Consolidated financial statements

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• Section 2: Table of contents: Section 2: Consolidated financial statements of the Government of Canada and report of the Auditor General of Canada

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. The definition of control for financial reporting purposes may be met by other organizations not listed in the Financial Administration Act, these organizations are therefore included in the government’s reporting entity if their revenues, expenses, assets or liabilities are significant.

Some Crown corporations and not-for-profit organizations rely on the government for a portion of their financing. Examples of consolidated Crown corporations that received significant funding from the government include Atomic Energy of Canada Limited, Canada Infrastructure Bank, Canadian Air Transport Security Authority, Canadian Broadcasting Corporation, Windsor-Detroit Bridge Authority and VIA Rail Canada Inc. The consolidated not-for-profit organizations that receive significant funding are the Canada Foundation for Innovation and the Canada Foundation for Sustainable Development Technology. The financial activities of all of these entities are consolidated in these financial statements on a line-by-line and uniform basis of accounting after eliminating significant inter-governmental balances and transactions. Detailed information on the consolidated entities is included in Section 4 (unaudited) of this volume.

Enterprise Crown corporations are government business enterprises able to raise substantial portions of their revenues through commercial business activity and are therefore considered self-sustaining. 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 include various Canada Port Authorities. Investments in government business enterprises are recorded under the modified equity method. Detailed information on the enterprise Crown corporations is included in Section 9 (unaudited) of this volume.

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.

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. The government has elected to recognize gains and losses resulting from foreign currency translation, including those arising prior to settlement or derecognition of the financial instrument, directly in the Consolidated Statement of Operations and Accumulated Operating Deficit for all financial instruments. 

Net exchange gains and losses are reported according to the activities to which they relate. Net exchange gains and losses relating to the foreign exchange accounts, foreign debt, swaps, foreign exchange forward agreements revaluations and loans, investments and advances are presented with investment revenues from foreign exchange accounts under net foreign exchange revenues and return on investments. Net exchange gains and losses relating to transfer payments are reported in the transfer payment expenses under other transfer payments. Net exchange gains and losses relating to departmental sale or purchase of goods or services in foreign currency are reported under other expenses. The carrying amounts of financial instruments denominated in a foreign currency are disclosed in the respective financial statement notes.

Fair value measurement

Fair value is the amount of the consideration that would be agreed upon in an arm’s length transaction between knowledgeable, willing parties who are under no compulsion to act. For financial reporting purposes, fair value measurements are categorized as Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs. The three levels of the fair value hierarchy are as follows:

• Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities, which represent actual and regularly occurring arm's-length market transactions;
• Level 2: Inputs other than quoted prices included in Level 1, which are observable for the assets or liabilities either directly (e.g., prices for similar instruments, prices from inactive markets) or indirectly (e.g., interest rates, credit spreads);
• Level 3: Unobservable inputs for the assets or liabilities that are not based on observable market data (e.g., market participant assumptions).

The fair value hierarchy requires the use of observable market inputs wherever such inputs exist and in measuring fair value, a financial instrument is classified at the lowest level of the hierarchy for which a significant input has been considered.

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 management’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.

Measurement uncertainty that is material 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 material measurement uncertainty exists with respect to the reported amounts for:

• the accrual of tax revenues and the related amounts receivable, other accounts receivables, and the allowance for doubtful accounts (Note 4, Note 16 and Note 17)
• non-tax revenues (Note 5)
• expenses (Note 6)
• the provision for contingent liabilities (Note 9)
• environmental liabilities and asset retirement obligations (Note 10)
• public sector pensions and other employee and veteran future benefits (Note 12)
• enterprise Crown corporations and other government business enterprises (Note 19)
• other loans, investments and advances (Note 20)
• the expected useful life of tangible capital assets (Note 21)
• inventories (Note 21)
• contractual obligations and contractual rights (Note 23)

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. Refer to the specific note disclosures for more information on measurement uncertainty.

Measurement uncertainties exist at March 31, 2025, in light of continued global uncertainty and heightened geopolitical tensions. The consolidated financial statements reflect the impacts to the extent known and estimable at the reporting date. The government continues to assess and monitor the effects of these measurement uncertainties on its financial position, including related estimates and assumptions used in the preparation of its statements. The full potential impact on the assumptions used for the year is unknown as it will depend on future developments that are uncertain.

In addition, these measurement uncertainties have impacted various estimates, assumptions, and judgments in the consolidated financial statements; the most critical areas are discussed within the specific notes below.

Additional significant accounting policies

To facilitate the understanding of these consolidated financial statements, the significant accounting policies related to the following financial statement line items are detailed in the referenced note.

• tax revenues (Note 4)
• non-tax revenues (Note 5)
• expenses (Note 6)
• other accounts payable and accrued liabilities (Note 8)
• contingent liabilities (Note 9)
• environmental liabilities and asset retirement obligations (Note 10)
• unmatured debt (Note 11)
• public sector pensions and other employee and veteran future benefits (Note 12)
• derivatives (Note 13)
• taxes receivable (Note 16)
• other accounts receivable (Note 17)
• foreign exchange accounts (Note 18)
• enterprise Crown corporations and other government business enterprises (Note 19)
• other loans, investments and advances (Note 20)
• tangible capital assets and inventories (Note 21)
• financial instruments (Note 22)
• contractual obligations and contractual rights (Note 23)
• segmented information (Note 24)

2. Comparative information

Certain comparative figures have been reclassified to conform to the current year's presentation. In particular, the Government has changed the presentation of the Consolidated Statement of Operations and Accumulated Operating Deficit to group the Canada Emergency Wage Subsidy with other transfer payments. This reflects the continued wind-down of the temporary COVID-19 support measures that have ended.

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 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 2025, 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 are 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:

The total net budgetary expenditures reported in the preceding table differs from the total expenses reported in the Consolidated Statement of Operations and Accumulated Operating Deficit. The difference is due to various factors. The transactions of consolidated specified purpose accounts and of certain Crown corporations and 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 the transfer is authorized and all eligibility criteria have been met by 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 $376,123 million ($332,454 million in 2024) was authorized for loans, investments and advances. A net amount of $129,355 million ($47,245 million in 2024) was used, an amount of $54,741 million ($1 million in 2024) lapsed and an amount of $192,027 million ($285,208 million in 2024) is available for use in subsequent years. An amount of $5,128 million ($21,714 million in 2024) committed through guarantees and loan agreements has been included in the determination of the amount available for use in subsequent years, resulting in a corresponding reduction to the total available balance.

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) Exceeded authority limit

During the fiscal year, Global Affairs Canada exceeded its authority limit of $50 million for working capital advance for advances to posts abroad in accordance with Vote 630, Appropriation Act No. 2, 1954, amended by Vote L12, Appropriation Act No. 3, 1989-90. Details (unaudited) of this overexpended authority can be found in the ministerial sections of Volume II of the Public Accounts of Canada.

(c) Borrowing authorities

Through the Borrowing Authority Act (BAA) and the Financial Administration Act (FAA), Parliament authorizes the Minister of Finance (the "Minister") to borrow money on behalf of His Majesty in right of Canada.

Borrowing Authority Act: Maximum Amount

Authority to borrow is granted through section 3 of the BAA up to the maximum amount on the total outstanding stock of debt set out under section 4 of the BAA.

Subject to limited exceptions, borrowings undertaken by the Minister – together with amounts borrowed by agent Crown corporations and Canada Mortgage Bonds (CMB) guaranteed by the Canada Mortgage and Housing Corporation, excluding those purchased by the Minister and not resold – may not exceed the maximum amount specified in the BAA, which was $1,831,000 million as of May 6, 2021. On June 20, 2024, Bill C-69 received royal assent to amend the BAA, which increased the maximum amount to $2,126,000 million.

As at March 31, 2025, the outstanding borrowings subject to the maximum amount was $1,787,450 million ($1,688,386 million as at March 31, 2024).

Financial Administration Act: Annual Borrowing Authority

In addition to the maximum amount on the total outstanding stock of debt, pursuant to Part IV of the FAA, the Governor in Council (GIC) specifies a maximum aggregate principal amount of money that the Minister is authorized to borrow.

For the fiscal year 2025, the GIC specified a maximum amount of $604,000 million ($517,000 million for fiscal year 2024). The GIC authority is calculated as the sum of i) the maximum stock of treasury bills anticipated to be outstanding during the year, ii) the total value of new issuances of marketable bonds, and iii) the total value of new issuances intended to fund the Exchange Fund Account, plus a contingency margin to enable responses to changes in economic circumstances. During fiscal year 2025, $544,477 million ($475,268 million in fiscal year 2024) has been borrowed by the Minister.

(d) Source of budget amounts

The budget amounts included in the Consolidated Statement of Operations and Accumulated Operating Deficit and the Consolidated Statement of Change in Net Debt are derived from the amounts that were budgeted for 2025 in the April 2024 Budget Plan (Budget 2024). To enhance comparability with actual 2025 results, Budget 2024 amounts have been reclassified to conform to the current year's presentation in the consolidated financial statements, with no overall impact on the budgeted 2025 annual deficit.

Since actual opening balances of the accumulated operating deficit and net debt were not available at the time of preparation of Budget 2024, the corresponding amounts in the budget column have been adjusted to the actual opening balances.

4. Tax revenues

Tax revenues are comprised of income tax revenues from personal, corporate and non-resident taxes, and other taxes and duties.

(a) Other taxes and duties

(b) Federal tax objections

As of March 31, 2025, $29,428 million of federal taxes were under objection ($23,686 million for 2024).

5. Non-tax revenues

Non-tax revenues consist of exchange and non-exchange transactions, and other non-tax revenues. The government has three main types of exchange and non-exchange transactions: employment insurance premiums, pollution pricing proceeds and other program revenues.

Exchange and non-exchange transactions include exchange transactions (where goods or services are provided for consideration and a performance obligation exists), and non-exchange transactions (where no performance obligation exists to provide a good or service). These transactions can be recurring or non-recurring in nature. Recurring transactions are viewed as ongoing, routine activities that form part of the normal course of operations and can be reasonably expected to be earned again in future years.

Other non-tax revenue, not otherwise defined as exchange or non-exchange transactions above, include revenues from enterprise Crown corporations and other government business enterprises and interest on bank deposits, income on loans, investments and advances, and other returns recognized on investments.

(a) Disaggregated non-tax revenues 

There were no significant revenues from non-recurring activities. Non-recurring revenues are typically from gains on the sale of assets, court awards and revenues from the forfeitures of licenses.

There were no significant revenues for which the government did not recognize due to the lack of expectation to collect payment.

(b) Pollution pricing proceeds

As of March 31, 2025, there were $13,537 million of fuel charge proceeds recorded ($10,278 million in 2024).

As of March 31, 2025, the excess emission charges revenue pursuant to the output-based pricing system for industrial facilities with high emissions totalled $15 million ($225 million in 2024).

(c) Deferred revenues

Deferred revenues include:

The majority of deferred revenues result from auctions of radio frequency licenses. Auction amounts are paid immediately in full and are recognized as revenue typically over a 20-year period (10-year period for some older auctions) for licenses arising from spectrum auctions.

6. Expenses

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

Transfer payments are monetary payments, or transfers of goods, services, or assets to third parties. These transfers do not result in the acquisition by the government of any goods, services, or assets.

Other expenses include 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, are also included in other expenses. Public sector pension and other employee and veteran future benefit expenses are included in personnel expenses except for net actuarial losses which are presented separately in the Consolidated Statement of Operations and Accumulated Operating Deficit.

Public debt charges include effective interest calculated on market debt including amounts arising on the extinguishment of debt, as well as interest on obligations for public sector pensions and other employee and veteran future benefits.

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

(a) Major transfer payments to other levels of government

Major transfer payments to other levels of government include the Canada Health Transfer, the Canada Social Transfer, the Canada-wide Early Learning and Child Care and fiscal arrangements pursuant to the Federal-Provincial Fiscal Arrangements Act. Other major transfers include contributions under the federal Canada Community-Building Fund program, and the Home Care and Mental Health Transfer.

(b) Employment insurance and support measures

Pursuant to the Employment Insurance Act, employment insurance includes unemployment and self-employed benefits and support measures paid to/for individuals of $23,133 million ($21,141 million in 2024) and payments to provinces and territories related to Labour Market Development Agreements of $1,947 million ($2,374 million in 2024). The Employment Insurance Act was amended to authorize the emergency response benefit payments, as part of the Government's Economic Response Plan. As at March 31, 2025, benefit overpayments to be recovered of $200 million ($385 million in 2024) related to the Employment Insurance Emergency Response Benefit (EI-ERB) were recorded. Refer to Note 6(c) for information on the Canada Emergency Response Benefit (CERB).

(c) COVID-19 income support for workers

The government provided financial support to workers during the COVID-19 pandemic through the Canada Emergency Response Benefit (ended on October 3, 2020), the Canada Worker Lockdown Benefit (ended on May 7, 2022) and the Canada Recovery Benefits. The Canada Recovery Benefits included three temporary recovery benefits starting September 27, 2020: the Canada Recovery Benefit (ended on October 23, 2021), the Canada Recovery Caregiving Benefit (ended on May 7, 2022), and the Canada Recovery Sickness Benefit (ended on May 7, 2022). Post-payment verification activities commenced shortly after payment issuance and were primarily completed by March 31, 2025.

Details of COVID-19 income support provided to workers and the related benefit overpayments to be recovered are as follows:

(d) Pollution pricing proceeds returned

All the direct proceeds from the federal carbon pollution pricing system were returned in the province and territory where they were collected. For the year ended March 31, 2025, these expenses for proceeds returned include $12,719 million ($9,648 million in 2024) in Canada Carbon Rebate payments for individuals and the new Canada Carbon Rebate payments for small businesses of $2,569 million.

(e) Other transfer payments

Other transfer payments totalling $107,140 million ($95,951 million in 2024), include various amounts paid or payable through federal programs to stabilize market prices for commodities, develop new technologies, conduct research, provide international development assistance, support health care and infrastructure of First Nations and Inuit communities, support social housing and families and 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.

As COVID-19 support measures ended, related transfer payment expenses in 2025 include:

• Benefit overpayments recoveries of $167 million ($420 million in 2024) for Canada Emergency Wage Subsidy; and
• Transfer payment expense of $173 million for the forgiveness incentives on Canada Emergency Business Account loans (a reversal of $2,574 million in 2024). The amount of the reversal in 2024 was overestimated by $173 million due to a delay in obtaining final numbers on forgiveness amounts and adjusted in 2025. Refer to Note 20 for further details on the Canada Emergency Business Account.

Details can be found in Table 3.6 of Section 3 (unaudited) of this volume.

(f)  Public debt charges

(g) Total expenses by segment

The government has defined segments as Ministries which groups the activities of departments, agencies and consolidated Crown corporations and other entities for which a Minister is responsible to Parliament. Additional segmented information is provided in Note 24. The following table presents the total expenses by segment after the elimination of internal transactions:

(h) Expenses by object

The following table presents the total expenses by main objects of expense:

7. Accumulated deficit

The accumulated deficit comprises accumulated operating deficit and accumulated remeasurement gains and losses.

Accumulated operating deficit

The accumulated operating deficit is equal to the net liabilities of the government less any accumulated remeasurement gains and losses. The government includes in its revenues and expenses 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 these accounts. Any deficiency of revenues over payments must be met through future revenues or transfers credited to these accounts. The following table shows the balance of these consolidated accounts included in the accumulated operating deficit:

Accumulated remeasurement gains and losses

Remeasurement gains and losses are revenues and expenses recognized in the Consolidated Statement of Remeasurement Gains and Losses arising when financial instruments in the fair value category are remeasured. When a financial instrument is derecognized, previously reported remeasurement gains or losses are reclassified to the Consolidated Statement of Operations and Accumulated Operating Deficit. Other comprehensive income or loss of enterprise Crown corporations and other government business enterprises is also reported in accumulated remeasurement gains and losses.

8. Other accounts payable and accrued liabilities

Other accounts payable and accrued liabilities mainly consist of amounts owed to suppliers and employees that have been invoiced or accrued.

Other accounts payable and accrued liabilities include:

9. Provision for contingent liabilities

Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown. Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events not wholly within the government’s control occur or fail to occur.

The following table presents the different components of the provision for contingent liabilities:

(a) Claims

Where the government has assessed a claim as likely and measurable, an estimated provision is determined using relevant historical experience, facts and circumstances. In situations where the estimate of loss is based on a range of amounts, the amount accrued within the range is management’s best estimate of the potential loss which may be at an amount lesser than the maximum of the range. Significant exposure to a liability could exist in excess of what has been accrued.

The government has claims for which the outcome is likely to result in a liability, but management cannot reasonably measure the amount at the financial statement date. These claims are continually reassessed as they progress through the legal process. Until more information becomes available which would allow for a reasonable estimate of the liability or the extent, no amount is accrued or disclosed.

Claims for which the outcome is not determinable and for which an amount has not been accrued are estimated at $3,652 million ($3,314 million in 2024). The resolution of these claims may result in a liability, if any, that differs from the estimated amount.

Pending and threatened litigation and other claims

There are thousands of pending and threatened litigation cases as well as claims 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 known in all cases. As a result, provisions that are recorded are based on management’s best estimate of the potential loss.

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 past grievances may be proceeding via the legal system or via the specific claims program. The Government of Canada will pursue a settlement agreement with the First Nation when a claim demonstrates an outstanding lawful obligation. There are currently 828 (747 in 2024) specific claims under negotiation, accepted for negotiation or under review. A liability is estimated and recorded for claims that have progressed to a point where quantification is possible. This estimate also includes projections based on historical rates and costs of settlement for similar claims and includes an estimate for claims which have been filed but not yet assessed.

Comprehensive land claims

Comprehensive land claims arise in areas of the country where Indigenous rights and title have not been resolved by treaty or by other legal means. There are currently 103 (104 in 2024) comprehensive land claims under negotiation, accepted for negotiation or under review. A liability is estimated and recorded for claims that have progressed to a point where quantification is possible. This estimate also includes projections based on historical rates and costs of settlement for similar claims.

(b) Guarantees provided by the government

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 or agent enterprise Crown corporations, and other explicit guarantees. At March 31, guarantees provided by the government include:

The authorized limit represents the aggregate total of various types of authorities of government bodies as stipulated in legislation, legal agreements or other documents that may be in force at any one time. The principal amount outstanding represents the total amount of guarantees provided as at the end of the fiscal year.

(c) Other

Assessed taxes under appeal

Contingent liabilities include previously assessed federal taxes where amounts are being appealed to the Tax Court of Canada, the Federal Court of Appeal, or the Supreme Court of Canada. As of March 31, 2025, an amount of $7,796 million ($7,354 million in 2024) was being appealed to the courts, for which the likelihood of an adverse outcome was not determinable or for which an amount could not be reasonably estimated. The government has recorded, in the amounts payable related to tax or in reduction of the amounts receivable from taxpayers, as applicable, the estimated amount of appeals that are considered likely to be lost and that can be reasonably estimated.

International organizations

The government has callable share capital whereby certain international organizations have the ability to require payments. As at March 31, 2025, the callable share capital amounts to $43,557 million ($40,949 million in 2024). No amounts (nil in 2024) have been requested by international organizations or paid by the government in the year related to the callable share capital.

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 of eligible deposits 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, of which the government purchased $36,557 million (including accrued interest) during the year ($7,580 million in 2024) - refer to Other Investments in Note 19(a); 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 and Farm Credit Canada’s risk of the insurance program is limited.

At March 31, 2025, total insurance in force amounts to $2,288,032 million ($2,165,120 million in 2024). The government expects that all four corporations will cover the cost of both current claims and possible future claims.

10. Environmental liabilities and asset retirement obligations

Environmental liabilities represent the amount required to remediate contaminated sites to current minimum environmental standards.

Asset retirement obligations represent the estimated amount required to retire for legally obligated costs for the asset retirement activities of tangible capital assets.

Environmental liabilities and asset retirement obligations include:

(a) Remediation of contaminated sites

The government’s “Federal Approach to Contaminated Sites” sets out a framework for management of contaminated sites using a risk-based approach. Under this approach the government has inventoried the contaminated sites identified on federal lands or on lands where the government has assumed responsibility for the clean-up, 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 human health and the environment.

The government has identified 5,365 sites (5,939 sites in 2024) where contamination may exist and assessment, remediation and monitoring may be required. Of these, the government has identified 2,194 sites (2,314 sites in 2024), where action is required and for which a liability of $10,027 million ($9,762 million in 2024) has been recorded. This liability estimate has been determined based on site assessments performed by environmental experts. In addition, a statistical model based upon a projection of the number of sites that will proceed to remediation and upon which current and historical costs are applied is used to estimate the liability for a group of unassessed sites. This group includes 2,410 unassessed sites (2,709 sites in 2024), of which 1,125 sites (1,264 sites in 2024) are projected to proceed to remediation and for which an estimated liability of $272 million ($275 million in 2024) has been recorded. These two estimates combined, totalling $10,299 million ($10,037 million in 2024), represents management's best estimate of the costs required to remediate sites to the current minimum environmental standard for its use prior to contamination, based on information available on March 31. For the remaining 761 sites (916 sites in 2024), 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.

When the liability estimate is based on a future cash requirement, the amount is adjusted for inflation using a forecast CPI rate of 2.0% (2.0% in 2024). Inflation is included in the undiscounted amount. The Government of Canada's cost of borrowing by reference to the actual zero-coupon yield curve for Government of Canada bonds has been used to discount the estimated future expenditures. March 2025 discount rates range from 2.50% (4.53% in 2024) for a 1-year term to 3.27% (3.29% in 2024) for a 30 or greater year term.

Also, during the year, 768 sites (588 sites in 2024) 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. Estimated recoveries related to environmental liabilities amounted to $27 million as at year end ($27 million in 2024) and are reported as other accounts receivable.

(b) Other environmental liabilities

The government has identified approximately 481 unexploded explosive ordnance (UXO) suspected sites (512 in 2024) for which clearance action may be necessary. Of these sites, 38 (37 in 2024) are confirmed UXO affected sites. Based on management's best estimates, a liability of $121 million ($120 million in 2024) has been recorded for clearance action on 8 of the confirmed UXO sites (8 in 2024). Following a risk assessment and review, 16 suspected sites (35 in 2024) were closed. The remaining 457 suspected sites (469 in 2024) are currently either still in the assessment phase or assessment has been completed, but a decision has not yet been made regarding risk mitigation or site closure. Of these sites, the obligation for clearance action is indeterminable for 54 (51 in 2024) and unlikely for the 403 remaining (418 in 2024).

(c) Asset retirement obligations

The government has recorded asset retirement obligations for the removal of asbestos and other hazardous materials in buildings, decommissioning of nuclear facilities, demilitarization or disarmament and other asset retirement obligations.

The changes in the asset retirement obligations during the year are as follows:

The undiscounted future expenditures, adjusted for inflation, for the planned projects comprising the liability are $24,822 million ($24,067 million at March 31, 2024). Estimated recoveries related to asset retirement obligations amounted to nil as at year end (nil in 2024).

Key assumptions used in determining the provision are as follows:

(d) Sensitivity analysis

Changes in assumptions can result in significantly higher or lower estimates of the environmental liabilities and asset retirement obligations. The table below illustrates the possible impact of a 1% change in the principal assumptions.

11. Unmatured debt

Unmatured debt consists of market debt, capital lease obligations and the obligation under public-private partnerships.

Unmatured debt includes:

(a) Market debt

The following table presents the future principal repayments at the contractual maturity date of debt issues, interest rates by currency and type of instrument and the weighted average annual interest rates as at March 31, 2025:

(b) Obligation related to capital leases

The net obligation related to capital leases as at March 31, 2025, is $2,188 million ($2,366 million in 2024). Interest on this obligation of $143 million ($151 million in 2024) is reported in the Consolidated Statement of Operations and Accumulated Operating Deficit as part of public debt charges. At March 31, 2025 future minimum lease payments are summarized as follows:

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

(c) Obligation under public-private partnerships

Under the government's P3 arrangements, private sector partners provide financing for the tangible capital assets built, acquired, or bettered. The financing can be partial or complete, depending on the arrangement. The obligations under P3s represent financial liabilities to the private sector partners for the tangible capital asset component of the P3s. The financial liability related to P3s is $2,493 million as at March 31, 2025 ($2,541 million in 2024). Interest on this obligation of $127 million ($129 million in 2024) is reported in the Consolidated Statement of Operations and Accumulated Operating Deficit as part of public debt charges and $17 million ($17 million in 2024) is capitalized as tangible capital assets. Repayment periods range between 25 and 35 years following the assets being ready for use. At March 31, 2025, the future minimum payments for the obligation under public-private partnerships are summarized as follows:

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

The accrued benefit obligations in respect of public sector pensions and other employee and veteran future benefits are presented net of pension assets, unrecognized net actuarial gains or losses and valuation allowance, 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.

(a) Overview of benefits

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:

• For the three main public sector pension plans, pension benefits generally accrue based on a member's average earnings during the best five consecutive years of earnings and years of pensionable service. Plan members can accrue up to a maximum of 35 years at a rate of 2% per year of pensionable service. Pension benefits are coordinated with the Canada and the Quebec Pension Plan benefits at age 65, without considering the enhancements that were phased-in between 2019 and 2025.
• For the Canadian Forces - Reserve Force pension plan, pension benefits accrue at a rate of 1.5% per year up to a maximum of 35 years based on total pensionable service and pensionable earnings over the service period, and are coordinated with the Canada and the Quebec Pension Plan benefits at age 65, without considering the enhancements that were phased-in between 2019 and 2025.
• For the Members of Parliament retiring allowance plan, basic allowances accrue at a rate of 3% per year of pensionable service multiplied by the average of the best five consecutive years of sessional indemnity and/or pensionable earnings up to a maximum of 75% of the plan member's average sessional indemnity and/or pensionable earnings as applicable. For service after December 31, 2015, retiring allowance benefits are coordinated with the Canada and the Quebec Pension Plan benefits at age 60. Members of Parliament are entitled to benefits after they have contributed to the plan for at least six years.
• For federally appointed judges, pension benefits do not have an explicit accrual rate. Instead, federally appointed judges may retire with a pension equivalent to two thirds of the salary annexed to their office once the member has completed 15 years of pensionable service and the sum of the member's age and years of service equals 80 or more.
• For the consolidated Crown corporations and other entities pension plans, pension benefits accrue depending on the terms of the plans; generally based on a combination of an accrual rate per year of pensionable service and pensionable earnings average as per plan terms. Some plans are closed to new entrants.

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

Pension benefits 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. An amount equal to contributions less benefit payments and other charges is invested by the PSPIB. Funded pension benefits also relate to consolidated Crown corporations and other entities where pension plans’ assets are held in external trusts that are legally separate from Crown corporations and other entities.

During the year ended March 31, 2025, PSPIB transferred $1,943 million (nil in 2024), from the Public Service Pension Fund to the Consolidated Revenue Fund of the Government of Canada in order to eliminate a non-permitted surplus in the Public Service Pension Fund (relating to service on or after April 1, 2000), as recommended by the President of the Treasury Board pursuant to subparagraph 44.4(2)(b) of the Public Service Superannuation Act.   

ii. Unfunded pension benefits

For unfunded pension benefits, separate 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 corporations and other entities' pension plans. Employee and employer contributions for unfunded pension benefits sponsored by the government are part of general government funds. Contributions amounted to $6,722 million ($3,590 million in 2024) of which $209 million ($180 million in 2024) represents regular employer contributions, $6,425 million ($3,333 million in 2024) represents special employer contributions, and $88 million ($77 million in 2024) represents employee contributions.

iii. Other future benefits

Other employee and veteran future benefits 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 $545 million ($536 million in 2024). 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 valuation report in respect of a pension plan must be filed with the Minister responsible for that pension plan within eighteen months of the valuation date. The Minister then has thirty sitting days to present the actuarial valuation to the Parliament. The actuarial assumptions underlying the valuations for funding purposes are based on the actuary’s best estimates.

The most recent triennial actuarial valuations were conducted as at March 31, 2023, for the public service pension plan; as at March 31, 2022, for the Canadian Forces - Regular Force and Reserve Force, the Members of Parliament and the federally appointed judges pension plans; and as at March 31, 2021, for the Royal Canadian Mounted Police pension plan.

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 pensions and other employee and veteran future benefits 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 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 the management of the consolidated Crown corporations and other entities.

(d) Change to benefits

No plan amendments, curtailments or settlements occurred this year. 

(e) Net future benefit liabilities and assets

The net future benefit liabilities and assets are comprised of different components. The details are as follows:

i. Accrued benefit obligations

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

ii. Pension and other future benefit assets

Pension and other future benefit assets include investments held by the PSPIB and external trusts of consolidated Crown corporations and other entities and contributions receivable from employees for past service buyback elections.

The changes in pension and other future benefit assets during the year are as follows:

As at March 31, the market value of the investments is $312,539 million ($277,141 million in 2024). The actual return on investments is $34,585 million ($18,512 million in 2024) and the actual net rate of return on investments, calculated on a time-weighted basis, is 12.5 % (7.2% in 2024) for the year.

iii. Net future benefit liabilities and assets

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

(f) Benefit and interest expenses

The components of public sector pension and other employee and veteran future benefit expenses are as follows:

Net actuarial losses of $4,020 million ($7,489 million in 2024) are presented in the Consolidated Statement of Operations and Accumulated Operating Deficit. The net actuarial losses are comprised of actuarial gains of $3,643 million ($3,063 million in 2024) on funded pension benefits, actuarial losses of $1,723 million ($3,348 million in 2024) on unfunded pension benefits and actuarial losses of $5,940 million ($7,205 million in 2024) on other future benefits.

(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 actuarial valuations for funding purposes, as applicable. The assumptions include estimates of discount rates, future inflation, 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 obligations for public sector pensions and other employee and veteran future benefits sponsored by the government are as follows:

• For funded pension benefits, the streamed expected rates of return on invested funds.
• For unfunded pension and other future benefits, the government's cost of borrowing derived from the yields on the actual zero-coupon yield curve for Government of Canada bonds which reflects the timing of the expected future cash flows.

The principal actuarial assumptions used in measuring the accrued benefit obligations as at March 31 for government-sponsored benefits, as well as the related benefit and interest expenses for the year, are as follows:

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 5.0% to 6.2% (5.2% to 6.2% in 2024) for the funded pension benefits, discount rates ranging from 3.1% to 4.7% (3.1% to 4.9% in 2024) for the unfunded pension benefits and discount rates ranging from 3.1% to 4.8% (3.1% to 4.9% in 2024) for the other employee future benefits. The long-term general wage increase ranged from 2.5% to 3.5% (2.5% to 4.0% in 2024). The long-term inflation rate has remained consistent at 2.0% (2.0% in 2024).

The expected average remaining service life (EARSL) of the employees represent periods ranging from 4 to 23 years (4 to 23 years in 2024) according to the plan in question; more specifically, from 11 to 15 years (11 to 15 years in 2024) 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 5 to 7 years (5 to 7 years in 2024).

(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 1% change in the principal actuarial assumptions.

13. Derivatives

Derivatives are financial contracts whose value is derived from movements in one or more underlying assets, indexes, interest rates, currency exchange rates, or other market-based factors. The government uses derivatives for hedging purposes and in conjunction with its other risk management activities.

The following table presents derivatives at March 31:

(a) Cross-currency swap agreements

The government has entered into individual cross-currency swap contracts with various counterparties to facilitate management of its debt structure. 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. 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 fair value of cross-currency swaps as at March 31, 2025 in terms of maturity date, stated in Canadian dollars, are as follows:

(b) Foreign exchange forward agreements

The government’s lending arrangements with the International Monetary Fund (IMF), included in the foreign exchange accounts, are denominated in special drawing rights (SDR). However, the government funds some of these loans with US dollars, while other are made directly in SDRs. Consequently, since the value of the SDR is based upon a basket of key international currencies (US dollar, Euro, Japanese yen, British pound sterling and Chinese renminbi), 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.

The notional principal amount of a foreign exchange forward agreement refers to the principal amount used to calculate contractual cash flows. Foreign exchange forward agreements outstanding at March 31, with notional principal amounts in Canadian dollars of $5,239 million ($5,106 million at March 31, 2024), mature during the next fiscal year.

14. Other liabilities

Other liabilities include:

(a) Canada Pension Plan Accounts

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 employee, employer and self-employed worker contributions, as well as investment 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. As at March 31, the fair value of the CPP’s consolidated net assets is $662,288 million ($600,471 million in 2024) for the CPP Account and $59,903 million ($39,742 million in 2024) for the Additional CPP Account.

Pursuant to the Canada Pension Plan Act, the transactions of the CPP are recorded in the Canada Pension Plan Accounts (the Accounts) within the accounts of Canada. The Accounts also record the amounts transferred to or received from the CPPIB. The $465 million ($159 million in 2024) balance in the Accounts represents the CPP's deposit with the Receiver General for Canada and, therefore, is reported as a liability. The CPP's deposit with the Receiver General for Canada is comprised of the CPP Account balance of $389 million ($126 million in 2024) and the Additional CPP Account balance of $76 million ($33 million in 2024).

(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. The net liability of the government is presented after reducing applicable accounts for securities held in trust. Certain accounts earn interest which is charged to interest on the public debt. Some of the largest deposit and trust accounts are the swap collateral guarantee deposit account of $255 million ($687 million in 2024) and the Indian band funds account in the amount of $587 million ($571 million in 2024). These accounts were established to record cash received as credit support under a collateral agreement with financial institutions and 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 $4,314 million ($4,222 million in 2024). This account was established under the Public Service Superannuation Act to provide life insurance to contributing members of the public service.

15. 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.

Cash and cash equivalents are as follows:

16. Taxes receivable

Taxes receivable include taxes, interest, penalties, and other revenues assessed or estimated but not yet collected as at March 31. 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 receivable from individuals and employers as applicable.

The details of the taxes receivable and other amounts collectible through the tax system and allowance for doubtful accounts are as follows:

17. Other accounts receivable

Other accounts receivable consist of billed or accrued financial claims arising from amounts owed to the government at year end, including COVID-19 benefit overpayments receivable, and cash collateral pledged to counterparties.

The details of the other receivable and allowance for doubtful accounts are as follows:

The following table provides an aging analysis of billed or accrued financial claims:

18. Foreign exchange accounts

Foreign exchange accounts represent financial assets and liabilities related to Canada's official international reserves, primarily held in the Exchange Fund Account (EFA), and its membership in the International Monetary Fund (IMF).

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

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

(a) International reserves held in the Exchange Fund Account

The purposes of the EFA, as specified in the Currency Act, are to aid in the control and protection of the external value of the Canadian dollar and to provide a source of liquidity for the government, if required. The EFA holds the largest component of Canada’s official international reserves in a portfolio consisting of high-quality liquid foreign currency securities, deposits and IMF special drawing rights (SDR) holdings. 

SDR holdings are interest-bearing international reserve assets created by the IMF. The SDR is not considered a currency, nor is it a direct claim on the IMF; rather, SDR holdings represent a potential claim on the freely usable currencies of other IMF members. The IMF allocates SDRs to its members who are also participants in its SDR department, such as Canada. In an SDR allocation by the IMF, a participant receives SDR holdings (assets) and assumes an equal amount of SDR allocations (liabilities). As a holder of SDRs, Canada has the right to exchange them for an equivalent amount of freely usable currency, or other reserve assets, with other IMF members. The exchange value of the SDR is determined by a weighted basket of major international currencies (US dollar, euro, Japanese yen, British pound sterling and Chinese renminbi). The SDR can also be used in a variety of transactions between the holder and other participants in the SDR department, the IMF, and other prescribed SDR holders. Also, the SDR serves as the unit of account for the IMF and certain other international organizations.

There were no impairments of the marketable securities held in the EFA in 2025 (nil in 2024).

(b) International Monetary Fund assets

As an IMF member, Canada has subscribed to the capital of the IMF in an amount corresponding to its quota, which broadly reflects its relative position in the world economy. IMF quotas are denominated in SDRs. Canada’s subscription to the IMF, or its quota, is SDR 11,024 million, or $21,070 million, at March 31, 2025 (SDR 11,024 million, or $19,757 million, in 2024). Subscriptions to the IMF are also a key determinant of a member’s voting power in the IMF, a member’s share in new general SDR allocations, a member’s maximum amount of loans that can be obtained from the IMF under normal access, and the maximum amount of financial resources a member may be required to provide to the IMF.

Canada also lends funds to the IMF and certain IMF-established trusts, which are used by the IMF to provide financing to other members. Canada, along with certain other IMF-member countries, participates in lending arrangements with the IMF (New Arrangements to Borrow, or NAB, and Bilateral Borrowing Agreements, or BBAs) and with the IMF's Poverty Reduction and Growth Trust (PRGT) and Resilience and Sustainability Trust (RST). The loans resulting from these arrangements that are considered part of Canada’s official international reserves are included in foreign exchange accounts assets.

Collectively, the maximum direct lending under the NAB and BBAs is limited to no more than the equivalent of SDR 11,279 million, or $21,558 million, at March 31, 2025 (SDR 11,279 million, or $20,214, million in 2024). The total lending committed to the PRGT is SDR 2,700 million at March 31, 2025 (SDR 2,700 million, in 2024). Total outstanding PRGT loans at March 31, 2025 are SDR 1,656 million, or $3,165 million (SDR 960 million, or $1,720 million, in 2024), of which SDR 1,000 million, or $1,911 million, is included in foreign exchange accounts assets (SDR 276 million, or $494 million, in 2024) and SDR 656 million, or $1,254 million, is included in other loans, investments and advances (SDR 684 million, or $1,226 million, in 2024). The RST lending commitment is for the equivalent of $2,000 million at March 31, 2025 ($2,000 million in 2024).

(c) International Monetary Fund liabilities

Canada is a participant in the IMF's SDR Department (participant), and as such it has received SDR allocations from the IMF. In an SDR allocation by the IMF, a participant assumes the obligations associated with its SDR allocations (liability) and receives an equal amount of SDR holdings (assets). SDR allocations represent an obligation to provide, on demand, freely usable currency to another participant(s) in exchange for an equivalent amount of SDRs, where that other participant(s) has a balance of payments or reserve position need. The SDR market generally functions on a voluntary basis and Voluntary Trading Arrangements (VTAs) are intermediated by the IMF, which handles most SDR transactions between a group of SDR participants who have agreed to exchange SDRs for specific currencies within set trading limits. Canada’s obligation to provide currency in exchange for an equivalent amount of SDRs is generally limited as Canada has a standing arrangement with the IMF which specifies the range of Canada’s SDR holdings and the maximum number of transactions per week. Canada’s SDR allocations are SDR 16,554 million, or $31,640 million, at March 31, 2025 (SDR 16,554 million, or $29,668 million, in 2024).

In partial consideration for its subscription to the capital of the IMF, Canada has issued promissory notes to the IMF which are non-interest bearing, payable on demand, and are subject to redemption or reissue, depending on the needs of the IMF for Canadian currency. These promissory notes have an outstanding amount of SDR 8,236 million, or $15,741 million, at March 31, 2025 (SDR 8,056 million, or $14,438 million, in 2024).

19. Enterprise Crown corporations and other government business enterprises

The net assets and liabilities of enterprise Crown corporations and other government business enterprises are recognized as an investment by the government. The government holds other investments issued by Crown corporations and other government business enterprises. In addition, the government has loans and advances receivable from these entities.

(a) Enterprise Crown corporations and other government business enterprises

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

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

(b) 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). Morale and welfare and military family programs, services and activities are provided across Canada and overseas through NPP entities, including CFMWS, Canadian Forces Charitable Fund (CFCF), Canadian Forces Exchange System (CANEX), Service Income Security Insurance Plan (SISIP), Canadian Forces Charitable Funds and those local to Bases and Wings. 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 2025, NPP administered estimated revenues and expenses of $543 million ($462 million in 2024) and $470 million ($420 million in 2024) respectively, and had net equity of $989 million at March 31, 2025 ($897 million at March 31, 2024). These amounts are excluded from the consolidated financial statements of the Government of Canada.

20. Other loans, investments and advances

Other loans, investments and advances are financial claims through debt instruments held by others that are owing to the government and ownership interests acquired through the use of parliamentary appropriations, excluding investments in enterprise Crown corporations and other government business enterprises.

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

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

Portfolio investments include investments such as bonds, equity investments, money market funds, fixed income securities, and hybrid capital.

Capital subscriptions are composed of both paid-in and callable capital of multilateral development banks. These investments are treated as concessionary as they do not provide a return on investment, but are repayable on termination of the organization or withdrawal from it.

Loans under the CEBA program were provided interest free until January 18, 2024. These loans included repayment incentives of up to a maximum of $20,000 forgiveness on loans of $60,000, where loan repayment was made in full by January 18, 2024 (March 28, 2024 with refinancing application). Loans not repaid by January 18, 2024, were not eligible for forgiveness but are subject to a one-time extension of three years and 5% interest per annum commencing on January 19, 2024. No principal repayments are required until December 31, 2026, at which time the entire loan becomes due and payable. In 2025, $258 million of loans were repaid and a valuation allowance of $5,354 million for estimated credit losses was applied to the outstanding loans ($21,339 million of loans were repaid in 2024 and a valuation allowance of $4,942 million). The valuation allowance includes $5,006 million of loans ($4,842 million in 2024) that were determined to be impaired due to events of default including overdue payments and bankruptcy. The following table provides an aging analysis of CEBA loans:

Effective April 1, 2023, loans under the Canada Student Financial Assistance Program and Canada Apprentice Loans are provided interest-free and no longer accrue interest. A concessionary amount of $1,108 million for newly issued loans ($1,016 million in 2024) is recognized as a transfer payment expense in the Consolidated Statement of Operations and Accumulated Operating Deficit. The loans are recorded net of the concessionary amount, which will be amortized over the term of the loans. The repayment period is generally 10 years, with a maximum of 15 years. Repayments are not required while borrowers are completing their studies, enrolled in their apprentice program, or during a 6-month period following completion. The following table provides an aging analysis of Canada Student Loans and Canada Apprentice Loans:

Unconditionally repayable contributions are administered under a transfer payment program to achieve objectives such as stimulating economic development and providing international assistance in support of sustainable development goals. The recipients are expected to repay all or part of the amounts advanced. As there is an expected financial return, they are in substance loans. Certain contributions are non-interest bearing and others bear interest at rates varying from 0.3% to 7.0%. Generally, unconditionally repayable contributions have concessional terms, with final instalments due within 1 to 30 years of initial disbursement. Unconditionally repayable contributions are recorded in part as transfer payment expenses in the Consolidated Statement of Operations and Accumulated Operating Deficit when their economic value is reduced due to their concessionary terms. 

Other loans and advances consist primarily of loans to international organizations and loans to national governments. Loans and advances to international organizations are primarily made to banks and associations that use these funds to make loans to developing countries at significant concessionary terms. Loans to national governments consist mainly of loans to support economic resilience, development assistance, or development of export trade. In 2025, the Government provided $2,900 million ($2,000 million in 2024) in financial assistance in the form of interest-bearing loans to Ukraine. As at March 31, 2025, the outstanding loan balance to Ukraine was $9,842 million ($6,908 million as at March 31, 2024). Certain loans are non-interest bearing and others bear interest at rates varying from 0.6% to 10.3%. These loans are repayable over 1 to 55 years, with final instalments due in 2071.

21. Tangible capital assets and inventories

Tangible capital assets consist of acquired, built, developed or improved tangible assets whose useful lives extend 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. Certain tangible capital assets relate to public-private partnerships (P3s), where the government enters into long-term agreements with private sector partners to design, build, acquire or better tangible capital assets, and for operating and/or maintaining those assets once they are ready for use. The government’s private sector partners, who provide partial or complete financing for the transactions, are not granted ownership interests in the assets. Detailed information on tangible capital assets is provided in Section 10 (unaudited) of this volume.

Inventories are comprised of spare parts and supplies held for future program delivery and are not primarily intended for resale.

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:

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

22. 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) Classification and risks overview

The government's financial instruments, the classification, and the nature of certain risks to which they may be exposed are as set out in the following table:

(b) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss.

Except for loan guarantees, the government's maximum exposure to credit risk is the carrying amount of its financial assets. The maximum exposure to credit risk related to guarantees is the principal amount outstanding as outlined in Note 9(b).

Cash and cash equivalents

The government has deposited cash with the Bank of Canada, from which management believes the risk of loss to be remote. The prudential liquidity balance is held by the Bank of Canada.

Exchange Fund Account

As specified in the Statement of Investment Policy (SIP) for the Government of Canada that sets out the policy governing the acquisition, management, and divestiture of assets held in the Exchange Fund Account (EFA), to help achieve the objective of preserving capital value, an entity must be deemed to have a credit rating of A - or higher to be eligible for investment by the EFA. The determination of credit quality is informed by external credit ratings and internal credit analysis.

Investment in Canada Mortgage Bonds – on loan

The government made its Canada Mortgage Bond holdings available to borrow through a securities lending program. As of March 31, 2025, $1,834 million of Canada Mortgage Bond holdings were on loan to third parties. The market value of the collateralized securities held totaled $1,926 million, representing 105% of the market value of securities loaned.

As of March 31, 2025, the majority of these investments were given a rating of AAA by external credit rating agencies. The external ratings are based on the second highest rating among those provided by Moody’s Investors Service, Standard & Poor’s, Fitch Ratings and Dominion Bond Rating Service.

Concentration of credit risk

Concentrations of credit risk occur when a significant proportion of the portfolio is invested in securities subject to credit risk with similar characteristics or subject to similar economic, political or other conditions. The EFA may hold fixed income securities of highly rated sovereigns, central banks, government-supported entities and supranational organizations. The EFA may also make deposits and execute other transactions, up to prescribed limits and subject to credit rating criteria, with commercial financial institutions. The SIP ensures that the EFA's asset portfolio is prudently diversified with respect to credit risk by placing limits on holdings by class of issuer (sovereign, agency, supranational, corporation or commercial financial institution), by individual issuer or counterparty, and by type of instrument. It also specifies the treatment of holdings that do not meet eligibility criteria or limits due to exceptional circumstances such as ratings downgrades. The following table provides the fair value of the investments held in the EFA as at March 31, 2025, by currency and class of issuer:

Other accounts receivable

There is no significant concentration of credit risk related to billed and accrued financial claims. An analysis of the age of these financial assets and the associated valuation allowances used to reflect these accounts at their net recoverable value is disclosed in Note 17.

Other accounts receivable also includes cash collateral pledged to counterparties on swap agreements. Credit risk related to these agreements is discussed with respect to derivatives below.

Other loans, investments and advances

The government intentionally takes on counterparty risk related to other loans, investments and advances with concessionary terms in order to support various policy aims. Other loans are issued pursuant to legislation or based on the established criteria set out under various loan programs. These loans have been provided to different borrowers such as small businesses and not-for-profit organizations, students, national governments, and international organizations.

Loans under the CEBA program to small businesses and not-for-profit organizations were provided to help these entities navigate the COVID-19 pandemic and remain resilient. Loans to students under the Canada Student Financial Assistance Program are provided to help students pay for their post-secondary education. Other loans and unconditionally repayable contributions are provided to various recipients including international organizations, banks, associations and national governments under various acts or programs, these instruments can include concessionary terms. These instruments are not provided based on a credit risk assessment of the borrower, but based on individual program criteria. Under these programs, various levels of credit risk are assumed. Credit risk is reduced on loans provided to national governments through the Extraordinary Revenue Acceleration (ERA) mechanism as the principal and interest of bilateral loan commitments is repaid by extraordinary revenues stemming from the immobilisation of Russian sovereign assets.

Valuation allowances are applied accordingly to reflect these accounts at their net recoverable amount. The valuation allowances take into consideration the borrower’s or group of borrowers’ credit risk rating, recent collection history, economic situation in the country or industry of operation, repayment mechanisms in place and any other known circumstances impacting collectability. These accounts are described in detail in Note 20.

Derivatives

For cross-currency swaps and foreign exchange forward contracts, the government manages its exposure to credit risk by dealing with counterparties having acceptable credit ratings.

The credit risk associated with cross-currency swaps is mitigated through netting provisions in the ISDA Master Agreements, which govern cross-currency swaps entered into by the government and which give the government the right, upon default of a counterparty, to settle all contracts with that counterparty under the particular ISDA Master Agreement on a net basis. This reduces the maximum exposure to credit risk from cross-currency swaps in the event of a counterparty’s default, in that the government may offset the amounts due from that counterparty with the obligations due to that counterparty under all derivative contracts covered by the particular ISDA Master Agreement.

Credit risk is also managed through collateral provisions in swap and foreign exchange forward agreements. The government enters into two-way Credit Support Annex (CSA) agreements for cross-currency swaps with certain counterparties pursuant to ISDA Master Agreements. Under the terms of those agreements, the government may be required to pledge and/or receive eligible collateral. 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. Collateral held in securities from counterparties has not been recognized in the Consolidated Statement of Financial Position as the government does not obtain economic ownership unless the pledgor defaults. Collateral pledged by counterparties to the government may be liquidated in the event of default to mitigate credit losses.

Collateral pledged by counterparties under two-way CSA agreements as at March 31, 2025, is presented in the following table:

The collateral posted by counterparties is sufficient to cover the government’s entire net exposure to credit loss under derivative contracts. 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:

(c) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting its obligations associated with financial liabilities.

The fundamental objective of the government’s debt management strategy is to provide stable, low-cost funding to meet the government’s financial obligations and liquidity needs. The government has access to multiple active borrowing programs, including those in the domestic Canadian market and those in foreign currency markets. Through the Borrowing Authority Act (BAA) and the Financial Administration Act (FAA), parliament authorizes the Minister of Finance to borrow money on behalf of His Majesty in right of Canada. Details of these programs are provided in Note 3(c) Borrowing Authorities.

Under its prudential liquidity plan, the government’s overall liquidity is maintained at a level sufficient to cover at least one month of net projected cash flows, including coupon payments and debt refinancing needs. The government holds liquid financial assets in the form of domestic cash deposits, including $20 billion in cash expressly designated for prudential liquidity, and foreign exchange reserves to safeguard its ability to meet payment obligations in situations where normal access to funding markets may be disrupted or delayed. 

Proceeds of the government’s foreign currency borrowings are held in the Exchange Fund Account to provide liquidity and provide funds needed to promote orderly conditions for the Canadian dollar in foreign exchange markets.

The following table details the contractual maturities for the government’s significant financial liabilities. The amounts represent undiscounted cash flows of financial liabilities based on the earliest date the government can be required to pay. The table includes both principal and interest cash flows:

(d) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk.

i. Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The government is exposed to currency risk through fluctuations in foreign-denominated future cash flows, namely those related to investments in the Exchange Fund Account, foreign debt, loans to international organizations and derivatives including collateral.

Exchange Fund Account

Currency risk is managed using a strategy of matching the currency and the duration of the Exchange Fund Account assets and the related foreign currency borrowings of the government. As at March 31, 2025, the impact of exchange rate changes affecting the Exchange Fund Account assets and the liabilities funding the assets naturally offset each other, resulting in no significant impacts to the government’s net debt. 

The majority of the Exchange Fund Account foreign currency assets and liabilities are held in 4 currency portfolios: US dollar, Euro, British pound sterling, and Japanese yen. The following table presents the net impact to the Exchange Fund Account, and the related foreign-denominated debt, cross-currency swaps and foreign exchange forward contracts of a 1% appreciation in the Canadian dollar as at March 31, 2025, as compared to the US dollar, euro, British pound sterling and the Japanese yen.

The net foreign exchange gain included in net foreign exchange revenues, other revenues and other expenses in the Consolidated Statement of Operations and Accumulated Operating Deficit amounts to $303 million (net foreign exchange gain of $158 million in 2024).

ii. Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The government’s exposure to interest rate risk principally arises from possible fluctuations in the future cash flows related to variable-rate cross-currency swaps due to changes in market interest rates.

The table below shows the sensitivity analysis of the possible net impact of an increase in interest rates of 100 basis points as at March 31 on cross-currency swaps.

Interest rate risk for the Exchange Fund Account is managed using a strategy of matching the duration of the assets with the related borrowings of the government, the foreign debt and cross-currency swaps, under the asset-liability matching strategy. By matching the duration of the assets with that of the liabilities, a change in interest rates has a similar effect on the fair value of both assets and liabilities.

The government’s domestic debt, cash equivalents and certain other loans, investments and advances generally bear fixed interest rates. Although subject to interest rate risk because the fair value of these instruments will be affected by changes in market interest rates, there is no impact in the consolidated financial statements as these financial instruments are measured at cost or amortized cost.

iii. Other price risk

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, other than those arising from interest rate risk or currency risk, whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.

In 2022, the government stopped issuing new real-return bonds. However, the government is exposed to inflation risk through its existing real return bonds, as interest and principal payments are adjusted for changes in the consumer price index (CPI). If the CPI applicable to real return bonds were to increase by 5% at March 31, 2025, the carrying amount of the bonds as at that date would increase by $3,831 million ($3,769 million in 2024), with the adjustment recognized immediately as an expense charge. Such a change would also increase annual interest expenses by $81 million. A decrease in the CPI would have the opposite effect, by decreasing the carrying amount of the bonds, with the adjustment recognized immediately as income, and by decreasing annual interest expense.

Other than inflation risk, the government is not exposed to significant other price risk.

23. Contractual obligations and contractual rights

(a) 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. Detailed information on contractual obligations is provided in Section 11 (unaudited) of this volume.

Major contractual obligations that will generate expenditures in future years and that can be reasonably estimated are summarized as follows:

(b) Contractual rights

The activities of government sometimes involve the negotiation of contracts or agreements with outside parties that result in the government having rights to both assets and revenues in the future. They principally involve sales of goods and services, leases of property, and royalties and revenue/profit-sharing arrangements while all other contractual rights are combined for reporting purposes. The government has agreements that provide contractual rights to future revenue based on a percentage of revenue or profits of the other party to the agreement or based on receiving an amount for each unit of goods sold. The terms of these contracts or agreements may not allow for a reasonable estimate of future revenues.

Where the terms of contracts and agreements allow for a reasonable estimate, the major contractual rights are summarized in the table presented below. Detailed information on contractual rights is provided in Section 11 (unaudited) of this volume.

24. Segmented information

The government segmented information is based on the ministry structure, which groups the activities of departments, agencies and consolidated Crown corporations and other entities for which a Minister is responsible, and the enterprise Crown corporations and other government business enterprises as described in Note 1 and Note 19.

In the table below, the five main ministries are reported separately, and the Other ministries column includes amounts for all other ministries as well as the provision for valuation and other items. The following tables present the segmented information by Ministry and enterprise Crown corporations and other government business enterprises before the elimination of internal transactions that are eliminated in the adjustments column before arriving at the total for the year ended March 31:

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