Accrual Accounting Transition Protocol - 2001-02 Update - Annex A
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Fiscal year 2001-02 is the third and last year of the transition period to accrual accounting for the Government of Canada (GOC). In 2001-02, the Government's audited financial statements presented in the Public Accounts will be prepared using full accrual accounting information as provided by Departments and Agencies (referred to as departments in this document). The 2001-02 financial statements will not present comparative figures with the previous year, 2000-01, which will remain presented on the expenditure basis. However, all financial statement opening balances as of April 1st 2001 and presented using the new accrual accounting policies in effect for 2001-02.
Starting April 1st 2001, it is expected that all departments will be FIS compliant from a system's perspective and that all will submit monthly trial balances to the Receiver General (RG) using accrual accounting policies identified in this Protocol and coded in accordance with the government-wide Chart of Accounts.
Until the 2001-02 GOC's audited financial statements are published, the monthly Fiscal Monitor will continue to be issued on the expenditure basis. In the interim, the RG will have to:
- adjust back to the expenditure-basis the accrual accounting information received from departments to prepare the monthly statements, and at the same time,
- accumulate accrual-based information for comparative purposes in 2002-03, and
- prepare for the issuance of the year-end audited financial statements on an accrual basis, including full restatement of the opening balance on the accrual basis.
The Transition Protocol was first developed in 1999-2000, to help manage the monthly process from a central perspective and to help ensure that accurate and timely financial information was available throughout the transition period for the preparation of the GOC's monthly statements. In the first two years of the transition, departments had some latitude in implementing accrual accounting policies through a phased approach. In 2001-02, the phasing-in latitude no longer exists and, with one exception, all accrual accounting policies identified in Annex B are now mandatory for all departments, as of April 1st 2001.
As a general rule, all accrual accounting policies effective in 2001-02 as listed at Annex B are mandatory as of April 1st 2001.
Starting April 1st 2001, all departments must send a monthly trial balance to the Central Financial Management Reporting System (CFMRS) of the RG, coded in accordance with the Government-wide Chart of Accounts.
- The monthly trial balance (for periods 1 to 12) must be submitted to the RG within five working days of month's end. Exceptionally, if corrections are required, a corrected trial balance may be submitted within 7 working days after the month end.
- All monthly trial balance submissions must include the yearly opening balance.
Starting in April 2001, opening balances for FY 2001-02 for all accrual accounting policies should be submitted with the trial balance. It is understood that opening balances relating to the closing of the previous fiscal year may be unavailable or incomplete on April 1st. These may need retroactive adjustment until the 2000-01 Public Accounts are closed in August 2001 and all balances are considered final. However, at the end of August 2001, or period five, all previous year balances will be considered closed in the central system and to be reported by departments as "final adjusted" opening balances in the August 2001 trial balance.
- All adjustments to opening balances should be submitted in the April 2001 trial balance, with the exception of adjustments to balances resulting from the normal closing process and carry forward of previous year's closing balances, which must be adjusted at the latest in the August 2001 trial balance.
- When a department that was FIS compliant before 2001-02 had applied an accrual accounting policy without recording the opening balance (e.g.: capitalization of assets), the adjustment to the opening balances will be expected to be done as of April 1st 2001, and the RG should be advised in advance of the amount of the restatement.
All accrual accounting policies identified in Annex B as being the responsibility of the departments should have already been, or should be, implemented by departments on April 1st 2001. As indicated in last year's Protocol:
- The recording of allowances for unused vacation pay and compensatory leave is mandatory effective April 1st 2001.
- Accounts receivable and their allowance for bad debts must be recorded by all departments, with an opening balance equivalent to the amount reported to the RG for inclusion in the Public Accounts of the previous year.
- The recording of other allowances, including allowances for Loans, Investments and Advances and allowances for liabilities currently recorded at the centre, will be reviewed to identify the level of decentralization that will be appropriate in the future. For the time being, these allowances must not be recorded in departmental trial balances submitted to the CFMRS until further notice, or without specific agreement and concurrence of the Treasury Board Secretariat.
As per Treasury Board Accounting Standard (TBAS) 3.2 - Transfers (Grants and Contributions), starting 2001-02, departments will also record loans for unconditionally repayable contributions and their allowance for bad debts. In addition, as recently announced in an Information Bulletin on FIS Accrual Accounting Policies:
- The capitalization of software will be mandatory on a basis starting April 1st 2001. This means that departments must capitalize allowable costs incurred after March 31, 2001 for acquired and in-house developed software, regardless of the start date of the project. Software costs incurred prior to April 1st 2001 will not be capitalized, therefore no opening balance must be provided in 2001-02.
- The capitalization of leasehold improvements will be mandatory on a basis starting April 1st 2001. This means that departments must capitalize allowable costs incurred after March 31, 2001. Leasehold costs incurred prior to April 1st 2001 will not be capitalized, therefore no opening balance must be provided in 2001-02.
- The recording of inventories (consumable and for re-sale) will not be mandatory until 2002-03, although departments are encouraged to capitalize them for 2001-02. Capitalization will be mandatory for 2002-03, and as such, inventory opening balances will be mandatory as at April 1st 2002, starting in period one of 2002-03.
- The costs of intangibles relating to patents, copyrights and trademarks will not be capitalized for 2001-2002. The accounting policy for these costs may be reviewed at a later date, but they will continue, for now, to be expensed as per the current policy.
All departments should complete the template in Annex B to confirm to the RG and TBS that they will comply with the requirements of the 2001-02 Transition Protocol. It is expected that all departments will be able to meet these requirements. If, , a department believes that these requirements may not be met, it is imperative that the TBS and the RG be informed so that a contingency plan may be developed with the department to ensure that the overall objective of preparing audited Government financial statements on the accrual basis in 2001-02 will still be met.
Your submission of the template in Annex B should be sent no later than December 14, 2000 to both: the Central and Public Accounts Reporting Directorate (CPARD) of Public Works and Government Services Canada (PWGSC) and to the Government Accounting Policy Division (GAPD) of the Treasury Board Secretariat (TBS).
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