Canadian Intellectual Property Office Revolving Fund

Public Accounts of Canada 2015 Volume III - Top of the page Navigation

Statement of Management Responsibility

We have prepared the accompanying financial statements of the Canadian Intellectual Property Office Revolving Fund (the "Fund") as required by and in accordance with the policy of Treasury Board on revolving funds and the reporting requirements and standards of the Receiver General for Canada. These financial statements were prepared by the management of the Fund in accordance with the significant accounting policies set out in Note 2 of the statements, on a basis consistent with that of the preceding year.

Responsibility for the integrity and objectivity of these financial statements rests with the management of the Fund. The information included in these financial statements is based on management's best estimates and judgement with due consideration given to materiality. To fulfill its accounting and reporting responsibilities, the Fund maintains a set of accounts, which provides a centralized record of the Fund's financial transactions. Financial information contained in the ministerial statements and elsewhere in the Public Accounts of Canada is consistent with that in these financial statements, unless indicated otherwise.

The Fund's directorate of financial services develops and disseminates financial management and accounting policies and issues specific directives, which maintain standards of accounting and financial management. The Fund maintains systems of financial management and internal control which gives due consideration to costs, benefits and risks. They are designed to provide reasonable assurance that transactions are properly authorized by Parliament, are executed in accordance with prescribed regulations, and are properly recorded to maintain accountability of Government funds and safeguard the assets under the Fund's administration. The Fund also seeks to assure the objectivity and integrity of data in its financial statements by the careful selection, training and development of qualified staff, by organizational arrangements that provide appropriate divisions of responsibility and by communication programs aimed at ensuring that its regulations, policies, standards and managerial authorities are understood throughout the organization.

At the request of the Fund, these financial statements have been examined by external auditors, their role being to express an opinion as to whether the financial statements present fairly the financial position as at March 31, 2015 and the results of operations and cash flow for the year then ended in accordance with the accounting principles for revolving funds of the Government of Canada as described in Note 2 to the financial statements.

Approved by:

Pierre R. Bélisle
Acting / Chief Executive Offcer

David Enns
Chief Financial Officer

May 22, 2015

Statement of Authority provided (Used) (Unaudited) for the year ended March 31

Table Summary

The table presents on a comparative basis the statement of Authority provided (Used) (Unaudited). It consists of five columns: item descriptions, current year with two columns — estimates and actual, and previous year with two columns — estimates and actual. Subtotals are displayed at operating source of funds and totals are displayed at authority provided (used).

(in thousands of dollars)

  2015 2014
Estimates Actual Estimates Actual
Net results 2,659 8,705 (negative 4,358) 7,120
Items not requiring the use of funds 1,191 1,294 2,357 2,155
Operating source (use) of funds 3,850 9,999 (negative 2,001) 9,275
Items requiring use of funds        
Net capital acquisitions (negative 10,784) (negative 1,843) (negative 7,275) (negative 1,549)
Net other assets and liabilities (negative 1,884) (negative 5,001) (negative 8,328) (negative 9,179)
Transition payments for implementing salary payments in arrears   (negative 2,890)    
Authority provided (used) (negative 8,818) 265 (negative 17,604) (negative 1,453)

Reconciliation of Unused Authority (Unaudited) as at March 31

Table Summary

The table presents on a comparative basis the reconciliation of Unused Authority (Unaudited). It consists of three columns: item descriptions, current year and previous year. Subtotals are displayed at net authority provided end of year and totals are displayed at the unused authority carried forward.

(in thousands of dollars)

  2014 2013
Accumulated net charge against the Fund's authorityLink to footnote 1 173,041 171,416
Payables at year‑end charged against the appropriation account after March 31 (negative 12,539) (negative 11,791)
Amounts credited to the appropriation account after March 31 837 625
Other items 6,067 6,891
Net authority provided, end of year 167,406 167,141
Authority limit (Note 1) 5,000 5,000
Unused authority carried forward 172,406 172,141

Independent Auditors' Report

To the Deputy Minister of Industry Canada

We have audited the accompanying financial statements of the Canadian Intellectual Property Office Revolving Fund, which comprise the statement of financial position as at March 31, 2015, the statements of operations and net liabilities, and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. These financial statements have been prepared by management in accordance with Section 6, subsection 4 of the Treasury Board of Canada's Policy on Special Revenue Spending Authorities.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Section 6, subsection 4 of the Treasury Board of Canada's Policy on Special Revenue Spending Authorities, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Canadian Intellectual Property Office Revolving Fund, as at March 31, 2015, and its results of operations and its cash flows for the year then ended, in accordance with the reporting requirements of Section 6, subsection 4 of the Treasury Board of Canada's Policy on Special Revenue Spending Authorities.

Basis of Accounting and Restriction on Use

Without modifying our opinion, we draw attention to Note 2 to the financial statements which describe the basis of accounting. The financial statements are prepared solely for the information and use of the management of the Revolving Fund, Deputy Minister of Industry Canada and the Treasury Board of Canada Secretariat for reporting on the use of the Fund authority. The financial statements are not intended to be and should not be used by anyone other than the specified users or for any other purpose.

KPMG LLP
Chartered Professional Accountants,
Licensed Public Accountants

Ottawa, Canada
May 22, 2015

Statement of Financial Position as at March 31

Table Summary

The table presents on a comparative basis the statement of Financial Position. It consists of three columns: item descriptions, current year and previous year. Item descriptions are grouped in two: assets and liabilities, both displaying totals. Current item descriptions are grouped together for assets and for liabilities, both displaying subtotals.

(in thousands of dollars)

  2015 2014
Assets    
Current    
Petty cash 3 3
Accounts receivable    
Government of Canada 59 8
Outside parties 778 617
Unbilled revenues 8,588 6,857
Prepaid expenses 377 304
Subtotal 9,805 7,789
Capital assets (Note 3) 4,149 3,955
Unbilled revenues 94 1,121
Total 14,048 12,865
Liabilities    
Current    
Deposit accounts 3,711 3,173
Accounts payable    
Government of Canada 1,992 4,286
Outside parties 10,547 7,505
Deferred revenues 40,694 38,077
Total 56,944 53,041
Employee termination benefits (Note 4) 4,133 5,149
Deferred revenues 32,748 38,642
Total 36,881 43,791
Net Liabilities (Note 5) (negative 79,777) (negative 83,967)
Total 14,048 12,865

Statement of Operations and Net Liabilities for the year ended March 31

Table Summary

The table presents on a comparative basis the statement of Operations and Net Liabilities. It consists of three columns: item descriptions, current year and previous year. Item descriptions for expenses are grouped together displaying subtotals. Subtotals for revenues net of expenses are displayed at net results and totals are displayed at net liabilities end of year.

(in thousands of dollars)

  2015 2014
Revenues 153,460 151,869
Expenses    
Salaries and employee benefits 95,324 102,230
Professional services 34,400 28,658
Amortization of capital assets 839 1,749
Accommodation 7,399 8,172
Materials and supplies 988 1,167
Information 2,048 236
Communications 3 20
Travel 506 422
Freight and postage 582 504
Repairs and maintenance 966 876
Training 804 626
Rentals 87 90
Loss/(gain) on disposal of capital assets 809 (negative 1)
Subtotal 144,755 144,749
Net results of operations 8,705 7,120
Net liabilities, beginning of year (negative 83,967) (negative 95,679)
Net financial resources used (provided) and change in the accumulated net charge against the Fund's authority, during the year (negative 1,625) 4,592
Transfer of the transition payments for implementing salary payments in arrears (Note 11) (negative 2,890)  
Net liabilities, end of year (negative 79,777) (negative 83,967)

Statement of Cash Flows for the year ended March 31

Table Summary

The table presents on a comparative basis the statement of Cash Flows. It consists of three columns: item descriptions, current year and previous year. Item descriptions are grouped in two: operating activities which displays subtotals and investing activities. Subtotals are displayed at net financial resources provided and change in the accumulated net charge against the Fund's authority account during the year. Totals are displayed at accumulated net charge against the Fund's authority account end of year.

(in thousands of dollars)

Statement of Cash Flows for the year ended March 31

  2015 2014
Operating activities    
Net results 8,705 7,120
Amortization of capital assets 839 1,749
Loss/(gain) on disposal of capital assets 809 (negative 1)
Provision for employee termination benefits (negative 354) 407
Subtotal 9,999 9,275
Changes in working capital (Note 7) 1,888 (negative 4,773)
Changes in other assets and liabilities    
Unbilled revenues 1,027 (negative 596)
Employee termination benefits (negative 662) (negative 7,020)
Deferred revenues (negative 5,894) 71
Subtotal (negative 5,529) (negative 7,545)
Transition payments for implementing salary payments in arrears (negative 2,890)  
Net financial resources provided (used) by operating activities 3,468 (negative 3,043)
Investing activities    
Acquisition of capital assets (negative 1,843) (negative 1,549)
Net financial resources provided (used) and change in the accumulated net charge against the Fund's authority, during the year 1,625 (negative 4,592)
Accumulated net charge against the Fund's authority, beginning of year 171,416 176,008
Accumulated net charge against the Fund's authority, end of year 173,041 171,416

Notes to financial statements for the year ended March 31, 2015

1. Authority and purpose

The Canadian Intellectual Property Office Revolving Fund (the "Fund") grants or registers exclusive ownership of intellectual property in Canada. In exchange, the Fund acquires intellectual property information and state‑of‑the‑art technology which it disseminates to Canadian firms, industries and individuals to improve economic performance, competitiveness and to stimulate further invention and innovation.

The Fund was established on April 1, 1994. The authority to make expenditures out of the Consolidated Revenue Fund, was granted on February 22, 1994 and had an authorized limit of $15 million. During the fiscal year ended March 31, 2002, the Fund's authorized limit was reduced from $15 million to $5 million. The Fund has a continuing non‑lapsing authority from Parliament to make payments out of the Consolidated Revenue Fund for working capital, capital acquisitions and temporary financing of accumulated operating deficits. The Fund may retain surpluses to continue to automate operations.

The Fund is not subject to income taxes.

2. Significant accounting policies

The financial statements have been prepared in accordance with the reporting requirements for revolving funds described by the Receiver General for Canada. The basis of accounting used in these financial statements differs from Canadian generally accepted accounting principles because:

  • services received without charge from other government departments are not reported as expenses;
  • vacation pay and employee termination benefits liability are based on management's estimates rather than based on actuarial valuations; and
  • contingent liabilities are disclosed rather than recorded.

The significant accounting policies are as follows:

a. Revenue recognition

Fees received for processing patent, trade‑mark and industrial design applications are recorded as deferred revenues until services are rendered, at which time they are recorded as revenue. Detailed inventory counts of applications are used to determine the amount of deferred revenue taking into account the fee schedule related to the application. Different rates may be charged depending of the size of the entity. Abandonments during the application process are recorded as earned revenue. When work is completed prior to the receipt of the fee, the amount is recorded as unbilled revenue. Fees are prescribed by various Orders in Council.

b. Capital assets and amortization

Capital assets are recorded at cost. Capital assets are amortized on a straight‑line basis over their estimated useful lives, beginning in the month after acquisition, as follows:

Table Summary

The table presents capital assets and amortization and consists of two columns: the assets categories with respective amortization periods.

Leasehold improvements 5 years
Software 3 years
Hardware 3-5 years
Furniture 10 years
Systems Estimated useful life, beginning in the year of deployment

c. Employee termination benefits

Employees of the Fund are entitled to specified termination benefits, calculated based on salary levels in effect at the time of termination as provided for under collective agreements and conditions of employment. These benefits are accrued as employees render the services necessary to earn them. In Budget 2012, the Government of Canada announced that it was eliminating the accumulation of termination benefits for voluntary resignation and retirement for federal government employees. As part of the implementation of this measure, collective agreements had provided three options to address the balances accumulated to date. These included:

  1. a single payment at the rate of pay of the employee's substantive position as of the coming into force of the collective agreement, or
  2. a single payment at the time of the employee's termination of employment from the core public administration, based on the rate of pay of the employee's substantive position at the date of termination of employment from the core public administration, or
  3. a combination of (1) and (2).

With the introduction of options (1) and (3), the Fund has been and will be required to draw down on the Employee termination benefit liability as the collective agreements came into force.

d. Pension plan

Employees of the Fund are covered by the Public Service Superannuation Plan administered by the Government of Canada. Under present legislation, contributions made by the Fund to the Plan are limited to an amount equal to the employee's contributions on account of current service. These contributions represent the total pension obligations of the Fund and are charged to operations on a current basis. The Fund is not required under present legislation to make contributions with respect to actuarial deficiencies of the Public Service Superannuation Account and/or with respect to charges to the Consolidated Revenue Fund for the indexation of payments under the Supplementary Retirement Benefits Act.

e. Use of estimates

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Revenues, the estimated useful lives of capital assets and salary related liabilities are the most significant items for which estimates are used. Actual results could differ from these estimates. These estimates are reviewed annually and as adjustments become necessary, they are recorded in the financial statements in the period in which they become known.

3. Capital assets

Table Summary

The table presents capital assets (above) and accumulated amortization (below), both displaying subtotals. The capital asset section of the table consists of six columns (item descriptions, balance at April 1 2014, acquisitions, transfers, disposals, and balance at March 31 2015) and the accumulated amortization section of the table consists of five columns (item descriptions, balance at April 1 2014, acquisitions, disposals and balance at March 31 2015). The bottom of the table displays the capital assets net of accumulated amortization totals at net total for the columns: balance at April 1 2014 and balance at March 31 2015.

(in thousands of dollars)

Cost Balance at April 1, 2014 Acquisitions Transfers Disposals Balance at March 31, 2015
Leasehold improvements 22,434       22,434
Software 11,174     622 10,552
Hardware 514     32 482
Furniture 494       494
Systems 21,400       21,400
Assets under development          
Systems under development 1,865 1,843   810 2,898
Total 57,881 1,843   1,464 58,260
Accumulated amortization Balance at April 1, 2014 Amortization Transfers Disposals Balance at March 31, 2015
Leasehold improvements 22,219 68     22,287
Software 10,519 403   622 10,300
Hardware 414 12   32 394
Furniture 218 49     267
Systems 20,556 307     20,863
Total 53,926 839   654 54,111
Net book value 3,955       4,149

4. Employee termination benefits

As a result of the elimination of the accumulation of termination benefits and the subsequent introduction of the three options to address the accumulated balances, which were summarized in Note 2, the Fund was required to pay out $6,315,213 during fiscal year 2013‑2014. The Employee termination benefit liability had been adjusted accordingly.

Table Summary

The table presents on a comparative basis the employee termination benefits. It consists of three columns: item descriptions, current year and previous year. Totals are displayed at employee termination benefits end of year.

(in thousands of dollars)

  2015 2014
Employee termination benefits beginning of year 5,149 11,762
Benefits paid during the year    
For retirements and departures from the Public Service (negative 401) (negative 705)
For employees who opted to cash out their accumulated balances as per the new collective agreements (negative 261) (negative 6,315)
Expense for the year (negative 354) 407
Employee termination benefits, end of year 4,133 5,149

5. Net liabilities

Accumulated Net Charge Against the Fund's Authority

The accumulated net charge against the Fund's authority is the cash position of the Revolving Fund, held by the Government on behalf of the Revolving Fund.

Accumulated surplus

The accumulated surplus is an accumulation of the annual net results of operations including the absorption of the opening deficit of $9,448,000 upon establishment of the Revolving Fund.

Table Summary

The table presents on a comparative basis the net liabilities. It consists of three columns: item descriptions, current year and previous year. Subtotals are displayed at accumulated surplus end of year and totals are displayed at net liabilities.

(in thousands of dollars)

  2015 2014
Accumulated surplus, opening balance 87,449 80,329
Net results of operations 8,705 7,120
Transfer of the transition payments for implementing salary payments in arrears (negative 2,890)  
Accumulated surplus, closing balance 93,264 87,449
Accumulated net charge against the Fund's authority account, closing balance (negative 173,041) (negative 171,416)
Net liabilities (negative 79,777) (negative 83,967)

6. Contractual obligations

The Fund is engaged in contractual obligations for:

Operating leases for its office premises:

Table Summary

The table presents total annual contractual obligations for operating leases of its office premises for 2016 to 2020. The last row presents the totals for those years.

(in thousands of dollars)

2016 7,488
2017 7,402
2018 7,419
2019 5,653
2020 64
Total 28,026

The preceding amounts represent only the leases for office premises that were signed and in force as at March 31, 2015.

Searching services and access to on-line databases:

Table Summary

The table presents total annual contractual obligations for Searching Services and Access to on‑line databases for 2016 to 2017. The last row presents the totals of for those years.

(in thousands of dollars)

2016 1,964
2017 157
Total 2,121

Translation:

Table Summary

The table presents total annual contractual obligations for translation services for 2016.

(in thousands of dollars)

2016 1,096

7. Changes in working capital

Components of the changes in current assets and liabilities include:

Table Summary

The table presents on a comparative basis changes in working capital. It consists of three columns: item descriptions, current year and previous year. The last row presents the total for all item descriptions.

(in thousands of dollars)

  2015 2014
Accounts receivable (negative 212) 872
Unbilled revenues (short term) (negative 1,731) 1,086
Prepaid expenses (negative 73) 97
Deposit accounts 538 (negative 1,737)
Accounts payable 749 (negative 2,222)
Deferred revenues (short term) 2,617 (negative 2,869)
Total 1,888 (negative 4,773)

8. Related party transactions

Through common ownership, the Fund is related to all Government of Canada created departments, agencies and Crown corporations. Payments for accommodation, translation, legal services, compensation and benefits services, mail services, security services and mainframe and computing services are made to related parties in the normal course of business.

9. Insurance

The Fund does not carry insurance on its property. This is in accordance with the Government of Canada policy of self‑insurance.

10. Contingencies

Sick leave

Employees are permitted to accumulate unused sick leave. However, such leave entitlements do not vest and can be used only in the event of illness. The amount of accumulated sick leave entitlements which will become payable in future years cannot reasonably be determined and accordingly have not been recorded in the accompanying financial statements. Payments of sick leave benefits are included in current operations as incurred.

11. Transfer of the transition payments for implementing salary payments in arrears

The Government of Canada implemented salary payments in arrears in 2014–2015. As a result, a one‑time payment was issued to employees and will be recovered from them in the future. The transition to salary payments in arrears forms part of the transformation initiative that replaces the pay system and also streamlines and modernizes the pay processes. This change to the pay system had no impact on the expenses of the Revolving Fund. However, it did result in the use of authorities by the Revolving Fund and impacted the accumulated net charge against the Fund's authority. Prior to year end, transition payments for implementing salary payments in arrears were transferred to a central account administered by Public Works and Government Services Canada, who is responsible for the administration of the Government pay system.

12. Comparative information

Certain 2014 comparative information has been reclassified with the financial statement presentation adopted for the current year.

Footnotes

Footnote 1

Debit balance in the accumulated net charge against the Fund's authority.

Return to footnote 1 referrer

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