrual basis. Interest is 
not recognized on non-performing loans. A non-performing 
loan is defined as a loan where, in management's opinion, 
there is reasonable doubt as to collectability. 
Loan fees and charges are recorded when earned. 

(c) Real estate 

Real estate is carried at the lower of cost and net realizable 
value. It represents farm property acquired in the process of 
administering the outstanding loans receivable and must be 
disposed of within five years of acquisition or such further 
period as the Governor in Council may prescribe. 



PUBLIC ACCOUNTS, 1986-87 



213 



FARM CREDIT CORPORATION— Coai/Zaiw^J 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \9S1— Continued 

(d) Fixed assets 

Fixed assets are recorded at cost less accumulated deprecia- 
tion or amortization. Leasehold improvements are amortized 
using the straight-line method over the term of the lease and 
one renewal period. Computer hardware and software are 
depreciated using the straight-line method over their 
estimated useful lives. Other fixed assets are depreciated 
using the diminishing balance method. 

(e) Debt discount and issue expenses 

Discounts and expenses relating to the issuance of debt are 
amortized on a straight-line basis over the life of the debt and 
included in interest expense on loans payable. 

(0 Translation of foreign currencies 

Loans payable in foreign currencies are hedged by currency 
conversion agreements and are translated into Canadian dol- 
lars at the rates provided therein. The differences between 
the ultimate amounts payable at the contracted rates and the 
cash proceeds of the debt issues are considered to be financ- 
ing costs and are therefore amortized by charges to interest 
expense over the lives of the obligations on a straight-line 
basis. The related interest payable in foreign currencies on 
these debt issues is also hedged by currency conversion agree- 
ments and is translated into Canadian dollars at such con- 
tract rates. 

(g) Pension plan 

The Corporation's employees participate in the Public Ser- 
vice Superannuation Plan administered by the Government 
of Canada. Contributions to the Plan are made equally by 
both employees and the Corporation, and these contributions 
are expensed during the year in which the services are ren- 
dered. 

(h) Employee termination benefits 

On termination of employment, employees of the Corpora- 
tion are entitled to severance benefits provided for under 
their terms of employment. The liability for these benefits is 
recorded as the benefits accrue to the employees. 

(i) Income taxes 

The Corporation records income taxes on the tax allocation 
basis which recognizes the income tax effect of transactions 
when they are recorded in accounting income, regardless of 
when such items are recognized for tax purposes. 

3. Loans receivable 

Maturi- 
ties Annual 
not interest 
exceeding rate% 1987 1986 



(in thousands of 
dollars) 



I 



Loans to farmers, 
secured by mort- 
gages 24 years 5-7% 

25 years 8-10% 

26 years 11-12% 
26 years 13-16 ¥4 

Loans to farm syn- 
dicates, secured 
by notes 15 years 6'/4-17'/i 

Loans receivable 
from real estate 
sales, secured by 
agreements for 
sale or mortgages . 26 years 5- 1 5 y4 



556.501 
2.070,218 
1,561,319 

730,084 



609,767 
1,812,994 
1,650,900 

871,147 



4,918,122 4,944,808 



7,573 



35,690 



9,012 



30,478 



Maturities by fiscal year are as follows: 

1987 1986 

(in thousands of 

dollars) 

Past due 56,325 41.985 

1987 76.206 

1988 148,220 139,920 

1989 163.554 149.770 

1990 581.787 615.339 

1991 289.975 221.937 

1992 316,935 240.961 

1993 through 2014 2.964.006 3.072.894 

4,520.802 4.559.012 

Accrued interest 440.583 425.286 

4,961,385 4,984.298 



During the year, interest not recognized on non-performing 
loans amounted to $55.4 million, (1986 — $40.0 million). At 
March 31, 1987, the accumulated interest not recognized on non- 
performing loans amounted to $95.4 million. 

Prepayments of principal from farmers of $215.9 million 
(1986 — $106.3 million) were received during the year. 

During the year, Commodity-based Loans in the amount of 
$242.6 million were disbursed. Of this amount, $13.5 million was 
used to pay arrears on the Corporation's previous loans. 

4. Allowance for losses on loans 

The allowance for losses on loans as at March 31, 1987, has 
been reduced by $15.0 million. This represents the balance of a 
$20.0 million commitment made in the February 26, 1986 Budget 
as part of the federal government's Farm Financial Assistance 
Package. The intent of this allocation was to reduce the impact of 
probable losses on the Corporation. 

In addition, certain amounts relating to interest which were 
previously included in the 1986 comparative amounts of the loans 
receivable and the allowance for losses on loans have been 
restated to conform to the presentation adopted in 1987. 

5. Loans payable 





Maturi- 










ties 


Annual 








not 


mterest 








exceeding 


rate % 


1987 


1986 








(in thousands of 








dolla 


rs) 


Loans from Canada. 










secured by notes 










Farm Credit Act . 


10 years 


6-7 '/: 


538.748 


625.951 




1 4 years 


8-10% 


1.460.830 


1.529.561 




15 years 


11-12 1/4 


1.298.898 
3,298,476 


1,730.977 
3,886.489 


Farm Syndicates 










Credit Act 


7 years 


9 ¥4-16 1/- 


6.030 
3,304.506 


9.172 
3,895,661 


Loans from capital 










markets, secur- 










ed by notes 










Farm Credit Act 


10 years 


8 V*- 1 2 1/4 


1.319.128 


735.312 


Amounts owing in 










respect of interest 










rate and currency 










conversion agree- 










ments 


7 years 


8%- 11 


9.028 
4.632.662 


11.290 
4.642.263 


Accrued interest 






121,229 


116.152 








4.753,891 


4,758.415 



4,961.385 4,984.298 



214 



PUBLIC ACCOUNTS, 1986-87 



FARM CREDIT CORPORATION— Co«c/M^e^ 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \9%1— Concluded 

Maturities by fiscal year are as follows: 

1987 1986 

(in thousands of 

dollars) 

1987 211,702 

1988 201,851 211,885 

1989 209,756 230,534 

1990 855,290 861,462 

1991 454,229 460,136 

1992 334,697 346,651 

1993 through 2005 2.576,839 2,319,893 

4,632,662 4,642,263 

Accrued interest 121,229 116,152 

4,753,891 4,758,415 



6. Contributed capital 

The contributed capital of the Corporation represents the 
amount received from Canada under Section 12 of the Farm 
Credit Act. The statutory limit on this amount is $225.0 million 
(1986 — $225.0 million). During the year, no capital was con- 
tributed by Canada. 

7. Income taxes 

As at March 31, 1987 the Corporation has available various 
timing differences of approximately $321.0 million which have 
not been recognized in the accounts since these will not be utilized 
in the foreseeable future. These result primarily from differences 
between the provision for losses on loans charged to operations 
and the amount claimed for tax purposes pursuant to Section 33 
of the Income Tax Act. 

In addition, the loss carry-forward for income tax purposes 
which has not been recognized in the financial statements 
amounts to $13.0 million. Of this amount, $7.0 million will expire 
on March 31, 1993 and $6.0 million will expire March 31, 1994. 

8. Limits on borrowing 

The Farm Credit Act limits the aggregate amount outstanding 
of the principal borrowings by the Corporation pursuant to the 
Act to twenty-five times the capital of the Corporation. At March 
31, 1987 the Corporation's outstanding borrowings under this 
Act, comprising short-term notes of $27 1 .6 million and loans pay- 
able of $4,617.6 million, were 22.39 times the capital of $218.3 
million (1986—22.26 times). 

The Farm Syndicates Credit Act limits the loans from Canada 
pursuant to the Act to twenty-five million dollars. At March 31, 
1987 the Corporation's loans from Canada under this Act were 
$6.0 million (1986— $9.2 million). 

9. Commitments to farmers 

As at March 31, 1987, loans to farmers approved but not dis- 
bursed amounted to $62.2 million (1986— $44.3 million). Of this 
amount, $53.3 million were for regular loan approvals, most of 
which were approved at rates from 10.75% to 11.50%. The bal- 
ance of $8.9 million is related to Commodity-based Loans 
approved at rates of 6% and 8.50%. It is expected that the 
majority of these loans will be disbursed within the six-month 
period ending September 30, 1987. 



10. Operating leases 

The future minimum lease payments by fiscal year required 
under operating leases having initial non-cancellable lease terms 
in excess of one year are as follows: 

(in 
thousands 

of 
dollars) 



1988 

1989 

1990 

1991 

1992 

1993 and subsequent . 



1,426 
1,157 
1,004 
790 
500 
1,439 



6,316 



These leases generally provide for the payment by the Corpora- 
tion of real estate taxes and operating expenses in excess of those 
amounts established at the commencement of the lease term. 

1 1 . Subsequent events 

As an interim measure, effective April 1, 1987 and pending 
approval of Farm Credit Corporation's recovery plan, the Corpo- 
ration has discontinued all financial market borrowings. Any 
required borrowing or refinancing, including any short-term 
requirements, will be made from the Consolidated Revenue Fund 
and will be subject to the approval of the Minister of Finance. 

The moratorium on foreclosures was lifted on May 1, 1987. 
Accordingly, the Corporation may commence foreclosure actions 
after all alternatives have been considered. 

1 2. Comparative figures 

Certain 1986 comparative figures have been reclassified to 
reflect the presentation adopted in 1987. 



PUBLIC ACCOUNTS, 1986-87 



21S 



SUMMARY PAGE 
FEDERAL BUSINESS DEVELOPMENT BANK 



MANDATE 

To promote and assist in the establishment and development of business enterprises in Canada by providing financial 
assistance, management counselling, management training, information and advice. 

BACKGROUND 

Since 1974, the Bank has provided financial assistance to Canadian firms by acting as a supplementary lender and a 
source of equity financing. It also provides financial planning, counselling and training, information and other 
management services to small business. 



CORPORATION DATA 

HEAD OFFICE 



STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS OF 
INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



800 Victoria Square 

Box 335 

Stock Exchange Tower Station 

Montreal, Quebec 

H4Z 1L4 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable Robert R. de Cotret, P.C, M.P. 

Regional Industrial Expansion and Science and Technology 

1974; by the Federal Business Development Bank Act (S.C. 1974- 
75-76, C. 14); (successor to the Industrial Development Bank, 
established 1944). 

Guy A. Lavigueur 

William J. McAleer 
Price Waterhouse 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 

1986-87 

At the end of the period 

Total Assets 1,920 

Obligations to the private sector 1,563 

Obligations to Canada 51 

Equity of Canada 242 

Cash from Canada in the period 

— budgetary 55 

— non-budgetary nil 



1985-86 



1984-85 



1983-84 



1,595 


1,566 


1,616 


1,184 


1,023 


921 


144 


263 


420 


207 


202 


200 


26 


31 


78 


nil 


nil 


nil 



216 



PUBLIC ACCOUNTS, 1986-87 



FEDERAL BUSINESS DEVELOPMENT BANK 

MANAGEMENTS RESPONSIBILITY 
FOR FINANCIAL STATEMENTS 

The accompanying financial statements were prepared by the man- 
agement of the Federal Business Development Bank in accordance 
with accounting principles generally accepted in Canada, consistently 
applied. The financial data contained in other sections of this annual 
report is consistent with the content of the financial statements. 

In discharging its responsibility for the integrity and fairness of the 
financial statements and for the accounting systems from which they 
are derived, management maintains a system of internal controls 
designed to provide reasonable assurance that transactions are author- 
ized, assets are safeguarded and proper records are maintained. The 
system of internal controls is augmented by audit and inspection staff 
who conduct periodic reviews of different aspects of the Bank's opera- 
tions. In addition, the Vice-President, Internal Audit and the 
Independent Auditor have full and free access to the Audit Committee 
of the Bank's Board of Directors which oversees management's respon- 
sibilities for maintaining adequate control systems and the quality of 
financial reporting. 

These financial statements have been examined and reported upon 
by the Bank's independent auditor, Mr. Raymond J. Morcel, F.C.A. of 
Price Waterhouse, Chartered Accountants. 

Guy A. Lavigueur 
President 



AUDITORS' REPORT 

THE HONOURABLE MINISTER OF REGIONAL 
INDUSTRIAL EXPANSION 
THE HONOURABLE MINISTER OF STATE 
SMALL BUSINESSES AND TOURISM 

I have examined the balance sheet of the Federal Business Develop- 
ment Bank as at March 31, 1987, and the statements of operations, 
deficit and changes in financial position for the year then ended. My 
examination was made in accordance with generally accepted auditing 
standards and accordingly included such tests and other procedures as 
I considered necessary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the Federal Business Development Bank as at March 3 1 , 
1987, and the results of its operations and the changes in its financial 
position for the year then ended in accordance with generally accepted 
accounting principles applied on a basis consistent with that of the 
preceding year. 

Further, I have examined the transactions that came to my notice in 
the course of the above mentioned examination of the financial state- 
ments of the Federal Business Development Bank for the year ended 
March 31, 1987, to determine whether they were in accordance with 
Part XII of the Financial Administration Act, the regulations, the 
FBDB Act and the by-laws of the Bank. My examination of these 
transactions was made in accordance with generally accepted auditing 
standards, and accordingly included such tests and other procedures as 
I considered necessary in the circumstances. In my opinion, these 
transactions were, in all significant respects, in compliance with the 
authorities specified. 



BALANCE SHEET AS AT MARCH 31 

(in thousands of dollars) 



Raymond J. Morcel, F.C.A. 
of Price Waterhouse 



Montreal, June 10, 1987 



ASSETS 



Cash 

Treasury bills. 



Loans 

Venture capital investments (Note 3) . 
Interest due and accrued 



Less: accumulated provision for losses (Note 4) . 



1987 


1986 


2,272 
15,664 


968 
14,093 


17,936 

1,921,884 
43,133 
14,623 


15,061 

1,646,695 
35,108 
21,657 


1,979,640 
125,565 


1,703,460 
141,831 



Long-term investment (Note 5) 

Fixed assets, less accumulated depreciation . 
Unamortized debt issue expenses 

Other assets 



1,854,075 

28,000 

2,007 

10,392 

7,814 



1,561,629 

5,766 
8,501 

4,030 



1,920,224 1,594,987 



LIABILITIES 



1987 



1986 



Cheques outstanding 6,755 10,513 

Short-term notes 430,226 365,359 

Accrued interest on short and long-term notes 48,031 41,601 

Other liabilities 9,874 8,251 

494.886 425.724 

Notes held by Canada (Note 6) 51.000 144.000 

Notes payable, other than to Canada (Note 7) 1.132.718 818.371 

1.678.604 1.388.095 

CAPITAL 

Capital paid in by Canada (Note 8) 484.600 456,600 

Deficit (242,980) (249,708) 

241,620 206,892 



1,920,224 1,594,987 



Approved by the Board: 

H. BLOOMFIELD 

Director 

GUY A. LAVIGUEUR 
Director 



PUBLIC ACCOUNTS, 1986-87 

FEDERAL BUSINESS DEVELOPMENT BANK— Continued 

FINANCIAL SERVICES 



217 



STATEMENT OF OPERATIONS 
FOR THE YEAR ENDED MARCH 31 

(in thousands of dollars) 



STATEMENT OF DEFICIT 

FOR THE YEAR ENDED MARCH 31 

(in thousands of dollars) 



1987 1986 

Interest and Investment Income 

Loans 230.806 210,139 

Venture capital investments 8,072 8,054 

238.878 218,193 

Interest Expense 

Long-term notes 1 1 1,628 103,507 

Short-term notes 36,534 35.195 

148,162 138,702 

Net interest and investment income 90,716 79,491 

Provision for losses on loans, guarantees and venture capi- 
tal investments 29,671 24,041 

Net interest and investment income after provision for 

losses 61,045 55,450 

Non-Interest Expenses 

Salaries and staff benefits 34.123 30,946 

Premises and equipment, including depreciation 7,335 7,160 

Other expenses 12,859 12,515 

Net income (Note 13) 

Net income attribuable to Loans Division 

Venture Capital Division 5,349 3,373 



1987 



1986 



54,317 


50,621 


6,728 


4,829 


1,379 


1.456 



MANAGEMENT SERVICES 

STATEMENT OF OPERATIONS 
FOR THE YEAR ENDED MARCH 31 

(in thousands of dollars) 



1987 1986 

Salaries and staff benefits 18.724 16.662 

Premises and equipment 3.664 3.25 1 

Other expenses 1 1,303 1 1,768 

Total expenditures 

Less: revenue from CASE counselling, training seminar 

registration and other activities 

Amount recovered from the Department of Regional Indus- 
trial Expansion Vote 50 (Vote 45 in 1986) 

Net expenditures were incurred as follows 

Management Counselling 

Management Training 

Information Services 

" 26,851 25,929 



33,691 
6,840 


31,681 
5,752 


26,851 


25,929 


9,537 

5,223 

12,091 


9,671 
6,400 
9,858 



Deficit, beginning of year (249,708) (254,537) 

Net income 6,728 4,829 

Deficit, end of year (242,980) (249,708) 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED MARCH 31 
(in thousands of dollars) 



1987 



1986 



Operations 

Net income 6,728 4,829 

Items not requiring an outlay of cash 

Provision for losses 

Depreciation 

Amortization of debt issue expenses 

Net changes in accrued interest 

Other 

Disbursements to borrowers and investees 

Purchase of long-term investment 

Repayments by borrowers and investees 

Cash used in operations 

Treasury 

Issue of long-term notes 

Repayment of long-term notes 

Net increase in short-term notes 

Capital paid in by Canada 

Sale of securities 

Debt issue expenses 

Increase (decrease) in cash and Treasury bills, net 

of cheques outstanding 

Cash and Treasury bills, net of cheques outstanding 

Beginning of year 

End of year 11.181 4.548 



29.671 


24,041 


860 


1,032 


2.603 


3.079 


1 3.464 


(541) 


3,762 


3,048 


57.088 


35,488 


(701.667) 


(482,751) 


(28.000) 




369,492 


351,758 


(303,087) 


(95,505) 


460,000 


378,418 


(238.653) 


(382,755) 


64.867 


46,470 


28.000 






40,495 


(4.494) 


(8.209) 


309.720 


74,419 


6,633 


(21,086) 


4,548 


25,634 



218 



PUBLIC ACCOUNTS, 1986-87 



FEDERAL BUSINESS DEVELOPMENT BANK— Continued 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, 1987 

1 . Objectives and operations of the Corporation 

Federal Business Development Bank is a Crown corporation 
wholly-owned by the Government of Canada, which was estab- 
lished December 20, 1974, by the Federal Business Development 
Bank Act, as the successor to the Industrial Development Bank 
which commenced operations in 1944. 

The objectives of the Bank, as stated in the Act, are to promote 
and assist in the establishment of business enterprises in Canada 
by providing financial assistance, management counselling, man- 
agement training, information and advice; giving particular con- 
sideration to the needs of small business enterprises. 

The Bank's lending and venture capital operations are carried 
out by Financial Services. Management Services includes counsel- 
ling, training and information services. A statement of operations 
is shown for Management Services since it is funded separately by 
Parliamentary appropriation. 

Federal Business Development Bank is for all purposes of its 
Act an agent of the Government of Canada, and as such all 
liabilities of the Corporation are direct obligations of the Govern- 
ment of Canada. 

The Bank is exempt from income taxes. 

2. Significant accounting policies 

Loans and venture capital investments 

Loans and venture capital investments are recorded at principal 
amounts. 

Provision for losses on loans, guarantees and venture capital 
investments 

Provisions are established for specifically identified probable 
losses on loans, guarantees and venture capital investments, as 
well as for anticipated but unidentified losses. The specific provi- 
sion is established on an account by account basis whereas the 
general provision is based on historical experience and is intended 
to cover losses on loans, guarantees and venture capital invest- 
ments which have not yet been specifically identified. 

Revenue recognition 

Interest on loans is recorded as income on an accrual basis 
except that interest is not accrued on loans where management 
believes that the interest will not be recovered. Dividends, interest 
and capital gains on venture capital investments are recorded as 
income when received. 

Fixed assets and depreciation 

Fixed assets are recorded at cost. 

Depreciation is charged against income using the straight-line 
or diminishing balance methods in amounts sufficient to amortize 
the cost of fixed assets over their estimated useful lives. 

With respect to the Management Services function of the Bank, 
all capital expenditures are recovered from the Department of 
Regional Industrial Expansion and hence are not capitalized. 
Debt issue expenses 

Discounts, premiums and expenses related to the issue of the 
long-term debt are amortized on a straight-line basis over the 
term of the obligations to which they pertain and charged to inter- 
est expense. 



Translation of foreign currencies 

Notes payable in foreign currencies are hedged by forward 
exchange contracts and are translated into Canadian dollars at 
the rates provided therein. The difference between the ultimate 
amount payable at the contracted rate and the cash proceeds of 
the issue is considered to be a financing cost and is therefore 
amortized by a charge to interest expense over the life of the obli- 
gation on a straight-line basis. The unamortized portion of these 
costs is included with unamortized debt issue expenses in the bal- 
ance sheet. The related interest payable on these note issues is also 
hedged by forward exchange contracts and is translated into 
Canadian dollars at such contract rates. 

3. Venture capital investments 

1987 1986 

(in thousands 

of dollars) 

Shares 24,960 20,046 

Shareholder advances 1,927 10,657 

Participating debentures 14,476 1,242 

Convertible debentures 1,770 3,163 

43,133 35,108 



Accumulated provision for losses 

1987 1986 

(in thousands 

of dollars) 

Accumulated provision, beginning of year 141,831 157,737 

Amounts written off during the year (48,961) (43,849) 

Recovery of amounts previously written off 3,024 3,902 

95,894 117,790 

Additional provision required for the year 29,671 24,041 

Accumulated provision, end of year 125,565 141,831 



Long-term investment 

Pursuant to a Directive dated October 16, 1986, given by the 
Government of Canada to the Federal Business Development 
Bank under section 99 of the Financial Administration Act, the 
Bank has been directed to purchase from Cominco Ltd. 790,000 
series "E" preferred shares for an amount of $79 million in three 
tranches. The first tranche of 280,000 preferred shares for $28 
million was made during the year. The second tranche of $28 mil- 
lion was made on April 1, 1987, and the final tranche of $23 mil- 
lion is scheduled for fiscal 1989. 

Cominco Ltd. is a Canadian mining producer of zinc and lead. 
This investment forms part of a $260 million programme of mod- 
ernization relating to lead smelting operations in Trail, B.C. 
Funding for this share purchase is provided by capital paid into 
the Bank by the Government of Canada. 

A twenty year agreement between the Government of Canada 
and Cominco Ltd. provides for a sharing in the risks of the 
project. The redemption of the Bank's investment and payment of 
dividends thereon are tied to the success of the project as deter- 
mined by a profitability index which is related to the performance 
of lead and silver prices over the life of the agreement. 

This investment is carried at cost and any dividends will be 
recorded when received. 



PUBLIC ACCOUNTS, 1986-87 

FEDERAL BUSINESS DEVELOPMENT BANK— Concluded 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \9%1— Concluded 
6. Notes held by Canada jq 

All notes held by Canada, amounting to $51 million, at rates of 
10% and 10'/8%, mature in fiscal 1988. 



219 



7. Notes payable, other than to Canada 

Maturities by fiscal year were as follows: 
Rate% 1988 1989 1990 1991 1992 1993-97 Total 



8H-9y4 55,000 

10-11 78,000 

12'/4-13H 109,600 

14-14% 30,000 105,700 



(in thousands of dollars) 
50,000 

157,600 128.968 105,000174,975 
53,000 69,875 3,000 3,000 9,000 



50.000 
621,543 
215.875 
109,600 
135.700 



272.600 158,700 277,475 131,968 108,000 183,975 1,132,718 

The above includes notes payable of U.S. $100 million and Yen 
16.4 billion. 



8. Capital paid in by Canada 



1987 



1986 



(in thousands 
of dollars) 

Capital, beginning of year 456,600 456,600 

Cash paid in 28,000 



Capital, end of year 484,600 456,600 



Contingent liabilities and commitments 

The Bank is contingently liable as guarantor of loans aggregat- 
ing $7,486,651. 

The undisbursed amount as at March 31, 1987, on loans and 
venture capital investments authorized aggregated $212,135,000 
(1986— $185,712,000). 



Lease commitments 

Future minimum lease commitments under operating leases 
related to the rental of Bank premises are as follows: 

(in thousands 
of dollars) 



1988 

1989 

1990 

199! 

1992 

Thereafter. 



5,584 
4.412 
3,666 
3,177 
3.431 
14,188 



34.458 



1 1 . Pension plan 

The Bank has a pension plan for its employees which is con- 
tributory and trusteed. Related costs, net of employees' contribu- 
tions, are charged to earnings as paid. Based on an independent 
actuarial valuation, the plan was fully funded as at December 3 1 
1985. 

12. Statutory limitations on operations 

The Minister of Finance may, with the approval of the Gover- 
nor in Council, authorize capital payments to the Bank not in 
excess of an aggregate amount determined by the application of 
Section 28 of the Federal Business Development Bank Act. Under 
current ministerial interpretation of the provisions of this Section, 
the Bank is presently authorized to receive capital payments to 
the extent that total capital paid in by Canada does not exceed 
$554 million. The total of direct and contingent liabilities of the 
Bank is limited to a maximum of 12 times the amounts of its capi- 
tal and deficit (or up to 15 times with the approval of the Gover- 
nor in Council) and may not exceed $3.2 billion. 

13. Financial services 

The statement of operations for Financial Services is comprised 
of the results of the Loans Division and the Venture Capital Divi- 
sion which are segregated below. Within the capital of the Bank 
as at March 31, 1986 and 1987, was an amount of $35.6 million 
provided by the Government of Canada to fund the venture capi- 
tal investment portfolio. 



Interest and investment income 

Interest expense 

Net interest and investment income 

Provision for losses 

Net interest and investment income after provision for losses 

Non-interest expenses 

Net income 





1987 






1986 




Loans 


Venture 
Capital 


Total 


Loans 


Venture 
Capital 


Total 


230,806 
148,162 


8,072 


(in thousands of dollars) 

238.878 210,139 
148,162 138,702 


8.054 


218,193 
138.702 


82,644 
29,608 


8,072 
63 


90,716 
29,671 


71.437 
21,539 


8,054 
2,502 


79,491 
24.041 


53,036 
51,657 


8,009 
2,660 


61,045 
54,317 


49,898 
48,442 


5,552 
2,179 


55,450 
50,621 


1,379 


5,349 


6,728 


1,456 


3.373 


4,829 



14. Comparative financial data 

Certain amounts pertaining to the fiscal year ended March 31, 
1986, have been reclassified to conform with the presentation 
adopted for the fiscal year ended March 31, 1987. 



220 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
FRESHWATER FISH MARKETING CORPORATION 



MANDATE 

To regulate inter-provincial and export trade in freshwater fish. 

BACKGROUND 

The corporation's Act gives it a monopoly over inter-provincial and export trade in freshwater fish originating in the 
Northwest Territories, the three prairie provinces and parts of northern Ontario. The objectives of the corporation are 
(a) to market fish in an orderly manner; (b) to increase returns to fishermen; and (c) to promote international 
markets for, and increase inter-provincial and export trade in, fish. The Act also requires the corporation to conduct 
its operations on a self-sustaining financial basis without appropriations. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS OF 
INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



1199 Plessis Road 
Winnipeg, Manitoba 
R2C 3L4 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable Thomas E. Siddon, P.C, M.P. 

Fisheries and Oceans 

1969; by the Freshwater Fish Marketing Act (R.S.C. 1970, F-13) 

J.T. Dunn 

John McFarlane 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends April 30. 

1986-87 

At the end of the period 

Total Assets 18.9 

Obligations to the private sector 2.4 

Obligations to Canada 0.9 

Equity of Canada nil 

Cash from Canada in the period 

— budgetary nil 

— non-budgetary (13.8) 



1985-86 



1984-85 



1983-84 



25.5 


25.0 


19.5 


1.9 


1.9 


1.3 


14.7 


13.6 


9.8 


nil 


nil 


nil 


nil 


nil 


nil 


2.2 


3.5 


(8.3) 






PUBLIC ACCOUNTS, 1986-87 

FRESHWATER FISH MARKETING CORPORATION 

AUDITOR'S REPORT 

TO THE MINISTER OF FISHERIES AND OCEANS 

I have examined the balance sheet of the Freshwater Fish Market- 
ing Corporation as at April 30, 1987 and the statements of income and 
retained earnings and changes in financial position for the year then 
ended. My examination was made in accordance with generally 
accepted auditing standards, and accordingly included such tests and 
other procedures as I considered necessary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the Corporation as at April 30, 1987 and the results of its 
operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Corporation that 
have come to my notice during my examination of the financial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, the Freshwa- 
ter Fish Marketing Act and the by-laws of the Corporation. 

D. Larry Meyers, F.C.A. 
Deputy Auditor General 
for the Auditor General of Canada 
Ottawa, Canada 
July 13, 1987 



221 



BALANCE SHEET AS AT APRIL 30, 1987 



ASSETS 



1987 



1986 



Current 

Cash 

Accounts receivable 

Trade 4,818,391 

Contributions (Note 3) 79,319 

Other 91 1,265 

inventory 

Finished fish products 5,441,418 

Packaging material and parts 996,559 

Prepaid expenses 50,313 

Property, plant and equipment (Note 4) 



1,403,010 

5,785,304 

62,871 

701,413 

10,052,400 

822,272 

25,063 



18,949,942 25,463,229 



LIABILITIES 



Current 

Bank indebtedness 

Accounts payable 

Accrued interest payable 

Loans from Canada (Note 5) 

Provision for final payments to fishermen. 



1987 



1986 



s 

159,189 

2,002,912 

1,992 

900,000 

13,659,913 


S 

2,133,752 

483,755 

14.652.589 

6.331,518 


16,724,006 


23.601.614 



12.297.265 


18,852,333 




6,652,677 


6,610,896 


EQUITY 
Retained earnings 



2,225,936 1. 86 1.6 1 5 
18,949,942 25,463,229 



Approved by the Board: 

R. E. ENGLAND 
Director 

D. M. GAUVIN 
Director 



222 



PUBLIC ACCOUNTS, 1986-87 



FRESHWATER FISH MARKETING CORPORATION— Continued 



STATEMENT OF INCOME AND RETAINED EARNINGS 
FOR THE YEAR ENDED APRIL 30, 1987 



1987 1986 

Sales 

Domestic 

Export 

Expenses 

Cost of sales 

Interest (Note 6) 

Salaries and employee benefits 

Depreciation and amortization 

Bad debts 

Other 

Income before provision for final payments to fish 

ermen 

Provision for final payments to fishermen 

Net income for the year 

Retained earnings at beginning of the year 

Retained earnings at end of the year 2,225,936 1,861,615 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED APRIL 30, 1987 



$ 

7,575,999 
51,071,240 


$ 

7,599,310 
41,070,407 


58,647,239 


48,669,717 


41,204,509 
826,142 
933,920 
938,705 
59,858 
659,871 


37,812,656 

1,449,848 

1,013,033 

900,487 

38,979 

846,638 


44,623,005 


42,061,641 


14,024,234 
13,659,913 


6,608,076 
6,331,518 


364,321 
1,861,615 


276,558 
1,585,057 



1987 



1986 



Cash provided by (used for) 
Operating Activities 

Income before provision for final payments to 

fishermen 14,024,234 

Add (deduct): 
Items not affecting working capital 

Depreciation and amortization 938,705 

Gain on sale of fixed assets 

Net changes in non-cash working capital 

balances relating to operations 4,516,267 

Cash provided by operations 

Investing Activities 

Additions to property, plant and equipment 

Proceeds on sale of property, plant and equip- 
ment 

Cash applied to investing activities 

Financing Activities 

Repayment of capital loans 

Contributions for plant and equipment 

Cash applied to fmancing activities 

Final payments to fishermen 

Increase (decrease) in cash during the year 

Cash and cash equivalents, beginning of year 

Cash and cash equivalents, end of year 

Cash and cash equivalents are composed of 

Cash 

Bank indebtedness 

Working capital loans from Canada 



6,608,076 



900,487 
(60,428) 

827,957 



19,479,206 


8,276,092 


(1,174,146) 
70,339 


(999,438) 
201,794 


(1,103,807) 


(797,644) 


(2,652,589) 
109,106 


(857,616) 
95,014 


(2,543,483) 


(762,602) 


(6,294,115) 


(7,271,750) 


9,537,801 
(10,596,990) 


(555,904) 
(10,041,086) 


(1,059,189) 


(10,596,990) 


(159,189) 
(900,000) 


1,403,010 
(12,000,000) 



NOTES TO FINANCIAL STATEMENTS 
APRIL 30, 1987 

1 . Objectives and operations 

The Corporation was established by the Freshwater Fish Mar- 
keting Act in 1969, as a corporation without share capital, for the 
purpose of marketing and trading in fish, fish products and fish 
by-products in and out of Canada. The Corporation is an agent 
Crown corporation named in Schedule C, Part I of the Financial 
Administration Act and is required to conduct its operations on a 
self-sustaining basis. Total loans outstanding from Canada and 
from banks may not exceed $30 million. 

The Corporation has the exclusive right to market the products 
of the commercial fishery in the provinces participating in the 
program in inter-provincial and export trade. Participation of the 
provinces of Manitoba, Saskatchewan, Alberta and Ontario and 
the Northwest Territories was established by agreement with the 
Government of Canada. 

2. Significant accounting policies 

Inventories 

Finished fish products are valued at the lower of cost and net 
realizable value. Packaging material and parts are valued at the 
lower of cost and replacement cost. 

Depreciation and amortization 

Depreciation is based on the estimated useful lives of the assets 
using the following methods and annual rates: 



Buildings — Lake stations 


Straight-line 


10% 


—Plant 


Straight-line 


2'/i% 


Equipment ^Machinery 






and office 






equipment 


Declining balance 


10-25% 


— Automotive 


Declining balance 


30% 


Fresh fish delivery tubs 


Straight-line 


10% 


Packer vessel 


Straight-line 


6 2/3% 



Leasehold improvements are amortized on a straight-line basis 
over the term of the lease. Lease terms vary in length up to 20 
years. 

Payments to fishermen 

The Corporation purchases fish at initial prices established by 
the Board of Directors and the cost of such purchases is included 
in the cost of sales. A guide used in the determination of the ini- 
tial price is 80% of the projected total payments to fishermen (ini- 
tial plus final), based upon forecasts prepared by the Corporation. 
Final payments, if any, to fishermen are determined by the Board 
after the end of the year, based on the results of operations for the 
year. The final payments are made in respect of products pur- 
chased during the year and therefore are charged to operations of 
the current year. 

Foreign currency translation 

Accounts receivable and payable denominated in foreign cur- 
rency are translated into Canadian dollars at the year-end 
exchange rate. Transactions in foreign currency during the year 
are translated at the rate in effect at the time of the transaction. 
Foreign exchange gains and losses are included in interest 
expense. 



(1,059,189) (10,596,990) 



PUBLIC ACCOUNTS, 1986-87 



223 



FRESHWATER FISH MARKETING CORPORATION— Co«c/«^e^ 



NOTES TO FINANCIAL STATEMENTS 
APRIL 30, 19S7— Concluded 

3. Contributions receivable 



1987 1986 



Government of Canada 

Department of Regional Industrial Expansion 78,834 57,458 

National Research Council 4g5 

Canada Employment and Immigration Commission. , 5,413 



79,319 62,871 



Total contributions from the Government of Canada towards 
the cost of property, plant and equipment, market research 
development and job creation programs earned by the Corpora- 
tion during the year were $256,775 (1986— $235,241). 

4. Property, plant and equipment 



1987 

Accu- 
mulated 
depre- 
ciation and 
amorti- 

Cost zation 

$ $ 

Land 214,428 

Buildings 5,386,223 2,214,460 

Equipment 6,573,904 4,377,677 

Fresh fish delivery tubs 1,692,084 1,040,550 

Packer vessel 444,492 363,840 

Leasehold improvements ... 420,904 364,375 
Construction in progress .... 28 1 ,544 

15,013,579 8,360,902 



1986 



Net 



Net 



214,428 


216.428 


3,171,763 


3.234,165 


2,196,227 


2,243,921 


651,534 


606,152 


80,652 


40,498 


56,529 


68,801 


281,544 


200,931 



6,652,677 6,610,896 



5. Loans from Canada 



These loans are secured by promissory notes and are made 
under Section 17 of the Act. At the end of the year the outstand- 
ing amounts were as follows: 



1987 



1986 





Interest 
rate 


Amount 


Interest 
rate 


Amount 


Working capital loans 


% 

7.02 
8.134 


$ 

400,000 
500,000 


% 

9.125 
9.375 
9.500_ 

10.125 
10.875 
14.000 
15.375 
15.625 


$ 

8,000,000 
2,000,000 
2,000,000 




900,000 


12.000.000 


Capital loans 




53.359 




1.191.122 
408.108 
450.000 
550,000 

2.652,589 



Interest expense 

1987 1986 

S S 

Interest on loans from Canada 

Working capital 725.192 1,21 1,481 

Capital 29.488 360.351 

754.680 1,571.832 

Losses (gains) on foreign exchange 187.949 (50.657) 

Interest income (net) (1 16.487) (71.327) 

826.142 1,449.848 



7. Income taxes 

The Corporation is eligible to deduct for tax purposes a portion 
of its eligible capital cost allowance, and accordingly has no tax- 
able income for the year. At April 30, 1987, the excess of unde- 
preciated capital cost over net book value of property, plant and 
equipment amounted to $5,121,889 (1986— $5,505,387) which 
can be used to reduce future years' taxable income. 

8. Remuneration to foreign agents 

During the year, the Corporation paid an aggregate amount of 
$1,147,614 (1986— $836,234) to the following foreign sales 
agents: Frohman International, Juhl Brokerage Incorporation, 
Bill Bush & Associates, R.M. Sloan Co., Mile Hi Country Sales 
Co., Sahakian, Salm & Gordon, Benolken Brokerage Company, 
International Pacific Seafoods, Inc., — U.S.; I. LeGrand H. Malo 
et Cie — France; Lejos Oy — Finland; AB.P. Jorgensen — Sweden; 
Rud Kanzow Gmbh & Co. — Germany. 

9. Comparative figures 

Certain figures for 1986 presented for comparison purposes 
have been reclassified to conform to the 1987 presentation. 



Working capital loans are repayable on demand and capital 
loans are repaid in amounts at least equal to the sum of the 
annual provision for depreciation and amortization on property, 
plant and equipment and proceeds derived from disposals thereof. 



224 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
GREAT LAKES PILOTAGE AUTHORITY, LTD. 



MANDATE 



To establish, operate, maintain and administer in the interests of safety, an efficient pilotage service in designated 
Canadian waters in the Great Lakes area and in and around Ontario, and in designated waters in Manitoba, and in 
the St. Lawrence River, south of the St. Lambert Lock in Quebec. 

BACKGROUND 

Established in 1972, the Authority provides pilotage services and has the power to make regulations, subject to the 
approval of the Governor in Council, which establish compulsory pilotage areas; prescribe the ships/classes of ships 
that are subject to compulsory pilotage, the circumstances under which compulsory pilotage may be waived and 
pilotage tariffs; and which cover the licensing of pilots and issuance of pilotage certificates. Tariffs must be fair and 
reasonable and sufficient to permit the Authority to operate on a self-sustaining financial basis. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS OF 
INCORPORATION 



CHAIRMAN AND CHIEF 
EXECUTIVE OFFICER 

AUDITOR 



132 Second Street East 
P.O. Box 95 
Cornwall, Ontario 
K6H 5R9 

— Schedule C, Part I 

— not an agent of Her Majesty 

The Honourable John Crosbie, P.C, Q.C., M.P. 

Transport 

1972; pursuant to the Pilotage Act (S.C. 1970-71-72, C. 52), 
incorporated under the Canada Corporations Act in May 1972 as a 
subsidiary of The St. Lawrence Seaway Authority. 

Richard G. Armstrong 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year is the calendar year. 



At the end of the year 

Total Assets 

Obligations to the private sector 

Obligations to Canada 

Equity of Canada 

Cash from Canada for the year 

— budgetary 

— non-budgetary 



1986 



1985 



1984 



1983 



5.2 


2.0 


4.3 


3.9 


nil 


nil 


nil 


nil 


nil 


nil 


nil 


nil 


(1.0) 


(5.2) 


(2.2) 


(1.9) 


nil 


3.4 


0.3 


0.2 


nil 


nil 


nil 


nil 



PUBLIC ACCOUNTS, 1986-87 

GREAT LAKES PILOTAGE AUTHORITY, LTD. 

AUDITOR'S REPORT 

TOTHE MINISTER OF TRANSPORT 

I have examined the balance sheet of Great Lakes Pilotage Author- 
ity, Ltd. as at December 31, 1986 and the statements of operations, 
deficit and changes in financial position for the year then ended. My 
examination was made in accordance with generally accepted auditing 
standards, and accordingly included such tests and other procedures as 
I considered necessary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the Authority as at December 31,1 986 and the results of its 
operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Authority that have 
come to my notice during my examination of the financial statements 
have, in all significant respects, been in accordance with' Part XII of 
the Financial Administration Act and regulations, the Pilotage Act 
and regulations, and the by-laws of the Authority. 

D. Larry Meyers, F.C.A. 
Deputy Auditor General 
for the Auditor General of Canada 
Ottawa, Canada 
January 30, 1987 



225 



BALANCE SHEET AS AT DECEMBER 31, 1986 



ASSETS 1986 1985 

$ S 

Current 

Cash and short-term deposits 3.195,752 322,314 

Accounts receivable 1,936,068 1,651.705 

Fixed, at cost 

Buildings.....' 

Furniture^and equipment 

Less: accumulated depreciation 

35,598 24,268 



5,131,820 


1,974,019 


63,642 
94,418 


63.642 
73.663 


158,060 
122,462 


137.305 
113.037 



5,167,418 1,998,287 



LIABILITIES 1986 1985 



Current 
Accounts payable and accrued liabilities . 
Accrued employee termination benefits... 

Long-term 
Accrued employee termination benefits... 



SHAREHOLDER'S DEFICIENCY 

Capital stock 

Authorized — Unlimited 

Issued and fully paid— 15 shares 1,500 1,500 

Contributed capiul 82,074 82,074 

Deficit (1,123,855) (5,258,133) 



s 


$ 


2,710,085 

35,477 


3,229,844 
648,638 


2,745,562 


3,878,482 


3,462.137 


3,294,364 


6,207.699 


7,172,846 



(1,040,281) (5,174,559) 



5,167,418 



1.998,287 



Approved by the Board: 

R. G. ARMSTRONG 
Director 

G. ST. MARSEILLE 
Director 



226 



PUBLIC ACCOUNTS, 1986-87 



GREAT LAKES PILOTAGE AUTHORITY, LTD.— Continued 



STATEMENT OF OPERATIONS 

FOR THE YEAR ENDED DECEMBER 31, 1986 



1986 1985 

S $ 

Revenues 

Pilotage charges 11,082,134 8,275,829 

Despatching and pilot boat income 198,350 207,976 

Interest and other income 103,522 99,21 1 

"11,384,006 8,583,016 

Expenses 

Pilots' salaries and benefits 7,865,224 8,574,418 

Staff salaries and benefits 1,008,555 1,141,667 

Transportation and travel 724,1 16 657,489 

Pilot boats 494,474 488,062 

Employee termination benefits 310,089 627,514 

Communications 57,072 74,333 

Purchased despatching services 41,385 33,776 

Rentals 40,166 34,571 

Professional and special services 33,363 73,706 

Utilities, materials and supplies 26,043 36,267 

Repairs and maintenance 16,277 15,868 

Depreciation 9,687 12,752 

Bad debts (recoveries) (16,223) 25,559 

10,610,228 11,795,982~ 

Profit (loss) for the year 773,778 (3,212,966) 



STATEMENT OF DEFICIT 

FOR THE YEAR ENDED DECEMBER 31, 1986 



1986 



1985 



Balance, beginning of the year 5,258,133 2,308,231 

Parliamentary appropriation (Note 3) (3,360,500) (263,064) 

(Profit) loss for the year (773,778) 3,212,966 

Balance, end of the year 1,123,855 5,258,133 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED DECEMBER 31, 1986 



1986 1985 

$ $ 

Financing activities 
Parliamentary appropriation 3,360,500 263,064 

Operating activities 
Cash provided from (used in) operations 

Profit (loss) for the year 773,778 (3,212,966) 

Items not requiring cash 

Employee termination benefits 310,089 627,514 

Depreciation 9,687 12,752 

1,093,554 (2,572,700) 

Increase (decrease) in accounts payable and 

accrued liabilities (519,759) 133,569 

Increase in accounts receivable (284,363) (276,548) 

Decrease in accrued employee termination ben- 
efits (755,477) (139,162) 

(466,045) (2,854,841) 

Investing activities 

Additions to fixed assets (21,017) (9,905) 

Increase (decrease) in cash 2,873,438 (2,601,682) 

Cash and short-term deposits, beginning of the 

year 322,314 2.923,996 

Cash and short-term deposits, end of the year 3,195,752 322,314 



NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, 1986 

1 . Authority and objectives 

The Great Lakes Pilotage Authority was established on Febru- 
ary 1, 1972 pursuant to the Pilotage Act, incorporated as a lim- 
ited company on May 17, 1972, and is continued under the 
Canada Business Corporations Act. Pursuant to the Financial 
Administration Act, the Authority is deemed to be a parent 
Crown corporation listed in Schedule C Part I thereto. The 
majority of shares issued by the Authority are held by The St. 
Lawrence Seaway Authority, also a parent Crown corporation. 
The balance is held by the Authority's Chairman and six Direc- 
tors appointed by the Governor in Council. 

The objectives of the Authority are to establish, operate, main- 
tain and administer a safe and efficient pilotage service within 
designated Canadian waters. The Act provides that the pilotage 
tariffs shall be fair, reasonable and sufficient and together with 
any revenue from other sources, shall permit the Authority to 
operate on a self-sustaining financial basis. 

The Authority is exempt from any income taxes. 

2. Significant accounting policies 
Parliamentary appropriations 

When revenues are not sufficient to permit the Authority to 
operate on a self-sustaining financial basis, cash operating losses 
are recovered from parliamentary appropriations. These appro- 
priations are recorded in the accounts when approved by Parlia- 
ment and are reflected in the statement of deficit. 

Parliamentary appropriations to finance capital expenditures 
are recorded as contributed capital. 

Depreciation 

Depreciation of fixed assets is calculated on a straight-line basis 
and is based on the estimated useful lives of the assets as follows: 

Buildings 20 years 

Furniture and equipment 5 to 10 years 

Pension plan 

All employees are covered by the Public Service Superannua- 
tion Plan administered by the Government of Canada. Contribu- 
tions to the Plan are required from both the employee and the 
Authority. Contributions with respect to current service are ex- 
pensed in the current period. Contributions with respect to past 
service benefits are expensed when paid, generally over the 
remaining years of service of the employees. 

Employee termination benefits 

Employees are entitled to specified benefits on termination as 
provided for under labour contracts and conditions of employ- 
ment. The liability for these benefits is recorded in the accounts as 
the benefits accrue to the employees. The current liability reflects 
the accrued termination benefits of only those employees who 
have indicated their intention to terminate their employment 
within the coming year. 

3. Parliamentary appropriation 

The parliamentary appropriation of $3,360,500 (1985 — 
$263,064), reflected in the statement of deficit appeared in Sup- 
plementary Estimates "C" and represents funding of the previous 
year's cash operating loss. 



PUBLIC ACCOUNTS, 1986-87 227 

GREAT LAKES PILOTAGE AUTHORITY, LTD.— Concluded 

NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, \9%6— Concluded 

4. Pension plan 

Under provisions of the Pilotage Act, pilots who choose to 
become employees of the Authority are entitled to count service 
prior to becoming an employee as pensionable under the Public 
Service Superannuation Act. For pilots who have elected to pur- 
chase pension benefits with respect to past service, the Authority 
is required to match the employee contribution. The estimated 
unfunded past service pension contribution with respect to these 
employees was approximately $293,000 as of December 31, 1986 
(1985 — $352,000) and will be funded over the remaining years 
of service of the pilots, or the terms of purchase, whichever is the 
lesser. 

In 1986, the pension expense was $541,158 (1985 — $593,534) 
including $48,028 (1985 — $61,066) for past service contribu- 
tions. 

5. Commitments 

The Authority has entered into a long-term lease for the rental 
of office space. The minimum annual rental payments which will 
be paid over the life of the lease are as follows: 

S 

1987 33,820 

1988 35.500 

1989 2.970 

72.290 

In addition, the Authority has requested tenders for its pilot 
boat services for the next two years. The estimated commitment 
with respect to these contracts is approximately $300,000 a year. 



228 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
HALIFAX PORT CORPORATION 

MANDATE 

Administration, management and control of the Halifax harbour and all works and property within the harbour 
previously under the jurisdiction of the Canada Ports Corporation or, prior to February 24, 1983, the National 
Harbours Board. 

BACKGROUND 

The Halifax Port Corporation was established on June 1 , 1 984, pursuant to the national ports policy to create local 
port corporations at the major ports and harbours previously under the centralized administration of the National 
Harbours Board and, since February 1983, the Canada Ports Corporation. Total cargo handled by the port in 1986 
amounted to 14.1 million tonnes including 2.3 million tonnes of containerized cargo. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS OF 
INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



P.O. Box 336 

Ocean Terminal 
Halifax, Nova Scotia 
B3J 2P6 

— Schedule C, Part II 

— an agent of Her Majesty 

The Honourable John Crosbie, P.C, Q.C., M.P. 

Transport 

1984; letters patent of incorporation issued by the Minister of 
Transport pursuant to subsection 6.2(1) of the Canada Ports 
Corporation Act. 

David F. Bellefontaine 

Raymond V. Beck 
Doane Raymond 



FINANCIAL SUMMARY ($ million) The financial year is the calendar year. 



At the end of the year 

Total Assets 

Obligations to the private sector 

Obligations to Canada* 

Equity of Canada 

Cash from Canada in the period 

— budgetary** 

— non-budgetary 

* Excludes $5.0 million in accrued interest owed to Canada. 

** Takes no account of special contributions to Canada in 1986 of $1.9 million. 



1986 


1985 


7 months to 
Dec. 31, 1984 


60.6 

nil 

30.0 

23.2 


60.2 

nil 

25.6 

23.9 


58.3 

nil 

25.6 

22.2 


nil 
4.1 


(negl.) 
nil 


0.6 
nil 



PUBLIC ACCOUNTS, 1986-87 



229 



HALIFAX PORT CORPORATION 

AUDITORS' REPORT 

TO THE HONOURABLE JOHN CROSBIE, P.C, M.P. 
MINISTER OF TRANSPORT 

We have examined the balance sheet of the Halifax Port Corpora- 
tion as at December 31,1 986, and the statements of income and deficit 
and changes in financial position for the year then ended. Our exami- 
nation was made in accordance with generally accepted auditing 
standards, and accordingly included such tests and other procedures as 
we considered necessary in the circumstances. 

In our opinion, these financial statements present fairly the financial 
position of the Corporation as at December 31, 1986 and the results of 
its operations and the changes in its financial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in our opinion, the transactions of the Corporation that 
have come to our notice during our examination of the financial state- 
ments have, in all significant respects, been in accordance with the 
Financial Administration Act and Regulations, the Canada Ports Cor- 
poration Act and the by-laws of the Corporation. 



Doane Raymond 
Chartered Accountants 



Halifax, Canada 
February 6, 1987 



BALANCE SHEET AS AT DECEMBER 31, 1986 



ASSETS 



1986 



1985 



LIABILITIES 



1986 



198S 



Current 

Cash 52,148 228,147 

Investments (Note 3) 3,999,445 3,597,121 

Accounts receivable 2,590,519 1,753,353 

Materials and supplies 92,842 84,491 

6,734,954 5,663,112 

Investments (Note 3) 33,195 33,090 

Amounts receivable 350,782 

Fixed (Note 4) 53.839,280 54,172.543 



60,607,429 60,219.527 



Current 

Accounu payable and accrued liabilities 837.109 4,468,785 

Grants in lieu of municipal taxes 32,702 163.809 

Deferred revenues 858.106 523.308 

Current portion of long-term debt 276,080 

2,003.997 5,155.902 

Accrued employee benefits 682,648 652,043 

Loans from Canada (Note 5) 34.680.853 30.556.933 

~37.367.498 36.364.878 

EQUITY 

Contributed capital 72.136.346 72.136.346 

Contribution to Canada (Note 6) ( 1 .920.000) 

Deficit (46.976.415) (48.281,697) 



23,239.931 



23.854.649 



60.607.429 60,219.527 



On behalf of the Board: 

RAYMOND V. BECK 
Chairman 

DAVID F. BELLEFONTAINE 

General Manager and Chief Executive Officer 



230 



PUBLIC ACCOUNTS, 1986-87 



HALIFAX PORT CORPORATION— Continued 

STATEMENT OF INCOME AND DEFICIT 
FOR THE YEAR ENDED DECEMBER 31, 1986 



Revenue from operations 

Operating and administrative expenses 

Depreciation 

Grants in lieu of municipal taxes 

Loss on grain elevator operations (Note 7) ... 

Income from operations 

Investment income 

Interest expense 

Loss on disposal of fixed assets 

Net income before extraordinary item 

Extraordinary item 

Gain on sale of land 

Net income 

Deficit, beginning of year 

Deficit, end of year (46,976,415) 



1986 


1985 


S 

11,037,012 


9,779,179 


6,788,356 

2,002,115 

668,352 


6,290,314 

1,519,654 

818,640 

75,069 


9,458,823 


8,703,677 


1,578,189 


1,075,502 


361,937 
(476,582) 
(407,262) 


663,275 
(37,989) 


(521,907) 


625,286 


1,056.282 
249.000 


1,700,788 


1,305,282 
(48,281,697) 


1,700,788 
(49,982,485) 



(48,281,697) 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED DECEMBER 31, 1986 



1986 



1985 



Operating activities 

Net income before extraordinary item 1,056,282 1,700,788 

Depreciation 2,002,115 1,519,654 

Other 437,762 (51,772) 

Decrease (increase) in operating components 
of w^orking capital (3,997,423) 1,101,367 

Cash provided by (applied to) operating activi- 
ties 

Financing activities 

Capital grants 

Loans from Canada 

Loans from Canada currently payable 

Cash provided by (applied to) financing activi- 
ties 

Investing activities 

Proceeds from sale of land 

Additions to fixed assets 

Other 

Cash applied to investing activities 

Contribution to Canada 

Increase (decrease) in cash and short-term 

investments 226,325 (8,096,854) 

Cash and short-term investments, beginning of 

the year 3,825,268 11.922,122 

Cash and short-term investments, end of year .... 4,051 ,593 3,825,268 



(501.264) 


4.270.037 


4.123,920 


(10.263) 
2,650.000 
(2.650,000) 


4,123.920 


(10,263) 


249,000 

(2,080,510) 

355,179 


(12,288,251) 
(68,377) 


(1,476,331) 


(12,356,628) 


(1.920.000) 



NOTES TO FINANCIAL STATEMENTS 
FOR THE YEAR ENDED DECEMBER 31, 1986 

1 . In accordance with the Canada Ports Corporation Act, sections 
6. 1 and 6.2, a petition for the establishment of a local port corpo- 
ration at the Port of Halifax was approved and the Halifax Port 
Corporation was established effective June 1, 1984. 

In accordance with the Canada Ports Corporation Act, the 
assets, liabilities and equity were transferred at their carrying val- 
ues in the accounts of the Canada Ports Corporation — Port of 
Halifax to the Halifax Port Corporation. 

2. Significant accounting policies 

(a) Investments 

The investments, which are direct and guaranteed securities 
of Canada, are shown at amortized cost. Premiums or dis- 
counts are amortized over the periods to maturity. 

(b) Fixed assets 

Fixed assets are recorded at cost except for those transferred 
to the Corporation from Canada which are recorded at 
appraised or fair market value established at the time of 
transfer. Grants towards capital projects received from 
Canada and from third parties are deducted from the cost of 
the related fixed assets. 

Depreciation is calculated on the straight-line basis for the 
full year, commencing with the year the asset becomes opera- 
tional, using rates based on the estimated useful lives of the 
assets. 

(c) Pension costs 

All permanent employees of the Corporation are covered by 
the Public Service Superannuation Plan administered by 
Canada. Contributions to the plan are required from both the 
employees and the Corporation. The annual contributions for 
pensions are recognized in the accounts on a current basis. 

(d) Insurance 

Canada Ports Corporation assumes substantially all risks 
against fire and general perils, as well as worker compensa- 
tion claims. Any costs arising from these risks are recorded in 
the accounts in the year they can be reasonably estimated. 

(e) Grants in lieu of municipal taxes 

The expense for grants in lieu of municipal taxes is based on 
estimated municipal assessments adjusted in accordance with 
the Municipal Grants Act. Grants are paid after the amounts 
have been audited by the Municipal Grants Division of Pub- 
lic Works Canada. Any adjustments upon finalization are 
reflected in the accounts in the year of settlement. 

(0 Employee benefits 

The Corporation accrues in its accounts, annually, the 
estimated liabilities for severance pay, annual leave and over- 
time compensatory leave, which are payable to its employees 
in subsequent years under its collective agreements, or in 
accordance with its policy. 



PUBLIC ACCOUNTS, 1986-87 

HALIFAX PORT CORPORATION— Co/ic/w^e^ 

NOTES TO FINANCIAL STATEMENTS 

FOR THE YEAR ENDED DECEMBER 31, \9i6— Concluded 



3. Investments 



1986 



1985 



Amortized Face Amortized Face 
cost value cost value 



s $ s s 

Short-term 3.999.445 4.045.400 3.597,121 3.618.500 



Amortized Market Amortized Market 
cost value cost value 



Long-term 33.195 

4. Fixed assets 



33.242 



33.090 33.242 



231 



7. Comparative Figures 

Certain of the 1985 comparative figures have been restated to 
separately disclose as follows the grain elevator operations: 



Revenue from operations 1.981.725 

Operating and administrative expenses 1 .933.839 

Grants in lieu of municipal taxes 122.955 

2.056.794 ' 
Loss on operations (75.069) 





1986 




1985 




Accu- 






Depre- 


mulated 


Net 


Net 


ciation 


depre- 


book 


book 


rates 


Cost ciation 


value 


value 



Land 23.324.979 23.324.979 18.024.654 

Dredging 2.5-6.7 2.596,947 2,201,275 395,672 422,230 

Berthing struc- 
tures 2.5-10 32,234,879 16,883,596 15,351.283 7.853,789 

Buildings 2.5-10 17.218.138 10.702.336 6.515.802 7.227.753 

Utilities 3.3-10 4,409,404 1,659,267 2.750.137 1.402.979 

Roads and sur- 
faces 2.5-10 6.434.209 3,203,685 3,230,524 2,698,939 

Machinery and 

equipment 5-100 9.230.913 7,389.937 1.840.976 1.554.323 

Office furniture 
and equip- 
ment 20 790.302 489.053 301.249 351.707 

Projects under 

construction ... 128,658 128,658 14.636.169 

96.368,429 42,529,149 53,839,280 54.172.543 



S. Loans from Canada 

1986 1985 

$ $ 

Non-interest bearing loan with indefmite due 

date 25.555,762 25,555,762 

Accrued interest on loans not due and pay- 
able 5,001,171 5,001,171 

30,556,933 30,556,933 
10% loan maturing on December 31, 1996 
repayable in blended annual principal and 

interest payments of $7 16,080 4,400.000 

Less current portion repayable within one 

year 276.080 

4.123.920 

34.680.853 30.556.933 



The loans from Canada are unsecured. 
6. Contribution to Canada 

This amount was paid pursuant to a demand from the Govern- 
ment of Canada. 



232 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
HARBOURFRONT CORPORATION 



MANDATE 



a) To develop, manage and operate the waterfront in accordance with the development framework. 

b) To initiate, conduct or sponsor cultural, recreational, scientific and educational programs which, in its opinion are 
of advantage to the public. 

BACKGROUND 

The Harbourfront site was delineated by the federal government in 1972 through the assembly of lands it owned plus 
other lands it expropriated. Extensive decayed properties were removed. With the efforts of all levels of government 
and an interim board, a long-term development plan was established and the mandate for Harbourfront Corporation 
was put in place in 1978. Since 1976, active Harbourfront programs of cultural, recreational and educational 
activities have made the site an attractive, busy public place. In addition to its spending on facilities for public use, 
the corporation has furthered private sector development on the site by leasing some land and selling air rights. With 
its cash flow from development, Harbourfront is now close to financial self-sufficiency in its operation. 



CORPORATION DATA 

HEAD OFFICE 



STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 



CHIEF EXECUTIVE 
OFFICER (ACTING) 

CHAIRMAN 

AUDITOR 



Suite 500 

410 Queen's Quay West 
Toronto, Ontario 
M5V 1A2 

— Schedule C, Part I 

— not an agent of Her Majesty 

The Honourable Stewart Mclnnes, P.C, M.P. 

Public Works 

1936; as Terminal Warehouses Ltd, under the Ontario Companies 
Act; July 14, 1978, as Harbourfront Corporation, under the Business 
Corporations Act of Ontario; continued under the Canada Business 
Corporations Act, December 21, 1984. 

Frank Mills 



Consiglio Di Nino 
Green & Cadsby 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 



1986-87 



1985-86 



At the end of the period 

Total Assets 

Obligations to the private sector 

Obligations to Canada 

Equity of Canada 

Cash from Canada in the period 

— budgetary 

— non-budgetary 



1984-85 
(restated) 



1983-84 



37.1 


36.3 


27.9 


9.8 


nil 


nil 


nil 


nil 


nil 


nil 


nil 


nil 


1.4 


0.3 


0.2 


0.5 


1.0 


6.1 


20.9 


14.0 


nil 


nil 


nil 


nil 



PUBLIC ACCOUNTS, 1986-87 
HARBOURFRONT CORPORATION 

AUDITOR'S REPORT 

TO THE HONOURABLE STEWART MCINNES, P.C, M.P. 
MINISTER OF PUBLIC WORKS 

We have examined the balance sheet of Harbourfront Corporation 
as at March 31, 1987 and the statements of income, retained equity 
and changes in financial position for the year then ended. Our exami- 
nation was made in accordance with generally accepted auditing 
standards, and accordingly included such tests and other procedures as 
we considered necessary in the circumstances. 

In our opinion, these flnanciai statements present fairly the financial 
position of the Corporation as at March 31, 1987 and the results of its 
operations and the changes in its fmancial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, we have examined the transactions that came to our notice 
in the course of the above mentioned examination of the flnanciai 
statements of Harbourfront Corporation for the year ended March 31, 
1987, to determine whether they were in accordance with Part XII of 
the Financial Administration Act, the regulations, the charter and by- 
laws of the corporation and the seven year management agreement 
dated June 13, 1980 as subsequently amended. In our opinion, these 
transactions were, in all significant respects, in compliance with the 
authorities specified. 



233 



Toronto, Canada 
June 11, 1987 



BALANCE SHEET MARCH 31. 1987 



Green and Cadsby 
Chartered Accountants 



ASSETS 



Cash and term deposits (Note 2) 

Government of Canada — Receivable (Note 2) .. 

Due from related companies (Note 2) 

Receivables and other assets (Note 4) 

Due under development agreements (Note 6).... 
Deposit with Receiver General (Notes 2 and 5). 
Fixed assets (Note 7) 



1987 


1986 


LIABILITIES 

Accounts payable and accrued liabilities 


1987 


1986 


S 

1,618,135 
357,022 

1,881,695 

3,482,824 
22,388,972 

6,972,765 
423,536 


S 

318,352 
344,733 
162,488 

3,028,184 
23,451,292 

8,773,245 
230,717 


S 

3,329,372 

30,154.518 

1,442.583 

781,619 

35,708,092 

1 

1,416.856 

1,416,857 

37,124,949 


S 

2,206,904 


Unearned revenue from development agreements 
(Note 8) 


31.034,821 


Deferred development contributions (Note 9) 

Other deferred revenues 

SHAREHOLDER'S EQUITY 
CapiUl 
Authorized 

500,000 — Common shares 
Issued 
215,500 — Common shares 


1,799.414 

932.361 

35.973.500 

1 




Retained Equity 


335.510 
335,511 


37,124,949 


36,309,01 1 


36.309,01 1 



See accompanying notes 

On behalf of the Board: 

CON di NINO 
Director 

BRAM APPEL 
Director 



234 



PUBLIC ACCOUNTS, 1986-87 



HARBOURFRONT CORPORATION— Co/ir/ni/e^ 

STATEMENT OF RETAINED EQUITY 
FOR THE YEAR ENDED MARCH 31, 1987 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED MARCH 31, 1987 



1987 



1986 



1987 



1986 



Retained earnings (deficit) at beginning of year (854,206) 243,193 

Net income for the year 1,081,346 92,317 

Transfer to restricted surplus (8,317,503) (1,189,716) 

Transfer from restricted surplus 9,800,000 

Retained earnings (deficit) at end of year 

Restricted surplus at beginning of year 

Transfer from retained earnings 

Appropriation of restricted surplus 

Restricted surplus (deficit) at end of year 
(Note 11) 

Retained equity at beginning of year 

Retained equity at end of year 1,416,856 335,510 

See accompanying notes 



INCOME STATEMENT 

FOR THE YEAR ENDED MARCH 31, 1987 



1,709,637 


(854,206) 


1,189,716 
8,317,503 
(9,800,000) 


1,189,716 


(292,781) 


1,189,716 


335,510 


243,193 



1987 



1986 



Operations 
Income 
Government of Canada — Contribution 

(Note 2) 205,700 

Rental from revenue producing property 1,709,631 1,563,040 

Parking, concessions and other income 3,657,219 3,834,201 

Events admissions 1,215,423 980,239 

Events sponsorships 1,520,629 1,257,543 

Interest earned under Harbourfront Capi- 
tal Account (Note 2) 532,977 557,062 

Interest and fees earned under development 

agreements 2.245,532 1,582,515 

10.881,411 9,980,300 
Expenses 

Personnel (Note 10) 4,967,311 4,443,437 

Property and operations 1,608.402 1,442.207 

Events production and marketing 3,560.932 2,738,055 

General and administration 2,673,538 2.387,702 

Depreciation 147,746 66,298 

~ 12,957,929 Tu 

Loss from operations 

Development 
Income 

Contributions applied (Note 9) 

Interest 

Income from the sale of air rights 

Income from capitalized leases 

Expenses 

Site improvements 

Land acquisition 

Income from development 

Net income for the year 1,081,346 92,317 

See accompanying notes 



12,957,929 


11,077,699 


2,076,518 


1,097,399 


3,278,831 
14,182 


11,995.955 
88.838 


3,293,013 

8,276,220 

41,283 


12,084,793 

1,168,000 

21,716 


11,610,516 


13,274,509 


8,452,652 


11,135,816 
948,977 


8,452,652 


12,084,793 


3,157,864 


1,189,716 



1,081,346 
147,746 


92,317 
66,298 


1,229,092 


158,615 


1,062,320 

1,800,480 
1,122,467 


15,140,698 

6,514,000 
55,186 


3,985,267 


21,709,884 




(13,853,414) 



(4,931,875) 
(4,785,104) 
(2,056,169) 
(1,538,984) 



(27.165.546) 



(5.297.047) 



Operating and Development Activities 
Funds provided from 

Net income for the year 

Expenses not requiring cash outlay 

Depreciation expense 

Funds increased by 
Deferred revenue from development agreements 

Due under development agreements 

Receivable from Government of Canada 

Deferred revenue 

Deposit with Receiver General 

Accounts payable and accrued liabilities 

Funds reduced by 

Due under development agreements 

Deferred revenue from development agreements (880,303) 

Deferred development contributions (356,831) 

Receivable from Government of Canada ( 1 2,289) 

Deferred revenue (150,742) 

Deposit with Receiver General 

Development contributions 

Accounts payable and accrued liabilities 

Receivables and other assets (454,640) 

Due from related companies (1,719,207) 

"(3,574,012) 
Funds increased (reduced) by operating and 

development activities 1,640,347 

Investing activities 

Land acquired from the Crown 

Operating fixed assets (340,564) 

(340.564) 

Increase (Decrease) in Funds 1,299,783 

Cash and term deposits at beginning of year 318,352 

Cash and term deposits at end of year 1,618,135 

See accompanying notes 



NOTES TO THE FINANCIAL STATEMENTS 
MARCH 31, 1987 

1. General 

The Company, incorporated under the Laws of Ontario, was 
continued under Section 181 of the Canada Business Corporations 
Act by Certificate of Continuance dated December 21, 1984. 

The Company is a Crown corpwration listed under Part I of 
Schedule C of the Financial Administration Act. Share capital is 
held by Her Majesty the Queen in Right of Canada as repre- 
sented by the Minister of Public Works. 

The Company is exempt from Corporation Income Taxes under 
Section 149(l)(d) of the Income Tax Act. 

The Company owns shares in the following subsidiary compa- 
nies: 

630370 Ontario Limited 

15972 Canada Limited 

Peter Street Basin Properties Inc. 

Harbourpoint Developments (Harbourfront) Ltd. 



(1) 
(297,013) 



(297,014) 



(5,594,061) 
5,912,413 



318,352 



PUBLIC ACCOUNTS, 1986-87 

HARBOURFRONT CORPORATION— Conrmwe^/ 

NOTES TO THE FINANCIAL STATEMENTS 
MARCH 31, \m— Continued 

2. Related parties transactions 

Pursuant to a seven year agreement dated June 13, 1980 as 
subsequently amended, Her Majesty the Queen in Right of 
Canada, has granted the Company the right to operate, manage, 
maintain and develop certain premises situated on the Toronto 
harbourfront for commercial and residential purposes, including 
the leasing of space and to initiate, conduct or sponsor on the 
premises cultural, recreational and educational programmes for 
the benefit of the public. Subsequent to March 31, 1987, this con- 
tract has been extended to March 31, 1988. This extension is sub- 
ject to the understanding that revisions to the Agreement may be 
required prior to the new expiry date as a result of present and 
impending policy reviews related to the future mandate. 

Funds received on account of development rights and capital- 
ized land leases are remitted to the Receiver General for deposit 
in the Harbourfront Capital Account, an interest bearing trust 
account within the Consolidated Revenue Fund of the Govern- 
ment of Canada. 

The Corporation may, with the approval of the Governor in 
Council, upon recommendation of the Treasury Board, withdraw 
amounts of principal remitted to the Harbourfront Capital 
Account for purposes consistent with the development and finan- 
cial objectives of the Corporation. 

The following summarizes related party transactions for the 
year. 
Government of Canada contributions: 



Operating contribution 

Development contribution 

Interest received and receivable from the Har- 
bourfront Capital Account 

Government of Canada receivable 



At March 31, 1987, $500,000 received under a development 
agreement and included in cash and term deposits, remained to be 
remitted to the Harbourfront Capital Account. 

The Company is related to two cultural corporations. Art Gal- 
lery at Harbourfront and School by the Water by virtue of com- 
mon management. In both cases Harbourfront has majority 
representation on the Boards of Directors. The Company also acts 
as financial agents for these companies. 



Art 
Gallery 

at School 

Harbour- by the 

front Water 1987 1986 



235 



1987 


1986 


$ 

954,000 


$ 

205,700 
5,886,300 


954,000 


6,092,000 


532,977 


557,062 


357,022 


344,733 



s s s $ 

Operating contribu- 
tion 194,600 81,300 275,900 243,400 

Amounts receivable 
at March 31 1,751.561 130,134 1,881,695 162,488 



The major portion of the $1,751,561 amount receivable from 
the Art Gallery at Harbourfront as at March 31, 1987 is related 
to the construction of the Gallery's new Power Plant building. The 
Gallery will repay Harbourfront, with interest tied to interest 
rates earned by the Harbourfront Capital Account, as pledges and 
donations are received in future years as follows: 



1988 
1989 
1990 
1991 . 
1992. 



$ 

710,842 
263,795 
245,331 
178.585 
105,352 



1,503,905 



3. Accounting policies 
Land 

The land being developed by Harbourfront is owned by Her 
Majesty the Queen in Right of Canada except for certain desig- 
nated portions that have been conveyed to the Company for nomi- 
nal consideration to facilitate certain redevelopment agreements. 
Land, the acquisitions of which are funded by contributions from 
the Government of Canada, is owned by the Government of 
Canada, and accordingly, is recorded as expenditures. Land trans- 
ferred to the Company from the Government of Canada is trans- 
ferred and recorded at $ 1 . 

Buildings and site improvements 

The Company records the costs of maintaining and improving 
the site and buildings thereon as expenditures in the year 
incurred, except for additions to land conveyed to and retained by 
the Company which are capitalized. 

Operating fixed assets 

Certain operating fixed assets were originally transferred from 
the Government of Canada to the Company by Order in Council 
for $1. Additions to March 31, 1985 were recorded as expendi- 
tures and equipment capital leases were treated as operating 
leases. 

Operating assets, consisting of machinery, equipment and office 
furniture, are recorded at cost and depreciated over their useful 
lives. Assets reflected in the financial statements include addi- 
tions, including acquisitions through capital leases, if any, after 
March 31, 1986. 

Recognition of revenues 

Development rights and leases 

Upon closing of development agreements, the Company records 
all amounts received and receivable which are reasonably deter- 
minable as unearned revenue. Sales of air rights are recognized 
and net income is recorded upon transfer of title of said air rights 
and registration of the condominium development. Capitalized 
land leases are recognized on a straight line basis over the lease 
term. 

Interest 

Interest earned by the Corporation from the monies held in the 
Harbourfront Capital Account and interest earned on balances 
due under development agreements, are part of the operating 
revenues of the Corporation. 

Government contributions 

Contributions from the Government of Canada are recognized 
at the time they are authorized as payable to the Company. 

Basis of consolidation 

The consolidated financial statements include the accounts of 
the Company and its subsidiaries. 

Retained equity 

Retained equity consists of retained earnings and restricted sur- 
plus (deficit). Net income recognized under development agree- 
ments and capitalized land leases, is transferred to the restricted 
surplus account to reflect the restriction set out in Note 2. Trans- 
fers out of the restricted surplus account to retained earnings are 



236 



PUBLIC ACCOUNTS, 1986-87 



HARBOURFRONT CORPORATION— Co/irm«ef/ 

NOTES TO THE FINANCIAL STATEMENTS 
MARCH 31, \9%1— Continued 

limited to such amounts as are approved by the Governor in 
Council, upon recommendation of the Treasury Board. 

4. Receivables and other assets 



1987 1986 

$ S 

Accounts receivable 653,091 

Interest and construction allowances under 

development agreements 1,717,594 

Interest, other 99,578 

Development fees 450,000 

Participating income receivable 37,616 

Programming grants receivable 65,700 

Prepaid expenses and deposits 459,245 

3,482,824 3,028,184 



316,144 

1,277,016 

86,063 

500,000 

124,355 

95,050 

629,556 



Deposit with Receiver General 

As of March 31, 1987, the Corporation had received and paid 
$7,999,520 into the Harbourfront Capital Account. Balances due 
upon the registration of various condominium developments 
amount to $22,388,972 and will be remitted to the Harbourfront 
Capital Account on receipt. 



1987 1986 

S S 

Balance at beginning of year 8,773,245 3,841,370 

Deposits during year 7,999,520 4,931,875 

Withdrawals during year (9,800,000) 

Balance at end of year 6,972,765 8,773,245 



6. Due under development agreements 



Due 


Due 






within 


after 






one 


one 


Total 


Total 


year 


year 


1987 


1986 



Amounts due, interest 
bearing 8,683,253 

Amounts due, non- 
interest bearing 8,341,094 



900,000 9,583,253 4,833,253 
4,464,625 12,805,719 18,618,039 



17,024,347 5,364,625 22,388,972 23,451,292 



7. Fixed assets 

Fixed assets consist of: 



Accu- Net 

mulated 
Cost depreciation 1987 1986 



8. Unearned revenue from development agreements 

1987 1986 

$ $ 

Balance at beginning of year 31,034,821 15,894,123 

Amounts received 500,000 2,477,000 

Amounts receivable 6,937,200 13,853,414 

38,472,021 32,224,537 

Earned in year 8,317,503 1,189,716 

Balance at end of year 30,154,518 31,034,821 



1987 



1986 



s 


S 


1,799,414 


6,472,518 


954,000 


5,886,300 


1,168,000 
800,000 


1,436,551 


4,721,414 
3,278,831 


13,795,369 
11,995,955 


1,442,583 


1,799,414 



9. Deferred development contributions 



Deferred contributions at beginning of year... 
Contributions during year 

Government of Canada (Note 2) 

Allowances under development agree- 
ments 

Sponsorships 

Contributions applied in year 

Deferred contributions at end of year 



The deferred contributions at beginning of 1986 were repre- 
sented by contributions from the Government of Canada. 

10. Personnel 

Personnel costs were incurred in each operational area as fol- 
lows: 

1987 1986 

$ $ 

Property and operations 1,028,750 983,089 

Events production 2,315,914 2,125,532 

General and administration 1,212,362 955,783 

Planning and development 410,285 379,033 

4,967,311 4,443,437 



1 1 . Restricted deficit 

The restricted deficit arises as a result of Harbourfront Capital 
Account funds advanced to provide working capital for the Corpo- 
ration, in excess of the recognition of income from development 
agreements, as summarized below. 

Recognized as income 

S 

1986 1,189,716 

1987 8,317.503 

9,507,219 

Advances in excess of recognized income 292,781 

Amounts withdrawn per Note 5 9.800,000 



Land 1 

Operating fixed 
assets trans- 
ferred from 
Crown 1 

Equipment 637,578 



637,580 



1 
214,044 423,534 



214,044 423,536 



1 
230,715 



230,717 



PUBLIC ACCOUNTS, 1986-87 

HARBOURFRONT CORPORATION— Co/ic/M^e^ 

NOTES TO THE FINANCIAL STATEMENTS 
MARCH 31, im— Concluded 



237 



The following items maintain a consistent relationship: 



1987 


1986 


$ 


$ 


16,772,765 
(9,800,000) 


8,773,245 



Funds received and deposited with 
Receiver General 

Approved withdrawals 

Deposit with Receiver General (Notes 2 
and 5) 6,972,765 8,773,245 

Deposit received under development agree- 
ment 500,000 

Amounts due under development agree- 
ments (Note 6) 

Unearned revenue from development 

agreements (Note 8) 

Restricted surplus (deficit) 



12. Comparative figures 

Certain other 1986 comparative figures have been reclassified 
in order to conform with the financial statement presentation 
adopted for 1987. 

13. Cumulative contributions by the Government of Canada 

The following historical cost information in millions of dollars 
has been supplied by the Department of Public Works: 



22,388,972 


23,451,292 


29,861,737 


32,224,537 


30,154,518 
(292,781) 


31,034,821 
1,189,716 


29,861,737 


32,224,537 



15. Uncertainties and Contingencies 

(a) A policy review of Harbourfront Corporation is in progress. 
To avoid actions that will prejudice the Corporation's ability 
to properly consider and act upon any recommendations, the 
Minister of Public Works on May 5, 1987 instructed the Cor- 
poration that all capital projects be put in abeyance. Projects 
which have received the required building permits from the 
City of Toronto and are now under construction are proceed- 
ing. All other projects requiring building permits are in abey- 
ance. 

Due to the nature of the review and the uncertainty of its 
results, these financial statements give no effect to the finan- 
cial implications of the projects under suspension. 

The ramifications of the suspension of capital projects are 
unknown at the present time. 

(b) The Company is the defendant in certain litigation matters. 
The Company has denied liability in these actions and in 
some instances has served counterclaims. In the opinion of 
management, based in part upon discussion with counsel, 
these actions will be resolved satisfactorily and will not have 
a material adverse effect on the Company's financial posi- 
tion. 



14. 



Fiscal 


Fiscal 




1972 to 


1981 to 




1980 


1987 


Total 


$ 


S 


S 


54.4 




54.4 


21.5 




21.5 




8.5 


8.5 




51.3 


51.3 


75.9 


59.8 


135.7 



Land acquisition 

Operating and capital expenditures 

Operating contributions 

Development and land acquisition 
contributions 



Funds contributed subsequent to fiscal 1980 represent expendi- 
tures pursuant to the Management Agreement referred to in 
Note 2. 

Commitments 

The contractual principal repayments under equipment leases 
entered into prior to April 1, 1985 are as follows: 

Fiscal year $ 

1988 102,798 

1989 38,089 

1990 25,891 



238 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
INTERNATIONAL CENTRE FOR OCEAN DEVELOPMENT 



MANDATE 

To initiate, encourage and support cooperation between Canada and developing countries in the field of ocean 
resource development. 

BACKGROUND 

ICOD was established by statute as a parent Crown corporation in February 1985. It complements the work of 
CIDA, the International Development Research Centre, and other development assistance organizations. It is seen as 
an important new dimension in Canada's efforts to assist less fortunate nations through its long experience and 
expertise in marine resource management. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



5670 Spring Garden Road 
9th Floor 

Halifax, Nova Scotia 
B3J 1H6 

— Schedule C, Part I 

— not an agent of Her Majesty 

The Right Honourable Joe Clark, P.C., M.P. 

External Affairs 

1985; The International Centre For Ocean Development Act, (S.C. 
1984-85 C. 6). 

G.C. Vernon 

Elisabeth Mann Borgese 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 



1986-87 



At the end of the period 

Total Assets 0.1 

Obligations to the private sector nil 

Obligations to Canada nil 

Equity of Canada negl 

Cash from Canada in the period 

— budgetary 4,0 

— non-budgetary nil 



1985-86 



1984-85 



0.1 


negl 


nil 


nil 


nil 


nil 


negl 


nil 


1.1 


0.8 


nil 


nil 



PUBLIC ACCOUNTS. 1986-87 

INTERNATIONAL CENTRE FOR OCEAN DEVELOPMENT 

AUDITORS REPORT 

TO THE SECRETARY OF STATE FOR EXTERNAL AFFAIRS 

I have examined the balance sheet of the International Centre for 
Ocean Development as at March 31, 1987 and the statements of oper- 
ations, deficit, contributed surplus and changes in financial position for 
the year then ended. My examination was made in accordance with 
generally accepted auditing standards, and accordingly included such 
tests and other procedures as I considered necessary in the circum- 
stances. 

In my opinion, these financial statements present fairly the financial 
position of the Centre as at March 31, 1987 and the results of its oper- 
ations and the changes in its financial position for the year then ended 
in accordance with generally accepted accounting principles applied on 
a basis consistent with that of the preceding period. 

Further, in my opinion, the transactions of the Centre that have 
come to my notice during my examination of the financial statements 
have, in all significant respects, been in accordance with Part XII of 
the Financial Administration Act and regulations, the International 
Centre for Ocean Development Act and regulations and the by-laws of 
the Centre. 

Raymond Dubois, C.A. 
Deputy Auditor General 
for the Auditor General of Canada 
Ottawa, Canada 
May 15. 1987 



239 



BALANCE SHEET AS AT MARCH 31, 1987 



ASSETS 



Current 

Cash 

Accounts receivable 



1987 



1986 



LIABILITIES 



1987 1986 



70,119 
74,014 



74.669 
5,070 



S S 

Current 

Accounts payable and accrued liabilities 100,190 45,408 

EQUITY 

Contributed surplus (Note 3) 54,227 52,790 

Deficit (10,284) (18,459) 

43.943 34.331 



144.133 79,739 



144,133 79,739 



Approved by the Board: 

J. VANDERMEULEN 
Director 

G. VERNON 
Director 



240 



PUBLIC ACCOUNTS, 1986-87 



INTERNATIONAL CENTRE FOR OCEAN DEYELOPMENT— Continued 



STATEMENT OF OPERATIONS 
FOR THE YEAR ENDED MARCH 31, 1987 
(with comparative figures for the period 
February 27, 1985 to March 31, 1986) 



1987 



1986 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED MARCH 31, 1987 
(with comparative figures for the period 
February 27, 1985 to March 31, 1986) 



1987 



1986 



Program activities 
Technical assistance 

Technical assistance projects (Schedule A) 

Program — Development and related expenses... 
— Administration costs (Schedule E)... 

Information 

Information — Projects (Schedule B) 

— Services expenses 

Program administration costs (Schedule E) 

Training 

Course development projects (Schedule C) 

Scholarship projects (Schedule D) 

Program— Development and related expenses ... 
— Administration costs (Schedule E) ... 

Total program activities expenditures 

Administrative expenditures (Schedule F) 

Deduct: revenues 
Recoveries from project co-sponsor 

Interest income 

Cost of operations for the year 3,991,825 



947,885 

87,894 

223,678 


77,000 

4,506 

66,877 


1,259,457 


148,383 


246,611 
72,404 
127,768 


27,508 
2,750 
1,588 


446,783 


31,846 


548,091 

514,583 

18,564 

181,611 


5;241 

276,769 

6,764 

89,821 


1,262,849 


378,595 


2,969,089 


558,824 


1,079,037 


660.069 


(34,117) 
(22,184) 


(75,434) 


(56,301) 


(75,434) 



1,143,459 



STATEMENT OF DEFICIT 
FOR THE YEAR ENDED MARCH 31, 1987 
(with comparative figures for the period 
February 27, 1985 to March 31, 1986) 



1987 



1986 



Deficit, at beginning of the year 18,459 

Parliamentary appropriations 4,000,000 1 , 1 25,000 

3,981,541 1,125,000 

Deduct: cost of operations for the year 3,991,825 1,143,459 

Deficit, at end of the year 10,284 18,459 



STATEMENT OF CONTRIBUTED SURPLUS 
FOR THE YEAR ENDED MARCH 31, 1987 
(with comparative figures for the period 
February 27, 1985 to March 31, 1986) 

1987 1986 



Financing activities 

Parliamentary appropriations 4,000,000 3,300,000 

Refund of parliamentary appropriations (2,175,000) 

4,000,000 1,125,000 

Cash balance contributed by predecessor non- 
government organization — International 

Centre for Ocean Development 1,437 

~ 4.001.437 1,125,000 

Operating activities 

Cash used for operations 

Cost of operations for the year (3,991,825) (1,143,459) 

Adjustment for non-cash items 

Net fixed asset contributions 52,790 

(3,991.825) (1,090,669) 
Increase (decrease) in working capital items 

other than cash (14,162) 40,338 

"(4,005,987) (1,050,331) 

Net funds provided (used) (4,550) 74,669 

Cash, at beginning of the year 74,669 

Cash, at end of the year 70,1 19 74,669 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, 1987 

1 . Authority and objectives 

The International Centre for Ocean Development was estab- 
lished by the International Centre for Ocean Development Act in 
1985 as a Crown corporation without share capital, named in 
Schedule C, Part I to the Financial Administration Act. The Cen- 
tre is dependant on the Government of Canada for operating 
appropriations. 

The objectives of the Centre are to initiate, encourage and sup- 
port cooperation between Canada and developing countries in the 
field of ocean resource development by: 

(a) initiating and supporting programs in developing countries 
for the improved management and utilization of ocean 
resources, particularly as a source of food; 

(b) supporting the development of indigenous expertise and insti- 
tutions in developing countries in order to increase the 
capacity of developing countries in integrated ocean use man- 
agement; 

(c) enlisting the expertise of people and institutions in Canada, 
developing countries and elsewhere; 

(d) developing and sponsoring the collection and dissemination of 
information relating to ocean resource development; 

(e) developing and sponsoring training programs, technical 
assistance and advisory services relating to ocean resource 
development; and 

(0 supporting research relating to ocean resource development. 



Contributed surplus, at beginning of the year 52,790 

Assets contributed by predecessor non-government organiza- 
tion—International Centre for Ocean Development 1,437 52,790 

Contributed surplus, at end of the year 54,227 52,790 



PUBLIC ACCOUNTS, 1986-87 



241 



INTERNATIONAL CENTRE FOR OCEAN DEWELOFMENT— Continued 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \9%1— Concluded 

2. Significant accounting policies 

The financial statements reflect the following policies: 

(a) Capital expenditures 

Purchases of equipment, office furniture, and costs of lease- 
hold improvements are expensed in the year of acquisition. 

(b) Parliamentary appropriations 

Parliamentary appropriations are recorded in the Statement 
of Deficit for the year to which they apply. 

(c) Project expenditures 

The Centre enters into agreements with third parties to 
undertake projects. Project expenditures are charged to oper- 
ations when disbursed and as they become due under the 
terms of the contractual agreement. 

(d) Pension plan 

Employees of the Centre are covered by the Public Service 
Superannuation Plan administered by the Government of 
Canada. Contributions to the Plan are required equally from 
the employees and the Centre. These contributions represent 
the total liability of the Centre and are recognized in the 
accounts on a current basis. 

3. Contributed surplus 

Contributed surplus represents the net book value of assets con- 
tributed to the Centre by the predecessor, non-government organi- 
zation. International Centre for Ocean Development. In accord- 
ance with the Centre's accounting policy, net fixed assets 
contributions of $52,790 were charged to expense during the 
preceding period. 

4. Income taxes 

The Centre is exempt from income taxes. 

5. Operating leases 

The Centre has entered into various operating lease arrange- 
ments for office premises and equipment. The future minimum 
lease payments are as follows: 



1987 1986 
Year ending March 31 $ $ 

1987 142,300 

1988 190,000 143,500 

1989 193,300 159,500 

1990 193,800 170,000 

1991 188,900 

1992 188.900 

954,900 615,300 



6. Contractual commitments 

The Centre is committed to project expenditures during the 
next five years subject to compliance by recipients with the terms 
of their agreements. 



TECHNICAL ASSISTANCE PROJECTS 
FOR THE YEAR ENDED MARCH 31, 1987 
(with comparative figures for the period 
February 27, 1985 to March 31, 1986) 



SCHEDULE A 



1987 



1986 



850011 FFA Surveillance 234,597 30,000 

850010 OECS Fisheries Desk 182,642 47,000 

850035 Fisherman's Training— Pictou 63.858 

860041 CCOP/SOPAC— Regional Marine Geology 60,996 

860034 Fisherman's Assistance — Dominican 60,219 

850013 Fisheries Research Needs and Assessment 55,065 

860086 Research Institute Evaluation 44.000 

860072 Economic Analysis of Costa Rica 26.324 

860056 Master Fisherman's Programme 26.041 

Projects under $25.000 194.143 

Total technical assistance projects expenditures 947.885 77,000 



INFORMATION PROJECTS 
FOR THE YEAR ENDED MARCH 31, 1987 
(with comparative figures for the period 
February 27, 1985 to March 31, 1986) 



SCHEDULE B 



1987 



1986 



860023 World Fisheries Map 69.804 

860037 Marine Information Sri Lanka 50,000 

860077 Regional Compendium — Indian Ocean 34.970 

850021 Ocean Training Directory 28.900 8.500 

Projects under $25,000 62.937 19.008 

Total information projects expenditures 246.61 1 27,508 



COURSE DEVELOPMENT PROJECTS 
FOR THE YEAR ENDED MARCH 31, 1987 
(with comparative figures for the period 
February 27, 1985 to March 31, 1986) 



SCHEDULE C 



1987 



1986 



850014 Marine Affairs Diploma Course 175.037 

860070 Marine Affairs Diploma Materials 85.325 

850059 SEAPOL Ocean Boundary Making 82.200 

850022 Stand Alone Materials 56.514 

860078 Maritime Boundary Delimitation Course 32.000 

860028 Non-Fuel Minerals Course— Halifax 30.872 

850015 WMU Marine Affairs Course 26.180 

Projects under $25.000 59.963 

Total course development projects expenditures 548.091 



5,241 



5,241 



1987 1986 

Year ending March 31 $ $ 

1987 678,500 

1988 3.485.000 519,000 

1989 1,622,700 450,000 

1990 385,500 151,000 

1991 310,000 128,000 

1992 295,900 

6,099.100 1,926,500 



242 



PUBLIC ACCOUNTS, 1986-87 



INTERNATIONAL CENTRE FOR OCEAN DEWELOPMENT— Concluded 



SCHOLARSHIP PROJECTS 
FOR THE YEAR ENDED MARCH 31, 1987 
(with comparative figures for the period 
February 27, 1985 to March 31, 1986) 



SCHEDULE D 



1987 



1986 



850017 ICOD Scholarship Programme 238,850 240,000 

860062 Tropical Fisheries Diploma 58,965 

860081 lOI Scholarships (Indian Ocean) 49,933 

860025 Regional University Scholarships 43,605 

860018 lOI Scholarships (Halifax Course) 37,174 

850019 WMU Scholarships 34,117 36,769 

860097 CIDA/WMU Africa Scholarships 34,117 

Projects under $25,000 17,822 

Total scholarship projects expenditures 514,583 276,769 



TOTAL PROGRAM ADMINISTRATION COSTS 

FOR THE YEAR ENDED MARCH 31, 1987 

(with comparative figures for the period 

February 27, 1985 to March 31, 1986) SCHEDULE E 



Salaries 



Travel 



Total 
1987 



Program activities 

Technical Assistance 130,057 

Information 93,473 

Training 148,444 

Total program 

Administration costs 371,974 



Total 
1986 



93,621 223,678 66,877 
34,295 127,768 1,588 
33,167 181,611 89,821 



161,083 533,057 158,286 



ADMINISTRATIVE EXPENDITURES 
FOR THE YEAR ENDED MARCH 31, 1987 
(with comparative figures for the period 
February 27, 1985 to March 31, 1986) 



SCHEDULE F 



1987 1986 

Employee and Contract Staff Salary and Benefits . 

Accommodation Costs 

Office Supplies and Services 

Office Equipment and Leasehold Improvements .... 

Recruitment and Relocation Costs 

Travel and Entertainment 

Communications 

Directors' Honoraria, Travel and Meetings 

Professional Services 

Total administrative expenditures 1,079,037 660,069 



$ 


$ 


468,404 


171,312 


142,136 


72,506 


107,259 


43,992 


95,898 


118,798 


75,465 




72,408 


59,883 


48,575 


30,314 


40,665 


53,109 


28,227 


110,155 



PUBLIC ACCOUNTS, 1986-87 



243 



SUMMARY PAGE 
INTERNATIONAL DEVELOPMENT RESEARCH CENTRE 



MANDATE 



To initiate, encourage, support and conduct research into the problems of the developing regions of the world and into 
the means for applying and adapting scientific, technical and other knowledge to the economic and social 
advancement of those regions. 

BACKGROUND 

IDRC was created to help resolve, through research carried out by Third World scientists, the problems of poverty in 
the developing countries. To this end, it has established the following main program areas: Agriculture, Food and 
Nutrition Sciences; Health Sciences; Information Sciences; Social Sciences; and, through collaborative research, the 
Earth Sciences and Technologies for Local Enterprises. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



250 Albert Street 
Ottawa, Ontario 
K1G3H9 

— not an agent of Her Majesty 

— exempt from provisions of Divisions 1 to IV of Part XII of the 
Financial Administration Act 

The Right Honourable Joe Clark, P.C, M.P. 

External Affairs 

1970; by The International Development Research Centre Act, 
(R.S.C., 1970, 1st Supplement C-21) 

Ivan L. Head 



Janet M. Wardlaw 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 



1986-87 



1985-86 



1984-85 
(restated) 



1983-84 



At the end of the period 

Total Assets 

Obligations to the private sector 

Obligations to Canada 

Equity of Canada 

Cash from Canada in the period 

— budgetary 

— non-budgetary 

* Net of $4.0 million repaid to Canada in each of these two years. 



14.3 


16.7 


20.3 


21.7 


nil 


nil 


0.3 


0.4 


nil 


4.0 


nil 


nil 


2.6 


1.1 


10.9 


7.9 


96.0* 


82.0* 


81.0 


67.4 


nil 


nil 


nil 


nil 



244 



PUBLIC ACCOUNTS, 1986-87 



INTERNATIONAL DEVELOPMENT RESEARCH CENTRE 

AUDITOR'S REPORT 

TO THE INTERNATIONAL DEVELOPMENT RESEARCH CENTRE 

AND THE 
SECRETARY OF STATE FOR EXTERNAL AFFAIRS 

I have examined the balance sheet of the International Development 
Research Centre as at March 31, 1987 and the statements of opera- 
tions, equity of Canada and changes in fmancial position for the year 
then ended. My examination was made in accordance with generally 
accepted auditing standards, and accordingly included such tests and 
other procedures as I considered necessary in the circumstances. 

In my opinion, these fmancial statements present fairly the fmancial 
position of the Centre as at March 31, 1987 and the results of its oper- 
ations and the changes in its fmancial position for the year then ended 
in accordance with generally accepted accounting principles applied on 
a basis consistent with that of the preceding year. 



Kenneth M. Dye, F.C.A. 
Auditor General of Canada 



Ottawa, Canada 
June 11, 1987 



''■"^'!r0,; 



BALANCE SHEET AS AT MARCH 31, 1987 



ASSETS 



1987 



1986 



LIABILITIES 



1987 



1986 



Current 

Cash and short-term deposits (Note 3) 9,181,248 1 1,925,534 

Accounts receivable 555,699 461,015 

Prepaid expenses 700,665 745,523 

10,437,612 13,132,072 

Recoverable deposits 444,754 455,909 

Property and equipment (Note 4) 3,310,258 3,108,716 

John Bene Endowment Fund (Note 5) 138,465 



Approved: 

RAYMOND AUDET 
Vice-President, Resources 

IVAN L. HEAD 
President 



14,331,089 16,696,697 



Current 
Accounts payable and accrued liabilities 

(Note 6) 7,974,540 

Due to Government of Canada (Note 7) 

Funds provided for contract research 691,597 

Deferred revenue (Note 8) 224,092 

Long-term 

Accrued employee separation benefits 

Deferred rent— Head Office (Note 9) 

John Bene Endowment Fund (Note 5) 

EQUITY 

Equity of Canada 



8,446,521 

4,000,000 

450,027 

241,110 



8,890,229 


13,137,658 


2,477,240 
270,229 


2,436,272 


2,747,469 


2,436,272 


11,637,698 


15,573,930 


138,465 


11,776,163 
2,554,926 


15,573,930 
1,122,767 



14,331,089 16,696,697 



iX..l»-} 3ri. 



PUBLIC ACCOUNTS, 1986-87 

INTERNATIONAL DEVELOPMENT RESEARCH CENTRE— Continued 



245 



STATEMENT OF OPERATIONS 

FOR THE YEAR ENDED MARCH 31, 1987 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED MARCH 31, 1987 



1987 



1986 



1987 



1986 



Expenditure 
Development research 

Project grants 52,498,074 47,057,173 

Centre projects 6,959,083 6,474,598 

Research-related activities 

Project development and support 

Information dissemination 

Development-research library 

Research operational support 

Technical support 

Regional and liaison offices 

Division management 

Contract research 

Total research and support expenditure 

(Schedule 1) 

General management expenditure 

(Schedule 2) 

Revenue 

Grant from Parliament of Canada 100,000,000 86.000,000 

Investment and other income 977,911 1.880,968 

Contract research 924,410 1,053,126 

CIDA contribution (Note 8) 498,393 728,890 

102.400,714 89,662,984 

Excess of revenue over expenditure (expenditure 

over revenue) 1,432,159 (1,823.024) 



STATEMENT OF EQUITY OF CANADA 
FOR THE YEAR ENDED MARCH 31, 1987 



59,457,157 


53,531,771 


4,893,498 
2.131,104 
1,396,237 


3,794,838 
1,925,219 
1.283,138 


8,420,839 


7,003,195 


12,876,019 
5,394,586 
4.541.789 


12,012,502 
4,946,549 
4,223,966 


22,812,394 


21,183,017 


924,410 


1,053,126 


91,614,800 
9,353,755 


82,771,109 
8,714,899 


100,968,555 


91,486,008 



Operating activities 
Cash provided by (used for) operations 

Excess of revenue over expenditure (expendi- 
ture over revenue) 

Items not affecting funds 

Depreciation and amortization 

Provision for employee separation benefits 
Loss (gain) on disposal of property and 
equipment 

Accounts receivable 

Prepaid expenses 

Recoverable deposits 

Accounts payable and accrued liabilities 

Deferred revenue 

Payment of employee separation benefits 

Contract research 

Deferred rent 270.229 

Financing activities 

Reduction of equity 

Due to Government of Canada 

Reduction of obligation under capital lease 

Investing activities 

Additions to property and equipment 

Proceeds on disposal of property and equipment 

Decrease in funds 

Cash and short-term deposits, beginning of year .. 

Cash and short-term deposits, end of year 9,181,248 



1.432,159 


(1.823.024) 


1.095.018 


1.035.657 


357,568 


500,722 


11,502 


(4,042) 


2.896.247 


(290.687) 


(94,684) 


(16,429) 


44,858 


82,296 


11,155 


(20.580) 


(471,981) 


1,910,443 


(17,018) 


241.110 


(316.600) 


(264.234) 


241.570 


181,927 



2,563.776 


1,823,846 


(4,000,000) 


(8.000.000) 

4,000.000 

(345.234) 


(4,000.000) 


(4.345,234) 


(1.354.825) 
46,763 


(835.100) 
45.380 


(1,308.062) 


(789,720) 


(2,744,286) 
11.925.534 


(3,311,108) 
15.236,642 



11.925.534 



1987 



1986 



Balance at the beginning of the year 1,122,767 10,945,791 

Reimbursement of equity to Government of 

Canada (Note 7) (8,000,000) 

Excess of revenue over expenditure (expenditure 

over revenue) 1,432,159 (1,823,024) 

Balance at the end of the year 2,554,926 1,122,767 



246 



PUBLIC ACCOUNTS, 1986-87 



INTERNATIONAL DEVELOPMENT RESEARCH CENTRE— Continued 



NOTES TO FINANCIAL STATEMENTS 
AS AT MARCH 31, 1987 

1 . Authority and objective 

The International Development Research Centre, a Corpora- 
tion without share capital, was established in 1970 by the Parlia- 
ment of Canada through the International Development Research 
Centre Act. The annual grant received from the Parliament of 
Canada is pursuant to External Affairs Votes 60 and 70 for the 
years ended March 31, 1987 and 1986 respectively. 

The objective of the Centre is to initiate, encourage, support, 
and conduct research into the problems of the developing regions 
of the world and into the means for applying and adapting scien- 
tific, technical, and other knowledge to the economic and social 
advancement of those regions. 

2. Significant accounting policies 

The financial statements have been prepared in accordance 
with Canadian generally accepted accounting principles and 
reflect the following policies: 
Property and equipment 

Property and equipment are recorded at cost and depreciated 
over their estimated useful lives. Leasehold improvements are 
amortized over the terms of the respective leases. The methods 
and rates used to provide for the depreciation and amortization of 
property and equipment are: 



Method 



Rate (%) 



Computer hardware 


Straight-line 


20 


Leasehold improvements 


Straight-line 


9-50 


Office furniture and equipment 


Diminishing 






balance 


20 


Vehicles 


Diminishing 






balance 


30 


Telephone system 


Straight-line 


20 



Expenditure 

Expenditure is recorded on an accrual basis except for contract 
research expenditure, which is charged to operations when dis- 
bursed. 

Recognition of revenue 

Revenue in respect of contract research and of the contribution 
from the Canadian International Development Agency (CIDA) is 
recognized at the time that the related project expenditure is 
incurred. Contract research and CIDA contribution funds 
received in excess of expenditure are included in current liabili- 
ties. 
Pension costs 

Employees of the Centre are covered by the Public Service 
Superannuation Plan administered by the Government of Canada. 
Contributions to the Plan are required from the employees and 
the Centre. These contributions represent the total liability of the 
Centre and are recognized in the accounts on a current basis. 

Income taxes 

The Centre is exempt from any liability for income taxes. 
Foreign currency translation 

Monetary assets and liabilities are translated into Canadian 
dollars at the rate of exchange in effect at year-end. Non mone- 
tary assets are translated at rates prevailing at the respective 
transaction dates. Foreign-currency transactions are translated 
into Canadian dollars by the use of an average exchange rate that 
closely approximates the rate in effect at the transaction date. 
Exchange gains and losses are included in operations for the cur- 
rent year. 



3. Cash and short-term deposits 

1987 1986 

$ $ 

Cash (bank overdraft) (2.062) 462.316 

Short-term deposits 

Canadian chartered banks 6.904.367 

Governments and governmental enter- 
prises 1.288.643 

Commercial enterprises 990,300 

Trust and mortgage companies 

~9.183.310 11.463.218 
9.181.248 11.925.534 



3,065,992 

1.279.354 
1.688.132 
5,429.740 



4. Property and equipment 

1987 1986 

Accu- 
mulated 
depre- 
ciation 

and 
amorti- 
Cost zation Net Net 

2 ) ^ ^ 

Computer hardware .. 2.695,035 1,171,571 1,523,464 1,204,720 

Leasehold improve- 
ments ... 327,587 180,585 147,002 466,947 

Office furniture and 

equipment 1,841,814 989,016 852,798 742,075 

Vehicles 936,657 434,572 502,085 385,848 

Telephone system 565,308 280,399 284.909 309,126 

6,366,401 3,056,143 3,310,258 3,108,716 



Depreciation and amortization for the year ended March 31, 
1987 amounted to $1,095,018 ($1,035,657 for 1986). 

5. John Bene Endowment Fund 

The estate of the late John Bene has established an endowment 
fund to be administered by the Centre, that provides a post-gradu- 
ate fellowship in the field of social forestry. 

1987 

$ 

Initial amount 50,000 

Other donations received 81,059 

Amount invested in short-term deposits 131,059 

Cash and accrued interest income 7,406 

Balance at the end of the year 138,465 



6. Accounts payable and accrued liabilities 



1987 



1986 



Accrued liabilities— Projects 4,198,635 4,765,749 

Accrued annual and other leave benefits 1,235,921 1,302,879 

Other 2,539,984 2,377,893 



7,974,540 8,446,521 



7. Due to Government of Canada 

The Budget Papers tabled in the House of Commons by the 
Minister of Finance on May 23, 1985 provided for the recovery of 
$15,000,000 from the Centre in 1985-86. The Centre negotiated 
the remittance of $8,000,000: $4,000,000 in fiscal year 1985-86 
and $4,000,000 in April 1986. 



PUBLIC ACCOUNTS, 1986-87 247 

INTERNATIONAL DEVELOPMENT RESEARCH CET<ITRE— Continued 

NOTES TO FINANCIAL STATEMENTS 
AS AT MARCH 31. \m— Concluded 

8. Contribution from the Canadian International Development 
Agency 

On March 29, 1985, the Centre executed an agreement in 
respect of a contribution of up to $4,764,690 to be provided by 
CIDA for a development-research project. 

1987 1986 

$ S 

Contribution received during the year 521.375 1.000.000 

Project expenditure 498.393 728.890 

Administration charges by the Centre 40.000 30.000 

538.393 758,890 
Excess of funds received over expenditure and 

administration charge (expenditure and 

administration charge over funds received) (17.018) 241.1 10 

Funds available at the beginning of the year 241.110 

Funds available at the end of the year 224.092 241.110 

9. Deferred rent — Head Office 

The Centre signed a new lease for 10 years and 10 months 
starting in January 1987. The terms call for an annual rent of 
about $2,740,000 starting with a rent-free period of 13 months. 
This rent-free period is being amortized over the life of the lease. 
The amount of $270,229 reflects the deferred rent as at March 
31. 1987. 

10. Operating leases 

The Centre has entered into various lease arrangements for 
office premises, equipment, and staff accommodation, in Canada 
and in various countries. The total annual payments under such 
lease arrangements will be: 

Year ending March 3 1 S 

1988 4.929.382 

1989 4.162.882 

1990 3.518.215 

1991 3,487,803 

1992 3.558.053 

19,656,335 



1 1 . Contractual commitments — Project grants and project develop- 
ment 

The Centre is committed to make payments totalling up to 
$85,005,643 during the next 4 years subject to funds being pro- 
vided by Parliament and subject to compliance by recipients with 
the terms of project agreements. The Centre has also submitted 
formal grant offers to prospective recipients totalling $24,918,569 
and is awaiting acceptance of these offers. 

The Centre is further committed to make payments of up to 
$3,337,617 during the next 3 years, subject to funds being pro- 
vided by CIDA and subject to compliance by the recipient with 
the terms of the project agreement. 

12. Contingencies 

The Centre is a defendant in two actions for damages and costs 
allegedly sustained by the plaintiffs. Management and counsel are 
of the opinion that the Centre has defences against these claims 
and accordingly no provision has been made in the financial state- 
ments in respect of them. The claims are not significant to the 
operations of the Centre. 

13. Comparative figures 

The 1986 comparative figures have been reclassified to conform 
to the statement presentation adopted in 1987. 



248 



PUBLIC ACCOUNTS, 1986-87 



INTERNATIONAL DEVELOPMENT RESEARCH CENTRE— Co«c/M^e^ 

SCHEDULE OF RESEARCH AND SUPPORT EXPENDITURE 
FOR THE YEAR ENDED MARCH 31, 1987 



SCHEDULE 1 



Development 

research 

$ 

Programs 

Agriculture, Food and Nutrition Sciences 20,746,162 

Social Sciences 9,715,694 

Information Sciences 8,150,814 

Health Sciences 7,924,226 

Fellowships and Awards 5,744,774 

Cooperative Programs 4,479,874 

Program-related activities 

Regional and liaison offices and Coordination unit 

Information dissemination 467,406 

Special Program Activities 2,227,477 

Development-research library 

External liaison and relations 730 

59.457,157 



1987 



Research 

related 

activities 



Research 

operational 

support 



Contract 
research 



Total 



1986 



Total 



618.517 


4,421,442 


391,660 


26.177,781 


23,401,904 


811,741 


3,587,405 


322,628 


14,437,468 


14,445,061 


558,948 


2,545,517 


94,828 


11,350,107 


9,613,195 


504,581 


2,477,872 


8,485 


10,915,164 


10,026,917 


208,484 


826,118 




6,779,376 


5,855,067 


710,964 


1,258,320 




6,449,158 


5,459,872 


847,746 


5,394,586 




6.242.332 


5,632,185 


2,131,104 


1,643,801 


9,500 


4.251.811 


4,005,802 


352,953 




97,309 


2.677.739 


2,244,707 


1,396,237 






1.396.237 


1,283,138 


279,564 


657,333 




937.627 


803,261 


8,420,839 


22,812,394 


924.410 


91.614.800 


82,771.109 



SCHEDULE OF GENERAL MANAGEMENT EXPENDITURE 
FOR THE YEAR ENDED MARCH 3 1 , 1 987 SCHEDULE 2 



1987 



1986 



Salaries and benefits 

Rent and accommodation 

Office and sundry 

Depreciation and amortization ... 

Travel and relocation 

Governors' meetings 

Professional and special services. 

Telecommunications 

Insurance 

Interest 



s 


$ 


6,065.602 


6,067,589 


1.004.136 


619,479 


638.6S4 


500,317 


535.439 


389,500 


488.402 


457,798 


238,885 


277,872 


185,141 


198.001 


164,208 


159.676 


33,288 


14.515 




30.152 



9.353,755 8.714.899 



PUBLIC ACCOUNTS, 1986-87 



249 



SUMMARY PAGE 
LAURENTIAN PILOTAGE AUTHORITY 



MANDATE 



To establish, operate, maintain and administer in the interests of safety an efficient pilotage service in the St. 
Lawrence River between Les Escoumins and the north end of the St. Lambert Lock, in the Saguenay River and in 
the Bay of Chaleur. 

BACKGROUND 

Established in 1972, the Authority provides pilotage services and has the power to make regulations, subject to the 
approval of the Governor in Council, which establish compulsory pilotage areas; prescribe the ships/classes of ships 
that are subject to compulsory pilotage, the circumstances under which compulsory pilotage may be waived and 
pilotage tariffs; and which cover the licensing of pilots and issuance of pilotage certificates. Tariffs must be fair and 
reasonable and sufficient to permit the Authority to operate on a self-sustaining financial basis. 



CORPORATION DATA 

HEAD OFFICE 



STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS OF 
INCORPORATION 

CHAIRMAN AND CHIEF 
EXECUTIVE OFFICER 

AUDITOR 



Suite 1402 

1080 Beaver Hall Hill 
Montreal, Quebec 
H2Z 1S8 

— Schedule C, Part I 

— not an agent of Her Majesty 

The Honourable John Crosbie, P.C, Q.C., M.P. 

Transport 

1972; pursuant to the Pilotage Act (S.C. 1970-71-72, C. 52). 

Jacques Chouinard 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year is the calendar year. 



1986 



At the end of the year 

Total Assets 

Obligations to the private sector 

Obligations to Canada 

Equity of Canada 

Cash from Canada for the year 

— budgetary 

— non-budgetary 



1985 



1984 



1983 



7.9 


6.3 


5.1 


5.2 


0.8 


0.7 


0.4 


0.1 


nil 


nil 


nil 


nil 


0.8 


(0.3) 


(0.1) 


0.3 


1.3 


2.0 


1.5 


1.0 


nil 


nil 


nil 


nil 



250 



PUBLIC ACCOUNTS, 1986-87 



LAURENTIAN PILOTAGE AUTHORITY 

AUDITOR'S REPORT 

TO THE MINISTER OF TRANSPORT 

I have examined the balance sheet of Laurentian Pilotage Authority 
as at December 31, 1986 and the statements of operations, contributed 
capital, deficit and changes in flnancial position for the year then 
ended. My examination was made in accordance with generally 
accepted auditing standards, and accordingly included such tests and 
other procedures as I considered necessary in the circumstances. 

In my opinion, these financial statements present fairly the flnancial 
position of the Authority as at December 31, 1986 and the results of its 
operations and the changes in its flnancial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Authority that have 
come to my notice during my examination of the flnancial statements 
have, in all signiflcant respects, been in accordance with Part XII of 
the Financial Administration Act and regulations, the Pilotage Act 
and regulations and the by-laws of the Authority. 

Raymond Dubois, C.A. 
Deputy Auditor General 
for the Auditor General of Canada 
Ottawa, Canada 
February 13, 1987 



BALANCE SHEET AS AT DECEMBER 31, 1986 



ASSETS 1986 1985 

S S 

Current 

Cash 359,138 21,525 

Accounts receivable 6,435,570 5.041,879 

6,794.708 5,063.404 
Fixed (Note 3) 

Land, buildings, pilot boats and other facilities 2,187,785 2,179,000 

Z,e55; accumulated depreciation 1,132,370 966,553 

1,055,415 1,212,447 



7,850,123 6,275,851 



LIABILITIES 

Current 

Bank loan 

Accounts payable 

Provision for employee termination benefits. 

EQUITY (DEFICIENCY) OF CANADA 

Contributed capital 

Deficit 



1986 


1985 


S 

750,000 
5,735,300 


$ 

650.000 

5.278.134 


6,485,300 
604,000 


5.928.134 
641.000 


7,089,300 


6,569,134 


971,621 
(210.798) 


914,293 
(1,207,576) 


760,823 


(293,283) 



7,850.123 6,275,851 



Approved by the Authority: 

YVON MATTE 
Vice- Chairman 

M. B. MILNER 
Member 



PUBLIC ACCOUNTS, 1986-87 

LAURENTIAN PILOTAGE AUTHORITY— Co/i/z/iwe^ 

STATEMENT OF OPERATIONS 

FOR THE YEAR ENDED DECEMBER 31, 1986 



251 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED DECEMBER 31. 1986 



1986 1985 

Revenues 

Pilotage charges 

Interest and other revenues 

Rewards for rescuing ships in distress — Net ... 

Expenses 

Pilots' fees, salaries and benefits 

Operating costs of pilot boats 

Staff salaries and benefits 

Professional services and members' allowances 

Rentals 

Communications 

Transportation and travel 

Financing costs 

Utilities, material and supplies 

Maintenance 

Bad debts 

Other 

Net loss before unusual item 1,413,944 1,747,255 

Unusual item — Incremental costs related to an 
investigation by the Canadian Transport Com- 
mission (Note 7) 331,126 

Net loss for the year 1,413,944 2.078,381 



STATEMENT OF CONTRIBUTED CAPITAL 
FOR THE YEAR ENDED DECEMBER 31, 1986 



1986 1985 

$ $ 

Balanceat beginning of the year 914,293 650,175 

Parliamentary appropriation to finance the previous year's 

acquisition of fixed assets 57,328 264,1 18 

Balance at end of the year 971.621 914.293 



s 


$ 


26,957.431 


24,671,138 


72,122 


78,006 


9,986 


89,438 


27,039,539 


24,838,582 


22,253,678 


20,780,682 


2,814,374 


3,048.696 


1,693,947 


1,693.963 


826,235 


301.564 


236,651 


228.181 


147,042 


139,916 


137,336 


110,991 


74,306 


45,815 


63.146 


64,324 


21.391 


28.401 


14,416 


28.396 


170,961 


114.908 


28,453,483 


26,585,837 



STATEMENT OF DEFICIT 

FOR THE YEAR ENDED DECEMBER 31, 1986 



1986 1985 

S S 

Balance at beginning of the year 1,207,576 

Net loss for the year 1,413,944 

Parliamentary appropriations to finance operating 
deficits 

—Previous year (1,398,722) 

—Current year (Note 5) (1.000,000) 

Services provided without charge by a government 

department (12,000) 

Balance at end of the year 210,798 1.207,576 



747,749 
2,078,381 



(1,106,554) 
(500,000) 

(12,000) 



1986 



Operating activities 

Net loss for the year 

Non-cash items 

Depreciation 

Services provided without charge by a gov 

ernment department 

Decrease in the provision for employee ter 
mination benefits 

Increase in accounts receivable 

Increase in accounts payable 

Investing activities 

Additions to fixed assets 

Financing activities 

Parliamentary appropriations 

Bank loan, net of cash 

Increase (decrease) for the year 

Balance at beginning of the year 

Balance at end of the year 390,862 



1985 



$ 


S 


1.413,944 


2,078,381 


(182,169) 


(173.659) 


(12,000) 


(12,000) 


37,000 


6,000 


1.256,775 
1.393,691 
(457,166) 


1,898,722 

1,316,470 

(1,134,544) 


2,193,300 


2,080,648 


25,137 


57,328 


(2,456,050) 


(1,870,672) 


(237,613) 
628,475 


267.304 
361.171 



628.475 



NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, 1986 

1 . Authority and activities 

The Laurentian Pilotage Authority was established on Febru- 
ary 1, 1972 under the Pilotage Act. Its objectives are to establish, 
operate, maintain and administer in the interests of safety an effi- 
cient pilotage service within certain designated Canadian waters 
in and around the Province of Quebec. The Act provides that 
pilotage tariffs shall be fair and reasonable and assure a revenue 
which, together with any revenue from other sources, is sufficient 
to permit the Authority to operate on a self-sustaining basis. 

The Authority is a Crown corporation named in Part I of 
Schedule C to the Financial Administration Act. 

2. Significant accounting policies 
Fixed assets 

Fixed assets obtained from Canada when the Authority was 
established were recorded at the then assigned values. Fixed assets 
purchased subsequently by the Authority are recorded at cost. 

Fixed assets are depreciated using the straight-line method, at 
rates based on the estimated useful lives of the assets. 

Contributed capital 

The values assigned to the fixed assets obtained from Canada 
when the Authority was established and the net cost of fixed 
assets financed from parliamentary appropriations are recorded as 
contributed capital. 

Parliamentary appropriations 

Parliamentary appropriations received to finance the excess of 
expenditures over revenues are recorded in the year in which they 
are voted by Parliament, to contributed capital for that portion 
pertaining to the acquisition of fixed assets and to the deficit for 
that pertaining to operations. In this respect, operating expendi- 
tures include only those which require an outlay of funds. 

Services provided without charge 

Estimated amounts for services provided without charge by a 
government department are included in expenses with an offset to 
the deficit. 



252 



PUBLIC ACCOUNTS, 1986-87 



LAURENTIAN PILOTAGE AVTHORITY— Concluded 

NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, 19S6— Concluded 

Pension plan 

Employees of the Authority participate in the Superannuation 
Plan administered by the Government of Canada. The employees 
and the Authority contribute equally to the cost of the Plan. This 
contribution represents the total liability of the Authority. Contri- 
butions in respect of current service and of admissible past service 
are expensed when paid. The terms of payment of past service 
contributions are set by the applicable purchase conditions, gener- 
ally over the number of years of service remaining prior to retire- 
ment. 

Employee termination benefits 

On termination of employment, employees of the Authority are 
entitled to certain benefits provided for under their collective 
agreements and their conditions of employment. The cost of these 
benefits is expensed in the year in which they are earned. 

3. Fixed assets 

Details of fixed assets are as follows: 



1986 



1985 



Land 

Buildings 

Pilot boats 

Furniture and fixtures 

Communications equipment . 

Boarding facilities 

Wharf improvements 

Leasehold improvements 





Accu- 








mulated 








depre- 






Cost 


ciation 


Net 


Net 


$ 


S 


S 


S 


9.300 




9,300 


9,300 


23,622 


23,622 




261 


1,386,892 


721,238 


665,654 


774,149 


121,358 


70,269 


51,089 


38,656 


178,832 


117,405 


61,427 


82,035 


216,689 


117,670 


99,019 


114,256 


169,033 


50,710 


118,323 


126,775 


82,059 


31,456 


50,603 


67,015 


2,187,785 


1,132.370 


1,055,415 


1,212,447 



6. Trust account 

Agreements between representatives of the users of the pilotage 
service and the pilots' corporations were signed on December 26, 
1985 in order to provide for supplementary interim remuneration 
to the pilots' corporations until the signing of new service con- 
tracts between the Authority and the pilots' corporations. Concur- 
rently with the signing of those agreements, the Authority had 
agreed to administer, through a trust account, amounts to be 
received from users and subsequently distribute them to the pilots' 
corporations. The supplementary interim remuneration arrange- 
ments were terminated in November 1986 concurrently with the 
signing of new service contracts. 

Although the amounts payable to the pilots' corporations under 
these agreements were fully paid before and after December 31, 
1986, an amount of approximately $300,000 remains receivable 
from certain users of the pilotage service who challenge their obli- 
gation to pay the supplementary interim remuneration provided 
for in these agreements. The Authority has taken action before 
the Courts to exercise its rights. 

7. Canadian Transport Commission investigation 

In January 1985, the Authority published in the Canada 
Gazette a copy of each tariff of pilotage charges that it had pro- 
posed to prescribe pursuant to the Pilotage Act. Notices of objec- 
tion were filed with the Canadian Transport Commission, which 
subsequently made such investigation as in its opinion was neces- 
sary or desirable in the public interest. The Commission made its 
recommendation to the Authority on April 4, 1986. The new tariff 
was applied effective September 26, 1986. 



Depreciation for the year is $182,169 ($173,659 in 1985). 

The estimated useful lives for the principal categories of fixed 
assets for the purposes of calculating depreciation are as follows: 



10, 15 and 20 years 

10 years 

10 years 

10 and 20 years 

20 years 

duration of the leases 



Pilot boats 

Furniture and fixtures 
Communications equipment 
Boarding facilities 
Wharf improvements 
Leasehold improvements 

4. Pension plan 

The estimated unrecorded liability for employees' past services 
is $69,600 as at December 31, 1986 ($80,000 as at December 31, 
1985). 

5. Parliamentary appropriation 

On November 18, 1986, the Treasury Board approved a tempo- 
rary allotment of $1,400,000 from its Vote 5, Government Con- 
tingencies, prior to the release, in Supplementary Estimates "C" 
for 1986-87, of an appropriation to cover the Authority's cash 
deficit for the year 1986. An amount of $1,000,000 was received 
during the year. 



PUBLIC ACCOUNTS, 1986-87 



253 



SUMMARY PAGE 



MARINE ATLANTIC INC. 



MANDATE 

To acquire, establish, manage and operate a marine transportation service, a marine maintenance, repair and refit 
service, a marine construction business and any service or business related thereto. 

BACKGROUND 

The company provides marine ferry services to Atlantic Canada. As CN Marine Inc., it was a subsidiary of Canadian 
National Railway Company. Pursuant to the Marine Atlantic Inc. Acquisition Authorization Act (S.C. 1986, C. 36), 
which was proclaimed on June 27, 1986, the company's name was changed to Marine Atlantic Inc. and was added to 
Part I of Schedule C of the Financial Administration Act. At close of business on December 31, 1986, ownership was 
transferred to Her Majesty in right of Canada. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



100 Cameron Street 
Moncton, New Brunswick 
E1C5Y6 

—Schedule C, Part I 

— not an agent of Her Majesty 

The Honourable John Crosbie, P.C, Q.C., M.P. 

Transport 

1979; by the Canada Business Corporations Act. Status and 
ownership changed as of December 31, 1986, pursuant to S.C. 1986, 
C. 36. 

R. J. Tingley 

J. D. Wilson 

Peat, Marwick, Mitchell & Co. 



FINANCIAL SUMMARY ($ million) The financial year is the calendar year. 

1986 

At the end of the year 

Total Assets 339 

Obligations to the private sector nil 

Obligations to Canada nil 

Equity of Canada (6) 

Cash from Canada in the year 

— budgetary 127 

— non-budgetary nil 



1985 



1984 



361 


364 


nil 


negl 


nil 


nil 


284 


283 


141 


161 


nil 


nil 



254 



PUBLIC ACCOUNTS, 1986-87 



MARINE ATLANTIC INC. 

AUDITORS' REPORT 

TO THE HONOURABLE J. CROSBIE 
MINISTER OF TRANSPORT 

We have examined the balance sheet of Marine Atlantic Inc. as at 
December 31, 1986 and the statements of income, retained earnings 
(deficit) and changes in fmancial position for the year then ended. Our 
examination was made in accordance with generally accepted auditing 
standards, and accordingly included such tests and other procedures as 
we considered necessary in the circumstances. 

In our opinion, these fmancial statements present fairly the fmancial 
position of the Corporation as at December 31, 1986 and the results of 
its operations and the changes in its fmancial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

We further report that, in our opinion, the transactions of the Cor- 
poration that have come to our notice in the course of our examination 
of the fmancial statements have, in all significant respects, been in 
accordance with Part XII of the Financial Administration Act and 
regulations, the charter and by-laws of the Corporation. 



Peat, Marwick, Mitchell & Co. 
Chartered Accountants 



Moncton, Canada 
February 27, 1987 



BALANCE SHEET DECEMBER 31, 1986 
(with comparative figures for 1985) 
(in thousands of dollars) 



ASSETS 



1986 1985 



Current assets 

Cash 

Accounts receivable 

Shipbuilding subsidies receivable 

Due from Canadian National Railway Company 

Inventory of fuel and supplies 

Prepaid expenses 

Total current assets 21,116 

Long-term receivables (including shipbuilding subsidy of 

$1.5 million in 1985) 175 

Fixed assets and deferred charges (Note 4) 318,128 



7,534 


82 


5,017 


4,468 




8,552 


760 


31,232 


5,688 


9,004 


2,117 


1,339 



54,677 

1,718 
294,615 



339,419 351,010 



LIABILITIES AND SHAREHOLDERS' EQUITY 
(DEFICIENCY) 



1986 



1985 



Current liabilities 

Accounts payable and accruals 19,642 21,365 

Deferred government contract revenue (Note 2) 7,549 182 

Total current liabilities 27,191 

Deferred income taxes 

Deferred credits 

Provision for capital assistance (Note 3) 318,128 

Provision for personal injury 

SHAREHOLDERS' EQUITY (DEFICIENCY) 

Capital stock 
Common shares without par value 
Authorized— Unlimited number 

Issued and fully paid — 517,061 shares 258,530 

Retained earnings (deficit) (264,430) 

Total shareholders' equity (deficiency) (5,900) 283,696 

Commitments and contingencies (Notes 5 and 7) 



21,547 

43,187 

1,605 

975 



258,530 
25,166 



339,419 351,010 



See accompanying notes to financial statements. 

On Behalf of the Board: 

J. D. WILSON 
Director 

R. J. TINGLEY 
Director 



PUBLIC ACCOUNTS, 1986-87 



255 



MARINE ATLANTIC INC.— Continued 

STATEMENT OF INCOME 
YEAR ENDED DECEMBER 31, 1986 
(with comparative figures for 1985) 
(in thousands of dollars) 



1986 



1985 



Commercial revenues 56,043 49,701 

Operating expenses 179,754 180,764 

Depreciation and amortization 15,874 1 1,865 

195,628 192,629 

139,585 142.928 

Government contract revenue 122,966 143,447 

Reduction in provision for capital assistance (Note 3) 15,874 

Interest and other income 1,744 2,873 

140.584 146,320 

Income before income taxes 999 3,392 

Income taxes (Note 8) 1,724 

Net income for the year 999 1,668 

See accompanying notes to financial statements. 



STATEMENT OF RETAINED EARNINGS (DEFICIT) 
YEAR ENDED DECEMBER 31, 1986 
(with comparative figures for 1985) 
(in thousands of dollars) 



Retained earnings, beginning of year 

Net income for the year 

Less: adjustment for capital assistance (Note 3).... 

dividends paid 

Retained earnings (deficit), end of year (264.430) 

See accompanying notes to financial statements. 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
YEAR ENDED DECEMBER 31, 1986 
(with comparative figures for 1985) 
(in thousands of dollars) 



1986 



1986 


1985 


25,166 
999 


24,044 
1,668 


26,165 
290,595 


25,712 
546 



25,166 



1985 



Operating activities 

Net income for the year 999 1,668 

Add (deduct) 

Items not affecting working capital (693) 13,750 

Net changes in non-cash working capital balances 

relating to operations 1,791 (5,316) 

Deferred government contract revenue (Note 2) 7,367 177 

Cash provided by operations 9,464 10,279 

Investing activities 

Additions to fixed assets and deferred charges (43,081) (13,817) 

Net proceeds on disposal of fixed assets 693 22 

Change in accounts payable — Fixed assets (2,309) 1,086 

Long-term receivables 43 63 

Cash applied to investing activities (44,654) (12,646) 

Financing activities 

Payments on long-term debt (58) 

Capital assistance 1,410 

Collections from CN R and shipbuilding subsidies 41,232 3,019 

Cash provided by financing activities 42,642 2,961 

Dividends paid (546) 

Increase in cash during the year 7,452 48 

Cash, beginning of year 82 34 

Cash, end of year 7,534 82 

See accompanying notes to financial statements. 



NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, 1986 
(in thousands of dollars) 

1 . Nature of operations and authority 

Bill C-88, the Marine Atlantic Inc. Acquisition Authorization 
Act was proclaimed in 1986 and transferred ownership of the 
Corporation from the Canadian National Railway Company 
("CNR") to the Government of Canada. This Act changed the 
Corporation's name of CN Marine Inc. to Marine Atlantic Inc. In 
accordance with the Act, the Corporation's articles restrict the 
business that it may carry on to the acquisition, establishment, 
management and operation of a marine transportation service, a 
marine maintenance repair and refit service, a marine construc- 
tion business and any service or business related thereto. 

The Corporation's activities are also governed by agreements 
negotiated with the Government of Canada. The agreements pro- 
vide, among other things, for the Corporation to receive contract 
revenues from the Government of Canada to the extent that the 
estimated cost of providing ferry, coastal, terminal and water ser- 
vices is not recovered from estimated commercial revenues. In 
addition, and subject to parliamentary appropriations, amounts 
are received to finance the acquisition of fixed assets on a proven 
cash needs basis. The allocation of funds received in respect of 
contract revenue and the acquisition of fixed assets are subject to 
ministerial directive. As a result, the Corporation is economically 
dependent on the Government of Canada for the funds it receives 
through these arrangements. 

2. Significant accounting policies 

Inventory of fuel and supplies 

Inventories are valued at the lower of cost and replacement 
cost. Cost is determined on a weighted-average basis. 

Fixed assets 

Fixed assets are carried at the cost to acquire them less 
accumulated depreciation. Due to a change in funding arrange- 
ments with the Corporation's shareholder, and as explained fur- 
ther in Note 3, a provision for those capital costs not considered 
recoverable from future revenue sources has been made and has 
been charged to retained earnings. 

Shipbuilding subsidies available on fixed assets acquired 
through long-term construction contracts are approved on the per- 
centage-of-completion basis and applied to reduce the cost of 
assets under construction. 

Depreciation 

Depreciation is calculated at rates sufficient to write off fixed 
assets over their estimated useful lives generally on a straight line 
basis. Assets acquired from the CNR in 1979 are depreciated 
based on the original cost to the Ministry of Transport of $197.7 
million. The rates for significant classes of assets are as follows: 

Vessels 5% 

Terminal properties 2.5% 

Equipment 1 0%, 1 2.5% and 25% 

Deferred charges 

Deferred charges are accounted for at cost less accumulated 
amortization. They are being amortized to income on a straight 
line basis over periods not exceeding 60 months. 

Capital assistance 

Amounts received from the Government of Canada to finance 
the acquisition of fixed assets are recorded as deferred capital 
assistance in the year in which they are reasonably assured of 
being received, and are amortized to income on the same basis 
and over the same periods as the related fixed assets are 
depreciated. 



256 



PUBLIC ACCOUNTS, 1986-87 



MARINE ATLANTIC INC.— Continued 

NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, \9%6— Continued 

Government contract revenue 

Revenues received under contract to provide ferry service to 
Atlantic Canada are based on operating budgets approved by the 
Government of Canada for each year and are included in income 
in the year received to fund operating expenses in excess of com- 
mercial revenues. Deferred contract revenue at December 31, 
1986 represents January 1987 government contract revenue 
received by the Company on December 31, 1986. 

Accruals for vacation pay and vessel refits are reduced to the 
extent that the amounts are reasonably assured of being paid and 
recovered from future contract revenues to be received from the 
Government of Canada. 

Foreign currency translation 

Monetary assets and liabilities denominated in a foreign cur- 
rency are translated at exchange rates in effect at the year end. 
Other assets and liabilities, revenues and expenses are translated 
using exchange rates in effect at the date of the transaction. Gains 
and losses arising on translation are included in net income. 

Employee compensation 

Pension plans 

During the year the Company assumed responsibility for retire- 
ment plans covering substantially all of its employees. In prior 
years the plans had been administered by CNR and the Corpora- 
tion had made payments to the plan on the basis of a formula 
determined by CNR's actuaries. 

In 1986 the costs of benefits for current services of employees 
have been funded and charged to income. Based on current 
actuarial information prepared in connection with the transfer of 
responsibility for the plans, management is of the opinion that it 
will be assuming an unfunded liability. Consequently an addi- 
tional payment of $3 million has been made toward a reduction of 
that liability and has been charged to income. 

Personal injury costs 

Certain retired employees are currently provided with specified 
pensions resulting from injury. The Corporation recognizes the 
benefit payouts as an expense in the year paid. 

Vessel spare parts 

The Company maintains spare parts for vessels in service. The 
acquisition of spare parts is charged to operations in the period 
the purchase is made. 

3. Provision for capital assistance 

In accordance with changes in the contractual funding agree- 
ments and the change in the ownership of the Company, future 
depreciation and amortization on those fixed assets and deferred 
charges acquired prior to January 1, 1987, and which had sub- 
stantially been financed through the issue of capital stock, are no 
longer recoverable under contracts with the Government of 
Canada. Management considers it unlikely that the Corporation 
will generate sufficient commercial revenue to recover these costs. 
Accordingly, management has provided for $290.6 million (after 
net related deferred income taxes of $44.6 million) as an adjust- 
ment to retained earnings. This provision for capital assistance 
will be reduced as the related assets are depreciated, amortized or 
upon their disposition. 



4. Fixed assets and deferred charges 





1986 




1985 




Accumulated 








depreciation 


Net 


Net 




and 


book 


book 


Cost 


amortization 


value 


value 



(in thousands of dollars) 



Vessels 285,868 

Terminal properties 81,316 

Equipment 11,007 

Leasehold improve- 
ments 

Assets under construe 
tion 

Deferred charges 



5. Commitments and contingencies 



49,517 

15,928 

7,766 



236,351 

65,388 

3,241 



104,063 

49,514 

3,760 



256 


77 


179 


375 


378.447 
7,279 


73,288 


305,159 

7,279 


157,712 
135,280 


385,726 
6,101 


73,288 
411 


312,438 
5,690 


292,992 
1,623 


391,827 


73,699 


318,128 


294,615 



(a) The Corporation has been directed by the Government of 
Canada to contract with a shipbuilder for a new vessel. The 
directive authorizes an expenditure of $130 million, subject 
to an economic price adjustment, of which the Corporation 
was required and has paid $5 million which is included in 
assets under construction. The balance will become payable 
by the Corporation upon delivery of the vessel. 

The total amount required to complete contracted fixed 
assets under construction at December 31, 1986 is estimated 
to be $134.7 million (1985— $31.6 million). 

(b) The Company has received a claim of approximately $14 
million plus interest from the builder of one of the 
Company's vessels. The Company has filed a claim of 
approximately $14 million plus interest against the builder. 
An arbitration of this matter was completed in October, 1986 
and the Company is awaiting the decision of the arbitrators. 
The final outcome of this matter cannot be determined at this 
time. The Company is also in receipt of claims which have 
not yet reached litigation. The Company's estimate of total 
financial exposure for these items is $2.6 million; however 
any final determination is presently unknown. 



Acquisitions 

The Company has agreed in principle to acquire, by purchase, 
all of the issued and outstanding shares of the capital stock of 
Coastal Transport Limited, whose principal business is transpor- 
tation. Such acquisition was approved by an Order In Council 
issued in December, 1985. 

In addition, the Government of Canada has authorized the 
Company to enter into negotiations with CNR to acquire the 
Newfoundland Dockyard Company. 



PUBLIC ACCOUNTS, 1986-87 25t 

MARINE ATLANTIC INC.— Concluded 

NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31. \9S6— Concluded 

7. Operating leases 

The company makes use of property which is available through 
operating leases. The minimum lease payments are as follows: 

(in thousands 
of dollars) 



1987 814 

1988 795 

1989 358 

1990 343 

1991 343 

1992 343 



Total minimum lease payments 2,996 



8. Income taxes 

The company has been listed under Part I of Schedule C to the 
Financial Administration Act and has not been prescribed as a 
Federal Crown Corporation under the Canadian Income Tax Act. 

9. Comparative figures 

Certain of the prior year's figures have been reclassified to con- 
form with the current year's presentation. 



258 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
MINGAN ASSOCIATES, LTD 



MANDATE 

To purchase land for eventual disposition. 

BACKGROUND 

Ownership of the corporation was purchased for Canada in 1983 to obtain the land and fishing rights it owns. Those 
assets are to become Indian reserve property and, as a first step, they have been transferred to the Crown in right of 
Canada. The further steps towards reserve status are underway now and the corporation is in position to be dissolved. 



CORPORATION DATA 

HEAD OFFICE 



STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS OF 
INCORPORATION 

CHAIRMAN AND CHIEF 
EXECUTIVE OFFICER 

FINANCIAL SUMMARY 



10 Wellington Street 

18th Floor 

Les Terrasses de la Chaudiere 

Hull, Quebec 

KIA 0H4 

— Schedule C, Part I 

— not an agent of Her Majesty 

The Honourable William H. McKnight, P.C, M.P. 

Indian Affairs and Northern Development 

1983; by Order in Council P.C. 1983-4029; a corporation under Part 
1 A of the Quebec Companies Act. 

Vacant 



This is not an operating company. Total assets have only nominal 
value. 



PUBLIC ACCOUNTS, 1986-87 259 

MINGAN ASSOCIATES, LTD. 



THE CORPORATION HAS NEGLIGIBLE ASSETS AND WAS INACTIVE 
DURING THE REPORT PERIOD 



260 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
MONTREAL PORT CORPORATION 



MANDATE 



Administration, management and control of the Montreal harbour and all the works and property within the harbour 
previously under the jurisdiction of the Canada Ports Corporation or, prior to February 24, 1983, the National 
Harbours Board. 



BACKGROUND 

The Montreal Port Corporation was established on July 1, 1983, pursuant to the national ports policy to create local 
port corporations at the major ports and harbours previously under the centralized administration of the National 
Harbours Board and, since February 1983, the Canada Ports Corporation. The Port of Montreal is the largest on the 
east coast of Canada and handles more diversified traffic than any of the other ports previously administered by the 
Canada Ports Corporation. The port handled 21.6 million tonnes of cargo in 1986 including 4.0 million tonnes of 
grain and 4.9 million tonnes of containerized cargo. 



CORPORATION DATA 

HEAD OFFICE 



STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS OF 
INCORPORATION 

CHIEF EXECUTIVE 
OFFICER 

CHAIRMAN 

AUDITOR 



Edifice du Port de Montreal 
Aile No. 1 
Cite du Havre 
Montreal, Quebec 
H3C 3R5 

— Schedule C, Part II 

— an agent of Her Majesty 

The Honourable John Crosbie, P.C., Q.C., M.P. 

Transport 

1983; letters patent of incorporation issued by the Minister of 
Transport pursuant to subsection 6.2(1) of the Canada Ports 
Corporation Act. 

Dominic J. Taddeo 

Ronald Corey 
Samson Belair 



FINANCIAL SUMMARY ($ million) The financial year is the calendar year. 

6 months 
ending 
1986 1985 1984 Dec. 31, 1983 

At the end of the period 

Total Assets 212.2 253.7 237.2 213.6 

Obligations to the private sector nil nil nil nil 

Obligations to Canada* 140.7 141.1 141.4 141.9 

Equity of Canada (47.6) (2.3) (22.1) (48.9) 

Cash from Canada in the period 

— budgetary** nil nil nil nil 

— non-budgetary nil nil nil nil 

* Excludes $98.2 million in accrued interest owed to Canada. 

** Takes no account of special contributions to Canada in 1986 of $55 million and a further $4.1 million in divi- 
dends declared in 1986. 



PUBLIC ACCOUNTS, 1986-87 



U\ 



MONTREAL PORT CORPORATION 

AUDITORS' REPORT 

TO THE HONOURABLE JOHN CROSBIE, P.C, M.P. 
MINISTER OF TRANSPORT 

We have examined the statements of income, contributions to 
Canada, deficit and changes in financial position of the Montreal Port 
Corporation Tor the fiscal year ended December 31, 1986 and its bal- 
ance sheet at that date. Our examination was made in accordance with 
generally accepted auditing standards, and accordingly included such 
tests and other procedures as we considered necessary in the circum- 
stances. 

In our opinion, these financial statements present fairly the results 
of operations and the changes in the financial position of the Corpora- 
tion for the year ended December 31, 1986 and its financial position at 
that date in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further in our opinion, the transactions of the Corporation that have 
come under our notice in the course of our examination of the financial 
statements were, in all material respects, in accordance with the 
Financial Administration Act and Regulations, the Canada Ports Cor- 
poration Act, the Letters Patent and by-laws of the Corporation. 



Samson Belair 
Chartered Accountants 



Montreal, Canada 
February 9, 1987 



BALANCE SHEET AS AT DECEMBER 31 

(in thousands of dollars) 



ASSETS 



1986 1 985 



LIABILITIES 



1986 I 985 



Current 

Cash 567 298 

Investments (Note 3) 27,280 79,594 

Accounts receivable , 13,206 10,003 

Materials and supplies 832 774 

41.885 90.669 

Long-term 

Investments (Note 3) 39,218 39.041 

Receivables 459 552 

39.677 39.593 

Fixed assets (Note 4) 130,682 123.433 



212,244 253.695 



Current 

Accounts payable and accrued liabilities (Note 5) 8.590 9,022 

Dividends payable 4,136 

Grants in lieu of municipal taxes 3,315 2.851 

16.041 11.873 

Long-term 

Accrued employee benefits 5,283 5.207 

Loans from Canada (Note 6) 238.508 238.869 

243,791 244.076 

EQUITY OF CANADA 

Contributed capital 19,243 19,243 

Contributions to Canada (Note 10) (59.119) 

Deficit (7.712) (21.497) 

(47.588) (2.254) 



212,244 253.695 



On behalf of the Board: 



RONALD COREY 
Chairman 



DOMINIC J. TADDEO 

General Manager and Chief Executive Officer 



262 



PUBLIC ACCOUNTS, 1986-87 



MONTREAL PORT CORFOR\TlO!Si— Continued 

STATEMENT OF INCOME 

FOR THE YEAR ENDED DECEMBER 31 

(in thousands of dollars) 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED DECEMBER 31 
(in thousands of dollars) 



Revenue from operations 

Operating and administrative expenses 

Depreciation 

Grants in lieu of municipal taxes 

Net income from operations 

Investment income 

Interest expense 

Net income before unusual item 

Adjustment of grants in lieu of municipal taxes 

Net income for the year 13.785 19,854 



STATEMENT OF CONTRIBUTIONS TO CANADA 
FOR THE YEAR ENDED DECEMBER 31 
(in thousands of dollars) 



1986 


1985 


56,659 


54,729 


39,690 

7,254 
3,873 


37,345 
6,711 
3,914 


50,817 


47,970 


5,842 


6,759 


8,446 
(503) 


12,006 
(523) 


7.943 


11,483 


13.785 


18,242 
1,612 



1986 1985 



Special contributions for the year 54,983 

Dividends on net income for the year 4,136 

Balance at end 59,1 19 



STATEMENT OF DEFICIT 

FOR THE YEAR ENDED DECEMBER 31 

(in thousands of dollars) 



1986 1985 

Balance at beginning 21,497 41,351 

Net income for the year 13.785 19,854 

Balance at end 7,712 21,497 



1986 1985 

Cash provided by (used for) the following activities 
Operations 

Net income for the year 13.785 19.854 

Items not affecting cash 

Depreciation 7,254 6,71 1 

Others 871 (63) 

21,910 26,502 
Changes in non-cash operating working capital bal- 
ances (3,175) (3.495) 

18,735 23.007 
Financing 

Repayment of loans from Canada (339) (319) 

Contributions to Canada (54.983) 

(55,322) (319) 

Investments 

Acquisition of long-term investments (177) (57) 

Receipt of long-term receivables 93 26 

Acquisition of fixed assets (15,374) (10,525) 

(15.458) (10,556) 

Cash* 

Increase (decrease) during the year (52,045) 1 2.1 32 

Balance at beginning 79.892 67.760 

Balance at end 27.847 79.892 

*Cash comprises cash and current investments. 



NOTES TO FINANCIAL STATEMENTS 
FOR THE YEAR ENDED DECEMBER 31, 1986 

1. Status 

The Montreal Port Corporation (the Corporation) was incorpo- 
rated by letters patent in accordance with paragraph 6.2(1) of the 
Canada Ports Corporation Act on July 1, 1983. 

Under Section 6.5 of the same Act, on the establishment of a 
local port corporation, all rights, obligations and liabilities of the 
Canada Ports Corporation in relation to that harbour shall 
become rights, obligations and liabilities of the local port corpora- 
tion and the administration of all such property and works within 
the limits of that harbour as are administered by the Board, shall 
be deemed to have been transferred to the local port corporation, 
in this case the Montreal Port Corporation. 

2. Significant accounting policies 

(a) Fixed assets and depreciation 

Fixed assets are recorded at original cost with related 
accumulated depreciation transferred from Canada Ports 
Corporation; subsequent acquisitions are recorded at cost. 
Depreciation on fixed assets is calculated according to the 
straight-line method for the full year, commencing in the 
year the asset becomes operational, using rates based on the 
estimated useful lives of the assets. 

(b) Pension costs 

All permanent employees of the Corporation are covered by 
the Public Service Superannuation Plan administered by the 
Government of Canada. Contributions to the plan are 
required from both the employees and the Corporation. 
These contributions represent the total liability of the Corpo- 
ration and are recognized in the accounts on a current basis. 



PUBLIC ACCOUNTS, 1986-87 



263 



MONTREAL PORT CORPORATION— Coaic/m^^J 



NOTES TO FINANCIAL STATEMENTS 

FOR THE YEAR ENDED DECEMBER 31, 1986- 



-Concluded 



(c) Grants in lieu of municipal taxes 

Grants in lieu of municipal taxes are based on estimated 
municipal assessments adjusted in accordance with the 
Municipal Grants Act. Grants are paid after the amounts 
have been audited by the Municipal Grants Division of Pub- 
lic Works Canada. Any adjustments upon finalization are 
reflected in the accounts in the year of settlement. 

(d) Employee benefits 

The Corporation accrues in its accounts annually the 
estimated liabilities for severance pay, annual leave, sick 
leave and overtime compensatory leave, which are payable to 
its employees in subsequent years under collective agree- 
ments, or in accordance with Corporation policy. 

3. Investments 

Funds are invested in Government of Canada direct securities 
and guaranteed by the Government of Canada which are shown at 
amortized cost, with premiums or discounts amortized over the 
periods to maturity. As at December 31, 1986, the market value 
of the short-term investments is equivalent to their amortized cost, 
and market value of long-term investments is $46,246,000 
($43,881,239 in 1985). 

4. Fixed assets 







1986 




1985 






Accu- 






Depre- 




mulated 






ciation 




depre- 


Net 


Net 


rates 


Cost 


ciation 


value 


value 



(in thousands of dollars) 



Land 

Dredging 2.5 

Berthing struc- 
tures 2.5 

Buildings 2.5-10 

Utilities 3.3-10 

Roads and sur- 
faces 2.5-10 

Machinery and 
equipment 5-20 

Office furniture 
and equipment . 20 

Projects under 
construction 



19,058 
15,633 


11,810 


19,058 
3,823 


18.060 
3.787 


58,521 
60,504 
13.698 


36,559 

27,677 

6,172 


21,962 

32,827 

7,526 


22,887 

33,418 

6,781 


30,681 


10,306 


20,375 


18,694 


41,739 


28,212 


13.527 


14,625 


1.405 


838 


567 


248 



241,239 121,574 
11.017 



119.665 
11.017 



118,500 
4,933 



252,256 121,574 130.682 123.433 



Accounts payable and accrued liabilities 

Included in accounts payable and accrued liabilities are 
amounts for deferred revenues of $652,589 ($792,840 in 1985) 
and for the current portion of long-term liabilities of $360,576 
($339,365 in 1985). 



6. Loans from Canada 

1986 1985 

(in thousands 

of dollars) 

Loans bearing interest at 6.25% with blended annual 

principal and interest repayment requirements of 

$842,561 and maturing in the year 2000 7,712 8,051 

Z.^5j.- current portion 361 339 

T^sl 7.712 
Non-interest bearing loans with indefinite due date . 132.995 132.995 
Accrued interest on loans not due nor payable 98.162 98.162 



238.508 238.869 



Principal repayment requirements over the next five years 
amount to: 

S 

1987 360.576 

1988 383.112 

1989 407.056 

1990 432.497 

1991 459.528 

7. Contingencies 

Claims aggregating approximately $5,948,000 in respect of 
lawsuits, guarantees and damages allegedly suffered on the Cor- 
poration property and sundry legal matters in dispute have been 
made against the Corporation but are not reflected in the 
accounts. In the opinion of the Corporation, its position is defen- 
sible and the final outcome of such claims should not result in any 
material loss. 

8. Capital expenditure commitments 

Contractual obligations for the completion, construction and 
purchase of fixed assets are estimated at $4,008,000. 

9. Related party transactions 

In the ordinary course of business, the Corporation enters into 
transactions with related parties, including the Government of 
Canada, its agencies and other Crown corporations. 

The Corporation derives revenues from related parties princi- 
pally from grain warehousing and switching charges. The 
expenses paid to related parties are principally administration 
fees. 

10. Contributions to Canada 

Canada has requested cash contributions from various Crown 
Corporations. As part of this cash recovery exercise, the Ports 
Canada network which consists of the Canada Ports Corporation 
and the six local port corporations, was requested to contribute 
$133,000,000. 

The Montreal Port Corporation's portion amounts to 
$54,983,000 and it has been charged to the "Contributions to 
Canada" item. 

In accordance with a decision by the Government of Canada, 
the Corporation is required to issue a dividend, in respect of the 
1986 financial year, set at 30% of net income before extraordinary 
items and payable before March 31, 1987. This dividend 
amounted to $4,136,000 in 1986 and has been charged to the 
"Contributions to Canada" item. 



264 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
NATIONAL ARTS CENTRE CORPORATION 



MANDATE 

To operate and maintain the National Arts Centre; to develop the performing arts in the National Capital Region; 
and to assist the Canada Council in the development of the performing arts elsewhere in Canada. 

BACKGROUND 

In 1969, the corporation was given the lease of the National Arts Centre complex for twenty years without charge. 
The corporation's revenues meet about 50 per cent of its cash requirements; payments from Canada cover the 
remainder. The corporation is a charitable organization for the purposes of the Income Tax Act. 



CORPORATION DATA 

HEAD OFFICE 

STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS 
OF INCORPORATION 

CHIEF EXECUTIVE 
OFFICER (ACTING) 

CHAIRMAN 

AUDITOR 



1 Confederation Square 
Ottawa, Ontario 
K1P5W1 

— exempt from the provisions of divisions I to IV of Part XII of the 
Financial Administration Act 

— not an agent of Her Majesty 

The Honourable Flora MacDonald, P.C., M.P. 

Communications 

1966; by The National Arts Centre Act, (R.S.C. 1970, N-2). 

Ron Blackburn 

Pierre Boutin 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends August 31, 



1985-86 



At the end of the period 

Total Assets 

Obligations to the private sector* 

Obligations to Canada 

Equity of Canada 

Cash from Canada in the period 

— budgetary 

— non-budgetary 

* These are advance ticket sales. 



1984-85 



1983-84 



1982-83 
(restated) 



6.7 


14.7 


14.1 


15.6 


2.4 


2.8 


2.0 


1.5 


nil 


nil 


0.1 


0.2 


1.1 


negl. 


(0.4) 


1.0 


14.8 


15.3 


15.5 


15.3 


nil 


nil 


nil 


nil 



PUBLIC ACCOUNTS, 1986-87 



265 



NATIONAL ARTS CENTRE CORPORATION 

AUDITOR'S REPORT 

TO THE CHAIRMAN OF THE BOARD OF TRUSTEES 
NATIONAL ARTS CENTRE CORPORATION 

I have examined the balance sheet of the National Arts Centre Cor- 
poration as at August 31, 1986 and the statements of revenue and 
expenses, surplus and changes in financial position for the year then 
ended. My examination was made in accordance with generally 
accepted auditing standards, and accordingly included such tests and 
other procedures as I considered necessary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the Corporation as at August 31, 1986 and the results of its 
operations and the changes in its fmancial position for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 



Kenneth M. Dye, F.C.A. 
Auditor General of Canada 



Ottawa, Canada 
October 27, 1986 



BALANCE SHEET AS AT AUGUST 31, 1986 



ASSETS 



Approved by Management: 

DONALD MACSWEEN 
Director General 

RONALD BLACKBURN 
Assistant Director General 
Finance and Administration 

Approved by the Board of Trustees: 

PIERRE BOUTIN 
Chairman 

THOMAS C. ASSALY 
Vice-Chairman 



1986 



1985 



LIABILITIES 



1986 



1985 



Current 

Short-term investments 

Accounts receivable (Note 3) 

Inventories (Note 4) 

Programmes in progress 

Prepaid expenses (Note 5) 

~ 3,597.728 
Fixed assets (Note 6) 3,097.229 



$ 


$ 


876.889 


8.057.641 


1.400.293 


1,223.105 


467,144 


366.999 


511,335 


952,794 


342.067 


697,000 



11,297,539 
3,378,779 



Current 

Bank overdraft 16,697 

Accounts payable and accrued liabilities 

(Note 7) 

Deferred revenue (Note 8) 

Deferred parliamentary appropriations 

Operating (Note 9) 

Extraordinary building repairs (Note 10) 

Provision for employee termination benefits ... 

EQUITY OF CANADA 

Surplus 



136,501 



2,243,881 
2,407,824 


2,209.110 
2.814.871 


461,086 


8,501,500 
611,463 


5,129,488 
469.278 


14.273,445 
394,495 


5.598.766 


14,667,940 


1,096,191 


8,378 



6.694.957 14.676.318 



6.694.957 14,676,318 



266 



PUBLIC ACCOUNTS, 1986-87 



NATIONAL ARTS CENTRE CORPORATION— Continued 



STATEMENT OF REVENUE AND EXPENSES 
FOR THE YEAR ENDED AUGUST 31, 1986 



STATEMENT OF CHANGES IN FINANCIAL POSITION 
FOR THE YEAR ENDED AUGUST 31, 1986 



1986 



198S 



1985 



Operating revenue 

Performing arts programmes (Schedule 1) 

Restaurants (Schedule 2) 

Garage (Schedule 3) 

Rentals 

Boutique (Schedule 7) 

Other 

Operating expenses 
Performing arts programmes (Schedule 1) 

Direct operating costs 

Support services 

Restaurants (Schedule 2) 

Garage (Schedule 3) 

Operation of the buildings (Schedule 4) 

Administrative services (Schedule 5) 

Boutique (Schedule 7) 

Excess of operating expenses over operating reve- 
nue 

Other income 

Interest on short-term investments 

Regional municipal grant 

Excess of expenses over revenue 



s 


S 


8,509,765 


6,971,740 


3,479,382 


2,794,280 


1,524.608 


1,614,389 


587,399 


485,614 


147,493 


97,614 


553,838 


510,648 


14,802,485 


12,474,285 


14,466,704 


13,036,840 


2,980,123 


3,193,552 


3,295,768 


2,582,893 


450,341 


401,455 


4,374,465 


4,433,117 


3,251,313 


3,854,112 


155,450 


100,892 


28,974,164 


27,602,861 


14,171,679 


15,128,576 


309,549 


436,970 


270,112 


257,250 


579,661 


694,220 


13,592,018 


14,434,356 



STATEMENT OF SURPLUS 

FOR THE YEAR ENDED AUGUST 31, 1986 



(15,148,227) 
16,007,615 
(1,180,884) 



(321,496) 
184,995 



(136,501) 



1986 

s 

Funds provided by (applied to) the following 
activities 

Operating (14,733,824) 

Financing 17,430,500 

Investing (2,576,872) 

Increase (decrease) in cash during the year 119,804 

(Bank overdraft) cash at beginning of the year .. (136,501) 

Bank overdraft at end of the year (16,697) 

Operating 

Excess of operating expenses over operating 
revenue (14,171,679) 

hems not requiring an outlay of funds 

Depreciation and amortization 687,414 

Loss on disposal of Hxed assets 

Increase of components of working capital 
other than cash (1,324,342) 

Increase in the provision for employee termi- 
nation benefits 74,783 

(14,733,824) 



(15,128,576) 

679,878 
1,112 

(737,324) 

36,683 



(15,148,227) 



Financing 
Parliamentary appropriations 

Operating 14,679,831 14,824,500 

Extraordinary building repairs 2,171,008 488,895 

Interest on short-term investments 309,549 436,970 

Regional municipal grant 270,112 257,250 

"T7,430,500 16,007,615 

Investing 

Additions to fixed assets (405,864) (702,589) 

Extraordinary building repairs (2,171,008) (488,895) 

Proceeds from disposal of fixed assets 1 0,600 

(2,576,872) (1,180,884) 



1986 



1985 



Surplus (deficit) at beginning of the year 8,378 (381,766) 

Excess of expenses over revenue (13,592,018) (14,434,356) 

(13,583,640) (14,816,122) 

Parliamentary appropriation — Operating 14,679,831 14,824,500 

Surplus at end of the year 1,096,191 8,378 



PUBLIC ACCOUNTS, 1986-87 



267 



NATIONAL ARTS CENTRE CORPORATION— Continued 

NOTES TO FINANCIAL STATEMENTS 
AUGUST 31, 1986 

1 . Objectives and operations 

The objectives of the Corporation are: to operate and maintain 
the National Arts Centre; to develop the performing arts in the 
National Capital Region; and to assist the Canada Council in the 
development of the performing arts elsewhere in Canada. 

In furtherance of its objectives, the Corporation may arrange 
for and sponsor performing arts activities at the Centre; encour- 
age and assist in the development of performing arts companies 
resident at the Centre; arrange for or sponsor radio and television 
broadcasts and the showing of films in the Centre; provide accom- 
modation at the Centre, on such terms and conditions as the Cor- 
poration may fix, for national and local organizations whose 
objects include the development and encouragement of the per- 
forming arts in Canada; and, at the request of the Government of 
Canada or the Canada Council, arrange for performances else- 
where in Canada by performing arts companies, whether resident 
or non-resident in Canada, and arrange for performances outside 
Canada by performing arts companies resident in Canada. 

With a view to achieving the objectives. Her Majesty demised 
and leased the National Arts Centre building complex to the Cor- 
poration for a period of twenty years, expiring May 31, 1989. 
Under the terms of the lease, the Corporation is responsible for 
maintenance and operation of the building complex, but is not 
required to pay for the use of the complex. 

2. Significant accounting policies 

(a) Basis of accounting 

The accounts of the Corporation are maintained on an 
accrual basis. 

(b) Short-term investments 

Short-term investments are carried at cost which approxi- 
mates market value. 

(c) Grants 

Grants are recorded as revenue in the year in which the gran- 
tors make firm commitments to the Corporation. 

(d) Programmes in progress 

Direct costs, including advances to performing companies 
and artists, incurred prior to the end of the year for pro- 
grammes in progress are deferred and charged to expenses in 
the year in which the programmes terminate. Indirect costs 
and common services not attributable to particular perform- 
ances are charged to expenses in the year in which they arc 
incurred. 

(e) Inventories 

Inventories are valued at the lower of cost and net realizable 
value for food, beverages and boutique materials or replace- 
ment cost for production materials. 

(f) Fixed assets 

Fixed assets used in the operations, other than the NAC 
complex, are recorded at cost. Depreciation and amortization 
are calculated on the straight-line method, as follows: 

Building— r Atelier 20 years 

Equipment 5 and 7 years 

Leasehold improvements 4 and 10 years 

Gains and losses on disposals of fixed assets are credited or 

charged to operations. 



Cost of uncompleted capital projects are transferred to the 
appropriate fixed asset classification upon completion, and 
are then depreciated or amortized according to the Corpora- 
tion's policy. 

Extraordinary repairs to the NAC building complex are 
deducted from the parliamentary appropriation received for 
that purpose and are neither capitalized nor expensed. 

(g) Deferred revenue 

Revenue from tickets sold prior to the end of the year for pro- 
grammes in progress is deferred and credited to revenue in 
the year in which the programmes terminate. Gift certificates 
and exchange vouchers not redeemed within three years of 
the year of their issuance are written off and credited to reve- 
nue. A percentage of those less than three years old is also 
credited to revenue. 

(h) Operating expenses 

Expenses of performing arts programmes do not include costs 
relating to building and equipment maintenance, utilities, 
administrative services, furniture and equipment. Expenses of 
restaurants, garage and boutique do not include costs relating 
to utilities, administrative services and building maintenance. 
These costs are disclosed respectively as operation of the 
buildings expenses and administrative services. 

(i) Pension plan 

Employees of the Corporation participate in the Public Ser- 
vice Superannuation plan, administered by the Government 
of Canada. Contributions to the plan are required by both 
the employees and the Corporation. These contributions 
represent the Corporation's total obligation and are recorded 
as they become due. 

(j) Employee termination benefits 

Employees of the Corporation are entitled to specified ben- 
efits on termination as provided for under labour contracts 
and conditions of employment. The liability for these benefits 
is recorded in the accounts as the benefits accrue to the 
employees under the respective terms of employment. 

(k) Parliamentary appropriations 

The parliamentary appropriation for operations, received 
during the period April 1 to August 31, is in respect of the 
Government of Canada's fiscal year ending on March 3 1 of 
the following year. The Corporation credits to surplus each 
month one-twelfth of the approved appropriation. Accord- 
ingly, of the amount received to August 31, the amount 
received which is in excess of 5/12ths of the appropriation is 
deferred to the following year. In the event that the amount 
received is less than 5/12ths of the appropriation, the differ- 
ence is recorded as a receivable. 

The parliamentary appropriation received for extraordinary 
building repairs is deferred until used. An amount equal to 
the repairs incurred during the year is deducted from the 
deferred parliamentary appropriation. Should the total cost 
of the repairs be less than the amount received, the balance 
will be returned to the Consolidated Revenue Fund. 



268 



PUBLIC ACCOUNTS, 1986-87 



NATIONAL ARTS CENTRE CORPORATION— Continued 



NOTES TO FINANCIAL STATEMENTS 
AUGUST 31, I9i6— Concluded 

3. Accounts receivable 



1986 



1985 



8. Deferred revenue 



1986 



1985 



Customer accounts 525,081 

Allowance for bad debts (1 1,284) 



851,907 
(8,009) 



513,797 843,898 

Parliamentary appropriation 628,331 

Grants 135,056 128,625 

Loans to musicians for the purchase of instru- 
ments 81,260 108,021 

Accrued interest 7,037 90,280 

Other 34,812 52,281 



1,400,293 1,223,105 



4. Inventories 



Production materials 

Food, beverages and tobacco.. 
Boutique 



5. Prepaid expenses 



Supplies 

Commissions 

Souvenirs and other items 

Salaries for musicians on tour 

Travel expenses for musicians and artists on tour 
Miscellaneous 



6. Fixed assets 



1986 



1986 1985 



236,618 225,213 

185,624 120,073 

44,902 21,713 

467,144 366,999 



1986 1985 



175.724 143,007 

81,480 87,430 

34,285 34,517 

226,561 

126,772 

50,578 78,713 

342,067 697,000 



1985 



Land 

Building — 1' Atelier. . . . 

Equipment 

Leasehold improve- 
ments 

Uncompleted capital 
projects 





Accu- 








mulated 








deprecia- 








tion and 


Net 


Net 




amorti- 


book 


book 


Cost 


zation 


value 


value 


$ 


S 


$ 


$ 


90,000 




90,000 


90,000 


298,069 


73,878 


224,191 


239,094 


3,673,142 


2,092,367 


1,580,775 


1,883,947 


1,948,947 


755,412 


1,193,535 


1,139,299 


8,728 




8,728 


26,439 



6,018,886 2,921,657 3,097,229 3,378,779 



7. Accounts payable and accrued liabilities 



Trade 

Accrued salaries and annual leave.. 

Payroll deductions and sales tax 

Holdbacks on contracts 



1986 



1985 



1,053,355 1,143,027 

704,318 592,369 

292,553 463,038 

193,655 10,676 

2,243,881 2,209,110 



Tickets sold prior to the end of the year for 

programmes in progress 2,271,278 2,675,763 

Unredeemed gift certificates and other 136,546 139,108 



2,407,824 2,814,871 



9. Parliamentary appropriation — Operating 



1986 



1985 



8,652,000 
14,674,000 



Deferred from the previous year 8,501,500 

Received during the year 5,550,000 

Receivable at August 31 628,331 

Credited to surplus (14,679,831) (14,824,500) 

Deferred to the following year 8,501,500 



10. Parliamentary appropriation — Extraordinary building repairs 

1986 1985 



Deferred from the previous year 611,463 1,100,358 

Received during the year 2,000,000 

Interest earned during the year 20,631 

Expenses for the year (2,171,008) (488,895) 

Deferred to the following year 461,086 611,463 



1 1 . Commitments 

As at August 31, 1986, commitments for operating leases and 
box office management services, with terms of more than one 
year, amounted to $1,360,408. Future minimum payments under 
these arrangements are payable as follows: 



Year ending 
August 3 1 

1987 

1988 

1989 

1990 

1991 

1992 



S 

504,302 
247,963 
128,886 
124,257 
165,000 
190,000 
1,360,408 



1 2. Related party transactions 

In addition to the rental of the NAC complex, provided free of 
charge, the Corporation receives audit services without charge 
from the Office of the Auditor General of Canada. 

During the year, in the normal course of business, the Corpora- 
tion incurred expenses totalling $554,078 (1985— $535,409) for 
utility services provided by the Department of Public Works and 
$85,929 (1985 — $82,711) for ground maintenance and snow 
removal services provided by the National Capital Commission. 

13. Comparative figures 

Certain figures for the year ended August 31, 1985 have been 
reclassified to conform to the presentation adopted for the year 
ended August 31, 1986. 



PUBLIC ACCOUNTS, 1986-87 

NATIONAL ARTS CENTRE CORPORATION— Co/i/mwe^ 

SCHEDULE OF REVENUE AND EXPENSES— PERFORMING ARTS PROGRAMMES 
FOR THE YEAR ENDED AUGUST 31, 1986 



269 



SCHEDULE 1 



Revenue 

Box office 

Tours 

Broadcasts 

Recordings 

Co-productions 

Sponsorships 

Other 

Expenses 
Direct 

Talent, performers and musicians 

Set, prop, sound and stage crew 

Wardrobe 

Artistic, creative and professional services 

Theatre and other production 

Advertising 

Performances 

Subscriptions 

Administration (Schedule 6) 

Direct operating costs 

Excess of expenses over revenue before support ser- 
vices 

Support services (Schedule 6) 

Excess of expenses over revenue 



Dance and Variety 



Music 



Theatre 



Total 



1986 



30,116 



740,438 



1985 



1986 



1985 



1986 



1985 



1986 



1985 



$ $ 

4,384,415 3,337,033 



15,163 



1,354,161 

378,308 

223,807 

51,720 

110,941 
66,945 



1,203,342 

217,597 

348,372 

30,196 

8,872 
79,709 



1,718,530 1,412,844 7,457,106 5,953,219 



64,725 

80,628 
45,469 



11,360 

293,016 
14.236 



443,033 
223,807 
51,720 
80,628 
110,941 
142,530 



228,957 
348,372 
30,196 
293,016 
8,872 
109,108 



4,414,531 3,352.196 2,185,882 1,888,088 1,909,352 1,731,456 8,509,765 6,971,740 



3,501,815 


2,597,535 


3,735,179 


3,530,150 


1,033,397 


1,220,231 


8,270,391 


7,347,916 


629,695 


537,628 


309,784 


316,049 


1,224,839 


1,203,121 


2,164,318 


2,056,798 


33 


778 


258 


261 


206,777 


212,223 


207,068 


213,262 


5,655 


7,559 


31,493 


42,665 


279,960 


243,250 


317,108 


293,474 


200,109 


187,646 


210,869 


173,886 


265,784 


232,640 


676,762 


594,172 



4,337,307 


3,331,146 


4,287,583 


4,063,011 


3,010,757 


3,111,465 


11.635,647 


10,505,622 


346,225 
104,223 


263,397 
54,889 


192,544 
284,642 


196,199 
240,374 


263,016 
215,917 


210,625 
207,929 


801,785 
604,782 


670,221 
503,192 


450,448 


318,286 


477,186 


436,573 


478,933 


418,554 


1,406.567 


1.173,413 


367,214 


305,107 


459,493 


493,300 


597,783 


559,398 


1.424.490 


1.357.805 


5,154,969 


3,954,539 


5,224,262 


4,992,884 


4,087,473 


4,089.417 


14,466.704 


13.036.840 



602.343 3,038,380 3,104,796 2,178,121 2,357.961 



5.956,939 
2,980.123 



6,065,100 
3,193,552 



8,937,062 9,258,652 



SCHEDULE OF REVENUE AND EXPENSES- 
FOR THE YEAR ENDED AUGUST 31, 1986 



-RESTAURANTS 



Food 



1986 



Beverage 



Total 



Food 



SCHEDULE 2 



1985 



Beverage 



Total 



Sales 

LeCaf* 1,210,974 

Catering 743,897 

Bars 

Green Room 60,497 

Total sales 

Cost of Sales 

Cost of goods consumed 

Less cost of employee meals 

Net cost of sales 

Gross profit 1,257,587 

Other revenue 

Total gross profit and other revenue 

Operating and administrative expenses 

Salaries, wages and employee benefits 

Supplies and equipment rental 

Repairs and maintenance 

Advertising and promotion 

Depreciation and amortization 

Music and entertainment 

Credit cards commissions 

Furniture and equipment 

Professional services 

Travel 

Other 

Total expenses 

Excess of revenue over expenses 



593,925 


1,804,899 


1,065,389 


549,005 


1,614,394 


370,054 


1,113,951 


464,398 


249,048 


713,446 


368,702 


368,702 
60,497 




409,013 


409,013 



2,015,368 


1,332,681 


3,348,049 


1,529,787 


1,207,066 


2,736,853 


786,132 
(28,351) 


415,322 


1,201,454 
(28,351) 


589,639 
(18,437) 


374,714 


964,353 
(18,437) 


757,781 


415,322 


1.173,103 


571,202 


374,714 


945,916 



917,359 



2,174,946 

131,333 

2.306,279 

1,426,452 

320,745 

98.217 

84.582 

68,968 

30,526 

23,135 

15,628 

12,393 

6.453 

35,566 

2,122,665 

183,614 



958,585 



832,352 



1,790,937 

57.427 

1.848.364 



1,137,219 

217,041 

75,023 

56,669 

65,719 

18,882 

17,962 

19,479 

5,818 

5,909 

17,256 

1,636,977 

211.387 



270 



PUBLIC ACCOUNTS, 1986-87 



NATIONAL ARTS CENTRE CORPORATION— Conc/w^e^ 



SCHEDULE OF REVENUE AND EXPENSES- 
GARAGE 
FOR THE YEAR ENDED AUGUST 31, 1986 



SCHEDULE OF EXPENSES 
PERFORMING ARTS PROGRAMMES- 
SCHEDULE 3 ADMINISTRATION AND SUPPORT SERVICES 
FOR THE YEAR ENDED AUGUST 31, 1986 



SCHEDULE 6 



1986 1985 

S S 

Revenue 

Parking 1,524,339 1,614,019 

Other 269 370 

1,524,608 1,614,389 

Expenses 

Salaries, wages and employee benefits 392,632 359,641 

Supplies 22,923 25,316 

Repairs and maintenance 14,692 1,302 

Depreciation and amortization 9,652 6,662 

Advertising 633 1,799 

Other 9,809 6,735 

450.341 401,455 

Excess of revenue over expenses 1,074,267 1,212,934 



Administration 

1986 1985 

$ $ 

Salaries, wages and 
employee benefiU 1,230,251 1,193,661 

Travel and duty entertain- 
ment 124,442 110,627 

Office expenses 34,955 19,913 

Professional services and 
expenses 15,169 14,994 

Commissions and service 
charges 

Advertising and promotion 

Warehouse rent 

Other 19.673 18.610 

1.424,490 1,357,805 



Support Services 



1986 



1985 



1,806,166 2,033,673 



25,160 
126.533 


31,501 
167,223 


36,502 


94,075 


411,724 

367,674 

147,040 

59,324 


251,735 

399,893 

140,356 

75,096 



2.980.123 3.193.552 



SCHEDULE OF EXPENSES- 
OPERATION OF THE BUILDINGS 
FOR THE YEAR ENDED AUGUST 31, 1986 



SCHEDULE 4 



SCHEDULE OF REVENUE AND EXPENSES- 
BOUTIQUE 
FOR THE YEAR ENDED AUGUST 31, 1986 



SCHEDULE 7 



1986 



1985 



Salaries, wages and employee benefits 

Utilities 

Repairs and maintenance to buildings and equipment . 

Depreciation and amortization 

Professional services and expenses 

Furniture and equipment 

Laundry and dry cleaning 

Office expenses 

Uniforms 

Travel and duty entertainment 

Other 



s 


$ 


1,803,038 


1.632.909 


958,666 


975.576 


790,054 


1.048.002 


606,117 


604.820 


85,772 


86.040 


66,674 


36.250 


25,533 


23.474 


12,707 


4.588 


9.080 


1.201 


6.316 


6.817 


10.508 


13.440 



4.374,465 4,433,117 



SCHEDULE OF EXPENSES- 
ADMINISTRATIVE SERVICES 
FOR THE YEAR ENDED AUGUST 31, 1986 



1986 


1985 


$ 

147.493 


$ 

97,614 


85,047 


51.217 


62,446 


46,397 



SCHEDULE 5 



Revenue 

Sales 

Expenses 

Cost of goods sold 

Gross margin 

General and administration 

Salaries, wages and employee benefits 53,503 39,719 

Advertising and display 4,306 2,602 

Amortization 2,677 2,677 

Supplies and equipment rental 2,549 638 

Travel 1,895 1,276 

Furniture and equipment 356 

Other 5.117 2.763 

70.403 49.675 

Total expenses 155,450 100,892 

Excess of expenses over revenue 7,957 3.278 



1986 1985 

S S 

Salaries, wages and employee benefits 2.293.132 2.878,863 

Office expenses 159.848 227,1 10 

Office rent 156,784 155,005 

Telecommunications 131,007 147.914 

Professional services and expenses 96,381 1 18,136 

Insurance 89,338 68,577 

Trustees' fees and expenses 76,449 52,027 

Repairs and maintenance 60,699 54,662 

Travel and duty entertainment 52,902 46,749 

Advertising and promotion 39,315 33,323 

Training 19,329 15,744 

Other 76,129 56,002 

3,251,313 3,854,112 



PUBLIC ACCOUNTS, 1986-87 271 

SUMMARY PAGE 
NATIONAL CAPITAL COMMISSION 

MANDATE 

To prepare plans for and assist in the development, conservation and improvement of the National Capital Region. 

BACKGROUND 

Funding from Canada to the Commission is usually budgetary funding. The Commission's own revenues meet about 
1 7 per cent of its operating expenses. 

CORPORATION DATA 

HEAD OFFICE 161 Laurier Avenue West 

Ottawa, Ontario 
K1P6J6 

STATUS — Schedule C, Part I 

— an agent of Her Majesty 

APPROPRIATE MINISTER The Honourable Stewart Mclnnes, P.C, M.P. 

DEPARTMENT Public Works 

YEAR AND MEANS 1 958; by the National Capital Act (R.S.C. 1 970, N-3). Canada has 

OF INCORPORATION owned this corporation since 1899 with the creation then of the 

Ottawa Improvement Commission (1899-1927), succeeded by the 
Federal District Commission (1927-1958). 

CHAIRMAN AND CHIEF Jean Pigott 

EXECUTIVE OFFICER 

AUDITOR The Auditor General of Canada 

FINANCIAL SUMMARY ($ million) The financial year ends March 31. 

1986-87 1985-86 1984-85 1983-84 

(restated) 

At the end of the period 

Total Assets* 298.3 306.5 332.8 411.6 

Obligations to the private sector nil nil nil nil 

Obligations to Canada nil nil 26.3 31.1 

Equity of Canada 267.1 284.4 281.4 344.5 

Cash from Canada in the period 

— budgetary 59.0** 73.4** 97.1 86.6 

— non-budgetary nil (26.3) (4.8) nil 

* The data series on Total Assets and on Equity reflect NCC's change in accounting practice by recording 
depreciation; this change has lowered the book value of much of its assets from "historic cost" value to "net of 
depreciation" value. 

** Net of sales proceeds and surplus (in 1986-87, $3.5 million; in 1985-86, $7.6 million) which were paid to Canada. 



272 



PUBLIC ACCOUNTS, 1986-87 



NATIONAL CAPITAL COMMISSION 

MANAGEMENT RESPONSIBILITY FOR FINANCIAL STATE- 
MENTS 

The accompanying financial statements of the National Capital 
Commission are the responsibility of management and have been 
approved by members of the Commission. The financial statements 
have been prepared by management in accordance with generally 
accepted accounting principles. 

Management has developed and maintains books of account, 
records, financial and management controls and information systems. 
These are designed to provide reasonable assurance that assets are 
safeguarded and controlled and that transactions are in accordance 
with the Financial Administration Act and regulations as well as the 
National Capital Act and By-Laws of the Commission. Internal audits 
are conducted to assess these systems and practices. 

The members of the Commission carry out their responsibilities for 
the financial statements principally through an Audit Committee 
which consists of members of the Commission only. The Audit Com- 
mittee meets periodically with management as well as with the internal 
and external auditors to discuss the results of audit examinations with 
respect to the adequacy of internal accounting controls and to review 
and discuss financial reporting matters. The external auditors have full 
access to the Audit Committee, with and without management being 
present. 

The Commission's external auditor, the Auditor General of Canada, 
has examined the financial statements. He submits his report to the 
Minister of Public Works who is responsible for the National Capital 
Commission. 



AUDITOR'S REPORT 



THE MINISTER OF PUBLIC WORKS 



I have examined the balance sheet of the National Capital Commis- 
sion as at March 31, 1987 and the statements of operations, equity and 
changes in cash resources for the year then ended. My examination 
was made in accordance with generally accepted auditing standards, 
and accordingly included such tests and other procedures as I con- 
sidered necessary in the circumstances. 

In my opinion, these financial statements present fairly the financial 
position of the Commission as at March 31, 1987 and the results of its 
operations and the changes in its cash resources for the year then 
ended in accordance with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 

Further, in my opinion, the transactions of the Commission that 
have come to my notice during my examination of the financial state- 
ments have, in all significant respects, been in accordance with Part 
XII of the Financial Administration Act and regulations, the National 
Capital Act, the articles and by-laws of the Commission. 



Kenneth M. Dye, F.C.A. 
Auditor General of Canada 



Ottawa, Canada 
June 12, 1987 



Jean E. Pigott 
Chairman 

John T. Denis 
Chief Financial Officer 



BALANCE SHEET AS AT MARCH 31, 1987 
(in thousands of dollars) 



ASSETS 



1987 1986 



LIABILITIES 



1987 



1986 



Current 

Cash and short-term deposits 1 1,084 23,209 

Accounts receivable 

Federal government departments and agencies 780 1,472 

Tenants and others 1,196 731 

Operating supplies, small tools and nursery stock 

(Note 2c) 660 682 

Prepaid expenses 1,874 2,138 

15,594 28,232 

Land, buildings and equipment (Note 3) 282,689 278,282 



298,283 306,514 



Current 

Accounts payable and accrued liabilities 22,847 14,894 

Unsettled expropriations of property 1,300 1,342 

Holdbacks and deposits from contractors and others 1,876 1,352 

Long-term 
Accrued employee termination benefits 

EQUITY 

Equity of Canada 

"298,283 306,514 



26,023 


17,588 


5,197 


4,496 


31,220 


22,084 


267,063 


284,430 



Approved by the Commission: 

JEAN E. PIGOTT 
Chairman 

A. L. MARTIN 
Commissioner 



PUBLIC ACCOUNTS, 1986-87 

NATIONAL CAPITAL COMMISSION— Continued 

STATEMENT OF OPERATIONS 

FOR THE YEAR ENDED MARCH 31, 1987 

(in thousands of dollars) 



STATEMENT OF CHANGES IN CASH RESOURCES 
FOR THE YEAR ENDED MARCH 31, 1987 
(in thousands of dollars) 



273 



_ 1987 1986 

Expenses 

Planning and development 

Real asset management 

Public activities 

Administration 

Revenues 

Property 

Interest 

Net gain on disposal of land, buildings and equipment .... 
Other 

Net cost of operations 

Parliamentary appropriations 

Less: appropriations used to acquire land, build- 
ings and equipment 

Excess of net cost of operations over parliamentary appro- 
priations 28,998 806 



STATEMENT OF EQUITY 

FOR THE YEAR ENDED MARCH 31, 1987 

(in thousands of dollars) 



13,173 
51,836 
11,915 
15.255 


12,838 

44,904 

9,957 

15,300 


92,179 


82.999 


9,690 

1,178 
3,136 
1,863 


8,848 

1.921 

364 

1.496 


15,867 


12,629 


76,312 


70,370 


62,445 
15.131 


81.026 
11,462 


47,314 


69,564 



1987 



1986 



Balance at beginning of year as previously reported 284,430 377,346 

Adjustment to record accumulated depreciation to begin- 
ning of year (95,953) 

Balance as restated 284,430 281,393 

Excess of net cost of operations over parliamentary appro- 
priations (28,998) (806) 

Appropriations to acquire land, buildings and equipment . . 15.131 1 1 ,462 - 

Payments to Canada (3.500) (7.619) 

Balance at end of year 267.063 284,430 



1987 1986 

Operating activities 
Excess of net cost of operations over parliamentary 

appropriations (28.998) (806) 

Items not involving cash 

Depreciation 10,549 9.316 

Net gains on disposal of land, buildings and equip- 
ment (3.136) (364) 

Increase (decrease) in accrued employee benefits 701 (41) 

(20.884) 8.105 
Increase (decrease) in non-cash operating working capi- 
tal 

Accounts receivable 227 (436) 

Inventories 22 (37) 

Prepaid expenses 264 (659) 

Accounts payable and accrued liabilities 7.953 (2.493) 

Unsettled expropriations (42) (267) 

Holdbacks and deposits 524 (228) 

8,948 (4,120) 

Cash provided by (used in) operating activities (11.936) 3.985 

Investing activities 

Acquisition of land, buildings and equipment (15,131) (11.462) 

Proceeds on disposal of land, buildings and equipment ... 3,3 1 1 3,259 

Cash used in investing activities (11.820) (8.203) 

Cash required before flnancing (23,756) (4.218) 

Financing activities 
Parliamentary appropriations to acquire land, buildings 

and equipment 15,131 11.462 

Repayment of loans from Canada (26.309) 

Payment of funds to Canada (3.500) (7.619) 

Cash provided by (used in) Hnancing activities 11.631 (22.466) 

Decrease in cash (12.125) (26.684) 

Cash and short-term deposits at beginning of year 23.209 49,893 

Cash and short-term deposits at end of year 11,084 23,209 "^ 



NOTES TO FINANCIAL STATEMENTS 
MARCH 31, 1987 

1 . Authority and Objectives 

The National Capital Commission was established by the 
National Capital Act, 1958. The Commission is a Crown Corpo- 
ration without share capital named in Schedule C, Part I to the 
Financial Administration Act and is an agent corporation. The 
objects and purposes of the Commission are to prepare plans for 
and assist in the development, conservation and improvement of 
the National Capital Region in order that the nature and charac- 
ter of the seat of the Government of Canada may be in accord- 
ance with its national significance. 

2. Significant Accounting Policies 

(a) Land, Buildings and Equipment 

Land, buildings and equipment are generally recorded at his- 
torical cost. Property acquired at nominal cost or by donation 
is recorded at market value at time of acquisition. Property 
acquired by exchange is recorded at the carrying value of the 
assets disposed of in the transaction. 



274 



PUBLIC ACCOUNTS, 1986-87 



NATIONAL CAPITAL COMMISSION— Con//«Me^ 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \9S1— Continued 

(b) Depreciation 

Depreciation is charged to operations in equal annual 
amounts based on the estimated useful life of the assets, as 
follows: 



Buildings 

Roads and bridges 

Park landscaping and improvement 

Festival equipment 

Equipment 

Vehicles 

Equipment and vehicle attachments 



20 years 

25 years 

25 years 

5 years 

7 to 1 5 years 

4 to 7 years 

10 years 



(c) Operating Supplies, Small Tools and Nursery Stock 

Operating supplies and small tools are carried at cost. Nur- 
sery stock is valued at estimated replacement cost less an 
allowance for overhead, balling and packaging expenses. 

(d) Pension Plan 

The Commission's employees participate in the Public Ser- 
vice Superannuation Plan, which is administered by the Gov- 
ernment of Canada. Contributions to the Plan are made by 
both the employees and the Commission on an equal basis. 
These contributions represent the total pension obligations of 
the Commission and are recognized in the accounts on a cur- 
rent basis. 

(e) Employee Termination Benefits 

Severance pay generally accrues to employees over their ser- 
vice period, and is payable on their separation or retirement. 
The liability for these benefits is recorded in the accounts as 
the benefits accrue to the employees. 



3. Land, Buildings and Equipment 





1987 




1986 




Accu- 








mulated 


Net 


Net 


Historical 


Depre- 


Book 


Book 


Cost 


ciation 


Value 


Value 



Land and Buildings 

Greenbelt 54,525 

Parkways 73,612 

Parks 46,584 

Bridges and 
approaches 26,094 

Historical sites 15,924 

Recreational 
facilities 14,452 

Rental properties . 139,295 

Unsettled expro- 
priations 1,300 

Administrative 
and service 
buildings 10,825 

Less: provision for 
transfers* 

Equipment 

Equipment 

Furniture 

Vehicles 

Antiques and 
works of art 



(in thousands of dollars) 



15,457 
32,189 
14,101 


39,068 

41,423 
32,483 


39,647 
40,300 
31,824 


12,299 
7,800 


13,795 
8,124 


14,206 
8,470 


5,409 
11,239 


9,043 
128,056 


9,067 
125,218 



5,703 



1,300 



5,122 



1,342 



5,180 



382,611 
2,045 


104,197 


278,414 
2,045 


275,254 
2,070 


380,566 


104,197 


276,369 


273,184 


4,483 
7,848 
3,592 

823 


3,060 
4,645 
2,408 

313 


1,423 
3,203 
1,184 

510 


1,241 

2,274 

995 

588 


16,746 


10,426 


6,320 


5,098 


397,312 


114,623 


282,689 


278,282 



Provision for transfers pertains to property to be transferred in accordance 
with agreements with the Province of Quebec. This includes lands to be 
given free of charge for approaches to the MacDonald-Cartier Bridge, and 
for the transfer for $ 1 of lands to be used as a right-of-way for Highway 
550. 



4. Summary of Expenses by Major Classification 



Payroll and related costs . 

Goods and services 

Grants-in-lieu of taxes 

Other contributions 

Depreciation 



1987 



1986 



(in thousands of 
dollars) 

37,801 33,482 
24,249 25,439 
13,007 7,933 
6,573 6,829 
10,549 9,316 


92,179 


82,999 



5. Major Commitments 

(a) The Commission is committed to make contributions to other 
levels of government and other authorities as follows: 

(i) Province of Quebec, one-half of the cost of the work of a 
road network within the Quebec portion of the National 
Capital Region. The Commission's remaining commit- 
ment to be paid over the next several years is estimated 
at $95 million and is subject to Treasury Board of 
Canada approval. 



PUBLIC ACCOUNTS, 1986-87 



275 



NATIONAL CAPITAL COMMISSION— Co/ic/u^e^ 

NOTES TO FINANCIAL STATEMENTS 
MARCH 31, \m— Concluded 

(ii) The Outaouais Regional Community Transit Commis- 
sion and the Ottawa-Carleton Regional Transit Com- 
mission, a total of $1.6 million annually to the end of 
1988 to assist in the provision of interprovincial transit 
service in the National Capital Region. 

(iii) The Canada Museums Construction Corporation Inc., 
65% of the cost of landscaping sites for two new 
museums in the National Capital Region. The Commis- 
sion's commitment is $7.0 million. 

(b) The Province of Quebec has expropriated certain lands at 
Laurier Park on behalf of the Commission. An amount of 
$1.25 million will be payable to the province in exchange for 
appropriate title documents. 

(c) The Commission has entered into agreements for computing 
services and leases of equipment and office space. Annual 
payments under these agreements are approximately as fol- 
lows: 





(in 
thousands 

of 
dollars) 


1987-88 


3,032 


1988-89 


2,541 


1989-90 


2,553 


1990-91 


2,138 








10,264 


6. Contingencies 





(a) Claims 

Claims and potential claims have or may be made against the 
Commission totalling approximately $25.7 million for alleged 
damages and other matters. The final outcome of these 
claims is not determinable and accordingly these items are 
not reflected in the accounts. However, in the opinion of 
management, the position of the Commission is defensible. 
Settlements, if any, resulting from the resolution of these 
claims will be accounted for in the year in which the settle- 
ments occur. 

(b) Agreement with the Province of Ontario 

In 1961, the Commission entered into an agreement whereby 
the Province of Ontario established and maintains 2,654 hec- 
tares (6,557 acres) of forest. When the agreement expires in 
2011, or is terminated, the Commission will reimburse the 
Province for the excess of expenses over revenues, or the 
Province will pay the Commission the excess of revenues over 
expenditures. At March 31, 1986, cumulative expenditures 
exceeded cumulative receipts by $1.0 million, and are not ref- 
lected in the accounts of the Commission. 



7. Related Party Transactions 

(a) Exchange of Properties 

In August and December 1986, the Commission, with the 
approval of the Governor in Council, exchanged certain prop- 
erties with the Departments of National Defence and Public 
Works. The properties received were recorded at the carrying 
value of the properties transferred. 

(b) Construction Costs 

The Commission has permitted another Crown corporation 
to undertake major construction projects on certain Commis- 
sion lands. Although the Commission is not responsible for 
funding and managing these projects, or reporting their costs, 
it may have title to the construction works. However, in keep- 
ing with the intent of these projects, which includes the even- 
tual transfer of the lands as explained in Note 8, the Com- 
mission is not claiming ownership of the work in progress or 
the completed buildings. Accordingly, the value of the con- 
struction costs is not included in the records of the Commis- 
sion or in its financial statements. 

8. Subsequent Events 

The Commission is in process of transferring certain lands to a 
federal government department. The estimated cost of these lands 
is $1 1.8 million. The financial statements of the Commission as at 
March 31, 1987 do not include this pending transaction because 
the authority necessary to effect the transfer has not yet been 
obtained. 

9. Comparative Figures 

Certain comparative figures have been reclassified to conform 
to the current presentation. 



276 



PUBLIC ACCOUNTS, 1986-87 



SUMMARY PAGE 
NORTHERN CANADA POWER COMMISSION 



MANDATE 

To plan, construct and operate, on a self-sustaining basis, public utilities in the Northwest Territories and, subject to 
approval of the Governor in Council, elsewhere in Canada. 

BACKGROUND 

Since incorporation in 1948, NCPC has acquired or installed power generation and distribution facilities in Yukon 
and the Northwest Territories. The federal government is presently pursuing options for the control of the 
Commission's operations to be transferred to the governments of the Territories. To this end, with the authority of the 
Northern Canada Power Commission Yukon Assets Disposal Authorization Act (S.C. 1987, C. 9), the assets and 
operations of the Commission in Yukon were sold on March 31, 1987 to the Yukon Power Corporation, a subsidiary 
of the Yukon Development Corporation, a corporation created by an ordinance of the Yukon Territorial Government. 



CORPORATION DATA 

HEAD OFFICE 



STATUS 

APPROPRIATE MINISTER 

DEPARTMENT 

YEAR AND MEANS OF 
INCORPORATION 



CHAIRMAN AND 

CHIEF EXECUTIVE OFFICER 

AUDITOR 



7909 -5 1st Avenue 
P.O. Box 5700 
Station L 

Edmonton, Alberta 
T6C 4J8 

— Schedule C, Part I 

— an agent of Her Majesty 

The Honourable William H. McKnight, P.C, M.P. 

Indian Affairs and Northern Development 

1948; by the Northwest Territories Power Commission Act 
(amended as Northern Canada Power Commission Act (R.S.C. 
1970, N-21)) 

John W. Beaver 

The Auditor General of Canada 



FINANCIAL SUMMARY ($ million) The financial year ends March 31. 

1986-87 

At the end of the year 

Total Assets 142.9 

Obligations to the private sector nil 

Obligations to Canada 103.3 

Equity of Canada 24.9 

Cash from Canada in the period 

— budgetary nil 

— non-budgetary 11.6 



1985-86 1984-85 1983-84 

(restated) 



268.7 


271.8 


270.4 


nil 


nil 


nil 


236.9 


241.0 


249.9 


9.5 


14.8 


8.9 


nil 


nil 


negl. 


3.9 


5.0 


20.1,ne 



i 



PUBLIC ACCOUNTS, 1986-87 



111 



NORTHERN CANADA POWER COMMISSION 

AUDITOR'S REPORT 

TO THE MINISTER OF INDIAN AFFAIRS AND NORTHERN DEVELOP- 
MENT 

I have examined the balance sheet of Northern Canada Power Com- 
mission as at March 31, 1987 and the statements of operations, 
retained earnings and changes in flnancial position for the year then 
ended. My examination was made in accordance with generally 
accepted auditing standards, and accordingly included such tests and 
other procedures as I considered necessary in the circumstances. 

In my opinion, these fmancial statements present fairly the financial 
position of the Commission as at March 31, 1987 and the results of its 
operations and the changes in its flnancial position for the year then 
ended in accordance with generally