Consolidated financial statements

Public Accounts of Canada 2016 Volume I—Top of the page Navigation

Consolidated statement of operations and accumulated deficit for the year ended March 31, 2016

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—Actual. The first series of rows presents the revenues. It 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. It 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 obtained by subtracting the total expenses from the total revenues. 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)

  2016 2015
Budget
(Note 3)
Actual Actual
Revenues (Note 19)
Tax revenues
Income tax revenues
Personal 143,355 144,897 135,743
Corporate 36,846 41,444 39,447
Non-resident 6,195 6,505 6,216
Total income tax revenues 186,396 192,846 181,406
Other taxes and duties
Goods and services tax 32,734 32,952 31,349
Energy taxes 5,607 5,565 5,528
Customs import duties 4,887 5,372 4,581
Other excise taxes and duties 5,795 5,916 5,724
Total other taxes and duties 49,023 49,805 47,182
Total tax revenues 235,419 242,651 228,588
Employment insurance premiums 23,125 23,070 22,564
Other revenues
Crown corporations 13,111 12,460 13,480
Other programs 16,580 14,950 16,359
Net foreign exchange 2,051 2,322 1,355
Total other revenues 31,742 29,732 31,194
Total revenues 290,286 295,453 282,346
Expenses (Note 4 and Note 19)
Transfer payments
Old age security benefits, guaranteed income supplement and spouse's allowance 45,678 45,461 44,103
Major transfer payments to other levels of government 65,436 65,850 63,109
Employment insurance benefits 18,375 19,419 18,052
Children's benefits 17,959 18,025 14,303
Other transfer payments 33,987 34,874 35,126
Total transfer payments 181,435 183,629 174,693
Other program expenses
Crown corporations 8,329 8,358 7,590
Ministries 73,448 78,858 71,558
Total other program expenses 81,777 87,216 79,148
Total program expenses 263,212 270,845 253,841
Public debt charges 25,704 25,595 26,594
Total expenses 288,916 296,440 280,435
Annual (deficit) surplus 1,370 (negative 987) 1,911
Accumulated deficit at beginning of year 612,330 612,330 611,881
Other comprehensive loss (Note 5 and Note 13) (negative 2,366) (negative 2,669) (negative 2,360)
Accumulated deficit at end of year (Note 5) 613,326 615,986 612,330

Consolidated statement of financial position as at March 31, 2016

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. It 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. It 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 obtained by subtracting the total financial assets from the total liabilities. The third series of rows presents the non-financial assets. The last row of this table presents the accumulated deficit—result obtained by subtracting the total non-financial assets from the net debt. The notes mentioned in the table refer to the notes within this section.

(in millions of dollars)

  2016 2015
Liabilities
Accounts payable and accrued liabilities
Amounts payable to taxpayers 53,697 56,198
Other accounts payable and accrued liabilities 45,971 40,737
Environmental liabilities (Note 6) 13,282 12,296
Deferred revenue 9,981 9,160
Interest and matured debt 4,922 5,240
Total accounts payable and accrued liabilities 127,853 123,631
Interest-bearing debt
Unmatured debt (Note 7) 688,211 665,180
Pensions and other future benefits
Public sector pensions (Note 8) 152,227 152,664
Other employee and veteran future benefits (Note 8) 85,681 76,140
Total pensions and other future benefits 237,908 228,804
Other liabilities (Note 9) 5,602 6,002
Total interest-bearing debt 931,721 899,986
Total liabilities 1,059,574 1,023,617
Financial assets
Cash and accounts receivable
Cash and cash equivalents (Note 10) 38,570 34,999
Taxes receivable (Note 11) 105,848 98,499
Other accounts receivable (Note 11) 10,270 3,198
Total cash and accounts receivable 154,688 136,696
Foreign exchange accounts (Note 12) 93,539 85,018
Loans, investments and advances
Enterprise Crown corporations and other government business enterprises (Note 13) 91,116 89,375
Other loans, investments and advances (Note 14) 24,841 24,306
Total loans, investments and advances 115,957 113,681
Public sector pension assets (Note 8) 1,639 1,263
Total financial assets 365,823 336,658
Net debt 693,751 686,959
Non-financial assets
Tangible capital assets (Note 15) 65,838 63,347
Inventories 7,221 7,250
Prepaid expenses and other 4,706 4,032
Total non-financial assets 77,765 74,629
Accumulated deficit (Note 5) 615,986 612,330
Contractual obligations and contingent liabilities (Note 17 and Note 18)

Consolidated statement of change in net debt for the year ended March 31, 2016

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—Actual. 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)

  2016 2015
Budget
(Note 3)
Actual Actual
Net debt at beginning of year 686,959 686,959 682,314
Change in net debt during the year
Annual deficit (surplus) (negative 1,370) 987 (negative 1,911)
Changes due to tangible capital assets
Acquisition of tangible capital assets 8,541 8,015 7,204
Amortization of tangible capital assets (negative 5,702) (negative 5,049) (negative 5,090)
Proceeds from disposal of tangible capital assets (negative 400) (negative 632) (negative 954)
Net gain on disposal of tangible capital assets, including adjustments 157 245
Total change due to tangible capital assets 2,439 2,491 1,405
Change due to inventories (negative 29) (negative 66)
Change due to prepaid expenses and other 674 2,857
Net increase in net debt due to operations 1,069 4,123 2,285
Other comprehensive loss (Note 5 and Note 13) 2,366 2,669 2,360
Net increase in net debt 3,435 6,792 4,645
Net debt at end of year 690,394 693,751 686,959

Consolidated statement of cash flow for the year ended March 31, 2016

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 obtained by adding the operating, capital investment, investing and financing activities. The last two rows present the cash and cash equivalents, at beginning and end of year—result obtained by adding the cash and cash equivalents at beginning of year, and 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)

  2016 2015
Operating activities
Annual (deficit) surplus (negative 987) 1,911
Non-cash items
Share of annual profit in enterprise Crown corporations and other government business enterprises (negative 7,316) (negative 8,365)
Amortization of tangible capital assets 5,049 5,090
Net gain on disposal of tangible capital assets, including adjustments (negative 157) (negative 245)
Cross-currency swap revaluation 1,722 4,343
Change in taxes receivable (negative 7,349) (negative 6,010)
Change in pensions and other future benefits 8,728 3,358
Change in foreign exchange accounts (negative 8,521) (negative 12,756)
Change in accounts payable and accrued liabilities 4,222 11,901
Change in cash collateral pledged to counterparties (negative 6,557)
Net change in other accounts 34 670
Cash used by operating activities (negative 11,132) (negative 103)
Capital investment activities
Acquisition of tangible capital assets (negative 7,379) (negative 6,804)
Proceeds from disposal of tangible capital assets 632 954
Cash used by capital investment activities (negative 6,747) (negative 5,850)
Investing activities
Enterprise Crown corporations and other government business enterprises
Equity transactions 4,975 3,514
Issuance of loans and advances (negative 54,542) (negative 79,905)
Repayment of loans and advances 52,699 88,168
Issuance of other loans, investments and advances (negative 7,749) (negative 8,124)
Repayment of other loans, investments and advances 6,145 5,503
Cash provided by investing activities 1,528 9,156
Financing activities
Issuance of Canadian currency borrowings 452,850 468,021
Repayment of Canadian currency borrowings (negative 435,143) (negative 471,891)
Issuance of foreign currency borrowings 26,817 16,961
Repayment of foreign currency borrowings (negative 24,602) (negative 12,724)
Cash provided by financing activities 19,922 367
Net increase in cash and cash equivalents 3,571 3,570
Cash and cash equivalents at beginning of year 34,999 31,429
Cash and cash equivalents at end of year (Note 10) 38,570 34,999
Supplementary information
Cash used for interest 14,337 15,152

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

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.

Tax expenditures that reduce taxes paid or payable are considered tax concessions and are netted against the applicable tax revenue. 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.

Tax collected on behalf of the provincial/territorial governments is not included in tax revenues. 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.

The following policies are applied for specific revenue streams:

Expenses

The Government has three major types of expenses: transfer payments, other program expenses and public debt charges.

Transfer payments are recorded as expenses when the recipients have met all the eligibility criteria and the transfers are authorized by March 31. 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 exchange 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). 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. The valuation allowance is based upon the amount qualified borrowers are expected to receive under various Government subsidy programs and the percentage of the subsidy expected to be applied to the outstanding loan balance.

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 recoverable 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, as described in Note 15. 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 generally the lower of the interest rate implicit in the lease and government's rate of incremental borrowing at the inception of the lease. These assets are amortized over the lease term or the estimated useful life of the asset in accordance with the asset type. 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, works of art, museum collections and Crown land to which no acquisition cost is attributable; and intangible assets. 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 per cent 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. As the Government does not specifically borrow on behalf of enterprise Crown corporations, 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.

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 a maximum of the related decrease in the accrued benefit obligation; similarly, an unrecognized net actuarial gain is recognized immediately, up to a maximum of the related increase in the accrued benefit obligation. 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 per cent 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 buyback 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, an allowance is recorded when it is determined that a loss is likely and 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.

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 future cash flows required to settle or otherwise extinguish a liability are estimable, predictable and 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 Consolidated Revenue Fund 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 ministries 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 March 31. 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 at March 31. 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 March 31. 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 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, 2016, net future benefit liabilities of $236,269 million ($227,541 million in 2015) 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 8.

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. Key assumptions used in estimating tax revenues are that tax instalments, historical information on refund rates, payments received on filing tax returns, and amounts receivable assessed 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 11. The methodologies used to determine the estimates were applied consistently with those of the previous year.

Environmental liabilities are subject to measurement uncertainty as discussed in Note 6 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.

3. Spending and borrowing authorities

a. 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. When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. During fiscal year 2015–2016, with the dissolution of Parliament on August 4, 2015, there were no requirements to issue special warrants to support expenditures

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 authorities 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)

  2016 2015
Annual spending limits voted by Parliament 95,358 93,955
Expenditures permitted under other legislation 158,135 148,614
Total budgetary expenditures authorized 253,493 242,569
Less: amounts available for use in subsequent years and amounts that have lapsed 12,094 11,428
Total net expenditures 241,399 231,141
Effect of consolidation and full accrual accounting 55,041 49,294
Total expenses 296,440 280,435

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 consolidated specified purpose accounts 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 $206,895 million ($245,788 million in 2015) was authorized for loans, investments and advances. A net amount of $55,446 million ($71,551 million in 2015) was used, an amount of $71 million ($33 million in 2015) lapsed and an amount of $151,378 million ($174,204 million in 2015) 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.

b. Over-expenditure of spending authorities

There were no over-expenditures of spending authorities in 2015–2016.

c. 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 2016, the Governor in Council specified $270,000 million ($270,000 million in 2015) 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 accounts. During the year, $237,867 million ($244,913 million in 2015) of the borrowing authority was used.

d. 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 2015–2016 in the April 2015 Budget Plan (Budget 2015).

Since actual opening balances of the accumulated deficit and net debt were not available at the time of preparation of Budget 2015, the corresponding amounts in the budget column have been adjusted to the actual closing balances of the previous year.

4. Expenses

Expenses in the Consolidated statement of operations and accumulated deficit include:

a. 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)

  2016 2015
Canada health transfer 34,025 32,114
Canada social transfer 12,959 12,582
Fiscal arrangements 16,893 16,271
Other major transfers 1,973 2,142
Total major transfer payments to other levels of government 65,850 63,109

b. Other transfer payments

Other transfer payments totalling $34,874 million ($35,126 million in 2015) include various amounts paid through federal programs to stabilize market prices for commodities, to develop new technologies, to conduct research, provide international development assistance, support health care and infrastructure of First Nations and Inuit communities, support social housing and families 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 of Section 3 (unaudited) of this volume.

c. 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 interest expenses related to pensions and other benenfits, and other liabilities. A final row presents the total for this table.

(in millions of dollars)

  2016 2015
Public debt charges related to unmatured debt
Interest on unmatured debt 13,203 13,614
Amortization of discounts on Canada and Treasury bills 871 1,420
Amortization of premiums and discounts on all other debts 1,503 841
Cross currency swap revaluation (negative 487) (negative 542)
Servicing costs and costs of issuing new borrowings 11 19
Capital lease obligations 209 209
Other unmatured debt 83 60
Total 15,393 15,621
Interest expense related to pensions and other future benefits 9,995 10,748
Other liabilities 207 225
Total public debt charges 25,595 26,594

d. 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 for this table presents the total for this table.

(in millions of dollars)

  2016 2015
Ministries
Agriculture and Agri-Food 2,028 2,081
Canadian Heritage 1,498 1,741
Environment and Climate Change 1,642 1,658
Families, Children and Social Development 81,743 75,013
Finance 90,176 88,892
Fisheries, Oceans and the Canadian Coast Guard 1,638 1,671
Global Affairs 6,224 6,126
Health 6,325 6,245
Immigration, Refugees and Citizenship 2,221 2,045
Indigenous and Northern Affairs 9,240 8,780
Infrastructure and Communities 3,135 3,020
Innovation, Science and Economic Development 4,001 5,007
Justice 1,615 1,625
National Defence 28,759 23,873
National Revenue 22,199 21,830
Natural Resources 1,523 2,253
Office of the Governor General's Secretary 21 20
Parliament 571 543
Privy Council 671 322
Public Safety and Emergency Preparedness 10,996 10,036
Public Services and Procurement 4,339 4,506
Transport 1,479 1,553
Treasury Board 4,214 3,277
Veterans Affairs 929 1,018
Provision for valuation and other items 234 (negative 957)
Total ministries 287,421 272,178
Crown corporations and other entities 9,019 8,257
Total expenses 296,440 280,435

e. 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; public debt charges; and the total for this table.

(in millions of dollars)

Objects of expense 2016 2015
Transfer payments 183,629 174,693
Other program expenses
Crown corporationsLink to footnote 1 7,846 7,162
Personnel 50,171 43,811
Transportation and communications 2,496 2,422
Information 235 232
Professional and special services 8,353 8,090
Rentals 2,052 1,979
Repair and maintenance 2,765 2,312
Utilities, materials and supplies 2,513 2,514
Other subsidies and expenses 5,592 5,435
Amortization of tangible capital assets 5,049 5,090
Net loss on disposal of assets 144 101
Total other program expenses 87,216 79,148
Total program expenses 270,845 253,841
Public debt charges 25,595 26,594
Total expenses 296,440 280,435

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 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)

  2016 2015
Accumulated deficit, excluding consolidated accounts and accumulated other comprehensive incomeLink to footnote 2 622,659 619,998
Consolidated specified purpose accounts
Employment Insurance Operating Account (negative 2,915) (negative 522)
Other insurance accounts (negative 711) (negative 707)
Other consolidated accounts (negative 326) (negative 306)
Subtotal 618,707 618,463
Consolidated Crown corporations and other entities (negative 1,463) (negative 2,274)
Accumulated other comprehensive income (negative 1,258) (negative 3,859)
Accumulated deficit 615,986 612,330

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. 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. 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 subtracted actuarial losses on pensions and other employee future benefits recorded directly to accumulated deficit to obtain the accumulated other comprehensive income at end of year.

(in millions of dollars)

  2016 2015
Accumulated other comprehensive income at beginning of year 3,859 4,317
Other comprehensive loss
Net change in unrealized gains and losses on available-for-sale financial instruments (negative 2,577) (negative 450)
Net change in fair value of derivatives designated as hedges (negative 24) (negative 8)
Actuarial losses on pensions and other employee future benefits (negative 68) (negative 1,902)
Total (negative 2,669) (negative 2,360)
Less: Actuarial losses on pensions and other employee future benefits recorded directly to accumulated deficit (negative 68) (negative 1,902)
Accumulated other comprehensive income at end of year 1,258 3,859

6. Environmental liabilities

a. 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 7,900 sites (8,600 sites in 2015) where contamination may exist and assessment, remediation and monitoring may be required. Of these, the Government has identified approximately 2,400 sites (2,400 sites in 2015), where action is possible and for which a gross liability of $5,954 million ($5,810 million in 2015) has been recorded. This liability estimate has been determined based on site assessments performed by scientific/engineering contractors. In 2016, a statistical model was developed to estimate the liability for a group of unassessed sites based on a projection of the number of sites that will proceed to remediation and applying current and historical costs. As a result, there are 4,300 unassessed sites where a liability estimate of $320 million has been recorded prospectively in 2016. These two estimates combined, totalling $6,274 million ($5,810 million in 2015), 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 on March 31

For the remaining 1,200 sites, no liability for remediation has been recognized. Some of these sites are at various stages of testing and evaluation and if remediation is required, liabilities will be reported as soon as a reasonable estimate can be determined. For other sites, the Government does not expect to give up any future economic benefits (there is likely no significant environmental impact or human health threats). These sites will be re-examined and a liability for remediation will be recognized if future economic benefits will be given up.

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, 2016 and March 31, 2015. When the liability estimate is based on a future cash requirement, the Consolidated Revenue Fund lending rate applicable to loans with similar terms to maturity has been used to discount the estimated future expenditures. March 2016 rates range from 0.62 per cent for 2 year term to 2.13 per cent for a 25 or greater year term.

Table summary

The table presents, in millions of dollars, a two-year comparative of the environmental liabiliites by nature and by source, the associated expected recoveries and the undiscounted future expenditures as at March 31. It consists of three columns: a listing of the liabilities by nature and by source; current year; previous year. The current and previous years' columns are divided into four columns, respectively–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)

  2016 2015
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 3 111 3,160 5,954 31 131 3,083 5,048 17
Radioactive materialLink to footnote 4 5 1,116 1,298 5 1,016 1,049
Military and former military sitesLink to footnote 5 288 574 594 177 559 581
Fuel related practicesLink to footnote 6 1,203 385 393 645 358 366
Marine facilities/aquatic sitesLink to footnote 7 3,294 290 301 819 278 291
Landfill/waste sitesLink to footnote 8 938 359 370 375 211 220
OtherLink to footnote 9 900 390 393 261 305 309
Total 6,739 6,274 9,303 31 2,413 5,810 7,864 17

Also during the year 1,200 sites (1,200 sites in 2015) were closed as they were either remediated or assessed to confirm that they no longer meet all the criteria required to record a liability for contaminated sites.

b. Asset retirement obligations

The asset retirement obligation is $6,767 million ($6,502 million in 2015) of which Atomic Energy of Canada Ltd. has recorded $6,763 million ($6,487 million in 2015) for nuclear facility decommissioning. In 2016, an amount of $233 million ($107 million in 2015) for the revisions in estimate and timing of expenditures was recorded. Also, an amount of $251 million ($250 million in 2015) was recognized to account for the unwinding of discount and the effect of change in discount rate and an amount of $219 million ($200 million in 2015) was recorded to settle the liabilities.

c. Other environmental liabilities

The Government has identified approximately 893 UXO (918 in 2015) suspected sites for which clearance action may be necessary. Of these sites, 61 (57 in 2015) are confirmed UXO affected sites. Based on the Government's best estimates, a liability of $272 million ($1.3 million in 2015) has been recorded for clearance action on 10 (5 in 2015) of the confirmed UXO sites. Remediation has been done on 14 of the sites and they will be closed in the next fiscal year. The remaining 869 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 61 sites, indeterminable for 667 sites and unlikely for 141 sites.

The Government's ongoing efforts to assess contaminated sites, asset retirement obligations and UXO affected sites may result in additional environmental liabilities.

7. 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)

  2016 2015
Market debt
Payable in Canadian currency 647,244 629,233
Payable in foreign currencies 22,482 20,267
Total 669,726 649,500
Unamortized discounts and premiums on market debt 5,047 4,296
Market debt including unamortized discounts and premiums 674,773 653,796
Cross currency swap revaluations 8,391 6,669
Obligation related to capital leases 3,477 3,710
Other unmatured debt 1,570 1,005
Total unmatured debt 688,211 665,180

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 buyback 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.

At March 31, 2016, the fair value of market debt including unamortized discounts and premiums is $742,648 million ($731,609 million in 2015). For marketable bonds denominated in Canadian dollars and foreign currencies, treasury bills issued in Canadian dollars, Canada bills and medium-term notes issued in United-States dollars and Euros, fair values are established using market quotes or the discounted cash flow calculated using year end market interest and exchange rates.

The Government has entered into individual cross-currency swap contracts with various counterparties. Terms and conditions associated with these outstanding contracts are established using International Swaps and Derivatives Association (ISDA) master agreements, which are in place with each counterparty. Cross-currency swaps are used primarily to fund foreign-denominated asset levels in the foreign exchange accounts.

Included in Cross-currency swap revaluations is $757 million ($1,029 million at March 31, 2015) related to individual cross-currency swap contracts that have a net foreign-exchange asset value to the Government upon revaluation and $9,148 million ($7,698 million at March 31, 2015) relating to individual cross-currency swap contracts that have a net foreign-exchange liability value, resulting in an overall cross-currency swap net liability revaluation of $8,391 million ($6,669 million at March 31, 2015).

a. 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, 2016:

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 subtracted Government holdings of unmatured debt and the consolidation adjustment to obtain the total market debt. The second section involves a series of rows presenting the nature of interest rates related to the first section's currency and type of instrument.

(in millions of dollars)

Maturing year Marketable bonds Treasury Bills Retail debtLink to footnote 10 Canada bills Medium-term notes Total
CAD USD Euro USD USD Euro
2017 77,191 3,939 138,100 864 4,748 519 225,361
2018 91,349 4,545 1,204 97,098
2019 42,123 3,917 1,793 325 48,158
2020 38,050 5 2,955 445 552 42,007
2021 40,467 368 746 222 41,803
2022 and subsequent 214,941 402 65 215,408
Subtotal 504,121 12,406 2,955 138,100 5,076 4,748 2,207 222 669,835
Less: Government holdings of unmatured debt and consolidation adjustmentLink to footnote 11 53 56 109
Total market debt 504,068 12,350 2,955 138,100 5,076 4,748 2,207 222 669,726
Nature of interest rateLink to footnote 12 FixedLink to footnote 13 Fixed Fixed Variable Variable Variable Fixed and Variable Fixed  
Effective weighted average annual interest rates 2.49 1.25 3.50 0.50 0.67 0.43 0.76 0.15
Range of interest rates 0.25 - 10.50 0.88 - 9.70 3.50 0.38 - 0.72 0.50 - 1.40 0.21 - 0.68 0.53 - 2.30 0.15

b. Obligation related to capital leases

The total obligation related to capital leases as at March 31, 2016 is $3,477 million ($3,710 million in 2015). Interest on this obligation of $209 million ($209 million in 2015) 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 future minimum lease payments as at March 31, 2016. It consists of two columns: future years; current year. The first series of rows presents a listing of future years and the total minimum lease payments. The following row presents the subtracted imputed interest at the average discount rate. A final row presents the total for this table.

(in millions of dollars)

Year 2016
2017 540
2018 471
2019 459
2020 353
2021 297
2022 and subsequent 3,382
Total minimum lease payments 5,502
Less: imputed interest at the average discount rate of 5.63 per cent 2,025
Obligation related to capital leases 3,477

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

8. Public sector pensions and other employee and veteran future benefits

a. Overview of benefit plans

i. 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 corporations and other entities 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:

ii. 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.

b. 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.

i. 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.

ii. Unfunded pension benefits

For unfunded pension benefits, separate market invested funds are not maintained. These relate to all pre April 2000 service, and only to 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 $1,036 million ($247 million in 2015).

iii. 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 $277 million in 2016 ($211 million in 2015). 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.

c. Actuarial valuations

i. 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, 2014 for the public service pension plan; 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; and as at March 31, 2015 for the Royal Canadian Mounted Police pension plan, for which the valuation is currently in-progress.

Federally regulated private pension plans sponsored by consolidated Crown corporations and other entities are governed by the provisions of the Pension Benefits Standards Act, 1985 and are required to adhere to the directives of the Superintendent of Financial Institutions. The actuarial valuations are conducted at least every three years, or more often depending on the financial situation of the plan.

ii. 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 corporations and other entities.

d. Changes to benefit plans

i. Plan amendments

In 2016, amendments were made to veteran future benefits thereby improving and expanding access for certain benefits. This includes the introduction of an individual assessment which measures the impact that service related impairment has on a veteran's future earnings potential and years left to serve to determine the appropriate Career Impact Allowance grade level, an increase of the maximum Disability Award benefit and the provision of retrospective payments to veterans who received a Disability Award since the introduction of the New Veterans Charter in 2006, an increase in the income replacement, before deductions, under the Earnings Loss Benefit, and an increase in the estate exemption for Funeral and Burial benefits. These amendments resulted in one-time past service costs of $3,750 million and the immediate recognition of a previously unrecognized net actuarial gain of $8 million. Amendments were also made to the pension plan of a Crown corporation resulting in a one-time past service cost of $19 million and the immediate recognition of a previously unrecognized net actuarial gain of $17 million.

In 2015, amendments to veteran future benefits resulted in one-time past service costs of $1,828 million and the immediate recognition of a previously unrecognized net actuarial gain of $69 million. An amendment to employee severance benefits resulted in a one-time past service cost of $3 million and the immediate recognition of a previously unrecognized net actuarial gain of $3 million.

ii. Plan curtailments

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 curtailments this year resulted in the immediate recognition of a previously unrecognized net actuarial loss of $2 million (one-time past service cost reduction of $3 million and immediate recognition of a previously unrecognized net actuarial gain of $37 million in 2015), representing the portion related to the obligation for employees subject to the curtailments.

In 2015, former employees of Atomic Energy of Canada Limited (CANDU Reactor Division) ceased to be employed in the public service and became employed by SNC-Lavalin Group Inc. The impact of this curtailment was a one-time past service cost of $51 million and the immediate recognition of a previously unrecognized net actuarial gain of $6 million.

iii. Plan settlements

In 2016, payments of $63 million ($643 million in 2015) were made to employees affected by the curtailments of severance benefits who opted to cash out the full or partial value of their accumulated benefits. The settlements resulted in the immediate recognition of a previously unrecognized net actuarial loss of $28 million (one-time past service cost reduction of $49 million and immediate recognition of a previously unrecognized net actuarial gain of $101 million in 2015), representing the portion related to the obligation for employees subject to the settlements.

e. 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:

i. 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, respectively—Pension benefits, sub-divided into three columns—Funded, Unfunded, and Total; 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)

  2016 2015
Pension benefits Other future benefits Pension benefits Other future benefits
Funded Unfunded Total Funded Unfunded Total
Accrued benefit obligations at beginning of year 109,375 163,088 272,463 106,263 97,912 156,452 254,364 82,170
Benefits earned 6,510 297 6,807 4,452 6,332 270 6,602 2,844
Interest on average accrued benefit obligations 4,781 7,412 12,193 2,549 4,963 7,597 12,560 2,857
Benefits paid (negative 2,623) (negative 8,813) (negative 11,436) (negative 4,617) (negative 2,282) (negative 8,613) (negative 10,895) (negative 5,062)
Administrative expenses (negative 87) (negative 104) (negative 191) (negative 70) (negative 81) (negative 105) (negative 186) (negative 66)
Net transfers to other plans (negative 575) (negative 106) (negative 681) (negative 559) (negative 114) (negative 673)
Plan amendments 19 19 3,750 1,831
Plan curtailments (negative 40) (negative 11) (negative 51) (negative 3)
Plan settlements (negative 49)
Actuarial losses 661 3,891 4,552 8,363 3,130 7,612 10,742 21,741
Accrued benefit obligations at end of year 118,061 165,665 283,726 120,690 109,375 163,088 272,463 106,263
ii. Pension assets

Pension assets include investments held by the PSPIB that are valued at market-related value; consolidated Crown corporations and other entities' investments, the majority of which are valued at fair value; and contributions receivable from employees for past service buyback 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; previous year. The current and previous years' columns are divided into two columns, respectively—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)

  2016 2015
Funded pension benefits Other future benefits Funded pension benefits Other future benefits
Investments at beginning of year 110,760 3 92,913 5
Expected return on average value of investments 4,899 4,764
Contributions
Employees 2,718 2,553
Public Service corporations, territorial governments and Crown corporations and other entities 360 1 420 1
Government 3,860 4,161
Benefits paid, transfers and others (negative 3,183) (negative 2) (negative 2,736) (negative 3)
Actuarial gains 2,278 8,685
Investments at end of year 121,692 2 110,760 3
Contributions receivable from employees for past service 601 587
Total pension assets at end of year 122,293 2 111,347 3

No actuarial gain ($2,778 million in 2015) was incorporated in the market-related value of the investments to adjust for the limit of plus or minus 10 per cent in the difference between the market related value and the market value of the investments at the end of the year.

At March 31, 2016, the market value of the investments is $126,561 million ($122,023 million in 2015). The actual rate of return of investments calculated on a time-weighted basis was 1.1 per cent (14.9 per cent in 2015) during the year.

iii. 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 years' columns are divided into two columns, respectively—Pension benefits, sub-divided into three columns—Funded, Unfunded, and Total; 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 minus pension assets, plus unrecognized net actuarial gain (less loss), minus contributions and benefits paid after the mesurement date. The second section involves a series of rows presenting pension and other future benefit liabilities, minus public sector pension assets, as recognized and presented in the Consolidated statement of financial position.

(in millions of dollars)

  2016 2015
Pension benefits Other future benefits Pension benefits Other future benefits
Funded Unfunded Total Funded Unfunded Total
Accrued benefit obligations 118,061 165,665 283,726 120,690 109,375 163,088 272,463 106,263
Less: Pension assets 122,293 122,293 2 111,347 111,347 3
Subtotal (negative 4,232) 165,665 161,433 120,688 (negative 1,972) 163,088 161,116 106,260
Plus: Unrecognized net actuarial gain (less loss) 7,752 (negative 18,557) (negative 10,805) (negative 35,005) 6,475 (negative 16,147) (negative 9,672) (negative 30,118)
Less: Contributions after measurement date up to March 31 40 40 43 43
Less: Benefits paid after measurement date up to March 31 2 2
Net future benefit liabilities 3,480 147,108 150,588 85,681 4,460 146,941 151,401 76,140
The net future benefit liabilities were recognized and presented in the Consolidated statement of financial position as follows:
Public sector pension liabilities 5,119 147,108 152,227 5,723 146,941 152,664
Other employee and veteran future benefit liabilities 85,681 76,140
Total pensions and other future benefit liabilities 5,119 147,108 152,227 85,681 5,723 146,941 152,664 76,140
Less: Public sector pension assets 1,639 1,639 1,263 1,263
Net future benefit liabilities 3,480 147,108 150,588 85,681 4,460 146,941 151,401 76,140

f. 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 $16,648 million ($11,164 million in 2015) and interest expense of $9,843 million ($10,653 million in 2015) are included in the Consolidated statement of operations and accumulated deficit. More specifically, a benefit expense of $16,688 million ($11,144 million in 2015) is included in ministries expenses, an interest expense of $9,995 million ($10,748 million in 2015) is included in public debt charges and a balance of $192 million in benefit and interest expenses is included as a reduction ($75 million reduction in 2015) 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 years' columns are divided into two columns, respectively—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)

  2016 2015
Pension benefits Other future benefits Pension benefits Other future benefits
Funded Unfunded Total Funded Unfunded Total
Benefit expense
Benefits earned, net of employee contributions 3,586 239 3,825 4,452 3,561 211 3,772 2,844
Actuarial (gains) losses recognized during the year (negative 338) 1,481 1,143 3,454 98 901 999 2,037
Plan amendments 19 19 3,750 1,831
Plan curtailments (negative 40) (negative 11) (negative 51) (negative 3)
Plan settlements (negative 49)
Actuarial (gains) losses recognized following plan amendments, curtailments and settlements (negative 17) (negative 17) 22 (negative 6) (negative 6) (negative 210)
Total 3,250 1,720 4,970 11,678 3,613 1,101 4,714 6,450
Interest expense
Interest on average accrued benefit obligations 4,781 7,412 12,193 2,549 4,963 7,597 12,560 2,857
Expected return on average market-related value of investments (negative 4,899) (negative 4,899) (negative 4,764) (negative 4,764)
Total (negative 118) 7,412 7,294 2,549 199 7,597 7,796 2,857

g. 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:

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 years' columns are divided into two columns, respectively—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.

  2016 2015
Accrued benefit obligations Benefit and interest expenses Accrued benefit obligations Benefit and interest expenses
Discount ratesLink to footnote 14
Funded pension benefits 5.8% 4.2% 5.8% 4.9%
Unfunded pension benefits 3.9% 4.8% 4.2% 5.1%
Other employee and veteran future benefits 2.3% 2.4% 2.4% 3.5%
Expected rate of return on investments 4.2% 4.9%
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 5.0% 4.5% 4.5% 4.6%
Cost trend rate is expected to stabilize at 4.8% 4.8% 4.8% 4.8%
Year that the rate is expected to stabilize 2026 2024 2024 2023

The discount rates used to measure the significant classes of pensions and other employee future benefits sponsored by the consolidated Crown corporations and other entities are based on a variety of methodologies. To measure the present value of their accrued benefit obligations, these consolidated Crown corporations and other entities used expected rates of return on invested funds ranging from 5.2 per cent to 6.0 per cent (4.8 to 6.3 per cent in 2015) for the funded pension benefits, discount rates ranging from 2.0 per cent to 3.8 per cent (2.2 to 3.5 per cent in 2015) for the unfunded pension benefits and discount rates ranging from 2.0 per cent to 3.8 per cent (2.2 to 4.0 per cent in 2015) for the other employee future benefits.The long-term general wage increase ranged from 2.8 per cent to 3.8 per cent (2.8 to 4.3 per cent in 2015).

The expected average remaining service life (EARSL) of the employees represent periods ranging from 4 to 23 years (4 to 23 years in 2015) according to the plan in question; more specifically, from 11 to 15 years (11 to 15 years in 2015) 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 2015).

h. 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 per cent change in the principal actuarial assumptions. Note that for the sensitivity to the discount rates, the one per cent 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 years' columns are divided into two columns, respectively—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)

  2016 2015
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 18,100) (negative 8,700) (negative 19,800) (negative 17,300) (negative 8,700) (negative 17,200)
Decrease of 1% in discount rates 23,900 9,600 27,200 22,500 9,100 23,500
Increase of 1% in rate of inflation 15,500 21,200 24,500 14,300 20,400 20,900
Decrease of 1% in rate of inflation (negative 12,800) (negative 17,600) (negative 18,300) (negative 11,800) (negative 17,000) (negative 15,700)
Increase of 1% in general wage increase 6,200 1,100 400 6,100 1,200 500
Decrease of 1% in general wage increase (negative 5,500) (negative 1,000) (negative 400) (negative 5,300) (negative 1,100) (negative 400)
Increase of 1% in assumed health care cost trend rates 8,800 7,500
Decrease of 1% in assumed health care cost trend rates (negative 6,400) (negative 5,400)

9. 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 following series of rows presents the other liability accounts. A final row presents the total for this table.

(in millions of dollars)

  2016 2015
Due to Canada Pension Plan 35 212
Others
Government Annuities Account 134 150
Deposit and trust accounts 1,445 1,675
Other specified purpose accounts 3,988 3,965
Subtotal 5,567 5,790
Total other liabilities 5,602 6,002

a. 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, 2016, the fair value of the CPP's consolidated net assets is $283,575 million ($269,615 million in 2015).

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 $35 million ($212 million in 2015) 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.

b. 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 $710 million ($835 million in 2015). 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 $3,527 million ($3,424 million in 2015). This account was established under the Public Service Superannuation Act to provide life insurance to contributing members of the public service.

10. 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)

  2016 2015
CashLink to footnote 15 32,335 28,845
Cash equivalents 6,235 6,154
Total cash and cash equivalents 38,570 34,999

11. 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 $14,330 million ($13,138 million in 2015) and has recorded a bad debt expense of $3,833 million ($3,910 million in 2015). 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 years' columns are divided into three columns, respectively—Total taxes receivable, Allowance for doubtful accounts, and Net. A final row presents the total for this table.

(in millions of dollars)

  2016 2015
Total taxes receivable Allowance for doubtful accounts Net Total taxes receivable Allowance for doubtful accounts Net
Income taxes receivable
Individuals 60,869 6,997 53,872 55,150 6,660 48,490
Employers 19,569 1,135 18,434 17,652 1,052 16,600
Corporations 18,184 2,529 15,655 16,964 2,282 14,682
Non-residents 1,511 132 1,379 1,462 138 1,324
Goods and services tax receivable 17,959 2,962 14,997 18,248 2,785 15,463
Customs duties receivable 268 103 165 266 24 242
Excise taxes and duties receivable 1,818 472 1,346 1,895 197 1,698
Total 120,178 14,330 105,848 111,637 13,138 98,499

Other accounts receivable represent billed or accrued financial claims arising from amounts owed to the Government at year end, and cash collateral pledged to counterparties.

Billed or accrued financial claims arising from amounts owed to the Government total $6,304 million ($5,418 million in 2015) and are presented net of an allowance for doubtful accounts of $2,591 million ($2,220 million in 2015). Further details can be found in Section 7 (unaudited) of this volume.

Cash collateral pledged to counterparties of $6,557 million (nil in 2015) represents collateral support under International Swaps and Derivatives Association (ISDA) master agreements in respect of outstanding cross-currency swap arrangements. Further details can be found in Note 16.

12. 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, 2016, the fair value of the marketable securities held in the Exchange Fund Account is $87,347 million ($84,241 million in 2015), established using market quotes or other available market information. 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 4,767 million ($8,722 million) at March 31, 2016.

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)

  2016 2015
International reserves held in the Exchange Fund Account
Cash and cash equivalents
US dollar 5,303 441
Euro 304 189
British pound sterling 114 48
Japanese yen 181 17
Total 5,902 695
Marketable securities
US dollar 56,638 60,558
Euro 20,162 17,685
British pound sterling 7,534 2,405
Japanese yen 712 794
Total 85,046 81,442
Special drawing rights 10,431 9,818
Gold 6
Total international reserves held in the Exchange Fund Account 101,379 91,961
International Monetary Fund
Subscriptions 20,170 11,129
Loans 1,278 1,353
Total 122,827 104,443
Less:
International Monetary Fund
Special drawing rights allocations 10,956 10,463
Notes payable 18,332 8,962
Total 29,288 19,425
Total foreign exchange accounts 93,539 85,018

13. 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.

a. 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.

b. 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 and include various Canada Port Authorities. 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 repayment, discount and premium transactions subtracted from the equation. A final row represents the total for this table.

(in millions of dollars)

  2016 2015
Investments
Canada Mortgage and Housing Corporation 19,939 18,733
Export Development Canada 8,889 8,527
Farm Credit Canada 5,354 4,855
Business Development Bank of Canada 5,323 4,745
Canada Port Authorities 2,710 2,521
Canada Deposit Insurance Corporation 2,116 1,801
Canada Development Investment Corporation 461 3,880
Canada Post Corporation (negative 2,157) (negative 2,277)
Other 845 1,023
Total investments 43,480 43,808
Loans and advances
Farm Credit Canada 23,438 22,691
Business Development Bank of Canada 16,942 15,676
Canada Mortgage and Housing Corporation 10,531 10,708
Other 340 333
Total loans and advances 51,251 49,408
Less:
Loans expected to be repaid from future appropriations 3,571 3,792
Unamortized discounts and premiums 44 49
Subtotal 3,615 3,841
Total loans, investments and advances to enterprise Crown corporations and other government business enterprises 91,116 89,375

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 years' columns are divided into three columns, respectively—Third Parties; Government, Crown corporations and other entities; and Total.

(in millions of dollars)

  2016 2015
Third parties Government, Crown corporations and other entities Total Third Parties Government, Crown corporations, and other entities Total
Assets
Financial assets 376,128 101,099 477,227 352,984 103,664 456,648
Non-financial assets 8,907 8,907 9,180 9,180
Total assets 385,035 101,099 486,134 362,164 103,664 465,828
Liabilities 367,154 74,878 442,032 349,723 71,735 421,458
Equity of Canada as reported 44,102 44,370
Elimination adjustments (negative 622) (negative 562)
Equity of Canada 43,480 43,808
Revenues 26,296 4,319 30,615 27,247 4,467 31,714
Expenses 21,630 1,534 23,164 20,916 2,402 23,318
Profit as reported 7,451 8,396
Adjustments and others (negative 135) (negative 31)
Profit 7,316 8,365
Other changes in equity
Other comprehensive loss (negative 2,669) (negative 2,360)
DividendsLink to footnote 16 (negative 4,002) (negative 2,341)
CapitalLink to footnote 17 (negative 973) (negative 1,030)
Other adjustments (negative 143)
Total (negative 328) 2,491
Equity of Canada at beginning of year 43,808 41,317
Equity of Canada at end of year 43,480 43,808
Contractual obligations 47,222 47,555
Contingent liabilities 2,957 2,503

c. 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 2016, CFMWS administered estimated revenues and expenses of $303 million ($327 million in 2015) and $301 million ($294 million in 2015) respectively and had net equity of $740 million at March 31, 2016 ($708 million at March 31, 2015). These amounts are excluded from the consolidated financial statements of the Government of Canada.

14. 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)

  2016 2015
National governments, including developing countries and international organizations
National governments including developing countries 966 988
International organizations 21,161 20,189
Total 22,127 21,177
Other loans, investments and advances
Provincial and territorial governments 419 1,112
Other loans, investments and advances 29,671 28,324
Total 30,090 29,436
Total 52,217 50,613
Less: allowance for valuation 27,376 26,307
Total other loans, investments and advances 24,841 24,306

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 in CAD; previous year—Loans, investments and advances in CAD. A final row presents the total for this table in Canadian currency only.

(in millions of dollars)

  2016 2015
Loans, investments and advances in base currency Foreign exchange rate Loans, investments and advances in CAD Loans, investments and advances in CAD
Canadian dollar 46,756 46,756 45,253
US dollar 3,978 1.29870 5,166 5,222
Special drawing rights 149 1.82963 273 119
Various other currencies 22 19
Total 52,217 50,613

Loans to national governments consist mainly of loans for financial assistance totalling $400 million ($400 million in 2015), international development assistance to developing countries totalling $155 million ($164 million in 2015), and development of export trade totalling $411 million ($424 million in 2015) which are administered by Export Development Canada. Certain loans are non-interest bearing and others bear interest at rates varying from 0.1 per cent to 10.3 per cent. These loans are repayable over 1 to 30 years, with final instalments due in 2045.

Loans, investments and advances to international organizations include subscriptions to the share capital of international banks totalling $13,191 million ($12,654 million in 2015) as well as loans and advances to associations and other international organizations totalling $7,970 million ($7,536 million in 2015). 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 $416 million ($789 million in 2015) are non-interest bearing and will be repaid by reducing transfer payments over 1 to 10 years.

Other loans, investments and advances include loans under the Canada Student Loans Program, loans for the development of export trade administered by Export Development Canada, unconditionally repayable contributions, and other investments in bonds, market funds and fixed income securities. Loans under the Canada Student Loans Program of $18,235 million ($17,519 million in 2015) are provided interest-free to full-time students and afterward bear interest at either a variable prime rate plus 2.5 per cent or a fixed prime rate plus 5.0 per cent. The repayment period is generally 10 years. Loans for the development of export trade of $2,667 million ($2,772 million in 2015) are either non-interest bearing or bear interest at rates varying from 1.0 per cent to 9.0 per cent. Collateral of $291 million ($259 million in 2015) is held on these loans and they are repayable over 1 to 7 years with final instalments due in 2022. At March 31, 2016, unconditionally repayable contributions were $3,431 million ($2,280 million in 2015) and other investments were $2,651 million ($2,991 million in 2015).

15. 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. 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 on tangible capital assets is provided in Section 10 (unaudited) 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 60 years
Works and infrastructureLink to footnote 18 10 to 80 years
Machinery and equipment 2 to 30 years
Vehicles 2 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, a 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 2016 Net book value 2015
Opening balance Acquisitions Disposals AdjustmentsLink to footnote 19 Closing balance Opening balance Amortization expense Disposals Adjustments Closing balance
Land 1,605 56 (negative 18) 22 1,665 1,665 1,605
Buildings 29,350 73 (negative 156) 1,311 30,578 14,936 819 (negative 120) (negative 6) 15,629 14,949 14,414
Works and infrastructure 14,549 150 (negative 131) 504 15,072 8,276 424 (negative 83) 21 8,638 6,434 6,273
Machinery and equipment 34,925 564 (negative 1,287) 1,383 35,585 25,612 1,755 (negative 940) (negative 693) 25,734 9,851 9,313
Vehicles 37,623 443 (negative 406) 3,371 41,031 23,388 1,617 (negative 279) (negative 62) 24,664 16,367 14,235
Leasehold improvements 3,116 26 (negative 128) 110 3,124 1,910 188 (negative 120) (negative 25) 1,953 1,171 1,206
Assets under construction 13,359 6,641Link to footnote 20 (negative 71) (negative 7,355) 12,574 12,574 13,359
Assets under capital leases 4,861 62Link to footnote 20 (negative 27) 69 4,965 1,919 246 (negative 27) Link to footnote 21 2,138 2,827 2,942
Total 139,388 8,015 (negative 2,224) (negative 585) 144,594 76,041 5,049 (negative 1,569) (negative 765) 78,756 65,838 63,347

16. 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.

a. Derivative financial instruments

i. 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.

Effective June 2015, the Government implemented two-way Credit Support Annex agreements for cross currency swaps with certain counterparties pursuant to International Swaps and Derivatives Association (ISDA) master agreements. Under the terms of those agreements, the Government may be required to pledge and/or receive eligible collateral relating to obligations to the counterparties. In the normal course of business, these pledged collateral amounts (which may include cash and/or securities) will be returned to the pledgor when there are no longer any outstanding obligations. At March 31, 2016, cash collateral pledged of $6,557 million is recorded in other accounts receivable, and cash collateral received of $128 million is recorded in other liabilities. In addition, the Government holds collateral in securities from counterparties with a nominal amount of $1,572 million (fair value of $2,017 million), which has not been recognized in the statement of financial position as the Government does not obtain economic ownership unless the pledgor defaults.

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; and the current year. A final row presents the total for this table.

(in millions of dollars)

Maturing year 2016
2017 5,379
2018 5,879
2019 7,011
2020 7,485
2021 11,405
2022 and subsequent 34,705
Total 71,864
ii. 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 $1,359 million ($1,572 million at March 31, 2015), mature during the next fiscal year.

iii. 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. Collateral pledged by counterparties to the Government may be liquidated in the event of default 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 2016 2015
A+ 21,854 17,774
A 18,980 14,040
A- 29,786 26,518
BBB+ 4,765
BBB 2,603 1,566
Total 73,223 64,663

b. 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, 2016, 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, 2016, a one per cent 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 $2 million due to the exposure of the US dollar portfolio, a foreign exchange loss of $2 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 $269 million (net foreign exchange gain of $452 million in 2015).

c. Fair value information

The carrying values of other accounts payable and accrued liabilities, interest and matured debt, cash and cash equivalents, other accounts receivable and other loans, investments and advances are assumed to approximate their fair values due to their short-term to maturity or allowances recorded to reduce their carrying values to amounts that approximate their estimated realizable values.

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 years' columns are divided into two columns, respectively—Principal amount, and Fair value. A final row presents the total for this table.

(in millions of dollars)

  2016 2015
Principal amount Fair value Principal amount Fair value
Cross currency swaps 71,864 (negative 7,196) 63,091 (negative 5,756)
Foreign-exchange forward agreements 1,359 (negative 47) 1,572 128
Total 73,223 (negative 7,243) 64,663 (negative 5,628)

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

17. 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)

  Transfer payment agreements Capital assets and purchases Operating leases International organizationsLink to footnote 22 Total
2017 15,794 9,458 374 1,847 27,473
2018 9,173 8,358 354 758 18,643
2019 6,043 9,338 331 552 16,264
2020 4,406 9,303 287 356 14,352
2021 2,086 6,445 258 101 8,890
2022 and subsequent 1,666 16,704 1,237 1,116 20,723
Total 39,168 59,606 2,841 4,730 106,345

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.

a. Guarantees provided by the Government

At March 31, 2016, the principal amount outstanding for guarantees provided by the Government amount to $490,557 million ($442,904 million in 2015) for which an allowance of $312 million ($317 million in 2015) has been recorded under the Other Accounts Payable and Accrued Liabilities in the Consolidated statement of financial position. The authorized limit, where applicable, is established at $357,360 million ($356,950 million in 2015) for an amount of $224,095 million ($188,901 million in 2015) of guarantees provided by the Government. The amount of guarantees with no authorized limit is established at $266,462 million ($254,003 million in 2015). 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, $266,434 million ($253,049 million in 2015) relates to guarantees on the borrowings of agent enterprise Crown corporations for which no authorized limit has been set and no allowance (nil in 2015) has been recorded.

b. International organizations

The Government has callable share capital in certain international organizations that could require payments to those agencies. As at March 31, 2016, callable share capital amounts to $31,041 million ($30,601 million in 2015).

c. 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, it has been recorded under the Accounts Payable and Accrued Liabilities in the Consolidated statement of financial position. Claims and litigation for which the outcome is not determinable and for which an amount has not been accrued, are estimated at approximately $8,679 million ($8,304 million in 2015) 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 76 (80 in 2015) comprehensive land claims under negotiation, accepted for negotiation or under review. A liability of $5,158 million ($4,840 million in 2015) 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 503 (456 in 2015) specific claims under negotiation, accepted for negotiation or under review. A liability of $4,531 million ($3,458 million in 2015) 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, 2016, $21,915 million ($22,987 million for 2015) was under objection at the Government level and $7,035 million ($5,450 million for 2015) 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.

d. 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, 2016, total insurance in force amounts to $1,672,619 million ($1,671,666 million in 2015). 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 13. 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—Families, Children and Social Development, Finance, National Defence, National Revenue, Public Safety and Emergency Preparedness, Other ministries, Crown corporations and other entities, Adjustments, and Total. The first series of rows presents the Revenues. It is divided into three sub-sections with related subtotals. The final row of the series presents the total for revenues. The second series of rows presents the expenses. It is divided in two sub-sections with related subtotals. The final row of the series presents the total for program expenses. The following row presents public debt charges. A final row presents the total for this table.

(in millions of dollars)

  2016
Families, Children and Social Development Finance National Defence National Revenue Public Safety and Emergency Preparedness Other ministries Crown corporations and other entities AdjustmentsLink to footnote 23 Total
Revenues
Tax revenues
Income tax revenues 192,846 192,846
Other taxes and duties 19,218 30,587 49,805
Total tax revenues 212,064 30,587 242,651
Employment insurance premiums 23,491 (negative 421) 23,070
Other revenues
Crown corporations 16,945 (negative 4,485) 12,460
Other programs 2,667 722 576 4,912 2,336 10,727 549 (negative 7,539) 14,950
Net foreign exchange 2,322 2,322
Total other revenues 2,667 3,044 576 4,912 2,336 10,727 17,494 (negative 12,024) 29,732
Total revenues 26,158 3,044 576 216,976 32,923 10,727 17,494 (negative 12,445) 295,453
Expenses
Transfer payments
Old age security benefits, guaranteed income supplement and spouse's allowance 45,461 45,461
Major transfer payments to other levels of government 63,877 1,973 65,850
Employment insurance benefits 19,419 19,419
Children's benefits 7,516 10,509 18,025
Other transfer payments 6,465 512 152 3,701 620 23,115 486 (negative 177) 34,874
Total transfer payments 78,861 64,389 152 14,210 620 25,088 486 (negative 177) 183,629
Other program expenses
Crown corporations 8,589 (negative 231) 8,358
Ministries 4,584 501 28,826 8,251 10,622 37,796 312 (negative 12,034) 78,858
Total other program expenses 4,584 501 28,826 8,251 10,622 37,796 8,901 (negative 12,265) 87,216
Total program expenses 83,445 64,890 28,978 22,461 11,242 62,884 9,387 (negative 12,442) 270,845
Public debt charges 25,306 88 1 203 (negative 3) 25,595
Total expenses 83,445 90,196 29,066 22,461 11,243 63,087 9,387 (negative 12,445) 296,440
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—Families, Children and Social Development, Finance, National Defence, National Revenue, Public Safety and Emergency Preparedness, Other ministries, Crown corporations and other entities, Adjustments and Total. The first series of rows presents the Revenues. It is divided into three sub-sections with related subtotals. The final row of the series presents the total for revenues. The second series of rows presents the expenses. It is divided in two sub-sections with related subtotals. The final row of the series presents the total for program expenses. The following row presents public debt charges. A final row presents the total for this table.

(in millions of dollars)

  2015
Families, Children and Social Development Finance National Defence National Revenue Public Safety and Emergency Preparedness Other ministries Crown corporations and other entities AdjustmentsLink to footnote 23 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 2,636 885 630 5,061 2,244 11,578 519 (negative 7,194) 16,359
Net foreign exchange 1,355 1,355
Total other revenues 2,636 2,240 630 5,061 2,244 11,578 18,249 (negative 11,444) 31,194
Total revenues 25,598 2,240 630 204,604 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 3,931 10,372 14,303
Other transfer payments 6,292 920 136 3,350 204 23,905 487 (negative 168) 35,126
Total transfer payments 72,378 62,056 136 13,722 204 25,878 487 (negative 168) 174,693
Other program expenses
Crown corporations 7,951 (negative 361) 7,590
Ministries 4,306 726 23,837 8,372 10,077 35,264 284 (negative 11,308) 71,558
Total other program expenses 4,306 726 23,837 8,372 10,077 35,264 8,235 (negative 11,669) 79,148
Total program expenses 76,684 62,782 23,973 22,094 10,281 61,142 8,722 (negative 11,837) 253,841
Public debt charges 26,330 68 1 200 (negative 5) 26,594
Total expenses 76,684 89,112 24,041 22,094 10,282 61,342 8,722 (negative 11,842) 280,435

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