Consolidated Financial Statements

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Consolidated Statement of Operations and Accumulated Deficit for the Year Ended March 31, 2015

Table Summary

The table presents, in millions of dollars, a two-year comparative of the consolidated statement of operations and accumulated deficit. It consists of three columns: a detailed listing of components; current year divided into two columns — Budget (Note 3), and Actual; previous year. The first series of rows presents the revenues and is divided in sub-sections with related subtotals. The final row of the series presents the total of revenues. The second series of rows presents the expenses and is divided in sub-sections with related subtotals. The final row of the series presents the total of expenses. The following row presents the annual deficit — result from the total revenues minus the total expenses. The last series of rows presents the accumulated deficit and its components. The notes mentioned in the table refer to the notes within this section.

(in millions of dollars)

  2015 2014
Budget
(Note 3)
Actual Actual
Revenues (Note 19)      
Tax Revenues —      
Income tax revenues —      
Personal 137,755 135,743 130,811
Corporate 36,984 39,447 36,587
Non‑resident 5,666 6,216 6,404
Total income tax revenues 180,405 181,406 173,802
Other taxes and duties —      
Goods and services tax 31,325 31,349 30,998
Energy taxes 5,501 5,528 5,486
Customs import duties 4,416 4,581 4,239
Other excise taxes and duties 5,807 5,724 5,413
Total other taxes and duties 47,049 47,182 46,136
Total Tax Revenues 227,454 228,588 219,938
Employment Insurance Premiums 22,655 22,564 21,766
Other Revenues —      
Crown corporations 8,431 13,480 11,455
Other programs 16,337 16,359 16,836
Net foreign exchange 1,461 1,355 1,682
Total Other Revenues 26,229 31,194 29,973
Total Revenues 276,338 282,346 271,677
Expenses (Note 4 and Note 19)      
Transfer Payments —      
Old age security benefits, guaranteed income supplement and spouse's allowance 43,797 44,103 41,786
Major transfer payments to other levels of government 62,559 63,109 60,475
Employment insurance benefits 17,670 18,052 17,300
Children's benefits 13,211 14,303 13,136
Other transfer payments 35,812 35,126 36,698
Total Transfer Payments 173,049 174,693 169,395
Other Program Expenses —      
Crown corporations 6,265 7,590 7,484
Ministries 70,927 71,558 71,728
Total Other Program Expenses 77,192 79,148 79,212
Total Program Expenses 250,241 253,841 248,607
Public Debt Charges 28,175 26,594 28,220
Total Expenses 278,416 280,435 276,827
Annual (Surplus) or Deficit 2,078 (negative 1,911) 5,150
Accumulated Deficit at Beginning of Year 611,881 611,881 609,391
Other Comprehensive Loss or (Income) (Note 5 and Note 12)   2,360 (negative 2,660)
Accumulated Deficit at End of Year (Note 5) 613,959 612,330 611,881

Consolidated Statement of Financial Position as at March 31, 2015

Table Summary

The table presents, in millions of dollars, a two-year comparative of the consolidated statement of financial position. It consists of three columns: a detailed listing of components; current year; previous year. The first series of rows presents the liabilities and is divided in sub-sections with related subtotals. The final row of the series presents the total of liabilities. The second series of rows presents the financial assets and is divided in sub-sections with related subtotals. The final row of the series presents the total of financial assets. The following row presents the net debt — result from the total liabilities minus the total financial assets. The third series of rows presents the non-financial assets. The last row of this table presents the accumulated deficit — result from the net debt minus the total non-financial assets. The notes mentioned in the table refer to the notes within this section.

(in millions of dollars)

  2015 2014
Liabilities    
Accounts Payable and Accrued Liabilities —    
Other accounts payable and accrued liabilities 40,420 38,096
Amounts payable to taxpayers 56,198 52,600
Environmental liabilities (Note 17) 12,296 11,143
Deferred revenue 9,160 3,920
Interest and matured debt 5,240 5,585
Allowance for guarantees (Note 18) 317 386
Total Accounts Payable and Accrued Liabilities 123,631 111,730
Interest‑Bearing Debt —    
Unmatured debt (Note 6) 665,180 658,958
Pensions and other future benefits —    
Public sector pensions (Note 7) 152,664 153,162
Other employee and veteran future benefits (Note 7) 76,140 71,959
Total pensions and other future benefits 228,804 225,121
Other liabilities (Note 8) 6,002 5,914
Total Interest‑Bearing Debt 899,986 889,993
Total Liabilities 1,023,617 1,001,723
Financial Assets    
Cash and Accounts Receivable —    
Cash and cash equivalents (Note 9) 34,999 31,429
Taxes receivable (Note 10) 98,499 92,489
Other accounts receivable (Note 10) 3,198 4,656
Total Cash and Accounts Receivable 136,696 128,574
Foreign Exchange Accounts (Note 11) 85,018 72,262
Loans, Investments and Advances —    
Enterprise Crown corporations and other government business enterprises (Note 5, Note 12 and Note 18) 89,375 94,815
Other loans, investments and advances (Note 13) 24,306 22,820
Total Loans, Investments and Advances 113,681 117,635
Public sector pension assets (Note 7) 1,263 938
Total Financial Assets 336,658 319,409
Net Debt 686,959 682,314
Non‑Financial Assets    
Tangible capital assets (Note 14) 63,347 61,942
Inventories 7,250 7,316
Prepaid expenses and other 4,032 1,175
Total Non‑Financial Assets 74,629 70,433
Accumulated Deficit (Note 5) 612,330 611,881
Contractual Obligations and Contingent Liabilities (Note 16 and Note 18)    

Consolidated Statement of Change in Net Debt for the Year Ended March 31, 2015

Table Summary

The table presents, in millions of dollars, a two-year comparative of the consolidated statement of change in net debt. It consists of three columns: a detailed listing of components; current year divided into two columns — Budget (Note 3), and Actual; previous year. The first row presents the net debt at beginning of year. The following series of rows presents the changes in net debt during the year due to operations. The following rows present the other comprehensive loss or (income) and the net increase in net debt. The last row of this table presents the net debt at end of year. The notes mentioned in the table refer to the notes within this section.

(in millions of dollars)

  2015 2014
Budget
(Note 3)
Actual Actual
Net Debt at Beginning of Year 682,314 682,314 678,313
Change in Net Debt During the Year —      
Annual (Surplus) or Deficit 2,078 (negative 1,911) 5,150
Changes due to Tangible Capital Assets —      
Acquisition of tangible capital assets 9,136 7,204 7,129
Amortization of tangible capital assets (negative 5,471) (negative 5,090) (negative 4,865)
Proceeds from disposal of tangible capital assets (negative 400) (negative 954) (negative 875)
Net gain on disposal of tangible capital assets, including adjustments   245 312
Total Change due to Tangible Capital Assets 3,265 1,405 1,701
Change due to Inventories   (negative 66) (negative 137)
Change due to Prepaid Expenses and Other   2,857 (negative 53)
Net Increase in Net Debt due to Operations 5,343 2,285 6,661
Other Comprehensive Loss or (Income) (Note 5 and Note 12)   2,360 (negative 2,660)
Net Increase in Net Debt 5,343 4,645 4,001
Net Debt at End of Year 687,657 686,959 682,314

Consolidated Statement of Cash Flow for the Year Ended March 31, 2015

Table Summary

The table presents, in millions of dollars, a two-year comparative of the consolidated statement of cash flow. It consists of three columns: a detailed listing of components; current year; previous year. The first series of rows presents the cash used by operating activities. The second series of rows presents the cash used by capital investment activities. The third series of rows presents the cash provided by investing activities. The fourth series of rows presents the cash provided or (used) by financing activities. The following row presents the net increase in cash — result from the addition of operating, capital investment, investing and financing activities. The last two rows present the cash and cash equivalents, at beginning and end of year — result from the addition of cash and cash equivalents at beginning of year plus the net increase in cash. Additional rows at the bottom of the table present supplementary information. The notes mentioned in the table refer to the note within this section.

(in millions of dollars)

  2015 2014
Operating Activities —    
Annual Surplus or (Deficit) 1,911 (negative 5,150)
Items not affecting cash —    
Share of annual profit in enterprise Crown corporations and other government business enterprises (negative 8,365) (negative 5,945)
Amortization of tangible capital assets 5,090 4,865
Net gain on disposal of tangible capital assets, including adjustments (negative 245) (negative 312)
Change in taxes receivable (negative 6,010) (negative 374)
Change in pensions and other future benefits 3,358 5,215
Change in foreign exchange accounts (negative 12,756) (negative 13,503)
Change in accounts payable and accrued liabilities 11,901 (negative 7,014)
Change in cross‑currency swap revaluation 4,343 5,745
Net change in other accounts 670 1,953
Cash Used by Operating Activities (negative 103) (negative 14,520)
Capital Investment Activities —    
Acquisition of tangible capital assets (negative 6,804) (negative 7,129)
Proceeds from disposal of tangible capital assets 954 875
Cash Used by Capital Investment Activities (negative 5,850) (negative 6,254)
Investing Activities —    
Enterprise Crown corporations and other government business enterprises —    
Equity transactions 3,514 5,165
Issuance of loans and advances (negative 79,905) (negative 70,328)
Repayment of loans and advances 88,168 110,259
Issuance of other loans, investments and advances (negative 8,124) (negative 5,525)
Repayment of other loans, investments and advances 5,503 4,418
Cash Provided by Investing Activities 9,156 43,989
Financing Activities —    
Issuance of Canadian currency borrowings 468,021 512,009
Repayment of Canadian currency borrowings (negative 471,891) (negative 536,364)
Issuance of foreign currency borrowings 16,961 12,011
Repayment of foreign currency borrowings (negative 12,724) (negative 6,783)
Cash Provided or (Used) by Financing Activities 367 (negative 19,127)
Net Increase in Cash 3,570 4,088
Cash and Cash Equivalents at Beginning of Year 31,429 27,341
Cash and Cash Equivalents at End of Year (Note 9) 34,999 31,429
Supplementary Information    
Cash used for interest 15,152 16,123

Notes to the Consolidated Financial Statements of the Government of Canada

1. Summary of Significant Accounting Policies

Reporting entity

The reporting entity of the Government of Canada includes all of the government organizations which comprise the legal entity of the Government as well as other government organizations, including Crown corporations, which are separate legal entities but are controlled by the Government. For financial reporting purposes, control is defined as the power to govern the financial and operating policies of an organization with benefits from the organization's activities being expected, or the risk of loss being assumed by the Government. All organizations defined as departments and as Crown corporations in the Financial Administration Act are included in the reporting entity. Other organizations not listed in the Financial Administration Act may also meet the definition of control and they are included in the Government's reporting entity if their revenues, expenses, assets or liabilities are significant.

The financial activities of all of these entities, except for enterprise Crown corporations and other government business enterprises, are consolidated in these financial statements on a line-by-line and uniform basis of accounting after eliminating significant inter‑governmental balances and transactions. Enterprise Crown corporations and other government business enterprises, which are not dependent on the Government for financing their activities, are recorded under the modified equity method.

The Canada Pension Plan (CPP), which includes the assets of CPP under the administration of the Canada Pension Plan Investment Board, is excluded from the reporting entity because changes to CPP require the agreement of two thirds of participating provinces and it is therefore not controlled by the Government.

Basis of accounting

These consolidated financial statements are prepared using the Government's accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Revenues

The Government reports revenues on an accrual basis. Tax revenues are recognized in the period in which the taxable event occurs and when they are authorized by legislation or the ability to assess and collect the tax has been provided through legislative convention.

Tax revenues are measured from amounts assessed/reassessed and from estimates of amounts not yet assessed/reassessed based on cash received that relates to the fiscal year ended March 31. Annual revenues also include adjustments between the estimated revenues of previous years and actual amounts, as well as revenues from reassessments relating to prior years. Revenues do not include estimates of unreported taxes, or the impact of future reassessments that cannot yet be reliably determined.

Income tax revenue is recognized when the taxpayer has earned the income subject to the tax.

Domestic goods and services tax revenue is recognized at the time of the sale of goods or the provision of services. These revenues are reported net of input tax credits, GST rebates, and the GST quarterly tax credits. The GST quarterly tax credit for low-income individuals and families is recorded in the period to which it relates. It is intended to offset the cost of the tax for low‑income individuals and families.

Customs duties and goods and services tax revenue on imports is recognized when goods are authorized to enter Canada.

Excise tax revenue is recognized when a taxpayer sells goods taxable under the Excise Tax Act.

Excise duties revenue is recognized when the taxpayer manufactures goods taxable under the Excise Act and the Excise Act, 2001.

Tax collected on behalf of the provincial/territorial governments is not included in Tax Revenue. It is recorded as payable to the provincial/territorial governments included within Other Accounts Payable and Accrued Liabilities and distributed by the Department of Finance in accordance with associated agreements.

Tax expenditures that reduce taxes paid or payable are considered tax concessions and are netted against the applicable tax revenue. As foregone revenue, tax concessions do not give rise to assets or expenses of the taxing government. Tax expenditures that provide a financial benefit through the tax system, and are not related to the relief of taxes paid or payable, are shown as other transfer payments and are not netted against tax revenue.

Tax revenues that were not collected at year end and refunds that were not yet disbursed are reported respectively as taxes receivable and amounts payable to taxpayers on the Consolidated Statement of Financial Position. These amounts also include other receivables and payables for amounts collected through the tax system such as provincial and territorial taxes, Employment Insurance premiums and Canada Pension Plan contributions.

Employment Insurance premiums are recognized as revenue in the period the insurable earnings are earned.

Other revenues are recognized in the period to which they relate.

Deferred revenue consists of spectrum licence fees and other amounts received in advance for the delivery of goods and rendering of services that will be recognized as revenue in a subsequent fiscal year as it is earned. Spectrum licence fees are recognized as revenue on a straight‑line basis over the term of the licence.

Expenses

The Government has three major types of expenses: transfer payments, other program expenses and public debt charges. All of the expenses are reported on an accrual basis.

Transfer payments are recorded as expenses when the recipients have met all the eligibility criteria and the transfers are authorized by the consolidated financial statements date. In the case of transfers which do not form part of an existing program, the transfers are considered to be authorized when the Government announces a decision to make a non‑recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the consolidated financial statements.

Other program expenses are generally recorded when goods are received or services are rendered and include expenses related to personnel, professional and special services, repair and maintenance, utilities, materials and supplies, as well as amortization of tangible capital assets. Provisions to reflect changes in the value of assets or liabilities, such as provisions for bad debts, loans, investments and advances and inventory obsolescence, as well as utilization of inventories and prepaid expenses and other are also included in other program expenses. Public sector pensions and other employee and veteran future benefits, which comprise a portion of personnel expenses, are recorded as employees render services using the projected benefit method prorated on service, except for: veteran future benefits and workers' compensation where benefits are accrued on an event driven basis; accumulated sick leave entitlements where benefits are recognized using an accrued benefit method; and plan amendments related to past services, curtailments and settlements where costs are recorded when approved or paid.

Public debt charges are recorded when incurred and include interest, servicing costs, costs of issuing new borrowings, amortization of premiums and discounts on market debt including amounts arising on the extinguishment of debt, as well as interest on public sector pensions and other employee and veteran future benefits.

Cash and cash equivalents

Cash consists of public moneys on deposit and cash in transit less outstanding cheques and warrants. Cash equivalents consist mainly of term deposits usually not exceeding 31 days.

Foreign exchange accounts

Short‑term deposits, marketable securities and special drawing rights held in the foreign exchange accounts are recorded at cost. Marketable securities are adjusted for amortization of purchase discounts and premiums. Purchases and sales of securities are recorded at the settlement date. Transaction costs are expensed as incurred for all classes of financial instruments.

Investment income earned with respect to foreign accounts as well as write‑downs to reflect other than temporary impairment in the fair value of securities are included in net foreign exchange revenues on the Consolidated Statement of Operations and Accumulated Deficit. Canada's subscriptions to the capital of the International Monetary Fund and loans to the International Monetary Fund are recorded at cost.

Loans, investments and advances

Investments in enterprise Crown corporations and other government business enterprises, which include the net assets and liabilities of enterprise Crown corporations and other government business enterprises, are recorded under the modified equity method whereby the cost of the Government's equity is reduced by dividends received and adjusted to include the annual profits and losses of these corporations, after elimination of unrealized inter‑organizational gains and losses. All of these corporations follow International Financial Reporting Standards (IFRS) used by publicly accountable enterprises. Under the modified equity method, the corporations' accounts are not adjusted to the Government's basis of accounting and other comprehensive income or loss of enterprise Crown corporations and other government business enterprises is recorded directly to the Government's accumulated deficit and net debt.

Some enterprise Crown corporations provide loans to borrowers outside the reporting entity of the Government. Some of these loans will be repaid through future appropriations of the Government under various subsidy programs which provide funds directly related to the repayment of the loan. For these loans receivable, a valuation allowance for the amount expected to be repaid from future appropriations is recorded to reduce their carrying value to an amount that approximates the amount to be recovered from sources outside the reporting entity of the Government.

Other loans, investments and advances are initially recorded at cost and are adjusted to reflect the concessionary terms of loans made on a long‑term, low interest or interest‑free basis.

When necessary, an allowance for valuation is recorded to reduce the carrying value of other loans, investments and advances to amounts that approximate their net realizable value. The allowance for valuation for other loans, investments and advances, reflects the possibility of losses associated with potential default on these exposures. The determination of the valuation allowance considers the credit risk of borrowers, collateral provided as well as previous repayment history. When they are determined to be uncollectible, other loans, investments and advances are written off. Subsequent recoveries are recorded as revenue when received.

Non‑financial assets

The costs of acquiring land, buildings, equipment and other capital property are capitalized as tangible capital assets and, except for land, are amortized to expense over the estimated useful lives of the assets. For certain tangible capital assets where the costs are not readily available, such as older buildings, estimated current costs have been extrapolated retrospectively in a systematic and rational manner to approximate original costs. Assets acquired under capital leases are recorded at the present value of the minimum lease payments using the appropriate discount rate, which is usually the lower of the implicit interest rate in the lease or the Consolidated Revenue Fund term lending rate at the inception of the lease. These assets are amortized over the lease term or over the estimated useful life of the asset if the lease term contains terms that allow ownership to pass to the Government or a bargain purchase option. The corresponding lease obligations are recorded under unmatured debt on the Consolidated Statement of Financial Position. When conditions indicate that a tangible capital asset no longer contributes to the government's ability to provide goods and services, or that the value of future economic benefits associated with the tangible capital asset is less than its net book value, the cost of the tangible capital asset is reduced to reflect the decline in the asset's value.

Tangible capital assets do not include immovable assets located on reserves as defined in the Indian Act, the cost of works of art and museum collections and Crown land to which no acquisition cost is attributable. Intangible assets are also not recognized in the consolidated financial statements. In addition, acquisitions of works of art and museum collections consisting mainly of paintings, sculptures, drawings, prints, photographs, monuments, films and videos are expensed in the fiscal year in which they are acquired.

Inventories are valued at cost and are comprised of spare parts and supplies held for future program delivery and are not primarily intended for resale. Inventories that no longer have service potential are valued at the lower of cost or net realizable value. Items for which the costs are not readily available are valued using management's best estimate of original cost, based on available information.

Non‑financial assets are not taken into consideration when determining the net debt of the Government, but rather are deducted from the net debt to determine the accumulated deficit.

Unmatured debt

Unmatured debt consists of market debt, cross currency swap revaluations, the obligation related to capital leases and other unmatured debt. Market debt is recorded at face value and is adjusted by discounts and premiums which are amortized on a straight-line basis over the term to maturity of the respective debt instrument. The corresponding amortization is recorded in public debt charges. When a marketable bond is exchanged or repurchased, and the transaction results in an extinguishment of the debt, the difference between the carrying amount of the debt instrument and the net consideration paid is recognized as a gain or loss in the Consolidated Statement of Operations and Accumulated Deficit, and the debt instrument is derecognized. An extinguishment occurs on the repurchase of bonds, or when there is an exchange of bonds with an existing bond holder and the terms of the original debt and the replacement debt are substantially different. Exchanged bonds are considered to have substantially different terms when the discounted present value of the cash flows under the new terms, including any amounts paid on the exchange, and discounted using the average effective interest rate of the original debt, is at least 10 percent different from the discounted present value of the remaining cash flows of the original debt. If an exchange of bonds with an existing bond holder does not result in an extinguishment, the carrying amount of the debt is adjusted for any amounts paid on the exchange, and the unamortized premiums or discounts relating to the original debt and arising on the exchange transaction are amortized over the remaining term to maturity of the replacement debt on a straight-line basis. The Government's holdings of its own securities, if any, are deducted from market debt to report the liability to external parties. The Government does not specifically borrow on behalf of enterprise Crown corporations. Consequently, there is no netting of outstanding market debt and loans to these corporations.

Cross currency swap revaluations consist of unrealized gains or losses due to fluctuations in the foreign exchange value of the cross currency swaps entered into by the Government.

The obligation related to capital leases represents the present values of the remaining minimum lease payments under capital lease agreements. The corresponding assets under capital leases are recorded under tangible capital assets on the Consolidated Statement of Financial Position.

Public sector pensions and other employee and veteran future benefits

Public sector pensions and other employee and veteran future benefits are measured on an actuarial basis. The actuarial valuations estimate the current value of benefits earned and use various actuarial assumptions in the process. When actual experience of the plans varies from estimates or when actuarial assumptions change, actuarial gains or losses arise. Due to their tentative nature and because further adjustments will likely be required in the future, actuarial gains and losses are not recognized immediately but rather over the expected average remaining service life (EARSL) of the employees, which varies across plans, or the average remaining life expectancy (ARLE) of the benefit recipients under wartime veteran plans. Recognition of actuarial gains and losses commences in the year following the effective date of the related actuarial valuations. In addition, an unrecognized net actuarial loss is recognized immediately upon a plan amendment, up to the one‑time past service cost reduction; similarly, an unrecognized net actuarial gain is recognized immediately up to the one‑time past service cost. The unrecognized net actuarial loss or gain, relating to the obligation that is curtailed or settled, is recognized immediately upon a plan curtailment or settlement.

Investments held by the Public Sector Pension Investment Board (PSPIB) are valued at market related value, a five‑year smoothed value. Under this method, the expected return on investments is recorded immediately while the difference between the expected and the actual return on investments is recorded over a five‑year period through actuarial gains and losses. The market related value of investments is adjusted, if necessary, to ensure that it does not fall outside a limit of plus or minus 10 percent of the market value of investments at year end; any difference is recorded immediately through actuarial gains and losses.

Contributions receivable from employees for past service buy‑back elections are discounted to approximate their fair value.

Contingent liabilities

Contingent liabilities, including the allowance for guarantees, are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. If the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued as part of other accounts payable and accrued liabilities and an expense recorded to other program expenses. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the consolidated financial statements.

For guarantees, the amount of the allowance is estimated taking into consideration the nature of the guarantee, loss experience and current conditions. The allowance is reviewed on an ongoing basis and changes in the allowance are recorded as expenses in the year they become known.

Environmental liabilities

Environmental liabilities consist of estimated costs related to the remediation of contaminated sites as well as estimated costs related to obligations associated with the retirement of tangible capital assets and other environmental liabilities.

Effective April 1, 2014, the Government of Canada adopted new Public Sector Accounting Standard PS 3260, Liability for Contaminated Sites. The standard was adopted retroactively and did not affect the recognition or measurement of liabilities for contaminated sites. Consequently, the impact on the consolidated financial statements of the Government of Canada is limited to increased disclosures.

A liability for remediation of contaminated sites is recognized when all of the following criteria are satisfied: an environmental standard exists, contamination exceeds the environmental standard, the Government is directly responsible or accepts responsibility, it is expected that future economic benefits will be given up and a reasonable estimate of the amount can be made. The liability reflects the Government's best estimate of the amount required to remediate the sites to the current minimum standard for its use prior to contamination. When the cash flows required to settle or otherwise extinguish a liability are expected to occur over extended future periods, a present value technique is used. The discount rate applied is taken from the Government's Consolidated Revenue Fund monthly lending rates for periods of one year and over which is based on the Government's cost of borrowing. The discount rates used are based on the term rate associated with the estimated number of years to complete remediation. For remediation costs with estimated future cash flows spanning more than 25 years, the 25‑year Government of Canada lending rate is used as the discount rate.

A liability for an asset retirement obligation is recognized when all of the following criteria are satisfied: there is an agreement, contract, legislation, or a constructive or equitable obligation that obligates the Government to incur retirement costs in relation to a tangible capital asset, the past event or transaction giving rise to the retirement liability has occurred, it is expected that future economic benefits will be given up and a reasonable estimate of the amount can be made. These costs are normally capitalized and amortized over the asset's estimated useful life based on the Government's best estimates of the cost to retire the tangible asset. If the related asset is fully amortized, the related cost is expensed. The liability reflects the present value of estimated future cash flows required to retire the assets where amounts can be reasonably estimated and is expected to be settled as the related sites, facilities or assets are removed from service.

A liability for unexploded explosive ordnance (UXO) affected legacy sites is recognized when there is an appropriate basis for measurement and a reasonable estimate can be made. These liabilities are present obligations arising from past transactions or events, the settlement of which is expected to result in the future sacrifice of economic benefits.

The recorded environmental liabilities are adjusted each year, as required, for present value adjustments, inflation, new obligations, changes in management estimates and actual costs incurred.

If the likelihood of the Government's responsibility is not determinable, a contingent liability is disclosed in the notes to the consolidated statements. If measurement uncertainty exists it is also disclosed in the notes to the consolidated statements.

Foreign currency translation

Transactions involving foreign currencies are translated into Canadian dollar equivalents using rates in effect at the time of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated using rates at March 31. Gains and losses resulting from foreign currency translation are reported on the Consolidated Statement of Operations and Accumulated Deficit according to the activities to which they relate. Net gains and losses relating to the foreign exchange accounts, foreign debt, swap and foreign exchange forward agreement revaluations are presented with investment revenues from foreign exchange accounts under net foreign exchange revenues. Net gains and losses relating to loans, investments and advances are presented with the return on investments from these loans, investments and advances under other program revenues. Net gains and losses relating to transfer payments are reported in the transfer payment expenses under other transfer payments. Net gains and losses relating to departmental sale or purchase of goods or services in foreign currency are reported in ministry expenses under other program expenses.

Measurement Uncertainty

The preparation of consolidated financial statements requires the Government to make estimates and assumptions that affect the reported and disclosed amounts of assets, liabilities, revenues and expenses in the consolidated financial statements and accompanying notes at the date of the financial statements. The estimates are based on facts and circumstances, historical experience, general economic conditions and reflect the Government's best estimate of the related amount at the end of the reporting period. Estimates and underlying assumptions are reviewed annually as at the date of the financial statements. Revisions to accounting estimates are recognized in the period in which estimates are revised if revisions affect only that period or in the period of revision and future periods if revisions affect both current and future periods.

A material measurement uncertainty exists when it is reasonably possible that a material variance could occur in the reported or disclosed amount in the near term. Near term is defined as a period of time not to exceed one year from the date of the financial statements. The Government has determined that a material measurement uncertainty exists with respect to the reported amounts for public sector pensions and other employee and veteran future benefits. Measurement uncertainty due to estimates and assumptions also exists in the accrual of tax revenues, the related amounts receivable and payable, and the allowance for doubtful accounts; and environmental liabilities. It is reasonably possible that the Government's reassessments of these estimates and assumptions could require a material change in reported amounts and/or disclosures in the consolidated financial statements.

Obligations for public sector pensions and other employee and veteran future benefits are actuarially determined and the actual experience may differ significantly from the assumptions used in the calculation of the plans' accrued benefits. At March 31, 2015, net future benefit liabilities of $227,541 million ($224,183 million in 2014) in regards to obligations for public sector pensions and other employee and veteran future benefits are recorded in the financial statements. The significant actuarial assumptions used in measuring the benefit obligations as well as a sensitivity analysis of the impact on the consolidated financial statements of changes in the most significant assumptions are found in Note 7.

Tax revenues, the related amounts receivable and payable and the allowance for doubtful accounts are subject to measurement uncertainty due to the use of estimates of amounts not yet assessed/reassessed based on cash received. A key assumption used in estimating tax revenues is that tax instalments and historical information on refund rates are good indicators of tax revenue earned to March 31 that has not yet been assessed. The estimates are subject to back‑testing and are refined as required. The key assumption used to estimate the general allowance for doubtful accounts is historical collection information as described in Note 10.

Environmental liabilities are subject to measurement uncertainty as discussed in Note 17 due to the evolving technologies used in the remediation of contaminated sites, the use of discounted present value of future estimated costs, and the fact that not all sites have had a complete assessment of the extent and nature of remediation. Changes to underlying assumptions, the timing of the expenditures, the technology employed, or revisions to environmental standards could result in significant changes to the environmental liabilities recorded.

Other comprehensive income or loss

Other comprehensive income or loss, resulting from the accounting of enterprise Crown corporations and other government business enterprises under the modified equity method, is excluded from the calculation of the Government's annual deficit and is recorded directly to the Government's accumulated deficit and net debt.

2. Comparative information

Certain comparative figures have been reclassified to conform to the current year's presentation. In particular, the Government has changed the presentation of the Consolidated Statement of Financial Position to segregate a significant class of pensions and other employee future benefits related to consolidated Crown corporations and other entities which were included in other accounts payable and accrued liabilities in previous years. The change in presentation has no financial impact on the Consolidated Financial Statements of the Government.

3. Spending and Borrowing Authorities

i. Spending authorities

The authority of Parliament is required before moneys can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts or through legislation in the form of statutory spending authority for specific purposes.

The Government uses the full accrual method of accounting to prepare its Budget and present its current consolidated financial statements. However, the spending authorities voted by Parliament remain on an expenditure basis, which uses only a partial accrual method of accounting. During the year, expenditures were made under the authorities indicated in the following table:

Table Summary

The table presents, in millions of dollars, a two-year comparative of the authority under which the expenditures were made. It consists of three columns: a detailed listing of components; current year; previous year. A final row presents the total for this table.

(in millions of dollars)

  2015 2014
Annual spending limits voted by Parliament 93,955 94,754
Expenditures permitted under other legislation 148,614 144,470
Total budgetary expenditures authorized 242,569 239,224
Less: amounts available for use in subsequent years and amounts that have lapsed 11,428 9,262
Total net expenditures 231,141 229,962
Effect of consolidation and full accrual accounting 49,294 46,865
Total expenses 280,435 276,827

The use of budgetary expenditure authorities reported in the preceding table differs from the total expenses reported in the Consolidated Statement of Operations and Accumulated Deficit. The difference is due to various factors. Spending authorities are presented on a partial accrual basis, while the Consolidated Statement of Operations and Accumulated Deficit is prepared on a full accrual basis. The transactions of certain accounts with separate non‑budgetary authorities and of certain Crown corporations or other controlled entities are consolidated in the financial statements but are not included in the budgetary expenditure authorities available for use. Transfer payments to organizations within the Government reporting entity are recorded against a budgetary expenditure authority in the year they are disbursed to the organization, but they are recorded as a consolidated expense only when they are disbursed to the ultimate recipient outside of the Government reporting entity. Provisions for valuation of assets and liabilities are also not included in spending authorities.

In addition to the authorities for budgetary expenditures, non‑budgetary spending of $245,788 million ($211,529 million in 2014) was authorized for loans, investments and advances. A net amount of $71,551 million ($29,703 million in 2014) was used, an amount of $33 million ($114 million in 2014) lapsed and an amount of $174,204 million ($181,712 million in 2014) is available for use in subsequent years.

Details about the source and disposition of authorities (unaudited) and the details of ministerial expenditures are provided in Volume II of the Public Accounts of Canada.

ii. Over‑expenditure of spending authorities

There were no over‑expenditures of spending authorities in 2014–2015.

iii. Borrowing authorities

The Government may borrow only on the authority of Parliament which is contained in Part IV of the Financial Administration Act. Section 43.1 of the Financial Administration Act empowers the Governor in Council to authorize the Minister of Finance to borrow money on behalf of Her Majesty in right of Canada. In 2015, the Governor in Council specified $270,000 million ($300,000 million in 2014) to be the maximum aggregate amount of principal that may be borrowed during the fiscal year. The maximum aggregate amount of principal is the sum of i) the maximum stock of treasury bills anticipated to be outstanding during the year, ii) the total value of refinanced and anticipated new issuances of marketable bonds and retail debt and iii) an amount to facilitate intra‑year management of the debt and foreign exchange reserves. During the year, $244,913 million ($252,122 million in 2014) of the borrowing authority was used.

iv. Source of budget amounts

The budget amounts included in the Consolidated Statement of Operations and Accumulated Deficit and the Consolidated Statement of Change in Net Debt are derived from the amounts that were budgeted for 2014–2015 in the February 2014 Budget Plan (Budget 2014). To enhance comparability with actual 2014–2015 results, Budget 2014 amounts have been restated to reflect the change in the Government's accounting policy for bond buy‑back operations in 2013–2014. This restatement has resulted in an $800 million decrease in budgeted public debt charges and a corresponding decrease in the budgeted 2014–2015 annual deficit.

Since actual opening numbers of the accumulated deficit and net debt were not available at the time of preparation of Budget 2014, the corresponding amounts in the budget column have been adjusted to the actual closing numbers of the previous year.

4. Expenses

Expenses in the Consolidated Statement of Operations and Accumulated Deficit include:

i. Major transfer payments to other levels of government

Table Summary

The table presents, in millions of dollars, a two-year comparative of the major transfer payments to other levels of government. It consists of three columns: a detailed listing of components; current year; previous year. A final row presents the total for this table.

(in millions of dollars)

  2015 2014
Canada health transfer 32,114 30,543
Canada social transfer 12,582 12,215
Fiscal arrangements 16,271 15,610
Other major transfers 2,142 2,107
Total major transfer payments to other levels of government 63,109 60,475

ii. Other transfer payments

Other transfer payments totalling $35,126 million ($36,698 million in 2014) include various subsidies paid through federal programs to stabilize market prices for commodities, to develop new technologies, to conduct research, to establish new jobs through support for training and to promote educational and cultural activities. Also included are expenses of other consolidated entities and other miscellaneous payments. The various types of transfer payments are being delivered by departments according to their departmental legislative mandates. Details can be found in Table 3.6, Section 3 (unaudited) of this volume.

iii. Public debt charges

Table Summary

The table presents, in millions of dollars, a two-year comparative of the major elements of the public debt charges. It consists of three columns: a detailed listing of components; current year; previous year. The first series of rows presents the elements of the public debt charges related to unmatured debt. The following rows present the interest expense related to pensions and other benefits, and other liabilities. A final row presents the total for this table.

(in millions of dollars)

  2015 2014
Public debt charges related to unmatured debt —    
Interest on unmatured debt 13,614 14,120
Amortization of discounts on Canada and Treasury Bills 1,420 1,818
Amortization of premiums and discounts on all other debts 841 974
Cross currency swap revaluation (negative 542) (negative 495)
Servicing costs and costs of issuing new borrowings 19 11
Capital lease obligations 209 214
Other unmatured debt 60 14
Total 15,621 16,656
Interest expense related to pensions and other future benefits 10,748 11,328
Other liabilities 225 236
Total public debt charges 26,594 28,220

iv. Total expenses by segment

The Government has defined the segments as the Ministries and Crown corporations and other entities. Additional segmented information is provided in Note 19. The following table presents the total expenses by segment after the elimination of internal transactions:

Table Summary

The table presents, in millions of dollars, a two-year comparative of the total expenses by segment after the elimination of internal transactions where segments is defined as Ministries and Crown corporations and other entities. It consists of three columns: a detailed listing of segments; current year; previous year. The first series of rows presents the ministries. The following row presents the Crown corporations and other entities. A final row presents the total for this table.

(in millions of dollars)

  2015 2014
Ministries —    
Agriculture and Agri‑Food 2,081 2,432
Atlantic Canada Opportunities Agency 237 253
Canada Revenue Agency 21,830 21,605
Canadian Heritage 1,794 1,636
Canadian Northern Economic Development Agency 49 49
Citizenship and Immigration 2,045 1,962
Economic Development Agency of Canada for the Regions of Quebec 179 197
Employment and Social Development 75,043 71,252
Environment 1,658 1,644
Finance 88,892 87,990
Fisheries and Oceans 1,671 1,755
Foreign Affairs, Trade and Development 6,126 5,947
Health 6,245 6,194
Indian Affairs and Northern Development 8,780 6,794
Industry 4,395 4,659
Justice 1,625 1,592
National Defence 23,873 21,696
Natural Resources 2,253 2,189
Office of Infrastructure of Canada 3,020 3,511
Office of the Governor General's Secretary 20 20
Parliament 543 535
Privy Council Office 322 293
Public Safety and Emergency Preparedness 10,036 11,871
Public Works and Government Services 4,423 4,337
Transport 1,553 1,350
Treasury Board 3,277 2,947
Veterans Affairs 1,018 897
Western Economic Diversification 147 182
Provision for valuation and other items (negative 957) 2,875
Total ministries 272,178 268,664
Crown corporations and other entities 8,257 8,163
Total expenses 280,435 276,827

v. Total expenses by type of resource used in operations

The Consolidated Statement of Operations and Accumulated Deficit and the previous table present a breakdown of expenses by segment, which represent the expenses incurred for each of the main functions of the Government. The following table presents the detail of these expenses by main objects of expense:

Table Summary

The table presents, in millions of dollars, a two-year comparative of the total expenses by type of resource used in operations. It consists of three columns: a detailed listing of main objects of expenses; current year; previous year. The first row presents transfer payments. The following series of rows presents other program expenses. The remaining rows present the total program expenses — result from the addition of transfer payments and other program expenses; public debt charges; and the total for this table.

(in millions of dollars)

Objects of expense 2015 2014
Transfer payments 174,693 169,395
Other program expenses —    
Crown corporationsLink to footnote 1 7,162 7,059
Personnel 43,811 44,994
Transportation and communications 2,422 2,472
Information 232 220
Professional and special services 8,090 7,753
Rentals 1,979 1,832
Repair and maintenance 2,312 2,498
Utilities, materials and supplies 2,514 2,461
Other subsidies and expenses 5,435 4,949
Amortization of tangible capital assets 5,090 4,865
Net loss on disposal of assets 101 109
Total other program expenses 79,148 79,212
Total program expenses 253,841 248,607
Public debt charges 26,594 28,220
Total expenses 280,435 276,827

5. Accumulated Deficit

The Government includes in its revenues and expenses, the transactions of consolidated Crown corporations and other entities controlled by the Government, and of certain accounts established for specified purposes. Legislation requires that revenues received for purposes specified in the legislation be credited to these accounts and that related payments be charged to the accounts. Any deficiency of payments over revenues must be met through future revenues or transfers credited to these accounts. The following table shows the balance of these consolidated accounts and the equity of the consolidated Crown corporations and other entities included in the accumulated deficit:

Table Summary

The table presents, in millions of dollars, a two-year comparative of the balance of the consolidated accounts and the equity of the consolidated Crown corporations and other entities included in the accumulated deficit. It consists of three columns: a detailed listing of components; current year; previous year. The first row presents the accumulated deficit, excluding consolidated accounts and accumulated other comprehensive income. The following series of rows presents the consolidated specified purpose accounts. The remaining rows present the consolidated Crown corporations and other entities, the accumulated other comprehensive income, and the total for this table.

(in millions of dollars)

  2015 2014
Accumulated deficit, excluding consolidated accounts and accumulated other comprehensive incomeLink to footnote 2 619,998 616,032
Consolidated specified purpose accounts —    
Employment Insurance Operating Account (negative 522) 2,734
Other insurance accounts (negative 707) (negative 691)
Other consolidated accounts (negative 306) (negative 321)
Subtotal 618,463 617,754
Consolidated Crown corporations and other entities (negative 2,274) (negative 1,556)
Accumulated other comprehensive income (negative 3,859) (negative 4,317)
Accumulated deficit 612,330 611,881

Accumulated other comprehensive income

For enterprise Crown corporations and other government business enterprises recorded under the modified equity method, certain unrealized gains and losses on financial instruments and certain actuarial gains and losses related to pensions and other employee future benefits are recorded in other comprehensive loss or income in accordance with International Financial Reporting Standards (IFRS). The unrealized gains and losses on financial instruments reflect changes in the fair value of financial assets classified as available‑for‑sale or derivative instruments used in hedging activities and are excluded from the calculation of profit or loss until realized. Actuarial gains and losses related to pensions and other employee future benefits reflect differences between the actual and expected returns on plan assets as well as the difference between actual and expected experience and changes in actuarial assumptions used to determine the present value of the benefit obligations. In accordance with IFRS, these actuarial gains and losses are recorded directly to retained earnings without reclassification to profit or loss in a subsequent period.

Other comprehensive loss or income is excluded from the calculation of the Government's annual deficit. It is instead recorded directly to the Government's accumulated deficit. Upon realization of the gains and losses on financial instruments, the associated amounts are reclassified to the profit or loss of enterprise Crown corporations and other government business enterprises and then reflected in the Government's annual deficit. As indicated above, the actuarial gains and losses related to pensions and other employee future benefits are not reclassified.

The following table presents the different components of other comprehensive income as well as accumulated other comprehensive income included in the Government's accumulated deficit:

Table Summary

The table presents, in millions of dollars, a two-year comparative of the different components of other comprehensive income as well as accumulated other comprehensive income included in the Government's accumulated deficit. It consists of three columns: a detailed listing of components; current year; previous year. The first row presents the accumulated other comprehensive income at beginning of year. The following series of rows presents the components of other comprehensive income. The remaining rows present the actuarial (losses) gains on pensions and other employee future benefits recorded directly to accumulated deficit and deducted to obtain the accumulated other comprehensive income at end of year.

(in millions of dollars)

  2015 2014
Accumulated other comprehensive income at beginning of year 4,317 3,480
Other comprehensive (loss) or income —    
Net change in unrealized gains and losses on available‑for‑sale financial instruments (negative 450) 887
Net change in fair value of derivatives designated as hedges (negative 8) (negative 50)
Actuarial (losses) gains on pensions and other employee future benefits (negative 1,902) 1,823
Total (negative 2,360) 2,660
Less: Actuarial (losses) gains on pensions and other employee future benefits recorded directly to accumulated deficit (negative 1,902) 1,823
Accumulated other comprehensive income at end of year 3,859 4,317

6. Unmatured Debt

Unmatured debt includes:

Table Summary

The table presents, in millions of dollars, a two-year comparative of the components of the unmatured debt. It consists of three columns: a detailed listing of components; current year; previous year. The first series of rows presents the market debt. The following rows present other debt related components. A final row presents the total for this table.

(in millions of dollars)

  2015 2014
Market debt —    
Payable in Canadian currency 629,233 632,636
Payable in foreign currencies 20,267 16,030
Total 649,500 648,666
Cross currency swap revaluations 6,669 2,326
Unamortized discounts and premiums on market debt 4,296 3,184
Obligation related to capital leases 3,710 3,603
Other unmatured debt 1,005 1,179
Total unmatured debt 665,180 658,958

Unamortized discounts result from Treasury bills and Canada bills which are issued at a discount in lieu of interest. Discounts or premiums also result from the Government's bond buy‑back program and from issuance of market debt when the face value of the instrument issued differs from the proceeds received. The unamortized portion represents the amount of premium and discount that has not yet been recorded to public debt charges.

i. Market Debt

The following table presents the contractual maturity of debt issues and interest rates by currency and type of instrument at gross value (in Canadian dollars) and the effective average annual interest rates as at March 31, 2015:

Table Summary

The table presents, in millions of dollars, the contractual maturity of debt issues and interest rates by currency and type of instrument at gross value (in Canadian $) and the effective average annual interest rates as at March 31 of the current year. It consists of seven columns: a detailed listing of components; marketable bonds divided into three columns — CAD, USD, and Euro; Treasury bills; Retail debt; Canada bills — USD; Medium‑term notes divided into two columns — USD, and Euro; Total. The table also presents two sections: Maturing year; Nature of interest rate. The first section involves a series of rows presenting a listing of maturing years. The remaining rows for the section present the deducted Government holdings of unmatured debt and consolidation adjustment and the total market debt. The second section involves a series of rows presenting the nature of related interest rates.

(in millions of dollars)

Maturing year Marketable bonds Treasury Bills Retail debtLink to footnote 3 Canada bills Medium-term notes Total
CAD USD Euro USD USD Euro
2016 56,409     135,700 902 3,789     196,800
2017 95,367 3,842     1,140   507   100,856
2018 53,742 4,433     1,224       59,399
2019 31,023 3,820     992       35,835
2020 38,050 4 2,723   505   285   41,567
2021 and subsequent 212,822       897   728 204 214,651
Subtotal 487,413 12,099 2,723 135,700 5,660 3,789 1,520 204 649,108
Less: Government holdings of unmatured debt and consolidation adjustmentLink to footnote 4 (negative 468) 68   8         (negative 392)
Total market debt 487,881 12,031 2,723 135,692 5,660 3,789 1,520 204 649,500
Nature of interest rateLink to footnote 5 FixedLink to footnote 6 Fixed Fixed Variable Variable Variable Fixed and Variable Fixed  
Effective weighted average annual interest rates 2.73 1.25 3.50 0.81 0.71 0.08 0.38 0.15  
Range of interest rates 0.25 - 11.25 0.88 - 9.70 3.50 0.43 - 1.02 0.50 - 1.40 0.02 - 0.20 0.18 - 2.30 0.15  

ii. Obligation related to capital leases

The total obligation related to capital leases as at March 31, 2015 is $3,710 million ($3,603 million in 2014). Interest on this obligation of $209 million ($214 million in 2014) is reported in the Consolidated Statement of Operations and Accumulated Deficit as part of public debt charges. Future minimum lease payments are summarized as follows:

Table Summary

The table presents, in millions of dollars, a six-year and subsequent summary of the future minimum lease payments less imputed interest. It consists of two columns: a detailed listing of components; related amounts. The first series of rows presents a listing of years and the total minimum lease payments. The following row presents the deducted imputed interest at the average discount rate. A final row presents the total for this table.

(in millions of dollars)

Year  
2016 498
2017 519
2018 462
2019 455
2020 349
2021 and subsequent 3,637
Total minimum lease payments 5,920
Less: imputed interest at the average discount rate of 5.62 percent 2,210
Obligation related to capital leases 3,710

A significant number of leases have a duration from inception that fall within the range of 10 to 25 years.

7. Public Sector Pensions and Other Employee and Veteran Future Benefits

i. Overview of benefit plans

a. Pension benefits

The Government sponsors a number of defined benefit pension plans covering substantially all the employees of the federal public service, as well as certain Public Service corporations as defined in the Public Service Superannuation Act, territorial governments, members of the Canadian Forces including the Reserve Force, members of the Royal Canadian Mounted Police, federally appointed judges and Members of Parliament, including Senators. The public service, Canadian Forces — Regular Force and Royal Canadian Mounted Police pension plans represent the three main public sector pension plans sponsored by the Government. In addition, some of the consolidated Crown corporations and other entities maintain their own defined benefit pension plans covering substantially all of their employees. In this note, the term "employees" is used in a general manner to apply to plan members of the different groups.

The defined benefit pension plans are designed to provide employees with a retirement income during their lifetime and, in the case of Government sponsored plans, are indexed to inflation. The indexation for Crown corporation and other entity pension plans varies depending on the specific plan. In the event of death, the pension plans also provide an income for a plan member's eligible survivors and dependants.

Pension benefits generally accrue as follows:

  • For the three main public sector pension plans, pension benefits generally accrue based on a member's average earnings during the best five consecutive years of earnings and years of pensionable service. Plan members can accumulate up to a maximum of 35 years at a rate of two percent per year of pensionable service. Pension benefits are coordinated with the Canada and the Quebec Pension Plan benefits.
  • For the Canadian Forces — Reserve Force pension plan, pension benefits accrue based on total pensionable service and pensionable earnings over the service period.
  • For the Members of Parliament retiring allowance plan, basic allowances accrue at a rate of three percent per year of pensionable service multiplied by the average of the best five years of sessional indemnity up to a maximum of 75 percent of the plan member's average sessional indemnity. Retiring allowance benefits are coordinated with the Canada and the Quebec Pension Plan benefits at age 60. Members of Parliament are entitled to benefits after they have contributed to the plan for at least six years.
  • For federally appointed judges, pension benefits do not have an explicit accrual rate. Instead, federally appointed judges may retire with a pension equivalent to two‑thirds of the salary annexed to their office once the member has completed 15 years of pensionable service and the sum of the member's age and years of service equals 80 or more.
  • For the consolidated Crown corporation and other entity pension plans, pension benefits vary depending on the terms of the plans. Some plans are closed to new entrants.
b. Other future benefits

In addition to pension plans, the Government and the consolidated Crown corporations and other entities sponsor different types of future benefit plans, with varying terms and conditions. The benefits are available to employees during or after employment or upon retirement. Other future benefits include disability and associated benefits available to war veterans, current and retired members of the Canadian Forces and the Royal Canadian Mounted Police, their survivors and dependants, health care and dental benefits available to retired employees and their dependants, accumulated sick leave entitlements, severance benefits and workers' compensation benefits.

ii. Financing arrangements

The Government has a statutory obligation to pay the pension benefits it sponsors. Pursuant to pension legislation, the transactions for funded and unfunded pension benefits are tracked in the pension accounts within the accounts of Canada. The details (unaudited) of the pension accounts can be found in Section 6 of this volume.

a. Funded pension benefits

The pension plans are generally financed from employee and employer contributions, as well as investment earnings. Pension benefits funded by the Government relate to post March 2000 service that falls within the Income Tax Act limits for the three main public sector pension plans and all service for the Canadian Forces — Reserve Force pension plan, as an amount equal to contributions less benefit payments and other charges is invested in capital markets through the Public Sector Pension Investment Board (PSPIB). Funded pension benefits also relate to consolidated Crown corporations and other entities where pension plans' funds are held in external trusts that are legally separate from Crown corporations and other entities.

b. Unfunded pension benefits

For unfunded pension benefits, separate market invested funds are not maintained. These relate to pre April 2000 service and post March 2000 service that falls above the Income Tax Act limits for the three main public sector pension plans, all service periods for the pension plans of the federally appointed judges and Members of Parliament, and some of the consolidated Crown corporation and other entity pension plans. Employee and employer contributions for unfunded pension benefits sponsored by the Government are part of general government funds. Contributions amounted to $247 million ($260 million in 2014).

c. Other future benefits

Other employee and veteran future benefit plans sponsored by the Government and almost all of the other employee future benefits sponsored by the consolidated Crown corporations and other entities are unfunded. The health care and dental plans for retired employees are contributory plans, whereby contributions by retired plan members are made to obtain coverage. These contributions amounted to $211 million in 2015 ($201 million in 2014). The cost of benefits earned and benefits paid are presented net of these contributions. Additional details can be found in Section 6 (unaudited) of this volume.

iii. Actuarial valuations

a. For funding purposes

Pursuant to the Public Pensions Reporting Act, actuarial valuations of the pension plans sponsored by the Government are performed at least every three years to determine the state of the pension plans, as well as to assist in making informed decisions regarding the financing of the Government's pension benefit obligations. The actuarial assumptions underlying the valuations are based on the actuary's best estimates.

The most recent triennial actuarial valuations were conducted as at March 31, 2013 for the Canadian Forces — Regular Force, Canadian Forces — Reserve Force, the Members of Parliament and the federally appointed judges pension plans; as at March 31, 2012 for the Royal Canadian Mounted Police pension plan; and as at March 31, 2014 for the public service pension plan, for which the valuation is currently in‑progress.

b. For accounting purposes

Actuarial valuations of the public sector pension and other employee and veteran future benefit plans are performed every year to measure and report the obligations and to attribute the costs of the benefits to the period. Actuarial valuations are conducted as at March 31, except for some of the consolidated Crown corporations and other entities for which the actuarial valuations are conducted as at December 31. The actuarial valuations are based on the most recent or any in‑progress actuarial valuation for funding purposes, as applicable, in regards to the majority of the demographic assumptions. The other assumptions underlying the valuations are based on best estimates of the Government or of management of the consolidated Crown corporation and other entities.

iv. Changes to benefit plans

a. Plan amendments

In 2015, amendments were made to the veteran future benefit plans thereby improving and expanding eligibility for certain benefits. This includes modifying the Earnings Loss Benefit to ensure that part‑time Reserve Force veterans have access to the same minimum level of income support as Regular and full‑time Reserve Force veterans and to ensure their benefits are calculated in the same way; expanding access to the Permanent Impairment Allowance to help compensate disabled veterans for the loss of career opportunities associated with their disabilities; and changes to vocational rehabilitation so that there is more flexibility in identifying a suitable employment goal — one that reflects both their military and civilian work experiences. Furthermore, access to treatment and long‑term care benefits were improved by expanding services within the Operational Stress Injury Social Support Program as well as the transfer of the Sainte‑Anne's Hospital to the government of Quebec effective April 1, 2016. New veteran future benefits were also created. This includes the Family Caregiver Relief Benefit which will provide annual financial support to eligible veterans who have an informal caregiver who plays an essential role in the provision or coordination of their care. The Retirement Income Security Benefit was created to provide additional financial security after the age of 65 for moderately to severely disabled veterans. The new Critical Injury Benefit will compensate eligible Canadian Armed Forces members and veterans for the immediate impacts of the most severe and traumatic service‑related injuries or diseases between the time the injury occurs and the time when their condition becomes medically stable. These amendments resulted in one‑time past service cost of $1,828 million and the immediate recognition of a previously unrecognized net actuarial gain of $69 million.

With respect to the employee severance benefit plan, an amendment was agreed upon resulting in a one‑time past service cost of $3 million ($23 million in 2014) and the immediate recognition of a previously unrecognized net actuarial gain of $3 million (nil in 2014).

In 2014, an amendment to the Public Service Health Care plan resulted in a one‑time past service cost reduction of $7,890 million and the immediate recognition of a previously unrecognized net actuarial loss of $7,106 million. Amendments to the veteran future benefit plans resulted in one‑time past service costs of $317 million. The amendments to the veteran future benefit plans also resulted in the immediate recognition of a previously unrecognized net actuarial gain of $49 million.

b. Plan curtailments

In 2015, former employees of the Candu Reactor Division of Atomic Energy of Canada Limited ceased to be employed in the public service and became employed by a new employer. As a result, new regulations defer the availability of pensions under the PSSA for those individuals who choose to leave their accrued pension benefits under the PSSA until such time as they cease to be employed with the new employer. The impact of this curtailment is a one‑time past service cost of $51 million and the immediate recognition of a previously unrecognized net actuarial gain of $6 million.

Beginning in 2011, the accumulation of severance benefits for voluntary departures ceased for certain employee groups. Employees subject to these changes are being given the option to be paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits upon departure from the public service. The impact of the curtailments is a one‑time past service cost reduction of $3 million ($94 million in 2014) and the immediate recognition of a previously unrecognized net actuarial gain of $37 million (net actuarial loss of $69 million in 2014), representing the portion related to the obligation for employees subject to the curtailments.

c. Plan settlements

In 2015, payments of $643 million ($1,178 million in 2014) were made to employees affected by the curtailments of the severance benefit plan who opted to cash out the full or partial value of their accumulated benefits. Because the actual cost of settling part of the obligation differed from the liability previously recorded, a one‑time past service cost reduction of $49 million (past service cost of $127 million in 2014) was recognized along with a previously unrecognized net actuarial gain of $101 million (net actuarial loss of $131 million in 2014), representing the portion related to the obligation for employees subject to the settlements.

v. Net future benefit liabilities

The accrued benefit obligations in respect of public sector pension and other employee and veteran future benefit plans are presented net of pension assets and unrecognized net actuarial gain or loss, as well as contributions and benefits paid by some of the consolidated Crown corporations and other entities after their measurement date of December 31 up to March 31, in the Consolidated Statement of Financial Position. The details are as follows:

a. Accrued benefit obligations

The changes in the accrued benefit obligations during the year were as follows:

Table Summary

The table presents, in millions of dollars, a two‑year comparative of the accrued benefit obligations. It consists of three columns: a detailed listing of components; current year; previous year. The current and previous year's columns are divided into two columns — Pension benefits, sub‑divided into three columns — Funded, Unfunded, Total; and Other future benefits. The first series of rows presents the accrued benefit obligations at beginning of year and a listing of related components. A final row presents the total for this table.

(in millions of dollars)

  2015 2014
Pension benefits Other future benefits Pension benefits Other future benefits
Funded Unfunded Total Funded Unfunded Total
Accrued benefit obligations at beginning of year 97,912 156,452 254,364 82,170 90,448 159,066 249,514 99,915
Benefits earned 6,332 270 6,602 2,844 6,484 285 6,769 3,429
Interest on average accrued benefit obligations 4,963 7,597 12,560 2,857 4,452 8,154 12,606 2,644
Benefits paid (negative 2,282) (negative 8,613) (negative 10,895) (negative 5,062) (negative 1,989) (negative 8,495) (negative 10,484) (negative 5,778)
Administrative expenses (negative 81) (negative 105) (negative 186) (negative 66) (negative 77) (negative 114) (negative 191) (negative 64)
Net transfers to other plans (negative 559) (negative 114) (negative 673)   (negative 491) (negative 142) (negative 633)  
Plan amendments       1,831       (negative 7,550)
Plan curtailments (negative 40) (negative 11) (negative 51) (negative 3)       (negative 94)
Plan settlements       (negative 49)       127
Actuarial (gains) losses 3,130 7,612 10,742 21,741 (negative 915) (negative 2,302) (negative 3,217) (negative 10,459)
Accrued benefit obligations at end of year 109,375 163,088 272,463 106,263 97,912 156,452 254,364 82,170
b. Pension assets

Pension assets include investments held by the PSPIB that are valued at market related value; consolidated Crown corporations' investments, the majority of which are valued at fair value; and contributions receivable from employees for past service buy‑back elections.

The changes in pension assets during the year were as follows:

Table Summary

The table presents, in millions of dollars, a two‑year comparative of the pension assets. It consists of three columns: a detailed listing of components; current year and previous year. The current and previous year's columns are divided into two columns — Funded Pension benefits, Other future benefits. The first row presents investments at beginning of year. The following series of rows presents expected return on average value of investments, contributions, benefits paid, transfers and others, as well as actuarial gains making up the total investments at end of year. The remaining rows present the added contributions receivable and the total pension assets at end of year.

(in millions of dollars)

  2015 2014
Funded pension benefits Other future benefits Funded pension benefits Other future benefits
Investments at beginning of year 92,913 5 79,746 6
Expected return on average value of investments 4,764   3,961  
Contributions —        
Employees 2,553   2,423  
Public Service corporations, territorial governments and Crown corporations and other entities 420 1 456 2
Government 4,161   4,418  
Benefits paid, transfers and others (negative 2,736) (negative 3) (negative 2,424) (negative 3)
Actuarial gains 8,685   4,333  
Investments at end of year 110,760 3 92,913 5
Contributions receivable from employees for past service 587   568  
Total pension assets at end of year 111,347 3 93,481 5

Actuarial gains of $2,778 million ($94 million in 2014) were incorporated in the market related value of the investments to adjust for the limit of plus or minus 10 percent in the difference between the market related value and the market value of the investments at the end of the year.

At March 31, 2015, the market value of the investments is $122,023 million ($102,319 million in 2014). The actual rate of return of investments calculated on a time‑weighted basis was 14.9 percent (15.6 percent in 2014) during the year.

c. Net future benefit liabilities

A reconciliation of the accrued benefit obligations to the amounts of net future benefit liabilities follows:

Table Summary

The table presents, in millions of dollars, a two‑year comparative of the net future benefit liabilities. It consists of three columns: a detailed listing of components; current year; previous year. The current and previous year's columns are divided into two columns — Pension benefits, sub‑divided into three columns — Funded, Unfunded, Total; and Other future benefits. The table presents two sections for reconciliation of the accrued benefit obligations to the amounts of net future benefit liabilities. The first section involves a series of rows presenting the accrued benefit obligations, unrecognized net actuarial gain, contributions and benefits paid after measurement. The second section involves a series of rows presenting pension and other future benefit liabilities, and public sector pension assets, as recognized and presented in the Consolidated Statement of Financial Position.

(in millions of dollars)

  2015 2014
Pension benefits Other future benefits Pension benefits Other future benefits
Funded Unfunded Total Funded Unfunded Total
Accrued benefit obligations 109,375 163,088 272,463 106,263 97,912 156,452 254,364 82,170
Less: Pension assets 111,347   111,347 3 93,481   93,481 5
Subtotal (negative 1,972) 163,088 161,116 106,260 4,431 156,452 160,883 82,165
Plus: Unrecognized net actuarial gain (less loss) 6,475 (negative 16,147) (negative 9,672) (negative 30,118) 810 (negative 9,436) (negative 8,626) (negative 10,204)
Less: Contributions after measurement date up to March 31 43   43   33   33  
Less: Benefits paid after measurement date up to March 31       2       2
Net future benefit liabilities 4,460 146,941 151,401 76,140 5,208 147,016 152,224 71,959
The net future benefit liabilities were recognized and presented in the Consolidated Statement of Financial Position as follows:
Public sector pension liabilities 5,723 146,941 152,664   6,146 147,016 153,162  
Other employee and veteran future benefit liabilities       76,140       71,959
Total pensions and other future benefit liabilities 5,723 146,941 152,664 76,140 6,146 147,016 153,162 71,959
Less: Public sector pension assets 1,263   1,263   938   938  
Net future benefit liabilities 4,460 146,941 151,401 76,140 5,208 147,016 152,224 71,959

vi. Future benefit and interest expenses

The cost of public sector pension and other employee and veteran future benefit plans is comprised of benefit and interest expenses. Benefit expense of $11,164 million ($13,273 million in 2014) and interest expense of $10,653 million ($11,289 million in 2014) are included in the Consolidated Statement of Operations and Accumulated Deficit. More specifically, a benefit expense of $11,144 million ($13,221 million in 2014) is included in ministries expenses, an interest expense of $10,748 million ($11,328 million in 2014) is included in public debt charges and a balance of $75 million in benefit and interest expenses is included as a reduction ($13 million increase in 2014) in Crown corporations' expenses. The components of the benefit and interest expenses are as follows:

Table Summary

The table presents, in millions of dollars, a two‑year comparative of the future benefit and interest expenses. It consists of three columns: a detailed listing of components; current year; previous year. The current and previous year's columns are divided into two columns — Pension benefits, sub‑divided into three columns — Funded, Unfunded, Total; and Other future benefits. The first series of rows presents the benefit expenses. The second series of rows presents the interest expenses.

(in millions of dollars)

  2015 2014
Pension benefits Other future benefits Pension benefits Other future benefits
Funded Unfunded Total Funded Unfunded Total
Benefit expense —                
Benefits earned, net of employee contributions 3,561 211 3,772 2,844 3,818 227 4,045 3,429
Actuarial losses recognized during the year 98 901 999 2,037 611 1,343 1,954 4,105
Plan amendments       1,831       (negative 7,550)
Plan curtailments (negative 40) (negative 11) (negative 51) (negative 3)       (negative 94)
Plan settlements       (negative 49)       127
Actuarial (gains) losses recognized following plan amendments, curtailments and settlements (negative 6)   (negative 6) (negative 210)       7,257
Total 3,613 1,101 4,714 6,450 4,429 1,570 5,999 7,274
Interest expense —                
Interest on average accrued benefit obligations 4,963 7,597 12,560 2,857 4,452 8,154 12,606 2,644
Expected return on average market related value of investments (negative 4,764)   (negative 4,764)   (negative 3,961)   (negative 3,961)  
Total 199 7,597 7,796 2,857 491 8,154 8,645 2,644

vii. Actuarial assumptions

The assumptions used in the actuarial valuations for accounting purposes are based on the Government's or the consolidated Crown corporations and other entities management's best estimates of expected long‑term experience and short‑term forecasts, as well as the majority of the demographic assumptions underlying the most recent or any in‑progress actuarial valuations for funding purposes. The assumptions include estimates of future inflation, interest rates, returns on investments, general wage increases, workforce composition, retirement rates and mortality rates.

The discount rates used to measure the present value of the accrued benefit obligations, as well as the costs of benefits earned, plan amendments, plan curtailments, plan settlements and the interest expense, for public sector pensions and other employee and veteran future benefits sponsored by the Government are as follows:

  • for funded pension benefits, the streamed expected rates of return on invested funds;
  • for unfunded pension benefits, the streamed weighted average of Government of Canada long‑term bond rates; and
  • for other future benefits, the expected Government of Canada long‑term bond rate at the valuation date.

The streamed weighted average of Government of Canada long‑term bond rates is a calculated 20‑year weighted moving average of Government of Canada long‑term bond rates projected over time. The streamed rates take into account historical Government of Canada long‑term bond rates and, over time, reflect expected Government of Canada long‑term bond rates.

The principal actuarial assumptions used in measuring the accrued benefit obligations as at March 31 for Government sponsored plans, as well as the related future benefit and interest expenses for the year, were as follows:

Table Summary

The table presents, in percentage, a two‑year comparative of the actuarial assumptions used for measurement of Government sponsored plans. It consists of three columns: a detailed listing of components; current year; previous year. The current and previous year's columns are divided into two columns — Accrued benefit obligations; Benefit and interest expenses. The series of rows presents the principal actuarial assumptions used to measure the accrued benefit obligations and determine the related future benefit and interest expenses.

  2015 2014
Accrued benefit obligations Benefit and interest expenses Accrued benefit obligations Benefit and interest expenses
Discount ratesLink to footnote 7 —        
Funded pension benefits 5.8 % 4.9 % 5.9 % 4.7 %
Unfunded pension benefits 4.2 % 5.1 % 4.6 % 5.4 %
Other employee and veteran future benefits 2.4 % 3.5 % 3.5 % 2.7 %
Expected rate of return on investments   4.9 %   4.7 %
Long‑term rate of inflation 2.0 % 2.0 % 2.0 % 2.0 %
Long‑term general wage increase 2.6 % 2.6 % 2.6 % 2.6 %
Assumed health care cost trend rates —        
Initial health care cost trend rate 4.5 % 4.6 % 4.6 % 3.8 %
Cost trend rate is expected to stabilize at 4.8 % 4.8 % 4.8 % 4.8 %
Year that the rate is expected to stabilize 2024 2023 2023 2022

The discount rates used by the consolidated Crown corporations and other entities to measure their accrued benefit obligations range from 4.8 percent to 6.3 percent (5.7 to 6.3 percent in 2014) for the funded pension benefits, from 2.2 percent to 3.5 percent (3.1 to 4.3 percent in 2014) for the unfunded pension benefits, and from 2.2 percent to 4.0 percent (2.8 to 4.8 percent in 2014) for the other employee future benefits.

The expected average remaining service life (EARSL) of the employees represent periods ranging from 4 to 23 years (3 to 23 years in 2014) according to the plan in question; more specifically, from 11 to 15 years (11 to 15 years in 2014) for the three main public sector pension plans. The average remaining life expectancy (ARLE) of the benefit recipients under wartime veteran plans represent periods ranging from 6 years to 11 years (6 to 11 years in 2014).

viii. Sensitivity analysis

Changes in assumptions can result in significantly higher or lower estimates of the accrued benefit obligations. The table below illustrates the possible impact of a one percent change in the principal actuarial assumptions. Note that for the sensitivity to the discount rates, the one percent change was considered only for the future expected Government of Canada long‑term bond rates and not for the historical Government of Canada long‑term bond rates included in the determination of the streamed discount rates used to measure the unfunded pension benefits sponsored by the Government.

Table Summary

The table presents, in millions of dollars, a two‑year comparative of the possible impact of a one percent change in the main actuarial assumptions. It consists of three columns: a detailed listing of components; current year; previous year. The current and previous year's columns are divided into two columns — Pension benefits, sub‑divided into two columns — Funded, Unfunded; and Other future benefits. The series of rows presents the principal actuarial assumptions used for measurement.

(in millions of dollars)

  2015 2014
Pension benefits Other future benefits Pension benefits Other future benefits
Funded Unfunded Funded Unfunded
Possible impact on the accrued benefit obligations due to:            
Increase of 1 % in discount rates (negative 17,300) (negative 8,700) (negative 17,200) (negative 15,600) (negative 8,400) (negative 11,600)
Decrease of 1 % in discount rates 22,500 9,100 23,500 20,400 9,500 15,300
Increase of 1 % in rate of inflation 14,300 20,400 20,900 12,700 19,300 13,900
Decrease of 1 % in rate of inflation (negative 11,800) (negative 17,000) (negative 15,700) (negative 10,300) (negative 16,200) (negative 10,600)
Increase of 1 % in general wage increase 6,100 1,200 500 5,700 1,400 400
Decrease of 1 % in general wage increase (negative 5,300) (negative 1,100) (negative 400) (negative 5,000) (negative 1,200) (negative 300)
Increase of 1 % in assumed health care cost trend rates     7,500     4,700
Decrease of 1 % in assumed health care cost trend rates     (negative 5,400)     (negative 3,500)

8. Other Liabilities

Other liabilities include:

Table Summary

The table presents, in millions of dollars, a two‑year comparative of other liabilities. It consists of three columns: a detailed listing of components; current year; previous year. The first row presents the deposit due to Canada Pension Plan. The second series of rows presents the other liability accounts. A final row presents the total for this table.

(in millions of dollars)

  2015 2014
Due to Canada Pension Plan 212 140
Others —    
Government Annuities Account 150 166
Deposit and trust accounts 1,675 1,686
Other specified purpose accounts 3,965 3,922
Subtotal 5,790 5,774
Total other liabilities 6,002 5,914

i. Due to Canada Pension Plan

As explained in Note 1, the financial activities of the Canada Pension Plan (CPP) are not included in these consolidated financial statements.

The CPP is a federal/provincial social insurance program established by an Act of Parliament. It is compulsory and in operation in all parts of Canada, except for the Province of Quebec. The objective of the program is to provide a measure of protection to workers and their families against the loss of earnings due to retirement, disability or death. The CPP is financed from employees, employers and self‑employed workers contributions, as well as investments earnings. The CPP's investments are held and managed by the Canada Pension Plan Investment Board (CPPIB). As administrator of the CPP, the Government's authority to provide benefits is limited to the consolidated net assets of the CPP. At March 31, 2015, the fair value of the CPP's consolidated net assets is $269,615 million ($223,209 million in 2014).

Pursuant to the Canada Pension Plan Act, the transactions of the CPP are recorded in the Canada Pension Plan Account (the Account) within the accounts of Canada. The Account also tracks the amounts transferred to or received from the CPPIB. The $212 million ($140 million in 2014) balance in the Account represents the CPP's deposit with the Receiver General for Canada and, therefore, is reported as a liability to the CPP.

ii. Others

Deposit and trust accounts are a group of liabilities representing the Government's financial obligations in its role as administrator of certain funds that it has received or collected for specified purposes and that it will pay out accordingly. To the extent that the funds received are represented by negotiable securities, these are deducted from the corresponding accounts to show the Government's net liability. Certain accounts earn interest which is charged to interest on the public debt. One of the largest deposit and trust accounts is the Indian band funds account in the amount of $835 million ($833 million in 2014). This account was established to record funds belonging to Indian bands throughout Canada pursuant to the Indian Act.

Other specified purpose accounts are liability accounts that are used to record transactions made under authorities obtained from Parliament through either the Financial Administration Act or other specific legislation. Certain accounts earn interest which is charged to interest on the public debt. The largest other specified purpose account is the Public Service Death Benefit Account totalling $3,424 million ($3,310 million in 2014). This account was established under the Public Service Superannuation Act to provide life insurance to contributing members of the public service.

9. Cash and Cash Equivalents

Cash and cash equivalents are as follows:

Table Summary

The table presents, in millions of dollars, a two-year comparative of the cash and cash equivalents. It consists of three columns: a detailed listing of components; current year; previous year. A final row presents the total for this table.

(in millions of dollars)

  2015 2014
CashLink to footnote 8 28,845 27,469
Cash equivalents 6,154 3,960
Total cash and cash equivalents 34,999 31,429

10. Taxes and Other Accounts Receivable

Taxes receivable represent tax revenues that were assessed by year end as well as amounts receivable due to the accrual of tax revenues as at March 31. These accrued receivables are not due until the next fiscal year. They also include other receivables for amounts collectible through the tax system such as provincial and territorial taxes, Employment Insurance premiums and Canada Pension Plan contributions.

The Government has established an allowance for doubtful accounts of $13,138 million ($12,690 million in 2014) and has recorded a bad debt expense of $3,910 million ($3,751 million in 2014). The allowance for doubtful accounts is management's best estimate of the collectability of amounts that have been assessed, including the related interest and penalties, but not yet paid. The allowance for doubtful accounts has two components. A general allowance is calculated based on the age and type of tax accounts using rates based on historical collection experience. A specific allowance is calculated based on an annual review of all accounts over $10 million. The allowance for doubtful accounts is adjusted every year through a provision for doubtful accounts and is reduced by amounts written off as uncollectible during the year. The annual provision is reported as a bad debt expense which is charged against other program expenses. The details of the taxes receivable and allowance for doubtful accounts are as follows:

Table Summary

The table presents, in millions of dollars, a two‑year comparative of the taxes receivable and allowance for doubtful accounts. It consists of three columns: a detailed listing of components; current year; previous year. The current and previous year's columns are divided into three columns — Total taxes receivable, Allowance for doubtful accounts, and Net. A final row presents the total for this table.

(in millions of dollars)

  2015 2014
Total taxes receivable Allowance for doubtful accounts Net Total taxes receivable Allowance for doubtful accounts Net
Income taxes receivable —            
Individuals 55,150 6,660 48,490 52,161 6,621 45,540
Employers 17,652 1,052 16,600 16,127 945 15,182
Corporations 16,964 2,282 14,682 15,410 2,152 13,258
Non‑residents 1,462 138 1,324 1,442 138 1,304
Goods and services tax receivable 18,248 2,785 15,463 17,752 2,779 14,973
Customs duties receivable 266 24 242 246 16 230
Excise taxes and duties receivable 1,895 197 1,698 2,041 39 2,002
Total 111,637 13,138 98,499 105,179 12,690 92,489

Other accounts receivable represent billed or accrued financial claims arising from amounts owed to the Government at year end. Total other accounts receivable amount to $5,418 million ($6,521 million in 2014) and are presented net of an allowance for doubtful accounts of $2,220 million ($1,865 million in 2014). Further details can be found in Section 7 (unaudited) of this volume.

11. Foreign Exchange Accounts

Foreign exchange accounts represent financial claims and obligations of the Government as a result of Canada's foreign exchange operations.

The Government holds certain investments in its Exchange Fund Account to provide general liquidity and to promote orderly conditions in the foreign exchange market for the Canadian dollar. As at March 31, 2015, the fair value of the marketable securities held in the Exchange Fund Account is $84,241 million ($68,976 million in 2014). Further details on these investments are provided in the unaudited financial statements of the Exchange Fund Account in Section 8 of this volume.

Subscriptions and loans to the International Monetary Fund (IMF) and special drawing rights allocations are denominated in special drawing rights (SDR). The SDR serves as the unit of account for the IMF and its value is based on a basket of key international currencies (US dollar, Euro, Japanese yen and British pound sterling). Canada participates in two multi‑lateral lending arrangements with the IMF along with a group of other member countries. Collectively, maximum direct lending under the multi‑lateral arrangements is limited to no more than the equivalent of SDR 8,517 million ($14,881 million) at March 31, 2015.

The following table presents the balances of the foreign exchange accounts:

Table Summary

The table presents, in millions of dollars, a two‑year comparative of the balances of the foreign exchange accounts. It consists of three columns: a detailed listing of components; current year; previous year. The first series of rows presents Government operations involving the international reserves held in the Exchange Fund Account. The second series of rows presents Government operations involving the International Monetary Fund. A final row presents the total for this table.

(in millions of dollars)

  2015 2014
International reserves held in the Exchange Fund Account —    
Cash and cash equivalents —    
US dollar 441 391
Euro 189 51
British pound sterling 48 2
Japanese yen 17 10
Short‑term deposits   223
Total 695 677
Marketable securities —    
US dollar 60,558 46,636
Euro 17,685 19,903
British pound sterling 2,405 199
Japanese yen 794 316
Total 81,442 67,054
Special drawing rights 9,818 9,628
Gold 6 6
Total international reserves held in the Exchange Fund Account 91,961 77,365
International Monetary Fund —    
Subscriptions 11,129 10,883
Loans 1,353 1,665
Total 104,443 89,913
Less:    
International Monetary Fund —    
Special drawing rights allocations 10,463 10,232
Notes payable 8,962 7,419
Total 19,425 17,651
Total foreign exchange accounts 85,018 72,262

12. Crown Corporations and Other Entities

Parent Crown corporations are included in the reporting entity of the Government. There are also a number of not‑for‑profit organizations and other government business enterprises that meet the definition of control for financial reporting purposes and are included in the reporting entity of the Government.

i. Consolidated Crown corporations and other entities

Some Crown corporations and not‑for‑profit organizations rely on the Government for most of their financing and their financial activities are consolidated in these financial statements. The major consolidated Crown corporations are Atomic Energy of Canada Limited, Canadian Air Transport Security Authority, Canadian Broadcasting Corporation, Canadian Commercial Corporation and VIA Rail Canada Inc. The major consolidated not‑for‑profit organizations are the Canada Foundation for Innovation and the Canada Foundation for Sustainable Development Technology. Detailed information on these consolidated entities is included in Section 4 (unaudited) of this volume.

ii. Enterprise Crown corporations and other government business enterprises

The remaining Crown corporations are government business enterprises able to raise substantial portions of their revenues through commercial business activity and are therefore considered self‑sustaining. These Crown corporations are referred to as enterprise Crown corporations. The major enterprise Crown corporations include the Bank of Canada, Canada Mortgage and Housing Corporation, Canada Post Corporation and Export Development Canada.

In addition, there are a number of self‑sustaining government business enterprises that are not Crown corporations but which are controlled by the Government. These are referred to as other government business enterprises. Investments in enterprise Crown corporations and other government business enterprises are recorded under the modified equity method.

The following table presents the Government's recorded loans, investments and advances in significant enterprise Crown corporations and other government business enterprises:

Table Summary

The table presents, in millions of dollars, a two‑year comparative of the government's recorded loans, investments and advances in significant Crown corporations and other government business enterprises. It consists of three columns: a detailed listing of components; current year; previous year. The first series of rows presents investments. The second series of rows presents loans and advances. The third series of rows presents the deducted repayment, discount and premium transactions. A final row represents the total for this table.

(in millions of dollars)

  2015 2014
Investments —    
Canada Mortgage and Housing Corporation 18,733 16,511
Export Development Canada 8,527 7,276
Farm Credit Canada 4,855 4,166
Business Development Bank of Canada 4,745 4,339
Canada Development Investment Corporation 3,880 4,953
Canada Deposit Insurance Corporation 1,801 1,568
Canada Post Corporation (negative 2,277) (negative 1,140)
Other 3,544 3,644
Total investments 43,808 41,317
Loans and advances —    
Farm Credit Canada 22,691 22,029
Business Development Bank of Canada 15,676 14,320
Canada Mortgage and Housing Corporation 10,708 21,173
Other 333 148
Total loans and advances 49,408 57,670
Less:    
Loans expected to be repaid from future appropriations 3,792 4,145
Unamortized discounts and premiums 49 27
Subtotal 3,841 4,172
Total loans, investments and advances to enterprise Crown corporations and other government business enterprises 89,375 94,815

The following table presents the summary financial position and results of enterprise Crown corporations and other government business enterprises:

Table Summary

The table presents, in millions of dollars, a two‑year comparative summary of the financial position and results of enterprises Crown corporations and other government business enterprises. It consists of three columns: a detailed listing of components; current year; previous year. The current and previous year's columns are divided into three columns — Third Parties; Government, Crown corporations and other entities; and Total.

(in millions of dollars)

  2015 2014
Third parties Government, Crown corporations and other entities Total Third Parties Government, Crown corporations, and other entities Total
Assets —            
Financial assets 352,984 103,664 456,648 349,246 97,118 446,364
Non‑financial assets 9,180   9,180 9,359   9,359
Total assets 362,164 103,664 465,828 358,605 97,118 455,723
Liabilities 349,723 71,735 421,458 333,096 80,951 414,047
Equity of Canada as reported     44,370     41,676
Elimination adjustments     (negative 562)     (negative 359)
Equity of Canada     43,808     41,317
Revenues 27,247 4,467 31,714 27,478 4,511 31,989
Expenses 20,916 2,402 23,318 22,999 3,065 26,064
Profit as reported     8,396     5,925
Adjustments and others     (negative 31)     20
Profit     8,365     5,945
Other changes in equity —            
Other comprehensive (loss) or income     (negative 2,360)     2,660
DividendsLink to footnote 9     (negative 2,341)     (negative 5,215)
CapitalLink to footnote 10     (negative 1,030)     50
Other adjustments     (negative 143)      
Total     2,491     3,440
Equity of Canada at beginning of year     41,317     37,877
Equity of Canada at end of year     43,808     41,317
Contractual obligations     47,555     44,803
Contingent liabilities     2,503     2,409

iii. Non Public Property

Non Public Property (NPP), as defined under the National Defence Act, consists of money and property contributed to or by Canadian Forces members and is administered for their benefit and welfare by the Canadian Forces Morale and Welfare Services (CFMWS). The CFMWS is responsible for delivering selected morale and welfare programs, services and activities through three operational divisions, Canadian Forces Exchange System (CANEX), Personnel Support Programs and Service Income Security Insurance Plan (SISIP) Financial Services. Under the National Defence Act, NPP is explicitly excluded from the Financial Administration Act. The Government provides some services related to NPP activities such as accommodation and security for which no amount is charged. The cost of providing these services is included in the consolidated financial statements of the Government of Canada. In 2015, CFMWS administered estimated revenues and expenses of $327 million ($400 million in 2014) and $294 million ($331 million in 2014) respectively and had net equity of $708 million at March 31, 2015 ($685 million at March 31, 2014). These amounts are excluded from the consolidated financial statements of the Government of Canada.

13. Other Loans, Investments and Advances

The following table presents a summary of the balances of other loans, investments and advances by category:

Table Summary

The table presents, in millions of dollars, a two‑year comparative summary of the balances of other loans, investments and advances by category. It consists of three columns: a detailed listing of components; current year; and previous year. A final row presents the total for this table.

(in millions of dollars)

  2015 2014
National governments, including developing countries and international organizations —    
National governments including developing countries 988 382
International organizations 20,189 19,150
Total 21,177 19,532
Other loans, investments and advances —    
Provincial and territorial governments 1,112 1,877
Other loans, investments and advances 28,324 26,583
Total 29,436 28,460
Total 50,613 47,992
Less: allowance for valuation 26,307 25,172
Total other loans, investments and advances 24,306 22,820

The following table presents a summary of the balances of other loans, investments and advances by currency:

Table Summary

The table presents, in millions of dollars, a two‑year summary of the balances of other loans, investments and advance by currency. It consists of three columns: a listing of the currencies; current year, divided into three columns — Loans, investments and advances in base currency, Foreign exchange rate, and Loans, investments and advances CAD; previous year — Loans, investments and advances CAD. A final row presents the total for this table in Canadian currency only.

(in millions of dollars)

  2015 2014
Loans, investments and advances in base currency Foreign exchange rate Loans, investments and advances CAD Loans, investments and advances CAD
Canadian dollar 45,253   45,253 43,348
US dollar 4,123 1.26660 5,222 4,552
Special drawing rights 68 1.74726 119 75
Various other currencies     19 17
Total     50,613 47,992

Loans to national governments consist mainly of loans for financial assistance totalling $400 million (nil in 2014), international development assistance to developing countries totalling $164 million ($187 million in 2014), and development of export trade totalling $424 million ($195 million in 2014) which are administered by Export Development Canada. Certain loans are non‑interest bearing and others bear interest at rates varying from 1.0 percent to 10.3 percent. These loans are repayable over 1 to 31 years, with final instalments due in 2045.

Loans, investments and advances to international organizations include subscriptions to the share capital of international banks totalling $12,654 million ($11,951 million in 2014) as well as loans and advances to associations and other international organizations totalling $7,536 million ($7,201 million in 2014). These subscriptions are composed of both paid‑in and callable capital. They do not provide a return on investment but are repayable on termination of the organization or withdrawal from it. Most loans and advances to international organizations are made to banks and associations that use these funds to make loans to developing countries at significant concessionary terms.

Loans to provinces and territories include loans made under relief acts and other legislation. Loans totalling $789 million ($1,234 million in 2014) are non‑interest bearing and are repayable over 1 to 11 years. An amount of $320 million ($640 million in 2014) is due from British Columbia regarding the Comprehensive Integrated Tax Coordination Agreement and is due in equal annual instalments with the final payment due March 2016. The Government has not collected interest on these amounts. The remaining loans totalling $3 million ($3 million in 2014) bear interest at rates varying from 4.5 percent to 9.5 percent with final instalments due in 2015.

Other loans, investments and advances include portfolio investments and loans and advances under various programs to individuals and organizations which include loans under the Canada Student Loans Program of $17,519 million ($16,739 million in 2014), and loans for development of export trade which are administered by Export Development Canada of $2,772 million ($2,595 million in 2014). Collateral of $259 million ($272 million in 2014) is held on loans for development of export trade. Loans under the Canada Student Loans Program are provided interest‑free to full‑time students and afterward bear interest at either a variable prime rate plus 2.5 percent or a fixed prime rate plus 5.0 percent. The repayment period is generally 10 years. Certain loans for development of export trade are non‑interest bearing and others bear interest at rates varying from 1.9 percent to 12.8 percent. These loans are repayable over 1 to 9 years, with final instalments due in 2023.

14. Tangible Capital Assets

Tangible capital assets consist of acquired, built, developed or improved tangible assets, whose useful life extends beyond the fiscal year and which are intended to be used on an ongoing basis for producing goods or delivering services, including military activities. Tangible capital assets include land, buildings, works and infrastructure, machinery and equipment including computer hardware and software, vehicles including ships, aircraft and others, leasehold improvements, and assets under construction. Software and leasehold improvements include only the cost of assets acquired since April 1, 2001. Tangible capital assets also include assets under capital lease. Renewal options for assets under capital leases are typically for periods of 3 to 5 years and are exercisable at the discretion of the lessee. Detailed information (unaudited) on tangible capital assets is provided in Section 10 of this volume.

Except for land, the cost of tangible capital assets used in Government operations is generally amortized on a straight‑line basis over the estimated useful life of the asset as follows:

Table Summary

The table presents the tangible capital assets and their related amortization periods. It consists of two columns: the tangible capital asset category; the estimation of useful life.

Buildings 10 to 40 years
Works and infrastructureLink to footnote 11 5 to 40 years
Machinery and equipment 3 to 30 years
Vehicles 3 to 40 years
Leasehold improvements lesser of useful life of improvement or lease term
Assets under construction once in service, in accordance with asset type
Assets under capital leases in accordance with asset type or over the lease term

The following table presents a summary of the transactions and balances for the main categories of tangible capital assets:

Table Summary

The table presents, in millions of dollars, the summary of the transactions and balances for the main categories of tangible capital assets. It consists of five columns; a list of capital asset categories; Cost divided into five columns — Opening balance, Acquisitions, Disposals, Adjustments, and Closing balance; Accumulated amortization divided into five columns — Opening balance, Amortization expense, Disposals, Adjustments, and Closing balance; current year's Net book value; previous year's Net book value. A final row presents the total for this table.

(in millions of dollars)

  Cost Accumulated amortization Net book value 2015 Net book value 2014
Opening balance Acquisitions Disposals AdjustmentsLink to footnote 12 Closing balance Opening balance Amortization expense Disposals Adjustments Closing balance
Land 1,597 36 (negative 32) 4 1,605           1,605 1,597
Buildings 27,047 229 (negative 350) 2,424 29,350 14,330 767 (negative 316) 155 14,936 14,414 12,717
Works and infrastructure 13,977 227 (negative 160) 505 14,549 8,001 419 (negative 142) (negative 2) 8,276 6,273 5,976
Machinery and equipment 34,556 484 (negative 1,296) 1,181 34,925 24,680 1,989 (negative 888) (negative 169) 25,612 9,313 9,876
Vehicles 36,452 157 (negative 520) 1,534 37,623 22,420 1,481 (negative 279) (negative 234) 23,388 14,235 14,032
Leasehold improvements 2,972 32 (negative 98) 210 3,116 1,787 206 (negative 83)   1,910 1,206 1,185
Assets under construction 13,850 5,639 (negative 230) (negative 5,900) 13,359           13,359 13,850
Assets under capital leases 4,517 400Link to footnote 13 (negative 130) 74 4,861 1,808 228 (negative 114) (negative 3) 1,919 2,942 2,709
Total 134,968 7,204 (negative 2,816) 32 139,388 73,026 5,090 (negative 1,822) (negative 253) 76,041 63,347 61,942

Some leases have escalation clauses for the operating cost component and are based on the consumer price index.

15. Financial Instruments

The Government uses various financial instruments to manage financial risks associated with its financial assets and liabilities. The Government does not hold or use derivative instruments for trading or speculative purposes.

1. Derivative financial instruments

a. Swap agreements

Government debt is issued at both fixed and variable interest rates and is denominated in Canadian dollars, US dollars and Euros. The Government has entered into cross currency swap agreements to facilitate management of its debt structure. Using cross currency swap agreements, Canadian dollar and other foreign currency debt has been converted into US dollars or other foreign currencies with either fixed interest rates or variable interest rates. As a normal practice, the Government's swap positions are held to maturity.

The interest paid or payable and the interest received or receivable on all swap transactions are recorded as part of public debt charges. Unrealized gains or losses due to fluctuations in the foreign exchange value of the swaps are presented in the cross currency swap revaluation account and are recognized as part of net foreign exchange revenues in the Consolidated Statement of Operations and Accumulated Deficit.

Cross currency swaps with contractual principal amounts outstanding at March 31, stated in Canadian dollars, are as follows:

Table Summary

The table presents, in millions of dollars, the current year's cross currency swaps with contractual principal amounts outstanding by maturing year. It consists of two columns; Maturing year; current year. The last row presents the total for this table.

(in millions of dollars)

Maturing year 2015
2016 5,107
2017 4,898
2018 5,610
2019 6,708
2020 7,296
2021 and subsequent 33,472
Total 63,091
b. Foreign‑exchange forward agreements

The Government's lending arrangements with the IMF, included in the Foreign Exchange Accounts, are denominated in SDRs. However, the government typically funds these loans with US dollars. Consequently, since the value of the SDR is based upon a basket of key international currencies (US dollar, Euro, Japanese yen and British pound sterling), a currency mismatch results, whereby fluctuations in the value of the loan asset are not equally offset by fluctuations in the value of the related funding liability. Therefore, the Government enters into forward agreements to hedge this foreign exchange risk.

Unrealized gains or losses due to fluctuations in the foreign exchange value of these agreements are recorded in accounts payable and accrued liabilities and are recognized as part of the net foreign exchange revenues in the Consolidated Statement of Operations and Accumulated Deficit.

The notional principal amount of a foreign‑exchange forward agreement refers to the principal amount used to calculate contractual cash flows. This amount does not represent an asset or liability, and is not included in the Consolidated Statement of Financial Position. Foreign‑exchange forward agreements outstanding at March 31, with notional principal amounts in Canadian dollars of $1,572 million ($2,650 million at March 31, 2014), mature during the next fiscal year.

c. Credit risk related to swap and foreign‑exchange forward agreements

The Government manages its exposure to credit risk by dealing principally with financial institutions having credit ratings from at least two recognized rating agencies, one of which must be Standard & Poor's or Moody's. At the time of inception of the agreement, the credit rating of the institution must be at least A‑.

Credit risk is also managed through collateral provisions in swap and foreign‑exchange forward agreements. Counterparties must pledge collateral to the Government, which, in the event of default, could be liquidated to mitigate credit losses.

The Government does not have a significant concentration of credit risk with any individual institution and does not anticipate any counterparty credit loss with respect to its swap and foreign‑exchange forward agreements.

The following table presents the contractual or notional principal amounts of the swap and foreign‑exchange forward agreements organized by credit ratings based on published Standard & Poor's credit ratings and stand‑alone credit profiles at year end:

Table Summary

The table presents, in millions of dollars, a two‑year comparative of the contractual or notional principal amounts of the swap and foreign-exchange forward agreements organized by credit rating based on published Standard & Poor's credit ratings and stand‑alone credit profiles. It consists of three columns: Credit ratings; current year; previous year. A final row presents the total for this table.

(in millions of dollars)

Credit ratings 2015 2014
A+ 17,774 16,707
A 14,040 14,782
A‑ 26,518 16,703
BBB+ 4,765 6,769
BBB 1,566 1,803
Total 64,663 56,764

ii. Managing foreign currency risk and sensitivity analysis to foreign currency exposures

Interest rate and foreign currency risks are managed using a strategy of matching the duration and the currency of the foreign exchange accounts assets and the related foreign currency borrowings of the Government. At March 31, 2015, assets within the foreign exchange accounts and their related foreign currency borrowings substantially offset each other on a market value basis. Accordingly, the impact of price changes affecting these assets and the liabilities funding these assets naturally offset each other, resulting in no significant impact to the Government's net debt.

Assets related to the IMF are only partially matched by related foreign currency borrowings, as they are denominated in SDRs, however, foreign‑exchange risks relating to loans to the IMF have been managed through entering into various foreign‑exchange forward agreements.

The majority of the government foreign currency assets and related liabilities are held in four currency portfolios: the US dollar, the Euro, the British pound sterling and the Japanese yen. At March 31, 2015, a one percent appreciation in the Canadian dollar as compared to the US dollar, the Euro, the British pound sterling and the Japanese yen would result in a foreign exchange loss of $9 million due to the exposure of the US dollar portfolio, a foreign exchange loss of $3 million due to the exposure of the Euro portfolio and a foreign exchange gain of $2 million due to the exposure of the British pound sterling. There is no significant exposure related to the Japanese yen portfolio.

The net foreign exchange gain included in net foreign exchange revenues, other program revenues and other program expenses on the Consolidated Statement of Operations and Accumulated Deficit amounts to $452 million (net foreign exchange gain of $448 million in 2014).

iii. Fair value information

a. Liabilities and financial assets

The following table presents the carrying value and the fair value of liabilities and financial assets. Fair values are Government estimates and are generally calculated using market conditions at a specific point in time where a market exists. Fair values of liabilities and financial assets with a short term to maturity or of a non‑negotiable nature are assumed to approximate their carrying values. Fair values may not reflect future market conditions nor the actual values obtainable should the instrument be exchanged on the market. The calculations are subjective in nature and involve inherent uncertainties due to the unpredictability of future events.

Table Summary

The table presents, in millions of dollars, a two‑year comparative of the carrying value and the fair value of liabilities and financial assets. It consists of three columns: a list of the components; current year; previous year. The current and previous year's columns are divided into three columns — Carrying value, Fair value, and Fair value over (under) carrying value. The first series of rows presents the liabilities. The second series of rows presents the financial assets.

(in millions of dollars)

  2015 2014
Carrying value Fair value Fair value over (under) carrying value Carrying value Fair value Fair value over (under) carrying value
Liabilities —            
Accounts payable and accrued liabilities 123,631 123,631   111,730 111,730  
Unmatured debt 665,180 742,080 76,900 658,958 705,520 46,562
Public sector pensions 152,664 152,659 (negative 5) 153,162 153,245 83
Other employee and veteran future benefits 76,140 106,258 30,118 71,959 82,163 10,204
Other liabilities 6,002 6,002   5,914 5,914  
Financial Assets —            
Cash and accounts receivable 136,696 136,696   128,574 128,574  
Foreign exchange accounts 85,018 87,955 2,937 72,262 74,316 2,054
Loans, investments and advances excluding investments in enterprise Crown corporations 69,873 72,061 2,188 76,318 78,141 1,823
Public sector pension assets 1,263 2,849 1,586 938 1,801 863

Fair values are determined using the following methods and assumptions:

The carrying values of other accounts payable and accrued liabilities, amounts payable to taxpayers, interest and matured debt and cash and accounts receivable are assumed to approximate their fair values due to their short term to maturity and allowances to reduce carrying values.

For marketable bonds denominated in Canadian dollars and foreign currencies, treasury bills issued in Canadian dollars, Canada bills and medium‑term notes issued in US dollars and Euros, fair values are established using market quotes or the discounted cash flow calculated using year end market interest and exchange rates. Fair values of other instruments comprising the unmatured debt are deemed to approximate their carrying values due to their short term to maturity or their non‑negotiable nature.

The fair values of public sector pension and other employee and veteran future benefit liabilities, and public sector pension assets are assumed to approximate the actuarial value of the accrued benefit obligations net of the fair values of the pension assets, which are established at market value for investments and at discounted net present value for other assets, and the contributions and benefits paid by some of the consolidated Crown corporations and other entities after their measurement date of December 31 up to March 31.

Fair values of the securities and gold reserves held in the foreign exchange accounts are established using market quotes or other available market information. Financial claims and obligations with the International Monetary Fund denominated in foreign currencies are reported at Canadian dollar equivalents at March 31, which are assumed to approximate fair value.

Fair values of loans to enterprise Crown corporations are established using market quotes or the discounted cash flow calculated using year end market interest rates. For portfolio or temporary investments, fair values are established using stock market quotes or other available information.

Fair values of other loans, investments and advances are assumed to approximate carrying values since allowances are recorded when necessary to reduce their carrying value to amounts that approximate their estimated realizable value.

b. Derivative financial instruments

The following table presents the fair value of derivative financial instruments with contractual or notional principal amounts outstanding at March 31:

Table Summary

The table presents, in millions of dollars, a two‑year comparative of the fair value of derivative financial instruments with contractual or notional principal amounts. It consists of three columns: a list of components; current year; previous year. The current and previous year's columns are divided into two columns — Principal amount, and Fair value. A final row presents the total for this table.

(in millions of dollars)

  2015 2014
Principal amount Fair value Principal amount Fair value
Cross currency swaps 63,091 (negative 5,756) 54,114 (negative 2,648)
Foreign‑exchange forward agreements 1,572 128 2,650 (negative 38)
Total 64,663 (negative 5,628) 56,764 (negative 2,686)

Fair values of the swap and foreign‑exchange forward agreements are the estimated amount that the Government would receive or pay, based on market factors, if the agreements were terminated on March 31. They are established by discounting the expected cash flows of the swap and foreign‑exchange forward agreements, calculated from the contractual or notional principal amounts, using year end market interest and exchange rates. A positive (negative) fair value indicates that the Government would receive (make) a payment if the agreements were terminated on March 31.

16. Contractual Obligations

The nature of government activities results in large multi‑year contracts and agreements, including international treaties, protocols and agreements of various size and importance. Any financial obligations resulting from these are recorded as a liability when the terms of these contracts or agreements for the acquisition of goods and services or the provision of transfer payments are met. Major contractual obligations that will generate expenditures in future years and that can be reasonably estimated are summarized as follows:

Table Summary

The table presents, in millions of dollars, a summary of the major contractual obligations that will generate expenditures in future years. It consists of six columns: Minimum payments to be made in; Transfer payment agreements; Capital assets and purchases; Operating leases; International organizations; Total. A final row presents the total for this table.

(in millions of dollars)

Minimum payments to be made in: Transfer payment agreements Capital assets and purchases Operating leases International organizations Total
2016 15,572 8,989 390 1,709 26,660
2017 8,407 6,612 358 1,441 16,818
2018 5,739 6,304 327 392 12,762
2019 4,370 7,736 292 243 12,641
2020 2,216 8,412 246 121 10,995
2021 and subsequent 2,358 18,957 1,411 1,178 23,904
Total 38,662 57,010 3,024 5,084 103,780

i. Transfer payment agreements

Transfer payments are one of the government's key instruments to provide various services to Canadians and to contribute to building a strong society and a competitive nation. They represent a large part of the Government of Canada's spending.

ii. Capital assets and purchases

Capital assets are tangible and durable items of value, including major additions or alterations thereto, from which benefits are expected to be derived during their useful life. Purchases are supported by contracts to supply goods or services.

iii. Operating leases

An operating lease is a lease in which the lessor does not substantially transfer all the benefits and risks incident to ownership of property to the lessee. The Government rents premises and equipment under operating leases which expire at various dates.

iv. International organizations

International contractual obligations include transfer payments, loans and advances to international organizations as well as loans for the development of export trade (administered by Export Development Canada), which Canada has agreed to disburse in the future. Future paid‑in share capital commitments made by Canada for future purchases of non‑budgetary share capital in international organizations are also included.

17. Environmental Liabilities

i. Remediation of contaminated sites

The Government has developed a "Federal Approach to Contaminated Sites" — which incorporates a risk‑based approach to the management of contaminated sites. Under this approach the Government has inventoried the contaminated sites on federal lands that have been identified, allowing them to be classified, managed and recorded in a consistent manner. This systematic approach aids in the identification of the high risk sites in order to allocate limited resources to those sites which pose the highest risk to the environment and human health.

The Government has identified approximately 9,800 sites (11,600 sites in 2014) where contamination may exist and assessment, remediation and monitoring may be required. Of these, the Government has identified approximately 2,400 sites (2,500 sites in 2014), where action is possible and for which a gross liability of $5,810 million has been recorded. A recovery of $17 million has also been recorded resulting in a net liability of $5,793 million ($4,796 million in 2014). This liability represents the Government's best estimate of the costs required to remediate sites to the current minimum standard for its use prior to contamination, based on information available at the financial statement date. A net present value technique has been used for sites where the cash flows are expected to occur over extended future periods.

The following table presents the total estimated amounts of these liabilities by nature and source, the associated expected recoveries and the total undiscounted future expenditures as at March 31, 2015 and March 31, 2014. When the liability estimate is based on a future cash requirement, the Government of Canada lending rate applicable to loans with similar terms to maturity has been used to discount the estimated future expenditures. March 2015 rates range from 0.61 percent for 2 year term to 2.12 percent for a 25 or greater year term.

Table Summary

The table presents, in millions of dollars, a two‑year comparative of the estimated amounts of environmental liabilities by nature and source, the associated expected recoveries and the total undiscounted future expenditures. It consists of three columns: Nature and Source; current year; previous year. The current and previous year's columns are divided into four columns — Number of Sites, Estimated Liability, Estimated Total Undiscounted Expenditures, and Estimated Recoveries. A final row presents the total for this table.

(in millions of dollars)

Nature and Source 2015 2014
Number of Sites Estimated Liability Estimated Total Undiscounted Expenditures Estimated Recoveries Number of Sites Estimated Liability Estimated Total Undiscounted Expenditures Estimated Recoveries
Former mineral exploration sitesLink to footnote 14 131 3,083 5,048 17 210 2,205 3,763  
Radioactive materialLink to footnote 15 5 1,016 1,049   5 991 1,061  
Military and former military sitesLink to footnote 16 177 559 581   140 552 600  
Fuel related practicesLink to footnote 17 645 358 366   668 341 351  
Marine facilities/aquatic sitesLink to footnote 18 819 278 291   788 271 299  
Landfill/waste sitesLink to footnote 19 375 211 220   389 202 174  
OtherLink to footnote 20 261 305 309   272 234 214  
Total 2,413 5,810 7,864 17 2,472 4,796 6,462  

Of the remaining 7,400 sites, 1,200 sites were closed as they were either remediated or assessed and no longer meet all the criteria required to record a liability for contaminated sites and there are 6,200 sites for which an estimated liability has not been determined primarily due to the fact the sites are not yet fully assessed and contamination has not yet been determined or it has not yet been determined if the site requires remediation or if a risk management plan will suffice. As the sites are assessed, if contamination is found, and it exceeds the environmental standard and if remediation is required, a liability will be recognized as soon as a reasonable estimate can be made.

Of the 6,200 sites that do not have liabilities, 200 are considered high priority for action because they present a higher risk to human health and the environment. These sites are at various stages of testing and evaluation in order to develop a remediation or risk management strategy. If remediation is required liabilities will be reported as soon as a reasonable estimate can be determined. If risk management is the preferred option the site will be monitored to determine if remediation is required or if the contamination can be reduced or eliminated through natural attenuation. Monitoring costs prior to determining if remediation is required are not included in a liability. These costs are considered operating costs of the current period. 1,800 sites are considered a medium to low priority based on the low level of risk to human health or the environment. Assessment and remediation or risk management will be done on these sites as resources become available. 3,600 sites are not yet classified because they are only at the initial testing stages and contamination has not yet been determined. 500 sites are not considered a priority for action because information indicates there is likely no significant environmental impact or human health threats and there is likely no need for action unless new information becomes available indicating greater concerns, in which case, the site will be re‑examined. 100 sites currently have insufficient information in order to classify. Additional information is required to classify the site but is not available at this time. As additional information becomes available the sites will be re‑examined.

ii. Asset retirement obligations

The asset retirement obligation is $6,502 million ($6,345 million in 2014) of which Atomic Energy of Canada Ltd. has recorded $6,487 million ($6,327 million in 2014) for nuclear facility decommissioning. These costs are normally capitalized and amortized over the asset's estimated useful life based on the Government's best estimates of the cost to retire the tangible asset. The liability reflects the present value of estimated future cash flows required to restore the assets where amounts can be reasonably estimated and is expected to be settled as the related sites, facilities or assets are removed from service.

iii. Other environmental liabilities

A liability for unexploded explosive ordnance (UXO) affected legacy sites is recognized when there is an appropriate basis for measurement and a reasonable estimate can be made. These liabilities are present obligations arising from past transactions or events, the settlement of which is expected to result in the future sacrifice of economic benefits.

The Government has identified approximately 918 UXO (865 in 2014) suspected sites for which clearance action may be necessary. Of these sites, 57 (63 in 2014) are confirmed UXO affected sites. Based on the Government's best estimates, a liability of $1.3 million ($2 million in 2014) has been recorded for clearance action on 5 (6 in 2014) of the confirmed UXO sites. The remaining 861 suspect sites are currently in the assessment stage and a reasonable estimate cannot yet be determined. Of these sites, the obligation for clearance action is likely for 68 sites, indeterminable for 774 sites and unlikely for 19 sites

The Government's ongoing efforts to assess contaminated sites, asset retirement obligations and UXO affected sites may result in additional environmental liabilities. Any additional liabilities will be accrued in the year in which they become known and can be reasonably estimated.

18. Contingent Liabilities

Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown. They are grouped into contingent liabilities related to: guarantees provided by the Government, international organizations, claims and pending and threatened litigation, and insurance programs of agent enterprise Crown corporations.

i. Guarantees provided by the Government

At March 31, 2015, the principal amount outstanding for guarantees provided by the Government amount to $442,904 million ($407,039 million in 2014) for which an allowance of $317 million ($386 million in 2014) has been recorded. The authorized limit, where applicable, is established at $356,950 million ($355,006 million in 2014) for an amount of $188,901 million ($160,435 million in 2014) of guarantees provided by the Government. The amount of guarantees with no authorized limit is established at $254,003 million ($246,604 million in 2014). Guarantees provided by the Government include guarantees on the borrowings of enterprise Crown corporations and other government business enterprises, loan guarantees, insurance programs managed by the Government, and other explicit guarantees. Of the total amount guaranteed, $253,049 million ($245,223 million in 2014) relates to guarantees on the borrowings of agent enterprise Crown corporations for which no authorized limit has been set and no allowance (nil in 2014) has been recorded.

ii. International organizations

The Government has callable share capital in certain international organizations that could require payments to those agencies. As at March 31, 2015, callable share capital amounts to $30,601 million ($28,217 million in 2014).

iii. Claims and pending and threatened litigation

There are thousands of claims and pending and threatened litigation cases outstanding against the Government. These claims include items with pleading amounts and items where an amount is not specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. The Government has recorded an allowance for claims and litigation where it is likely that there will be a future payment and a reasonable estimate of the loss can be made. Claims and litigation for which the outcome is not determinable and for which an amount has not been accrued, are estimated at approximately $8,304 million ($7,300 million in 2014) which is based on management's best estimate determined on a case by case basis. Certain large and significant claims are described below:

Comprehensive land claims: Comprehensive land claims arise in areas of the country where Aboriginal rights and title have not been resolved by treaty or by other legal means. There are currently 80 (81 in 2014) comprehensive land claims under negotiation, accepted for negotiation or under review. A liability of $4,840 million ($3,912 million in 2014) is estimated for claims that have progressed to a point where quantification is possible. This estimate includes projections based on historical rates and costs of settlement for similar claims.

Specific claims: Specific claims deal with the past grievances of First Nations related to Canada's obligations under historic treaties or the way it managed First Nations' funds or other assets. The Government of Canada will pursue a settlement agreement with the First Nation when a claim demonstrates an outstanding lawful obligation. There are currently 456 (447 in 2014) specific claims under negotiation, accepted for negotiation or under review. A liability of $3,458 million ($3,265 million in 2014) is estimated for claims that have progressed to a point where quantification is possible. This estimate includes projections based on historical rates and costs of settlement for similar claims.

Assessed taxes under objection or appeal: Contingent liabilities include previously assessed taxes where amounts are under objection or are being appealed to the Tax Court of Canada, the Federal Court of Canada, or the Supreme Court of Canada. As of March 31, 2015, $22,987 million ($22,230 million for 2014) was under objection at the Government level and $5,450 million ($4,715 million for 2014) was being appealed to the courts. The Government has recorded, in the amounts payable to taxpayers or in reduction of the amounts receivable from taxpayers, as applicable, the estimated amount of objections or appeals that are considered likely to be lost and that can be reasonably estimated.

iv. Insurance programs of agent enterprise Crown corporations

Four agent enterprise Crown corporations operate insurance programs for the Government. In the event that the corporations have insufficient funds, the Government will have to provide financing. The Canada Deposit Insurance Corporation operates the Deposit Insurance Fund which provides basic protection coverage to depositors for up to $100,000 deposited with each member bank, trust or loan company; the Canada Mortgage and Housing Corporation operates the Mortgage Insurance Fund which provides insurance for mortgage lending on Canadian housing by private institutions and the Mortgage‑Backed Securities Guarantee Fund which guarantees the timely payment of the principal and interest for investors of securities based on the National Housing Act through the Mortgage‑Backed Securities program and the bonds issued by the Canada Housing Trust through the Canada Mortgage Bond program; Export Development Canada provides export and foreign investment insurance to help with export trade; and Farm Credit Canada sells group creditor life and accident insurance to its customers through a program administered by a major insurance provider. At March 31, 2015, total insurance in force amounts to $1,671,666 million ($1,648,444 million in 2014). The Government expects that all four corporations will cover the cost of both current claims and possible future claims.

Further details on contingent liabilities can be found in Section 11 (unaudited) of this volume.

19. Segmented Information

The Government segmented information is based on the ministry structure, which groups the activities of departments and agencies for which a Minister is responsible, and the Crown corporations and other entities as described in Note 12. The five main ministries are reported separately and the others are grouped together with the provision for valuation and other items. The presentation by segment is based on the same accounting policies as those described in the Summary of significant accounting policies in Note 1. Inter-segment transfers are measured at the exchange amount. The following tables present the segmented information by Ministry and Crown corporations and other entities before the elimination of internal transactions that are eliminated in the Adjustments column before arriving at the total for the year ended March 31:

Table Summary

The table presents, in millions of dollars, the segmented information for the Consolidated Statement of Operations by Ministry and Crown corporations and other entities before the elimination of internal transactions for the current year. It consists of two columns: a detailed listing of components; current year divided into nine columns — Canada Revenue Agency, Finance, National Defence, Public Safety and Emergency Preparedness, Other ministries, Crown corporations and other entities, Adjustments and Total. The first series of rows presents the Revenues and is divided into three sub‑sections with related subtotals. The final row of the series presents the total of revenues. The second series of rows presents the expenses and is divided in two sub‑sections with related subtotals. The final row of the series presents the total of program expenses. The following row presents public debt charges. A final row presents the total for this table.

(in millions of dollars)

  2015
Canada Revenue Agency Employment and Social Development Finance National Defence Public Safety and Emergency Preparedness Other ministries Crown corporations and other entities AdjustmentsLink to footnote 21 Total
Revenues                  
Tax Revenues  —                  
Income tax revenues 181,406               181,406
Other taxes and duties 18,137       29,045       47,182
Total Tax Revenues 199,543       29,045       228,588
Employment Insurance Premiums   22,962           (negative 398) 22,564
Other Revenues  —                  
Crown corporations             17,730 (negative 4,250) 13,480
Other programs 5,061 2,636 885 630 2,244 11,578 519 (negative 7,194) 16,359
Net foreign exchange     1,355           1,355
Total Other Revenues 5,061 2,636 2,240 630 2,244 11,578 18,249 (negative 11,444) 31,194
Total Revenues 204,604 25,598 2,240 630 31,289 11,578 18,249 (negative 11,842) 282,346
Expenses                  
Transfer Payments  —                  
Old age security benefits, guaranteed income supplement and spouse's allowance   44,103             44,103
Major transfer payments to other levels of government     61,136     1,973     63,109
Employment insurance benefits   18,052             18,052
Children's benefits 10,372 3,931             14,303
Other transfer payments 3,350 6,311 920 136 204 23,886 487 (negative 168) 35,126
Total Transfer Payments 13,722 72,397 62,056 136 204 25,859 487 (negative 168) 174,693
Other Program Expenses —                  
Crown corporations             7,951 (negative 361) 7,590
Ministries 8,372 4,317 726 23,837 10,077 35,253 284 (negative 11,308) 71,558
Total Other Program Expenses 8,372 4,317 726 23,837 10,077 35,253 8,235 (negative 11,669) 79,148
Total Program Expenses 22,094 76,714 62,782 23,973 10,281 61,112 8,722 (negative 11,837) 253,841
Public Debt Charges     26,330 68 1 200   (negative 5) 26,594
Total Expenses 22,094 76,714 89,112 24,041 10,282 61,312 8,722 (negative 11,842) 280,435
Table Summary

The table presents, in millions of dollars, the segmented information for the Consolidated Statement of Operations by Ministry and Crown corporations and other entities before the elimination of internal transactions for the previous year. It consists of two columns: a detailed listing of components; previous year divided into nine columns — Canada Revenue Agency, Finance, National Defence, Public Safety and Emergency Preparedness, Other ministries, Crown corporations and other entities, Adjustments and Total. The first series of rows presents the Revenues and is divided into three sub-sections with related subtotals. The final row of the series presents the total of revenues. The second series of rows presents the expenses and is divided in two sub‑sections with related subtotals. The final row of the series presents the total of program expenses. The following row presents public debt charges. A final row presents the total for this table.

(in millions of dollars)

  2014
Canada Revenue Agency Employment and Social Development Finance National Defence Public Safety and Emergency Preparedness Other ministries Crown corporations and other entities AdjustmentsLink to footnote 21 Total
Revenues                  
Tax Revenues  —                  
Income tax revenues 173,802               173,802
Other taxes and duties 19,233       26,903       46,136
Total Tax Revenues 193,035       26,903       219,938
Employment Insurance Premiums   22,160           (negative 394) 21,766
Other Revenues  —                  
Crown corporations             15,843 (negative 4,388) 11,455
Other programs 5,830 2,601 795 528 2,202 11,642 415 (negative 7,177) 16,836
Net foreign exchange     1,682           1,682
Total Other Revenues 5,830 2,601 2,477 528 2,202 11,642 16,258 (negative 11,565) 29,973
Total Revenues 198,865 24,761 2,477 528 29,105 11,642 16,258 (negative 11,959) 271,677
Expenses                  
Transfer Payments  —                  
Old age security benefits, guaranteed income supplement and spouse's allowance   41,786             41,786
Major transfer payments to other levels of government     58,369     2,106     60,475
Employment insurance benefits   17,300             17,300
Children's benefits 10,402 2,734             13,136
Other transfer payments 3,361 6,322 1,100 159 2,097 23,228 516 (negative 85) 36,698
Total Transfer Payments 13,763 68,142 59,469 159 2,097 25,334 516 (negative 85) 169,395
Other Program Expenses —                  
Crown corporations             7,885 (negative 401) 7,484
Ministries 8,109 4,745 807 22,019 10,008 37,235 271 (negative 11,466) 71,728
Total Other Program Expenses 8,109 4,745 807 22,019 10,008 37,235 8,156 (negative 11,867) 79,212
Total Program Expenses 21,872 72,887 60,276 22,178 12,105 62,569 8,672 (negative 11,952) 248,607
Public Debt Charges     27,999 26 1 201   (negative 7) 28,220
Total Expenses 21,872 72,887 88,275 22,204 12,106 62,770 8,672 (negative 11,959) 276,827

20. Subsequent Events

i. Divestiture of remaining interests in General Motors

Subsequent to the end of the fiscal year, through an enterprise Crown corporation, the Government sold its remaining 73 million common shares in General Motors Company through an unregistered block trade. The shares were sold on April 6, 2015 for proceeds of $3,254 million, resulting in a realized gain of $2,131 million recorded in other revenues that will be reflected on the Consolidated Statement of Operations and Accumulated Deficit for fiscal year 2015–2016.

Footnotes

Footnote 1

This amount differs from the expense shown on the Consolidated Statement of Operations and Accumulated Deficit due to the amortization of tangible capital assets and the net loss on disposal of assets of consolidated Crown corporations, which have been reclassified within their respective object of expense.

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Footnote 2

Included in this amount are actuarial gains and losses on pensions and other employee future benefits of enterprise Crown corporations and other government business enterprises which are a part of other comprehensive income but recorded directly to accumulated deficit and therefore are not a component of accumulated other comprehensive income.

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Footnote 3

Includes $3,910 million of Canada savings bonds having fixed dates of maturity which are redeemable on demand.

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Footnote 4

Includes $68 million of securities held for the retirement of unmatured debt, $15 million of securities held by consolidated Crown corporations and other entities and $475 million of borrowings by consolidated agent Crown corporations.

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Footnote 5

Debt with terms to maturity of less than one year is considered to have a variable interest rate. For marketable bonds and foreign currency notes, some of the fixed interest rates were converted into variable interest rates through swap agreements.

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Footnote 6

Includes real return bonds which have a variable component based on the consumer price index.

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Footnote 7

The streamed discount rates used to measure the accrued benefit obligations are equivalent to the flat discount rates presented in the table. The initial discount rates used to measure the benefit expense are presented in the table whereas the ultimate discount rates are expected to reach 6.1 percent by 2022 (6.1 percent by 2020 in 2014) for the funded pension benefits and 5.1 percent by 2040 (5.1 percent by 2036 in 2014) for the unfunded pension benefits. The interest expense is calculated using the discount rates presented in the table.

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Footnote 8

Included in cash is $20,000 million ($20,000 million in 2014) which has been designated as a deposit held at the Bank of Canada with respect to prudential liquidity management undertaken by the Government.

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Footnote 9

Amounts reported as dividends include $1,041 million ($1,331 million in 2014) from Canada Development Investment Corporation, $1,100 million ($1,127 million in 2014) from the Bank of Canada and nil ($2,569 million in 2014) from Export Development Canada.

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Footnote 10

Amounts reported as capital include a return of capital of $1,030 million (nil in 2014) from Canada Development Investment Corporation.

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Footnote 11

Except for the Confederation Bridge, which is amortized over 100 years.

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Footnote 12

Adjustments include assets under construction of $5,193 million that were transferred to other categories upon completion of the assets.

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Footnote 13

Acquisitions of assets under capital leases do not involve the use of cash and are therefore excluded from the Consolidated Statement of Cash Flow.

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Footnote 14

Contamination associated with former mine activities, e.g. heavy metals, petroleum hydrocarbons, etc. Sites often have multiple sources of contamination.

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Footnote 15

Contamination associated with former nuclear operations, e.g. low‑level radioactive waste, radioactive isotopes.

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Footnote 16

Contamination associated with the operations of military and former military sites where activities such as fuel handling and storage activities, waste sites, metals/PCB‑based paint used on buildings resulted in former or accidental contamination, e.g. petroleum hydrocarbons, PCBs, heavy metals. Sites often have multiple sources of contamination.

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Footnote 17

Contamination primarily associated with fuel storage and handling, e.g., accidental spills related to fuel storage tanks or former fuel handling practices, e.g. petroleum hydrocarbons, polyaromatic hydrocarbons and BTEX (benzene, toluene, ethylbenzene and xylenes).

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Footnote 18

Contamination associated with the operations of marine assets, e.g., port facilities, harbours, navigation systems, light stations, hydrometric stations, where activities such as fuel storage/handling, use of metal based paint on light stations resulted in former or accidental contamination, e.g. metals, petroleum hydrocarbons, polyaromatic hydrocarbons and other organic contaminants. Sites often have multiple sources of contamination.

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Footnote 19

Contamination associated with former landfill/waste site or leaching from materials deposited in the landfill/waste site, e.g. metals, petroleum hydrocarbons, BTEX, other organic contaminants, etc.

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Footnote 20

Contamination from other sources, e.g. use of pesticides, herbicides, fertilizers at agricultural sites; use of PCBs, firefighting training areas, firing ranges and training facilities, the operations of assets such as airports, railways and roads where activities such as, fuel storage/handling, waste sites, and chemical storage areas resulted in former or accidental contamination, e.g. metals, petroleum hydrocarbons, polyaromatic hydrocarbons, BTEX and other organic contaminants.

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Footnote 21

Represents consolidation adjustments to eliminate internal transactions

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