Transcript Slide 1

2010-11 Financial
Statements Changes
Information Session for School Boards and External Auditors
Financial Analysis and Accountability Branch
Fall 2011
Agenda
 Legislative Changes
 Government Transfers Standard
 Deferred Capital Contributions
 Accumulated Surplus/(Deficit)
 Prior Period Restatements
 Proceeds of Disposition
 Assets Held for Sale
 Asset Upload File
 Notes to the Financial Statements
 Form Changes
2007-08 Grants for Student Needs
2
Legislative Changes
2007-08 Grants for Student Needs
3
Purpose
 The Ministry of Education (EDU) has introduced
legislative changes to the accountability framework for
the School Board Sector.
 Ministry proposals were shared at previous information
sessions.
 Highlights changes most of which are effective
September 1, 2010.
2007-08 Grants for Student Needs
4
Education Act – S231





The Ministry has amended legislation to update the budget requirements to:
 Better align the financial accountability provisions with accounting policies of
the province.
 Establish new financial accountability controls on accumulated surpluses.
 Establish new provisions related to multi-year deficit management strategies
and recovery plans.
Section 231 of the Act has been amended to provide a new definition of balanced
budget.
 The new model measures budget compliance by measuring the amount that
a board’s expenses exceed its revenues against the “1% threshold”.
The 1% threshold is the lesser of:
1) 1% of the board’s operating revenue for the school board fiscal year, and
2) the board’s accumulated surplus for the immediately preceding fiscal
year.
The board’s deficit may be greater than the criteria above if the board has prior
approval from the Minister.
The above provisions have been implemented starting with the 2010-11 estimates
of school boards and are compliance requirements for estimates, revised estimates
and financial statements.
2007-08 Grants for Student Needs
5
Education Act – Recovery Plans






The Ministry has amended legislation to permit multi-year deficit
management strategies and recovery plans.
A new division C.1 called Financial Recovery Plans has been
added.
The section gives the Minister the power to trigger a recovery plan
at any point a board’s expenses exceed its revenues for the fiscal
year by an amount greater than the 1% threshold referred to in the
previous slide.
A recovery plan would not be triggered if the board had prior
approval from the Minister.
The board would be required to submit a recovery plan within a
specified time period, after which the Minister could approve or
change the plan as necessary to address the deficit.
The board would be required to comply with the recovery plan until
the board eliminated its in-year and accumulated deficits.
2007-08 Grants for Student Needs
6
Regulations – Surpluses and Deficits
 Reserves concepts have been replaced with
accumulated surplus or deficit.
 Education Act amended to allow regulations
prescribing exclusions/inclusions etc. in the
determination of accumulated surplus/deficit and inyear surplus/deficit.
 Ontario Regulation 488/10, Determination of Board
Surpluses and Deficits, has been introduced.
 Schedule 5 of the Financial Statements implements
the provisions of this regulation.
2007-08 Grants for Student Needs
7
Regulations – Restricted Purpose Revenues
 Reserves concepts that have external restrictions
are reported as deferred revenues.
 Reserves regulation has been replaced with
Ontario Regulation 193/10, Restricted Purpose
Revenues.
 Enveloping provisions on GSN revenues e.g.
Special Education, Internal Audit that were
previously in the GSN Regulation have been moved
to this regulation.
2007-08 Grants for Student Needs
8
Regulations – Restricted Purpose Revenues
 Addresses restrictions on School Renewal,
including the school renewal portion of the Pupil
Accommodation Reserve as of August 31, 2010.
 Includes a provision allowing the school renewal
allocation to be applied against the
amortization/DCC gap related to school renewal
capital spending.
 Restrictions related to School Condition
Improvement, a new funding source provided
starting in 2011/12 are addressed. It is similar to
renewal except that expenditures must meet Code
of Accounts and TCA Guide criteria.
2007-08 Grants for Student Needs
9
Regulations – 2010-11 GSN
 To implement amended section 231 of the Act,
operating revenue is defined in section 12 of the
GSN regulation (Reg 196/10).
 New provision introduced, section 57 – Required
spending, minor tangible capital assets.
 Requires boards to use 2.5% of funding allocations
against minor TCA first before using residual for other
purposes.
 This was implemented to be able to include funding spent
on minor TCA in DCC.
2007-08 Grants for Student Needs
10
Government Transfers
Standard
2007-08 Grants for Student Needs
11
Government Transfers Standard
 In February 2011, PSAB released the revised
Government Transfers standard (PS 3410).
 This standard explains how to report transfers from a
government.
 Where a board has a liability due to a capital transfer
received to acquire or develop a TCA to be used to
provide services for a defined number of years, the
liability would be reduced and an equivalent amount
of revenue would be recognized as the liability is
settled (PS 3410, paragraphs 23 and 25).
 This liability is referred to as deferred capital
contributions (DCC) in the following training material
and EFIS worksheets.
2007-08 Grants for Student Needs
12
DCC and Non-Depreciable Assets (ex. Land)
 The treatment of non-depreciable assets (ex. land) in PS
3410 is different that what was implemented in the 201011 Revised Estimates.
 Per the updated standard, capital transfers relating to
non-depreciable assets would be recognized in revenue
once the asset is acquired (PS 3410, paragraph 27).
 The 2010-11 Financial Statement forms have been
updated to exclude non-depreciable assets from DCC.
 Regulations were updated to include revenues received
for land in Accumulated Surplus - Unavailable for
Compliance.
2007-08 Grants for Student Needs
13
ICAO Technical Committee
 On July 7, 2011, the Ministry of Education met
with an Institute of Chartered Accountants of
Ontario (ICAO) Technical Committee to discuss
the implementation Government Transfers in the
school board sector.
 Memorandum 2011:B8 (Implementation of the
revised government transfers accounting
standard) includes the slides that were shared at
the meeting, plus a description of one of the
issues encountered.
2007-08 Grants for Student Needs
14
Government Transfers Implementation
 The majority of the Ministry’s implementation plan clearly
conforms to the Government Transfers standard.
 Boards have a liability with respect to past and future
capital transfers for buildings and minor tangible
capital assets (TCA). Therefore, PS 3410 can be
applied and DCC recorded.
 However, the treatment of property tax revenues that
were used to fund the construction of depreciable
assets (i.e. buildings and building additions) was
inconclusive.
 The implementation plan was the focus of the training
sessions with the boards’ external auditors in early
September 2011.
 The following slides describe the issue of property tax
revenues and provide a solution.
2007-08 Grants for Student Needs
15
Capital funded through property taxes

Prior to 1998, some boards used property tax revenues to fund the
construction of depreciable assets.

Generally, PS 3510 (Tax Revenues) would be used to determine
how to account for property tax revenues.

The Province and school boards have a unique set of circumstances
whereby the Ministry believes it is appropriate to include these
amounts in DCC.
 These circumstances were described in detail in memorandum
2011:B8.
 The control structure changed significantly such that even pre1998 assets became the responsibility of the Province.
 The financial statements should reflect this.
2007-08 Grants for Student Needs
16
Capital funded through property taxes (con’t)

From a cost-benefit perspective, it is not reasonable, nor necessarily
possible, to calculate capital contributions received through property tax
revenue, thus it is not possible to exclude this amount from the opening
DCC balance.

In such instances, the standard would generally be applied prospectively;
however, the Ministry instructed boards to implement the provisions of PS
3410 retroactively. This was:


 To ensure that the Financial Statements are relevant, understandable to
the user, and comparable over periods, consistent with PS 1000.24.
 To be consistent with the implementation of TCA.
Boards have not had taxing power since 1998, so this is a transition issue
only.
In consideration of the above, the Ministry believes it is appropriate to
include the opening balance related to property tax revenue contributions in
DCC.
2007-08 Grants for Student Needs
17
Audit Report and Accounting Policy Note
 The boards’ 2010-11 Financial Statements will
be prepared under a special purpose fair
presentation framework.
 See sample audit report provided.
 The financial statements will be prepared in
accordance with the basis of accounting
described in Note 1 to financial statements.
 See sample Note 1 provided.
2007-08 Grants for Student Needs
18
Deferred Capital
Contributions
2007-08 Grants for Student Needs
19
Agenda
 DCC Recap
 What goes into DCC?
 What does not go into DCC?
 Opening Balance Adjustment
 Sinking Fund Interest
 Third Party Contributions
 Information Tracking
2007-08 Grants for Student Needs
20
DCC Recap: What goes into DCC?


Government or non-government capital transfers that are to be used for
depreciable assets will be recorded in DCC.
 Rationale for government transfers was discussed earlier in the session.
 Rationale for non-government transfers is explained in the slide deck
attached to Memorandum 2011:B8 (Government Transfers:
Implementation Discussion).
− These are donations, which are generally non-material amounts.
The funding sources that go into DCC are shown on Schedule 3 (Capital
Expenditure Budget. They are:
NPP & GPL Other
Renewable Energy-Capital
GPL Renewal
School Renewal
FDK
Minor TCA
Temporary Accommodation
School Generated Funds
Energy Efficient Schools-Capital
Proceeds of Disposition
Other
2007-08 Grants for Student Needs
21
DCC Recap: What goes into DCC (continued)?

The “Other” category includes capital transfers that were not
specified on Schedule 3. These amounts come from Schedule 5.1
(Deferred Revenue). They are:
Other Ministry of Education Grants
Federal Government Grants
Other Provincial Grants
Other Third Party Deferred Revenue
2007-08 Grants for Student Needs
22
DCC Recap: What does not go into DCC?

“Unsupported capital spending” is spending on depreciable TCA that
has not been supported with capital contributions.

It equals to the value of the depreciable TCA less the DCC balance.

Examples of unsupported capital spending:

 Accumulated surplus used to fund a depreciable capital project
 Operating grants that are spent on depreciable capital
 (Note that the school renewal grant, up to 2.5% of total
operating allocation that is used for minor tangible capital
assets, and any capitalized interest costs are designated as
capital grants.)
 Sinking fund interest
The resulting shortfall in DCC revenue is managed through a
compliance adjustment.
2007-08 Grants for Student Needs
23
DCC: Opening Balance Adjustment

The 2010-11 Estimate forms were based on the third Government
Transfers Re-exposure Draft.

Between the 2010-11 Estimates and 2010-11 Financial Statements,
there were some changes and corrections to the forms because of
the release of the Government Transfers standard.

Due to these changes, the unsupported capital spending for
September 1, 2010 calculated on the Capital Wrap-Up Template
(CWT) was revised.

Boards received a draft revised CWT in mid-May 2011 detailing
these changes, and will have received a final version in by the end
of the training sessions.
 For most boards, this will not impact the receivable from the
Province significantly; however, for some boards, it may.
2007-08 Grants for Student Needs
24
DCC: Opening Balance Adjustment (continued)
Changes/corrections made for the September 1, 2010 unsupported
capital spending calculation:

Excluded from DCC - Sinking fund interest expected to be earned
during the life of the sinking funds per the sinking fund agreement.

Excluded from DCC – Capital contributions recognized for the
purchase of land.

Excluded from DCC - Amounts committed from accumulated surplus
in 2009-10 for capital that were to be spent on TCA by August 31,
2010.

Included in DCC – NPF related to supported capital spending using
FDK and $120M Capital funding sources that was mistakenly
excluded from DCC in the CWT.
2007-08 Grants for Student Needs
25
Sinking Fund Interest
 The Ministry reviewed the 2010-11 Estimates approach
on sinking funds, and determined that the accounting
treatment was not in line with PS 3100.13.
 Interest earned on sinking funds should be recognized in
revenue when earned.
 The 2010-11 Financial Statement forms (and 2011-12
Estimates) have been changed to exclude sinking fund
interest from DCC.
 Interest earnings on the sinking funds will be included in
accumulated surplus as internally appropriated.
2007-08 Grants for Student Needs
26
Sinking Fund Interest (continued)


The compliance shortfall due to the exclusion of sinking fund interest from
DCC will be managed from the interest earned by the sinking funds
(Schedule 5.5).
 Sinking fund interest earned in the early years of contributions may not
be enough to cover the compliance shortfall, causing a in year
compliance deficit
 In later years, the interest earning will exceed the compliance shortfall,
causing a in year compliance surplus
 Deficits in the early years and surpluses in later years are just timing
differences.
 As most of the sinking funds have shorter life than that of the assets
supported by the sinking funds, at maturity of the sinking fund, there is
usually an accumulated surplus attributable to SF interest
 This accumulated surplus will be used to cover the compliance shortfall
after the sinking fund maturity
Any excess sinking fund earnings can be used for other operating purposes
once the requirements to repay the sinking funds are met (on an aggregate
basis).
2007-08 Grants for Student Needs
27
Compliance and PSAB Impact
SF Interest
2.5
1.5
DCC
0
(years)
25
40
(2.5)
Amortization
($)
Note: Total contributions of $60 put into DCC, then amortized over 40
years. Yearly SF interest earned recognized in income over 25 years.
2007-08 Grants for Student Needs
28
DCC: Third Party Contributions
 Two new lines were added to determine the
portion of the DCC balance that relates to third
party (Schedule 5.3, item 2.4) and non-third
party capital contributions (Schedule 5.3, item
2.5).
 Required for Ministry consolidation purposes
 Third party amounts are:
 federal government
 school generated funds for capital
 board level donations for capital
 other third parties amounts specified by the
board
2007-08 Grants for Student Needs
29
DCC: Information Tracking
 If DCC information for assets purchased preSeptember 1, 2010 is available on an asset-byasset basis, boards are encouraged to track the
information on an asset-by-asset basis.
 Starting September 1, 2010, board are
required to track DCC additions, disposals
and amortization on an asset-by-asset basis
(including third party and non-third party
capital contributions).
2007-08 Grants for Student Needs
30
Accumulated
Surplus/(Deficit)
2007-08 Grants for Student Needs
31
Overview of Changes

CPP and EI Restatement has been removed

New line item 2.8.1, Committed Sinking Fund Interest, has been
added

Committed Capital Projects moved from Unavailable for Compliance
to Internally Appropriated

New Line 4.7 Revenue Recognized for Land

Line 4.9 from 2009-10 Financial Statements, Portion of Proceeds of
Disposition Related to Net Book Value of Disposed Assets,” has
been removed
2007-08 Grants for Student Needs
32
Opening Balance Column
 The September 1, 2010 opening balance
column will be input based on the 2009-10
Schedule 5 closing balances except for the
changes.
2007-08 Grants for Student Needs
33
Summary of Changes

CPP & EI Restatement line has been removed
 Transfer to 1.1 total operating accumulated surplus

Committed Sinking Fund Interest Earned
 New line 2.8.1
 Data for this line comes from Schedule 5.5, List of Committed Capital Amounts
Funded by Accumulated Surplus
 Represents earning on sinking fund assets that will be used to pay off the
associated debt as well as revenues earned to offset the amortization of the
unsupported portion of the assets related to the sinking fund debentures.

Committed Capital Projects
 In 2009-10 was included under Unavailable for Compliance item 4.10
 This year amount is line 2.8.2 under internally appropriated
 Data for this line comes from Schedule 5.5 also
 The amount is the committed accumulated surplus to support the unsupported
portion of the project and to offset the amortization of the unsupported portion of
the asset.
2007-08 Grants for Student Needs
34
Summary of Changes - Continued

Revenues Recognized for Land
 New line 4.7, Revenues Recognized for Land
 Comes from Schedule 5.6A, Continuity of Revenues Recognized for the
Purchase of Land
 Schedule 5.6 was added due to a PSAB Government Transfers
Standard (PS3410)
 The standard allows for DCC relating to the purchase or acquisition of
depreciable assets, this is not the case for non depreciable assets such
as land
 Prior to this Ministry included land revenues in DCC, however due to the
release of the new standard, revenues received in the purchase of land
will be excluded from DCC
 The opening balance is adjusted to exclude land revenues and this
amount is moved into accumulated surplus for compliance on line 4.7 in
Schedule 5
2007-08 Grants for Student Needs
35
Summary of Changes - Continued

Proceeds of Disposition
 Line 4.9, Portion of Proceeds of Disposition Related to Net Book Value
of the Disposed Assets) will be transferred to Schedule 5.1, deferred
revenue, item 2.25 (School building), item 2.26 (prohibitive to repair) or
item 2.27 (other)
 Due to the implementation of DCC in 2010-11, the treatment of
proceeds of disposition will be different
 In 2009-10, only the gain on sale was transferred to deferred revenue
on disposal of real property
 In 2010-11, the gain and prior capital contributions will be transferred to
deferred revenue on disposal of real property
 For the restatement of the September 1, 2010 accumulated surplus
balance, boards will transfer this amount out of accumulated surplus
and into deferred revenue
 The assumption under this transaction is that prior disposals were fully
contributed (i.e. the DCC balance would have equaled the TCA balance)
2007-08 Grants for Student Needs
36
Summary of Changes - Continued
 Line 4.6 (Debt), 4.7 (Not Permanently Financed Amounts),
and 4.8 (Receivable from Province) from 2009-10 are no
longer on the schedule, the total of these amounts represents
the unsupported debts in the old DCC calculation before the
adjustments required to exclude land and sinking fund interest
earned from DCC.

This amount is now split into 3 components, under four lines:
 The adjusted DCC amount – line 4.5 (Net TCA less land)
from Schedule 3C on TCA and line 4.6 (Unsupported Debt
at August 31, 2010) from the approved CWT
 Line 2.8.1 (Committed Sinking Fund Interest Earned) from
Schedule 5.5
 Line 4.7 (Revenue Recognize from Land) from Schedule
5.6A
2007-08 Grants for Student Needs
37
Schedule 5.5

The name of this schedule has been changed to List of Committed Capital Amounts
Funded by Accumulated Surplus.

It is used to track:
 Depreciable committed capital projects (same as previous forms)
 Interest earned on sinking funds (new).
Sinking fund interest earned:

Recognized as revenues, not in DCC

Schedule 5.5 brings the sinking fund interest (earned and to be earned under the
debentures agreement) into Available for Compliance over the average remaining
service life (RSL) of depreciable TCA as at August 31, 2010

 The amount is to cover the amortization of the unsupported portion of the
related assets (i.e. the difference between the assets amount and the total
sinking fund contributions under the by-laws/debenture agreement)
 Boards can modify the average RSL to reflect the RSL of the assets that are
supported by the sinking funds.
Once the board meets their contractual sinking fund interest requirements, the
excess earnings are unrestricted and made available for compliance.
 This is calculated on an aggregate basis for all sinking funds held by the board.
2007-08 Grants for Student Needs
38
Schedule 5.6A – Land revenues
 This is a new schedule that tracks details of land revenues
reported in Schedule 5.
 These amounts were previously included in DCC (Schedule
5.3), but are now shown in Accumulated Surplus Unavailable
for compliance on Schedule 5 at item 4.7.
 In-year revenues for current year land expenditures is
populated from Schedule 3. Boards need to report the in-year
revenues for unsupported past spending on land
 Once disposed, the revenues recognized for the disposed
asset is removed from this line.
 Boards can also commit a portion of its accumulated surplus
for land purchase which will increase this line.
2007-08 Grants for Student Needs
39
Schedule 5.6B – Land deficit
 This is a new schedule that tracks the capital
deficit on land.
 The difference between the book value of land
(under TCA and Financial assets, if applicable)
and the revenues recognized in Schedule 5.6A
equals to the land deficit
 This amount will be used in the Capital Analysis
Template.
2007-08 Grants for Student Needs
40
Prior Period Restatements
2007-08 Grants for Student Needs
41
Prior Year DCC Restatement
 Prior period comparative numbers are required for the
Statement of Financial Position, Statement of
Operations, Statement of Cash Flow and Statement of
Change in Net Debt.
 With the implementation of DCC as at September 1,
2010, boards will have the prior period comparative DCC
figure for the Statement of Financial Position.
 For the other three schedules, the 2009-10 DCC
amortization (or DCC revenue) is required to restate the
comparative numbers.
 As this amount was not required for 2009-10 Financial
Statements, it will be calculated based on a reasonable
assumption to facilitate the required comparative
reporting.
2007-08 Grants for Student Needs
42
Statement of Financial Position: DCC
 The 2009-10 column on the Statement of
Financial Position will be restated to show the
DCC balance at August 31, 2010.
 Boards did not have DCC in their 2009-10
Financial Statements, but boards do know the
DCC value at September 1, 2010.
 To make the restatement at August 31, 2010,
boards will move an amount from accumulated
surplus to DCC.
 For example, assume a board’s DCC balance at
August 31/September 1, 2010 is $50M.
 $50M will be moved from the A/S to DCC in the
2009-10 column.
2007-08 Grants for Student Needs
43
Statement of Financial Position: Deferred Revenue

The 2009-10 column on the Statement of Financial Position will be restated
to show the deferred revenue (DR) balance at August 31, 2010.

In the 2009-10 Financial Statements, when a board sold real property, only
the gain on sale went into deferred revenue.

With the implementation of DCC, the prior capital contributions also go into
DR (journal entries shown elsewhere in the slide deck).

In 2009-10, boards recorded this amount in accumulated surplus (A/S) on
Schedule 5, item 4.9 (Portion of proceeds of disposition related to the net
book value of disposed assets).

It will be assumed that these disposals were depreciable and fully supported
by capital contributions*.

This amount will be moved from the A/S to DR in the 2009-10 column.
*
Sector-wide, this is a reasonable assumption. Please call the Ministry for
guidance if this is a materially different case for your board.
2007-08 Grants for Student Needs
44
Statement of Financial Position: Deferred Revenue

For example, assume amount on Schedule 5, item 4.9 in 2009-10
equalled $3M.

$3M will be moved from the A/S to DR in the 2009-10 column.
Consolidated Statement of Financial Position (simplified)
(restated for DCC and Deferred revenue)
2010-11
2009-10
2009-10
Restated
Prior to
Restatement
Financial Assets
$x
$52,000,000
$52,000,000
DCC
$x
$50,000,000
$0
Deferred Revenue
$x
$7,000,000
$4,000,000
Other Liabilities
$x
$3,000,000
$3,000,000
Non-Financial
Assets
$x
$52,000,000
$52,000,000
Accumulated
Surplus
$x
$44,000,000
$97,000,000
2007-08 Grants for Student Needs
45
Prior Year DCC Restatement Calculation

The DCC continuity is as follows:
DCC at Sept. 1, 2009
+ Revenue from Capital Wrap-Up (Note 1)
- Disposals during 2009-10
- DCC revenue during 2009-10
= DCC at Aug. 31, 2010
Note 1: Since the capital wrap-up happened at August 31, 2010, this amount should
not be included in the September 1, 2009 balance. It includes the additions made
during 2009-10.
2007-08 Grants for Student Needs
46
Calculation of Prior Period DCC Revenues



For 2009-10, boards know their TCA amortization.
Boards can also estimate the portion of the TCA that was supported by capital
contributions (DCC) in 2009-10.
 To do this, the board would divide the September 1, 2010 DCC balance by the
September 1, 2010 non-land TCA balance.
The board would then multiply this percentage by the 2009-10 TCA amortization to
estimate the 2009-10 DCC amortization.

For example, assume the following information for a board:
 2009-10 TCA amortization = $2,062,000
 September 1, 2010 TCA balance (excluding land) = $51,500,000
 September 1, 2010 DCC balance = $50,000,000

The percentage of TCA supported by DCC is calculated as $50,000,000/$51,500,000
= 97%.
The estimated DCC amortization for 2009-10 is calculated as $2,062,000 x 97% =
$2,000,000.
 This revenue will be included in the restated Statement of Operations.

2007-08 Grants for Student Needs
47
Calculation of Prior Period DCC Revenues



*
Assume this additional information:
 Revenue from Capital Wrap-Up in 2009-10 = $25,000,000
 Disposals in 2009-10 = $3,000,000
The amount received for the Capital Wrap-Up in 2009-10 was a capital
contribution representing current and prior period contributions; therefore,
the amount was an addition to DCC in year of $25M.
 This revenue will be restated as an exclusion from the Statement of
Operations since it will be in DCC.
Depreciable real property disposed during the year totalled $3M, and it will
be assumed that these disposals were fully supported by DCC*. That
means that the board disposed of $3M of DCC in the year.
 The $3M DCC reduction caused an increase of $3M to deferred
revenue. (The increase to DR has been explained on slide 44.)
Sector-wide, this is a reasonable assumption. Please call the Ministry for
guidance if this is a materially different case for your board.
2007-08 Grants for Student Needs
48
Prior Year DCC Restatement Calculation

Using the example in the previous slides, one can extrapolate the
opening DCC balance at September 1, 2009:
DCC at Sept. 1, 2009
= DCC at Aug. 31, 2010
- Revenue from Capital Wrap-Up (assume $25M)
+ Disposals during 2009-10
+ DCC revenue during 2009-10
= $50M - $25M + $3M+ $2M
= $30M

Therefore, the change in DCC from Sept. 1, 2009 to Aug. 31, 2010 is
$20M. This will be used in the Statement of Cash Flow.
2007-08 Grants for Student Needs
49
Statement of Operations Comparatives



The 2009-10 column on the Statement of Operations will be restated to
include the DCC revenue during 2009-10, and to exclude the revenues that
were recognized for depreciable capital contributions.
To make the restatement at August 31, 2010, boards will increase their DCC
revenues, as calculated on the previous slide (ex. $2M).
Boards will decrease their Provincial grants by the amount of their 2009-10
capital contributions (ex. $25M).
Consolidated Statement of Operations (simplified)
2010-11
2009-10
2009-10
Restated
Prior to
Restatement
DCC Revenues
$x
$2,000,000
$0
Provincial Grants
$x
$175,000,000
$200,000,000
Other Revenues
$x
$10,000,000
$10,000,000
Expenses
$x
$209,000,000
$209,000,000
Annual Surplus/(Deficit)
$x
($22,000,000)
$1,000,000
2007-08 Grants for Student Needs
50
Statement of Cash Flow Comparatives

The 2009-10 column on the Statement of Cash Flow will be restated.

To make the restatement at August 31, 2010, boards will:
 Adjust annual surplus/deficit as calculated previously.
 Increase the DCC line by the Capital Wrap-Up revenue ($25M), and decrease
the DCC line by the disposals ($3M) and DCC revenue ($2M), for a net increase
of $20M.
 Increase the deferred revenue line by the disposals ($3M).

Note that the restated change in cash remains the same.
Consolidated Statement of Cash Flow (simplified)
2010-11
2009-10
2009-10
Restated
Prior to
Restatement
Annual Surplus (Deficit)
$x
($22,000,000)
$1,000,000
DCC
$x
$20,000,000
$0
Deferred Revenue
$x
$6,000,000
$3,000,000
All Other Categories
$x
($5,000,000)
($5,000,000)
Change in Cash
$x
($1,000,000)
($1,000,000)
2007-08 Grants for Student Needs
51
Statement of Change in Net Debt

The 2009-10 column on the Statement of Change in Net Debt will be
restated.

To make the restatement at August 31, 2010, boards will:
 Adjust annual surplus/deficit as calculated previously.
Consolidated Statement of Change in Net Debt (simplified)
2010-11
2009-10
2009-10
Restated
Prior to
Restatement
Annual Surplus (Deficit)
$x
($22,000,000)
$1,000,000
TCA Activity
$x
($30,000,000)
($30,000,000)
Other Non-Financial
Asset Activity
$x
$0
$0
(Increase) Decrease in
Net Debt
$x
($52,000,000)
($29,000,000)
2007-08 Grants for Student Needs
52
Proceeds of Disposition
2007-08 Grants for Student Needs
53
Proceeds of Disposition (POD)


Due to the inclusion of DCC in the 2010-11 Financial Statements, the treatment of
proceeds of disposition of tangible capital assets will change.
 In 2009-10, portion of the capital contribution related to the net book value of the
asset disposed is already recognized and included in the accumulated surplus;
Only the gain on sale was recognized in year as revenue or transferred to
deferred revenue
 In 2010-11, portion of the capital contribution related to the net book value of the
asset disposed was restated and reported as deferred revenue. For all disposals
after September 1, 2010 both the gain and net book value of asset disposed will
be recognized as revenue or transferred to deferred revenue
The treatment will depend on whether the DCC information is available for the asset
being disposed.
 Assets purchased before September 1, 2010 may not have asset-specific DCC
information available, since DCC prior to this date was calculated on an
aggregate basis.
 Assets purchased on or after September 1, 2010 will have asset-specific DCC
information available, since boards are required to track this information starting
in 2010-11.
2007-08 Grants for Student Needs
54
POD Journal Entries - Overview
 The following slides will present the respective proceeds
of disposition journal entries for:




Unrestricted assets (mTCA) – pooled
Unrestricted assets (mTCA) – non-pooled
Restricted depreciable assets (building)
Restricted non-depreciable assets (land)
 Each scenario will be presented based on DCC
information availability (purchased before or after
September 1, 2010) and sold at a gain or loss
2007-08 Grants for Student Needs
55
POD: mTCA

mTCA are assets that are not real property (land and buildings), and
generally include pooled and non-pooled assets.

The proceeds of disposition from disposal of mTCA are not
restricted by regulation and will be recognized as in year revenue.
Pooled Assets

Examples include Equipment 5 and 10 yrs, computers, furniture.

Pooled assets have a deemed disposal at the end of their useful life

Individual disposals are not generally recorded.

If disposed of before the asset has reached the end of its useful life,
the proceeds (if any) are to be recorded as revenue.
The entry would be:
Dr:
Cash
Cr:
X
Revenue
X
2007-08 Grants for Student Needs
56
POD: mTCA
Non-Pooled Assets
 Equipment 15 years and vehicles are recorded on an asset by
asset basis
 The journal entries for non-pooled mTCA assets are shown on
the following pages.
 Non-pooled mTCA purchased post-Sept. 1, 2010 (Gain)
 Non-pooled mTCA purchased post-Sept. 1, 2010 (Loss)
 Non-pooled mTCA purchased pre-Sept. 1, 2010 (Gain)
 Non-pooled mTCA purchased pre-Sept. 1, 2010 (Loss)
2007-08 Grants for Student Needs
57
Non-pooled mTCA purchased post-Sept. 1, 2010 (Gain)

Boards are required to track DCC information after September 1, 2010 on an asset by
asset basis. As a result, boards should have DCC information related to each
individual asset.

Assume that mTCA was purchased after September 1, 2010, and is now being sold at
a later date. At the date of disposition, the following information is available.
 NBV = 8 / DCC = 6 / POD = 9
JE 1: To remove the NBV of the asset from the books.
Dr:
Cash
9
Cr:
NBV
8
Cr:
Gain
1
The revenue is increased by the gain of $1.
JE 2: To remove the DCC from the books.
Dr:
DCC
6
Cr:
Revenue
6

The net impact to accumulated surplus is an increase of $7. This includes $6
revenue from prior capital contributions plus the gain of $1.

The difference ($2) between the net impact to accumulated surplus ($7) and the
actual cash from the disposal ($9) is the unsupported capital spending for the asset
which equals to the NBV less the DCC.
2007-08 Grants for Student Needs
58
Non-pooled mTCA purchased post-Sept. 1, 2010 (Loss)

Assume that mTCA mentioned above is now sold at a loss.
 NBV = 8 / DCC = 6 / POD = 7
JE 1: To remove the NBV of the asset from the books.
Dr:
Cash
7
Dr:
Loss on disposal
1
Cr:
NBV
8
A loss of $1 is recognized in the Statement of Operations.
JE 2: To remove the DCC from the books.
Dr:
DCC
Cr:
6
Revenue
6

The net impact to accumulated surplus is $5, which includes $6 revenue
from prior capital contributions less the loss of $1.

The difference ($2) between the net impact on accumulated surplus ($5)
and the actual cash from the disposal ($7) is the unsupported portion of the
asset which equals to the NBV less the DCC.
2007-08 Grants for Student Needs
59
Non-pooled mTCA purchased pre-Sept. 1, 2010 (Gain)

DCC balance for assets purchased before September 1, 2010 is set up on
an aggregate basis

Assume unsupported capital spending as of September 1, 2010 is
associated only with buildings and land. As a result, all the mTCA
purchased pre-September 1, 2010 is fully supported.

Assume an mTCA asset purchased pre-September 1, 2010 was disposed
in 2010-11 and the information available is

NBV = 3 / DCC=NBV=3 / POD = 4
2007-08 Grants for Student Needs
60
Non-pooled mTCA purchased pre-Sept. 1, 2010 (Gain)
The entries for the disposition of asset 1 would be
JE 1: To remove the NBV of the asset from the books.
Dr: Cash
4
Cr:
NBV
3
Cr:
Gain
1
A gain of $1 is recognized in the Statement of Operations.
JE 2: To remove the DCC from the books.
Dr: DCC
3
Cr:
Revenue
3



The net impact to accumulated surplus is now $4
This includes $3 revenue from prior capital contributions plus the gain of $1
There is no difference between the net impact to accumulated surplus and
the actual POD as DCC is assumed to be the same as NBV disposed,
which means there is no unsupported spending for asset 1
2007-08 Grants for Student Needs
61
Non-pooled mTCA purchased pre-Sept. 1, 2010 (Loss)
Assume the asset is now sold at a loss. Information available is:
NBV = 3 / DCC=NBV=3 / POD = 2
The entries for the disposition of asset 1 would be
JE 1: To remove the NBV of the asset from the books.
Dr: Cash
2
Dr: Loss
1
Cr:
NBV
3
A loss of $1 is recognized in the Statement of Operations.
JE 2: To remove the DCC from the books.
Dr: DCC
3
Cr:
Revenue
3

The net impact to accumulated surplus is now $2.

This includes $3 revenue from prior capital contributions less the loss of $1.

There is no difference between the net impact to accumulated surplus and the actual
POD as DCC is assumed to be the same as NBV disposed, which means there is no
unsupported spending for asset 1.
2007-08 Grants for Student Needs
62
Restricted Depreciable Assets (buildings) - Overview

Proceeds of dispositions (POD) from building disposal are restricted
under O. Reg. 193/10. All proceeds including gain and the portion
related to net book value disposed need to be deferred for future
capital use.

If a building is disposed of at a loss, the loss on disposal would be
recognized as an in-year expense in the period in which they occur.

The same amount of the loss needs to be recognized as DCC
transferred to revenue instead of deferred revenue.

The rationale is that the amount to be spent on a future asset
purchase should take into account the loss incurred, otherwise this
amount would be inflated.

The net impact on Statement of Operations is zero as the loss
equals to the revenue recognized from DCC disposed.
2007-08 Grants for Student Needs
63
Building purchased post-Sept. 1, 2010 (Sold at gain)

For building assets purchased after September 1, 2010, boards are required to track the DCC asset
by asset; boards should have specific DCC information related to individual asset

Assume that a building was purchased after September 1, 2010, and is now being sold at a later
date. The following information is available.
 NBV = 25 / DCC = 24 / POD = 35
JE 1: To remove the NBV of the asset from the books.
Dr:
Cash
35
Cr:
NBV
25
Cr:
Deferred revenue
10
The deferred revenue is increased by the gain of $10.
JE 2: To remove the DCC from the books.
Dr:
DCC
24
Cr:
Deferred revenue
24

The net impact to deferred revenue is $34. This includes $24 from prior capital contributions and
the gain of $10.

On a future asset purchase, $34 will be available as a capital contribution (i.e. to transfer to DCC).

The difference ($1) between the net impact to deferred revenue ($34) and the actual cash from the
disposal ($35) is the unsupported capital spending ($1 = NBV $25 less DCC $24) for the asset.

If the unsupported capital spending was funded by the unsupported debt, the $1 would be available
to pay down that debt.

If the unsupported capital spending was funded by the associated A/S in committed capital, it would
be released to ‘available for compliance’.
2007-08 Grants for Student Needs
64
Building purchased post-Sept. 1, 2010 (Sold at loss)

Assume the building mentioned above is now sold at a loss.
 NBV = 25 / DCC = 24 / POD = 18
JE 1: To remove the NBV of the asset from the books.
Dr:
Cash
18
Dr:
Loss on disposal
7
Cr:
NBV
25
A loss of $7 is recognized in the Statement of Operations.
JE2: To recognize revenue from DCC for the same amount of loss incurred.
Dr.
DCC
7
Cr:
Revenue
7
JE 3: To remove the remaining DCC balance from the books.
Dr:
DCC
17
Cr:
Deferred revenue
17

The net impact to deferred revenue is $17. This is the prior capital contribution of $24 less
the loss of $7.

On a future asset purchase, $17 will be available as a capital contribution (i.e. to transfer to
DCC).

The difference ($1) between the net impact to deferred revenue ($17) and the actual cash
from the disposal ($18) is the unsupported capital spending ($1 = NBV $25 less DCC $24)
for the asset.
2007-08 Grants for Student Needs
65
Building purchased pre-Sept. 1, 2010 - overview

DCC opening balance for September 1, 2010 will be set up on an
aggregate basis.

If a board has DCC information for specific assets purchased before
September 1, 2010 (for example, admin buildings likely have $0
DCC), the board should use that amount when recording the asset
disposal.

The journal entries will be the same for assets purchased after
September 1, 2010.

If a board does not have this information, the board will assume that
the DCC of the buildings sold first equal to the net book value
disposed until the aggregate DCC balance is depleted.

Approach assumes that buildings sold first are fully supported, and
last buildings sold would be partially unsupported assets when
disposed.
2007-08 Grants for Student Needs
66
Building purchased pre-Sept. 1, 2010

Does not create a material misrepresentation. The reasons include:
 Sector wide DCC has been reported as 97% of the TCA value. Thus,
very small unsupported TCA.
 Boards can use POD deferred revenue to reduce or even close the
TCA-DCC gap. Boards will need ministry approval to do so. The journal
entries will be
Dr:
POD Deferred Revenue
xx
Cr:
DCC
xx
 The sale of last buildings in sector not likely to happen anytime in the
foreseeable future, as this would require all or most of the 5000 schools
as of September 1, 2010 to have been disposed.
 Many of the buildings in the sector have been around since the early
part of the last century. These buildings are likely to have been fully
depreciated before disposal, thus eliminating the issue altogether.
 Any betterments on these buildings after September 1, 2010 will be
tracked; therefore, this portion of the DCC will be known.
2007-08 Grants for Student Needs
67
Building purchased pre-Sept. 1, 2010 (Sold at gain)

Assume that building 1 was purchased before September 1, 2010, and is now
being sold during 2010-11 for $45. The following information is available.
Building 1
NBV
DCC
Building 2
30
n/a
Total
70
n/a
100
97
Based on the approach discussed, the journal entries will be:
JE 1: To remove the NBV of the asset from the books.
Dr:
Cash
45
Cr:
NBV
30
Cr:
Deferred revenue
15
The deferred revenue is increased by the gain of $15.
JE 2: To remove the DCC from the books.
Dr:
DCC
30
Cr:
Deferred revenue
30

The net impact to deferred revenue is $45. This includes $30 from prior capital
contributions plus the gain of $15.

On a future asset purchase, $45 will be available as a capital contribution (i.e. to
transfer to DCC).

The net impact to deferred revenue is the same as the actual proceeds of disposition
as it is assumed that the asset is fully supported
2007-08 Grants for Student Needs
68
Building purchased pre-Sept. 1, 2010 (Sold at loss)

Assume now the building 1 was sold at a loss for $25.
Building 1
NBV
DCC
Building 2
30
n/a
Total
70
n/a
100
97
The journal entries will be
JE 1: To remove the NBV of the asset from the books.
Dr:
Cash
25
Dr:
Loss on disposal
5
Cr:
NBV
30
A loss of $5 is recognized in the Statement of Operations.
JE2: To recognize revenue from DCC for the same amount of loss incurred.
Dr.
DCC
5
Cr:
Revenue
5
JE 3: To remove the remaining DCC balance from the books
Dr:
DCC
25
Cr:
Deferred revenue
25

The net impact to deferred revenue is $25. This includes $30 from prior capital contributions less
the loss of $5.

On a future asset purchase, this $25 will be available as a capital contribution (i.e. to transfer to
DCC).

There is no difference between impact to deferred revenue and actual cash proceeds as it is
assumed there is no unsupported capital spending for this asset.
2007-08 Grants for Student Needs
69
POD: Land – Revenue Recovery






Similar to buildings, proceeds on the sale of land are restricted under O. Reg. 193/10.
All proceeds including gain and the portion related to net book value disposed need to
be deferred for future capital use
Unlike building, capital contributions for the purchase of land are not put into DCC as
per PS 3410. Instead, they were recognized as revenue in prior years and included in
the accumulated surplus:
 This amount is referred to as “revenues recognized for land purchase”.
 It represents the book value of the land less the unsupported capital spending.
 It is tracked in accumulated surplus - unavailable for compliance
 Boards generally have asset-by-asset information on the revenues recognized for
each land purchase
To allow for the proceeds on sale to flow back to deferred revenue, boards will record
a revenue recovery to reverse the revenue recognized and defer for future use:
Dr:
Revenue recovery
xx
Cr:
Deferred revenue
xx
If the land purchase was funded by Education Development Charges (EDC), the
deferred revenue will be EDC deferred revenue
If the land purchase was funded by other source (provincial grant or third party
revenue), the deferred revenue will be POD deferred revenue
This revenue recovery will generate an in-year PSAB deficit. However, it will be
excluded from compliance
2007-08 Grants for Student Needs
70
Land (EDC) sold at gain

Assume the following information on a land disposal.
 BV = 50
 Revenues recognized for land purchase (EDC) = 49
 POD = 55
JE 1: To remove the BV of the asset from the books.
Dr:
Cash
55
Cr:
BV
50
Cr:
Deferred revenue (POD)
5
The deferred revenue is increased by the gain of $5.
JE 2: To recover the revenue recognized previously.
Dr:
Revenue recovery
49
Cr:
Deferred revenue (EDC)
49

The net impact to deferred revenue is $54.

This includes $49 from prior capital contributions plus the gain of $5.

On a future EDC asset purchase, this $54 will be available.

The difference ($1) between the impact to deferred revenue ($54) and the actual
POD ($55) is the unsupported capital spending, which equals to net book value ($50)
less the Revenue recognized for land purchase ($49).
2007-08 Grants for Student Needs
71
Land (Non-EDC) sold at gain

Assume the following information on a land disposal.
 BV = 50
 Revenues recognized for land purchase (Non-EDC) = 49
 POD = 55
JE 1: To remove the BV of the asset from the books.
Dr:
Cash
55
Cr:
BV
50
Cr:
Deferred revenue (POD)
5
The deferred revenue is increased by the gain of $5.
JE 2: To recover the revenue recognized previously.
Dr:
Revenue recovery
49
Cr:
Deferred revenue (POD)
49

The net impact to deferred revenue is $54.

This includes $49 from prior capital contributions plus the gain of $5.

On a future asset purchase, this $54 will be available as a capital contribution (i.e. to
transfer to DCC).

The difference ($1) between the impact to deferred revenue ($54) and the actual
POD ($55) is the unsupported capital spending, which equals to net book value ($50)
less the Revenue recognized for land purchase ($49).
2007-08 Grants for Student Needs
72
Land (EDC) sold at loss

Assume the following information on a land disposal.
 BV = 50
 Revenues recognized for land purchase (EDC) = 49
 POD = 30
JE 1: To remove the BV of the asset from the books.
Dr:
Cash
30
Dr:
Loss on disposal
20
Cr:
BV
50
A loss of $20 is recognized in the Statement of Operations.
JE 2: To recover the revenue recognized previously.
Dr:
Revenue recovery
49
Cr:
Deferred revenue (EDC)
29
Cr:
Revenue
20

The net impact to deferred revenue is that it now contains $29.

This includes $49 from prior capital contributions less the loss of $20.

On a future EDC asset purchase, only this $29 will be available.

The difference ($1) between the impact to deferred revenue ($29) and the actual POD ($30) is the
unsupported capital spending, which equals to the net book value ($50) less the revenues
recognized for land purchase ($49)
2007-08 Grants for Student Needs
73
Land (Non-EDC) sold at loss

Assume the following information on a land disposal.
 BV = 50
 Revenues recognized for land purchase (Non-EDC) = 49
 POD = 30
JE 1: To remove the BV of the asset from the books.
Dr:
Cash
30
Dr:
Loss on disposal
20
Cr:
BV
50
A loss of $20 is recognized in the Statement of Operations.
JE 2: To recover the revenue recognized previously.
Dr:
Revenue recovery
49
Cr:
Deferred revenue (POD)
29
Cr:
Revenue
20

The net impact to deferred revenue is that it now contains $29.

This includes $49 from prior capital contributions less the loss of $20.

On a future asset purchase, this $29 will be available as a capital contribution (i.e. to transfer to
DCC).

The difference ($1) between the impact to deferred revenue ($29) and the actual POD ($30) is the
unsupported capital spending, which equals to the net book value ($50) less the revenues
recognized for land purchase ($49)
2007-08 Grants for Student Needs
74
Assets Held for Sale
2007-08 Grants for Student Needs
75
Assets Held for Sale (AHFS)



According to PS1200.051, an asset held for sale should be recognized as a
financial asset when all of the following criteria are met:
a) prior to the date of the financial statements, the government body,
management board or an individual with the appropriate level of
authority commits the government to selling the asset;
b) the asset is in a condition to be sold;
c) the asset is publicly seen to be for sale;
d) there is an active market for the asset;
e) there is a plan in place for selling the asset; and
f) it is reasonably anticipated that the sale to a purchaser external to the
government reporting entity will be completed within one year of the
financial statement date.
Assets that meet the criteria above would be moved from TCA to Financial
Assets (FA) on the Statement of Financial Position.
Financial Assets are subject to valuation allowances such that the assets
are reflected at their net recoverable or other appropriate value [PS
1200.049].
 TCA may be written down upon transfer to FA; not allowed to write-up
TCA.
2007-08 Grants for Student Needs
76
Impact: AHFS

TCA that are in the process of being sold, but that are not yet sold at
the Financial Statement date, would be transferred to FA.

TCA that go on the market and are sold within the fiscal year would
be recorded as regular TCA disposal instead of FA.

These entries would generally apply to land and buildings, since
minor TCA is likely to be sold in the year, or is disposed of after
being fully depreciated.

Once an asset is transferred to FA, no capitalized
additions/betterments will be reported; all costs incurred will be
considered expenses and reported on the Income Statement.

Journal entries on the following slides will illustrate the sale of
buildings and land, at both a gain and a loss.
2007-08 Grants for Student Needs
77
AHFS: Building (Period 1) – No write-down

A board decides to sell a building in fiscal period 1, but actually makes the sale in
fiscal period 2. Assume the following information:
 NBV = 80
 DCC = 78
 Market value in period 1 = 90
In period 1:
JE 1: To record valuation allowance and transfer TCA to financial asset. As the net
recoverable value (market value) is higher than the book value, no write down is
necessary.
Dr:
Financial Asset
80
Cr:
NBV
80
JE2: To remove the associated DCC balance
Dr:
DCC
78
Cr:
Deferred Revenue
78

The net impact to deferred revenue is $78, which equals to the supported capital
spending (DCC balance $78)

The corresponding asset is not the cash, instead, it is the financial asset.
2007-08 Grants for Student Needs
78
AHFS: Building (Period 1) – Write-down

A board decides to sell a building in fiscal period 1, but actually makes the sale in fiscal period 2.
Assume the following information:
 NBV = 80
 DCC = 78
 Market value in period 1 = 50
In period 1:
JE 1: To record valuation allowance and transfer TCA to financial asset
Dr:
Loss on write-down
30
Dr:
Financial Asset
50
Cr:
NBV
80
JE 2: To recognize DCC revenue related to the loss on write down.
Dr:
DCC
30
Cr:
Revenue
30
JE3: To remove the remaining DCC balance
Dr:
DCC
48
Cr:
Deferred Revenue
48

The net impact to deferred revenue is $48, which equals to the supported capital spending (DCC
balance $78) less the write-down ($30)

The corresponding asset is not the cash, instead, it is the financial asset.

The net impact on in-year surplus/deficit is zero as the DCC revenue equals to write-down
2007-08 Grants for Student Needs
79
AHFS: Building (Period 2) – Sold at a gain

Now assume the above mentioned asset is sold at a gain in period 2. The following
information is available:
 NBV = 80
 DCC = 78
 Market value in period 1 = 50
 Actual POD in period 2 = 90
In period 2:
JE 1: To remove the financial asset from the books and record gain.
Dr:
Cash
90
Cr:
Financial Asset
50
Cr:
Deferred revenue
40

The net impact to deferred revenue in this period is $40. The net impact to deferred
revenue recorded in period 1 was $48. Total net impact to deferred revenue is $88.

This includes $78 from prior capital contributions plus the gain of $40 in period 2 less
the write-down of $30 in period 1.

On a future asset purchase, this $88 will be available as a capital contribution (i.e. to
transfer to DCC).
2007-08 Grants for Student Needs
80
AHFS: Building (Period 2) – Sold at a loss

Now assume the above mentioned asset is sold at a loss in period 2. The following information is
available:
 NBV = 80
 DCC = 78
 Market value in period 1 = 50
 Actual POD in period 2 = 35
In period 2:
JE 1: To remove the financial asset from the books and record loss.
Dr:
Cash
35
Dr:
Loss
15
Cr:
Financial Asset
50
Dr:
Deferred revenue
15
Cr:
Revenue
15

The net impact to deferred revenue in this period is ($15). The net impact to deferred revenue
recorded in period 1 was $48. Total net impact to deferred revenue is $33.

This includes $78 from prior capital contributions less the write down of $30 in period 1 and less
the loss of $15 incurred in period 2.

On a future asset purchase, this $33 will be available as a capital contribution (i.e. to transfer to
DCC).

The net impact on surplus/deficit is zero as the loss equals to DCC revenue.
2007-08 Grants for Student Needs
81
AHFS: Land (Period 1) – No write-down


Similar to building, if a land meets the criteria to be classified as asset held
for sale, the board needs to transfer the land to AHFS at the end of
accounting period 1.
Assume a board decides to sell land in fiscal period 1, but actually makes
the sale in fiscal period 2. The following information is available:
 BV = 80
 Revenues recognized for land purchase = 78
 Market value in period 1 = 90
In period 1:
JE 1: To record valuation allowance and transfer TCA to financial asset.
Dr:
Financial Asset
Cr:
80
BV
80
Since the net recoverable value is higher than book value, no write-down is
needed.
2007-08 Grants for Student Needs
82
AHFS: Land (Period 1) – Write-down

Now assume the net recoverable value is lower than the book value
in period 1. The following information is available:
 BV = 80
 Revenues recognized for land purchase = 78
 Market value in period 1 = 50
In period 1:
JE 1: To record valuation allowance and transfer TCA to financial asset.
Dr:
Loss on write-down 30
Dr:
Financial Asset
Cr:
50
BV
80

The write-down is $30 ($80 BV less $50 market value).

The impact to surplus/deficit is $30.
2007-08 Grants for Student Needs
83
AHFS: Land (Period 2) – Sold at a Gain
Assume the board disposed the above asset in period 2. The following information is available

BV = 80


Revenues recognized for land purchase = 78
Market value in period 1 = 50
 Actual POD in period 2 = 90
In period 2:
JE 1: To remove the financial asset from the books and record gain.
Dr:
Cash
90
Cr:
Financial Asset
50
Cr:
Deferred revenue
40
JE 2: To recover revenue recognized before the future capital use
Dr:
Revenue recovery
78
Cr:
Deferred revenue
78
JE 3: To recognize deferred revenue related to the loss on write-down in period 1.
Dr:
Deferred Revenue
30
Cr:
Revenue (equals to loss on write-down in period 1) 30

The net impact to deferred revenue is $88. This includes $78 from prior capital contributions plus the gain
of $40 less the write down of $30.

On a future asset purchase, this $88 will be available.

The net impact on surplus/deficit is ($48) for period 2, which includes the recovery of prior capital
contribution ($78) less the loss recognized into revenue for $30 (from period 1).
2007-08 Grants for Student Needs
84
AHFS: Land (Period 2) – Sold at a Loss
Assume the AHFS is disposed at a loss in period 2. The following information is available:

BV = 80


Revenues recognized for land purchase = 78
Market value in period 1 = 50
 Actual POD in period 2 = 15
In period 2:
JE 1: To remove the financial asset from the books and record loss.
Dr:
Cash
15
Dr:
Loss on disposal
35
Cr:
Financial Asset
50
JE 2: To recover revenue recognized before for future capital use
Dr:
Revenue recovery
78
Cr:
Deferred revenue
78
JE 3: To recognize deferred revenue related to the loss on write-down in period 1 and the loss on disposal in
period 2.
Dr:
Deferred Revenue
65
Cr:
Revenue (equals to loss on write-down) 30
Cr:
Revenue (equals to loss on disposal)
35

The net impact to deferred revenue is $13. This includes $78 from prior capital contributions less the loss
on write-down recorded in period 1 of $30 and a loss on disposal of financial asset recorded in period 2 of
$35.

On a future asset purchase, this $13 will be available.
2007-08 Grants for Student Needs
85
Asset Upload File
2007-08 Grants for Student Needs
86
Overview of Changes
 No change to the structure/columns of the asset upload
file
 Boards can no longer make adjustments to opening
gross book value and opening accumulated amortization
balances
 5 New Asset Classes added for the Assets Held For Sale
 Assets being transferred from TCA to AHFS will be
mapped into Schedule 3C for any in-year activities prior
to the transfer and into Schedule 3D for the closing
balances
2007-08 Grants for Student Needs
87
Adjustments
 Boards are no longer able to make adjustments
to Opening Gross Book Value and Opening
Accumulated Amortization Balances
 Any adjustments should go through the in year
additions/amortization/write down
 Implication is that there will be no prior period
restatement related to TCA anymore
 These two columns are still kept in the asset
upload file but boards should enter “0” for these
two columns in order to avoid file rejection
2007-08 Grants for Student Needs
88
New Asset Classes

EFIS forms have changed to accommodate the requirements to
report asset held for sale (AHFS)

A new schedule 3D is added to capture the AHFS information

Five new asset classes are added in the asset upload file:





40H = Building 40 Held for Sale
20H = Building 20 Held for Sale
LAH = Land Held for Sale
LIH = Land Improvement Held for Sale
PRH = Building 40 Permanently Removed from Service Held for
Sale
 These asset classes are correspondent to the existing land and
building asset classes
2007-08 Grants for Student Needs
89
Assets Held for Sale

Only these assets that are in the process of being sold, but that are not yet sold at the
Financial Statement date, would be classified and transferred to AHFS

TCA that go on the market and are sold within the fiscal year would be recorded as
regular TCA disposal instead of AHFS

Asset is only transferred to financial asset at the end of the accounting period

Any activities before the transfer is still reported as TCA activities

Example:
 An asset met the criteria to be classified as AHFS in December. The asset is not
sold on August 31
 From September to December the asset is still amortized. Before the transfer
from TCA to AHFS, a write-down is recorded if required
 Impact - The amortization and write down will be treated as TCA activities and
reported in Schedule 3C; any betterments done will also be considered as TCA
transactions
 The ending balance after the amortization and write down will be transferred to
AHFS and reported in Schedule 3D
2007-08 Grants for Student Needs
90
Reporting of AHFS in Asset Upload File

If an asset is newly classified as AHFS, report the asset similar to regular
TCA except that report the asset class as one of the 5 AHFS classes

All the in-year activity (addition/amortization, if there is any), no matter what
asset class, will be mapped into Schedule 3C as TCA activities

Board needs to enter the total transfer of the ending balance in Transfer to
Asset Held for Sale Column in Schedule 3C

Only the ending balance of TCA asset classes will be mapped into the
Closing Balance from Asset Upload Data in Schedule 3C

That total ending balance will be checked against calculated ending balance
(Closing Balance August 31, 2011 column) based on information reported in
Schedule 3C

In the subsequent year, this asset will be removed from asset upload file
and reported directly in Schedule 3D

Any disposal of assets held for sale and proceeds from disposal should be
reported in Schedule 3D in the subsequent years
2007-08 Grants for Student Needs
91
Schedule 3C - Excerpt
RELATIONSHIP BETWEEN EXCEL/PIPE DELIMITED FILE AND SCHEDULE 3C
Gross Book Value
Balance at September 1,
2010
Land & Land
Improvements with Infinite
Lives
Transfers Between
Asset Class*
INPUT
Additions
Disposals September 1,
September 1,
2010 to August 31, 2011
2010 to August
31, 2011
LAN_GBV_ADD
LAN_GBV_DISP Col
Col
19+LAH_GBV_DISP Col
15+LAH_GBV_AD
19
D Col 15
LIM_GBV_DISP Col
19+LIH_GBV_DISP Col
19
INPUT
INPUT
LIM_GBV_ADD
Col
15+LIH_GBV_AD
D Col 15
B40_GBV_DISP Col
19+40H_GBV_DISP Col
19
INPUT
INPUT
B40_GBV_ADD
Col
15+40H_GBV_AD
D Col 15
B20_GBV_DISP Col
19+B20_GBV_DISP Col
19
INPUT
INPUT
B20_GBV_ADD
Col
15+20H_GBV_AD
D Col 15
PRE-POPULATED FROM
0910 FS CLOSING
Land Held for Sale Notes
Land Improvements
PRE-POPULATED FROM
0910 FS CLOSING
Land Improvements Held
for Sale Notes
Buildings (40 Years)
PRE-POPULATED FROM
0910 FS CLOSING
Buildings Held for Sale (40
Years) Notes
Other Buildings (20 Years)
Buildings Held for Sale (20
Years) Notes
PRE-POPULATED FROM
0910 FS CLOSING
Transfer to AHFS
2007-08 Grants for Student Needs
92
Schedule 3D
Schedule 3D - Financial Asset Continuity
Opening
balance at
September
1, 2010
LOCKED
LOCKED
LOCKED
LOCKED
LOCKED
In-year
additions
FROM SCH
3C
TRANSFER
COL
FROM SCH
3C
TRANSFER
COL
FROM SCH
3C
TRANSFER
COL
FROM SCH
3C
TRANSFER
COL
FROM SCH
3C
TRANSFER
COL
In-year disposals
Closing
balance at
August 31,
2011 = From
Asset Upload
File = Transfer
Column
Proceeds of Disposition
Gain/Loss on
Disposal =
Proceeds Disposals
INPUT
CALCULATED
INPUT
CALCULATED
INPUT
CALCULATED
INPUT
CALCULATED
INPUT
CALCULATED
INPUT
CALCULATED
INPUT
CALCULATED
INPUT
CALCULATED
INPUT
CALCULATED
INPUT
CALCULATED
2007-08 Grants for Student Needs
93
Notes to the
Financial Statements
2007-08 Grants for Student Needs
94
Notes to the Financial Statements
Sample Independent Auditor’s Report
Updated
Note 1a: Significant Accounting Policies-Basis of Accounting
Updated
Note 1h: Significant Accounting Policies-Tangible Capital Assets
Updated
Note 1i: Significant Accounting Policies-Government Transfers
Updated
Note 2: Change in Accounting Policy
Updated
Note 4: Accounts Receivable – Government of Ontario
Updated
Note 5: Assets Held for Sale
New
Note 6: Deferred Revenue
Updated
Note 7: Deferred Capital Contributions
New
Note 14: Tangible Capital Assets
Updated
Note 15: Accumulated Surplus
Updated
Note 20: Budget Data
Updated
Note 22: Repayment of “55 School Board Trust” Funding
Added Back
2007-08 Grants for Student Needs
95
Audit Report and Basis of Accounting Note
Sample Independent Auditor’s Report
and
Note 1a (Significant Accounting Policies – Basis
of Accounting)
 Discussed in an earlier presentation called
“Accounting Standard: Government Transfers”.
2007-08 Grants for Student Needs
96
Note 1h: Significant accounting policies
Tangible Capital Assets (TCA)
 Updated note.
 Added explanation on assets held for sale.
 Not amortized.
 Recorded at lower of carrying value and
estimated net realizable value.
2007-08 Grants for Student Needs
97
Note 1i: Significant accounting policies
Government Transfers
 Updated note.
 Added explanation on government capital
transfers that meet the definition of a liability.
 Referred to as DCC.
 Recognized into revenue as the liability is
extinguished over the useful life of the asset.
2007-08 Grants for Student Needs
98
Note 2 - Change in Accounting Policy
 Updated note.
 First year of implementation of PS 3410
Government Transfers
 Implemented as described in Note 1a.
 Retroactively with prior periods restated.
 The approach to establish the opening balance
 Value of depreciable TCA less the
unsupported capital debt at August 31, 2010.
2007-08 Grants for Student Needs
99
Note 2 - Change in Accounting Policy continued
 The impact on the prior period Statement of
Financial Position and Statement of Operations
 Restatement of Accumulated Surplus –
Deduct amount recorded as DCC.
 Restatement of Annual Surplus/Deficit – Add
DCC recognized into revenue and deduct inyear provincial capital contributions received.
2007-08 Grants for Student Needs
100
Note 2 - Change in Accounting Policy continued
 The impact on the current period Statement of
Operations
 Starting with Annual Surplus/Deficit as per
prior year policy – Add DCC recognized into
revenue and deduct in-year provincial capital
contributions received at arrive at annual
surplus/deficit as currently reported.
2007-08 Grants for Student Needs
101
Note 4 – Accounts Receivable – Government of Ontario
 Updated note.
 Receivable is adjusted to reflect in-year capital
grants, not just the initial capital wrap-up amount.
2007-08 Grants for Student Needs
102
Note 5 – Assets Held for Sale
 New note.
 Denotes the value of land and buildings recorded
as assets held for sale in the period.
 Shows the value of assets held for sale at the
beginning of the period that were sold.
 Proceeds, carrying value, gain/loss.
 Gains on assets restricted under Ontario
Regulation 193/10 are deferred for future
capital purchases.
2007-08 Grants for Student Needs
103
Note 6 – Deferred Revenue
 Updated note.
 Added a column for transfers to deferred capital
contributions.
2007-08 Grants for Student Needs
104
Note 7 – Deferred Capital Contributions
 New note.
 Includes explanation on government capital
transfers that meet the definition of a liability.
 Referred to as DCC.
 Recognized into revenue as the liability is
extinguished over the useful life of the asset.
 A continuity table in included.
2007-08 Grants for Student Needs
105
Note 14 – Tangible Capital Assets
 Updated note.
 Added columns under the cost and accumulated
amortization sections for transfer to assets held
for sale.
2007-08 Grants for Student Needs
106
Note 15 – Accumulated Surplus

Updated note.

This note is optional as it is not required under PSAB.

Disclose components of accumulated surplus

 Invested in non-depreciable tangible capital assets
 *new* Employee future benefits to be covered in the future
 Designated for future use by board motion
 Other
Boards may also disclose detail of the amount restricted by board
motion
 Sick leave
 Retirement gratuities
 Amounts restricted for future use on capital expenditures
2007-08 Grants for Student Needs
107
Note 20 – Budget Data
 The components of DCC revenue at financial statements are
different from the original budget because the budget was
prepared based on the third re-exposure draft of the
government transfers standard and the financial statements
were prepared based on the final standard.
 Other changes include the treatment of sinking fund interest.
 The Statement of Operations is restated in order to reflect the
same basis of accounting in the budget and actuals.
 As boards budget only the Statement of Operations, the
budget figures in the Statement of Change in Net Debt have
not been provided.
2007-08 Grants for Student Needs
108
Note 22: Repayment of “55 School Board Trust” Funding
 This note was erroneously deleted in the 200910 financial statement sample notes.
 It has been added back.
2007-08 Grants for Student Needs
109
Form Changes
2007-08 Grants for Student Needs
110
Section 1

OMERS contribution supplement is a new allocation at line 1.19.1

Divided into 2 pages:
 Section 1A –
− Show operating and capital allocation separately
− Show revenues on Schedule 9 at line 1.81 and 1.82
− Show allocation amounts transfer to deferred revenues at line 1.84
− Show allocation amounts transfer to deferred capital contribution at
line 1.85
− Show the operating allocation to be used for compliance allocation at
line 1.92
 Section 1B –
− Show monthly grant payment base at line 1.80
− Show non-monthly grant payment amount at lines 1.70 to 1.73), e.g.
OFA loan payment and 55 school Boards Trust payment.
2007-08 Grants for Student Needs
111