1. 2010-11 Financial Statements Changes Information Session for School Boards and External Auditors Financial Analysis and Accountability Branch Fall 2011

2. 2007-08 Grants for Student Needs 2 Agenda  Legislative Changes  Government Transfers Standard  Deferred Capital Contributions  Accumulated Surplus/(Deficit)  Prior Period Restatements  Proceeds of Disposition  Assets Held for Sale  Asset Upload File  Notes to the Financial Statements  Form Changes

3. 2007-08 Grants for Student Needs 3 Legislative Changes

4. 2007-08 Grants for Student Needs 4 Purpose  The Ministry of Education (EDU) has introduced legislative changes to the accountability framework for the School Board Sector.  Ministry proposals were shared at previous information sessions.  Highlights changes most of which are effective September 1, 2010.

5. 2007-08 Grants for Student Needs 5 Education Act – S231  The Ministry has amended legislation to update the budget requirements to:  Better align the financial accountability provisions with accounting policies of the province.  Establish new financial accountability controls on accumulated surpluses.  Establish new provisions related to multi-year deficit management strategies and recovery plans.  Section 231 of the Act has been amended to provide a new definition of balanced budget.  The new model measures budget compliance by measuring the amount that a board’s expenses exceed its revenues against the “1% threshold”.  The 1% threshold is the lesser of: 1)1% of the board’s operating revenue for the school board fiscal year, and 2)the board’s accumulated surplus for the immediately preceding fiscal year.  The board’s deficit may be greater than the criteria above if the board has prior approval from the Minister.  The above provisions have been implemented starting with the 2010-11 estimates of school boards and are compliance requirements for estimates, revised estimates and financial statements.

6. 2007-08 Grants for Student Needs 6 Education Act – Recovery Plans  The Ministry has amended legislation to permit multi-year deficit management strategies and recovery plans.  A new division C.1 called Financial Recovery Plans has been added.  The section gives the Minister the power to trigger a recovery plan at any point a board’s expenses exceed its revenues for the fiscal year by an amount greater than the 1% threshold referred to in the previous slide.  A recovery plan would not be triggered if the board had prior approval from the Minister.  The board would be required to submit a recovery plan within a specified time period, after which the Minister could approve or change the plan as necessary to address the deficit.  The board would be required to comply with the recovery plan until the board eliminated its in-year and accumulated deficits.

7. 2007-08 Grants for Student Needs 7 Regulations – Surpluses and Deficits  Reserves concepts have been replaced with accumulated surplus or deficit.  Education Act amended to allow regulations prescribing exclusions/inclusions etc. in the determination of accumulated surplus/deficit and in- year surplus/deficit.  Ontario Regulation 488/10, Determination of Board Surpluses and Deficits, has been introduced.  Schedule 5 of the Financial Statements implements the provisions of this regulation.

8. 2007-08 Grants for Student Needs 8 Regulations – Restricted Purpose Revenues  Reserves concepts that have external restrictions are reported as deferred revenues.  Reserves regulation has been replaced with Ontario Regulation 193/10, Restricted Purpose Revenues.  Enveloping provisions on GSN revenues e.g. Special Education, Internal Audit that were previously in the GSN Regulation have been moved to this regulation.

9. 2007-08 Grants for Student Needs 9 Regulations – Restricted Purpose Revenues  Addresses restrictions on School Renewal, including the school renewal portion of the Pupil Accommodation Reserve as of August 31, 2010.  Includes a provision allowing the school renewal allocation to be applied against the amortization/DCC gap related to school renewal capital spending.  Restrictions related to School Condition Improvement, a new funding source provided starting in 2011/12 are addressed. It is similar to renewal except that expenditures must meet Code of Accounts and TCA Guide criteria.

10. 2007-08 Grants for Student Needs 10 Regulations – 2010-11 GSN  To implement amended section 231 of the Act, operating revenue is defined in section 12 of the GSN regulation (Reg 196/10).  New provision introduced, section 57 – Required spending, minor tangible capital assets.  Requires boards to use 2.5% of funding allocations against minor TCA first before using residual for other purposes.  This was implemented to be able to include funding spent on minor TCA in DCC.

11. 2007-08 Grants for Student Needs 11 Government Transfers Standard

12. 2007-08 Grants for Student Needs 12 Government Transfers Standard  In February 2011, PSAB released the revised Government Transfers standard (PS 3410).  This standard explains how to report transfers from a government.  Where a board has a liability due to a capital transfer received to acquire or develop a TCA to be used to provide services for a defined number of years, the liability would be reduced and an equivalent amount of revenue would be recognized as the liability is settled (PS 3410, paragraphs 23 and 25).  This liability is referred to as deferred capital contributions (DCC) in the following training material and EFIS worksheets.

13. 2007-08 Grants for Student Needs 13 DCC and Non-Depreciable Assets (ex. Land)  The treatment of non-depreciable assets (ex. land) in PS 3410 is different that what was implemented in the 2010- 11 Revised Estimates.  Per the updated standard, capital transfers relating to non-depreciable assets would be recognized in revenue once the asset is acquired (PS 3410, paragraph 27).  The 2010-11 Financial Statement forms have been updated to exclude non-depreciable assets from DCC.  Regulations were updated to include revenues received for land in Accumulated Surplus - Unavailable for Compliance.

14. 2007-08 Grants for Student Needs 14 ICAO Technical Committee  On July 7, 2011, the Ministry of Education met with an Institute of Chartered Accountants of Ontario (ICAO) Technical Committee to discuss the implementation Government Transfers in the school board sector.  Memorandum 2011:B8 (Implementation of the revised government transfers accounting standard) includes the slides that were shared at the meeting, plus a description of one of the issues encountered.

15. 2007-08 Grants for Student Needs 15 Government Transfers Implementation  The majority of the Ministry’s implementation plan clearly conforms to the Government Transfers standard.  Boards have a liability with respect to past and future capital transfers for buildings and minor tangible capital assets (TCA). Therefore, PS 3410 can be applied and DCC recorded.  However, the treatment of property tax revenues that were used to fund the construction of depreciable assets (i.e. buildings and building additions) was inconclusive.  The implementation plan was the focus of the training sessions with the boards’ external auditors in early September 2011.  The following slides describe the issue of property tax revenues and provide a solution.

16. 2007-08 Grants for Student Needs 16 Capital funded through property taxes  Prior to 1998, some boards used property tax revenues to fund the construction of depreciable assets.  Generally, PS 3510 (Tax Revenues) would be used to determine how to account for property tax revenues.  The Province and school boards have a unique set of circumstances whereby the Ministry believes it is appropriate to include these amounts in DCC.  These circumstances were described in detail in memorandum 2011:B8.  The control structure changed significantly such that even pre- 1998 assets became the responsibility of the Province.  The financial statements should reflect this.

17. 2007-08 Grants for Student Needs 17 Capital funded through property taxes (con’t)  From a cost-benefit perspective, it is not reasonable, nor necessarily possible, to calculate capital contributions received through property tax revenue, thus it is not possible to exclude this amount from the opening DCC balance.  In such instances, the standard would generally be applied prospectively; however, the Ministry instructed boards to implement the provisions of PS 3410 retroactively. This was:  To ensure that the Financial Statements are relevant, understandable to the user, and comparable over periods, consistent with PS 1000.24.  To be consistent with the implementation of TCA.  Boards have not had taxing power since 1998, so this is a transition issue only.  In consideration of the above, the Ministry believes it is appropriate to include the opening balance related to property tax revenue contributions in DCC.

18. 2007-08 Grants for Student Needs 18 Audit Report and Accounting Policy Note  The boards’ 2010-11 Financial Statements will be prepared under a special purpose fair presentation framework.  See sample audit report provided.  The financial statements will be prepared in accordance with the basis of accounting described in Note 1 to financial statements.  See sample Note 1 provided.

19. 2007-08 Grants for Student Needs 19 Deferred Capital Contributions

20. 2007-08 Grants for Student Needs 20 Agenda  DCC Recap  What goes into DCC?  What does not go into DCC?  Opening Balance Adjustment  Sinking Fund Interest  Third Party Contributions  Information Tracking

21. 2007-08 Grants for Student Needs 21 DCC Recap: What goes into DCC?  Government or non-government capital transfers that are to be used for depreciable assets will be recorded in DCC.  Rationale for government transfers was discussed earlier in the session.  Rationale for non-government transfers is explained in the slide deck attached to Memorandum 2011:B8 (Government Transfers: Implementation Discussion). −These are donations, which are generally non-material amounts.  The funding sources that go into DCC are shown on Schedule 3 (Capital Expenditure Budget. They are: NPP & GPL Other GPL Renewal FDK Temporary Accommodation Energy Efficient Schools-Capital Renewable Energy-Capital School Renewal Minor TCA School Generated Funds Proceeds of Disposition Other

22. 2007-08 Grants for Student Needs 22 DCC Recap: What goes into DCC (continued)?  The “Other” category includes capital transfers that were not specified on Schedule 3. These amounts come from Schedule 5.1 (Deferred Revenue). They are: Other Ministry of Education Grants Other Provincial Grants Federal Government Grants Other Third Party Deferred Revenue

23. 2007-08 Grants for Student Needs 23 DCC Recap: What does not go into DCC?  “Unsupported capital spending” is spending on depreciable TCA that has not been supported with capital contributions.  It equals to the value of the depreciable TCA less the DCC balance.  Examples of unsupported capital spending:  Accumulated surplus used to fund a depreciable capital project  Operating grants that are spent on depreciable capital  (Note that the school renewal grant, up to 2.5% of total operating allocation that is used for minor tangible capital assets, and any capitalized interest costs are designated as capital grants.)  Sinking fund interest  The resulting shortfall in DCC revenue is managed through a compliance adjustment.

24. 2007-08 Grants for Student Needs 24 DCC: Opening Balance Adjustment  The 2010-11 Estimate forms were based on the third Government Transfers Re-exposure Draft.  Between the 2010-11 Estimates and 2010-11 Financial Statements, there were some changes and corrections to the forms because of the release of the Government Transfers standard.  Due to these changes, the unsupported capital spending for September 1, 2010 calculated on the Capital Wrap-Up Template (CWT) was revised.  Boards received a draft revised CWT in mid-May 2011 detailing these changes, and will have received a final version in by the end of the training sessions.  For most boards, this will not impact the receivable from the Province significantly; however, for some boards, it may.

25. 2007-08 Grants for Student Needs 25 DCC: Opening Balance Adjustment (continued) Changes/corrections made for the September 1, 2010 unsupported capital spending calculation:  Excluded from DCC - Sinking fund interest expected to be earned during the life of the sinking funds per the sinking fund agreement.  Excluded from DCC – Capital contributions recognized for the purchase of land.  Excluded from DCC - Amounts committed from accumulated surplus in 2009-10 for capital that were to be spent on TCA by August 31, 2010.  Included in DCC – NPF related to supported capital spending using FDK and $120M Capital funding sources that was mistakenly excluded from DCC in the CWT.

26. 2007-08 Grants for Student Needs 26 Sinking Fund Interest  The Ministry reviewed the 2010-11 Estimates approach on sinking funds, and determined that the accounting treatment was not in line with PS 3100.13.  Interest earned on sinking funds should be recognized in revenue when earned.  The 2010-11 Financial Statement forms (and 2011-12 Estimates) have been changed to exclude sinking fund interest from DCC.  Interest earnings on the sinking funds will be included in accumulated surplus as internally appropriated.

27. 2007-08 Grants for Student Needs 27 Sinking Fund Interest (continued)  The compliance shortfall due to the exclusion of sinking fund interest from DCC will be managed from the interest earned by the sinking funds (Schedule 5.5).  Sinking fund interest earned in the early years of contributions may not be enough to cover the compliance shortfall, causing a in year compliance deficit  In later years, the interest earning will exceed the compliance shortfall, causing a in year compliance surplus  Deficits in the early years and surpluses in later years are just timing differences.  As most of the sinking funds have shorter life than that of the assets supported by the sinking funds, at maturity of the sinking fund, there is usually an accumulated surplus attributable to SF interest  This accumulated surplus will be used to cover the compliance shortfall after the sinking fund maturity  Any excess sinking fund earnings can be used for other operating purposes once the requirements to repay the sinking funds are met (on an aggregate basis).

28. 2007-08 Grants for Student Needs 28 Compliance and PSAB Impact ($) (years) 0 (2.5) 2.5 1.5 Amortization 40 Note: Total contributions of $60 put into DCC, then amortized over 40 years. Yearly SF interest earned recognized in income over 25 years. 25 DCC SF Interest

29. 2007-08 Grants for Student Needs 29 DCC: Third Party Contributions  Two new lines were added to determine the portion of the DCC balance that relates to third party (Schedule 5.3, item 2.4) and non-third party capital contributions (Schedule 5.3, item 2.5).  Required for Ministry consolidation purposes  Third party amounts are:  federal government  school generated funds for capital  board level donations for capital  other third parties amounts specified by the board

30. 2007-08 Grants for Student Needs 30 DCC: Information Tracking  If DCC information for assets purchased pre- September 1, 2010 is available on an asset-by- asset basis, boards are encouraged to track the information on an asset-by-asset basis.  Starting September 1, 2010, board are required to track DCC additions, disposals and amortization on an asset-by-asset basis (including third party and non-third party capital contributions).

31. 2007-08 Grants for Student Needs 31 Accumulated Surplus/(Deficit)

32. 2007-08 Grants for Student Needs 32 Overview of Changes  CPP and EI Restatement has been removed  New line item 2.8.1, Committed Sinking Fund Interest, has been added  Committed Capital Projects moved from Unavailable for Compliance to Internally Appropriated  New Line 4.7 Revenue Recognized for Land  Line 4.9 from 2009-10 Financial Statements, Portion of Proceeds of Disposition Related to Net Book Value of Disposed Assets,” has been removed

33. 2007-08 Grants for Student Needs 33 Opening Balance Column  The September 1, 2010 opening balance column will be input based on the 2009-10 Schedule 5 closing balances except for the changes.

34. 2007-08 Grants for Student Needs 34 Summary of Changes  CPP & EI Restatement line has been removed  Transfer to 1.1 total operating accumulated surplus  Committed Sinking Fund Interest Earned  New line 2.8.1  Data for this line comes from Schedule 5.5, List of Committed Capital Amounts Funded by Accumulated Surplus  Represents earning on sinking fund assets that will be used to pay off the associated debt as well as revenues earned to offset the amortization of the unsupported portion of the assets related to the sinking fund debentures.  Committed Capital Projects  In 2009-10 was included under Unavailable for Compliance item 4.10  This year amount is line 2.8.2 under internally appropriated  Data for this line comes from Schedule 5.5 also  The amount is the committed accumulated surplus to support the unsupported portion of the project and to offset the amortization of the unsupported portion of the asset.

35. 2007-08 Grants for Student Needs 35 Summary of Changes - Continued  Revenues Recognized for Land  New line 4.7, Revenues Recognized for Land  Comes from Schedule 5.6A, Continuity of Revenues Recognized for the Purchase of Land  Schedule 5.6 was added due to a PSAB Government Transfers Standard (PS3410)  The standard allows for DCC relating to the purchase or acquisition of depreciable assets, this is not the case for non depreciable assets such as land  Prior to this Ministry included land revenues in DCC, however due to the release of the new standard, revenues received in the purchase of land will be excluded from DCC  The opening balance is adjusted to exclude land revenues and this amount is moved into accumulated surplus for compliance on line 4.7 in Schedule 5

36. 2007-08 Grants for Student Needs 36 Summary of Changes - Continued  Proceeds of Disposition  Line 4.9, Portion of Proceeds of Disposition Related to Net Book Value of the Disposed Assets) will be transferred to Schedule 5.1, deferred revenue, item 2.25 (School building), item 2.26 (prohibitive to repair) or item 2.27 (other)  Due to the implementation of DCC in 2010-11, the treatment of proceeds of disposition will be different  In 2009-10, only the gain on sale was transferred to deferred revenue on disposal of real property  In 2010-11, the gain and prior capital contributions will be transferred to deferred revenue on disposal of real property  For the restatement of the September 1, 2010 accumulated surplus balance, boards will transfer this amount out of accumulated surplus and into deferred revenue  The assumption under this transaction is that prior disposals were fully contributed (i.e. the DCC balance would have equaled the TCA balance)

37. 2007-08 Grants for Student Needs 37 Summary of Changes - Continued  Line 4.6 (Debt), 4.7 (Not Permanently Financed Amounts), and 4.8 (Receivable from Province) from 2009-10 are no longer on the schedule, the total of these amounts represents the unsupported debts in the old DCC calculation before the adjustments required to exclude land and sinking fund interest earned from DCC.  This amount is now split into 3 components, under four lines:  The adjusted DCC amount – line 4.5 (Net TCA less land) from Schedule 3C on TCA and line 4.6 (Unsupported Debt at August 31, 2010) from the approved CWT  Line 2.8.1 (Committed Sinking Fund Interest Earned) from Schedule 5.5  Line 4.7 (Revenue Recognize from Land) from Schedule 5.6A

38. 2007-08 Grants for Student Needs 38 Schedule 5.5  The name of this schedule has been changed to List of Committed Capital Amounts Funded by Accumulated Surplus.  It is used to track:  Depreciable committed capital projects (same as previous forms)  Interest earned on sinking funds (new). Sinking fund interest earned:  Recognized as revenues, not in DCC  Schedule 5.5 brings the sinking fund interest (earned and to be earned under the debentures agreement) into Available for Compliance over the average remaining service life (RSL) of depreciable TCA as at August 31, 2010  The amount is to cover the amortization of the unsupported portion of the related assets (i.e. the difference between the assets amount and the total sinking fund contributions under the by-laws/debenture agreement)  Boards can modify the average RSL to reflect the RSL of the assets that are supported by the sinking funds.  Once the board meets their contractual sinking fund interest requirements, the excess earnings are unrestricted and made available for compliance.  This is calculated on an aggregate basis for all sinking funds held by the board.

39. 2007-08 Grants for Student Needs 39 Schedule 5.6A – Land revenues  This is a new schedule that tracks details of land revenues reported in Schedule 5.  These amounts were previously included in DCC (Schedule 5.3), but are now shown in Accumulated Surplus Unavailable for compliance on Schedule 5 at item 4.7.  In-year revenues for current year land expenditures is populated from Schedule 3. Boards need to report the in-year revenues for unsupported past spending on land  Once disposed, the revenues recognized for the disposed asset is removed from this line.  Boards can also commit a portion of its accumulated surplus for land purchase which will increase this line.

40. 2007-08 Grants for Student Needs 40 Schedule 5.6B – Land deficit  This is a new schedule that tracks the capital deficit on land.  The difference between the book value of land (under TCA and Financial assets, if applicable) and the revenues recognized in Schedule 5.6A equals to the land deficit  This amount will be used in the Capital Analysis Template.

41. 2007-08 Grants for Student Needs 41 Prior Period Restatements

42. 2007-08 Grants for Student Needs 42 Prior Year DCC Restatement  Prior period comparative numbers are required for the Statement of Financial Position, Statement of Operations, Statement of Cash Flow and Statement of Change in Net Debt.  With the implementation of DCC as at September 1, 2010, boards will have the prior period comparative DCC figure for the Statement of Financial Position.  For the other three schedules, the 2009-10 DCC amortization (or DCC revenue) is required to restate the comparative numbers.  As this amount was not required for 2009-10 Financial Statements, it will be calculated based on a reasonable assumption to facilitate the required comparative reporting.

43. 2007-08 Grants for Student Needs 43 Statement of Financial Position: DCC  The 2009-10 column on the Statement of Financial Position will be restated to show the DCC balance at August 31, 2010.  Boards did not have DCC in their 2009-10 Financial Statements, but boards do know the DCC value at September 1, 2010.  To make the restatement at August 31, 2010, boards will move an amount from accumulated surplus to DCC.  For example, assume a board’s DCC balance at August 31/September 1, 2010 is $50M.  $50M will be moved from the A/S to DCC in the 2009-10 column.

44. 2007-08 Grants for Student Needs 44 Statement of Financial Position: Deferred Revenue  The 2009-10 column on the Statement of Financial Position will be restated to show the deferred revenue (DR) balance at August 31, 2010.  In the 2009-10 Financial Statements, when a board sold real property, only the gain on sale went into deferred revenue.  With the implementation of DCC, the prior capital contributions also go into DR (journal entries shown elsewhere in the slide deck).  In 2009-10, boards recorded this amount in accumulated surplus (A/S) on Schedule 5, item 4.9 (Portion of proceeds of disposition related to the net book value of disposed assets).  It will be assumed that these disposals were depreciable and fully supported by capital contributions*.  This amount will be moved from the A/S to DR in the 2009-10 column. * Sector-wide, this is a reasonable assumption. Please call the Ministry for guidance if this is a materially different case for your board.

45. 2007-08 Grants for Student Needs 45 Statement of Financial Position: Deferred Revenue  For example, assume amount on Schedule 5, item 4.9 in 2009-10 equalled $3M.  $3M will be moved from the A/S to DR in the 2009-10 column. Consolidated Statement of Financial Position (simplified) (restated for DCC and Deferred revenue) 2010-112009-10 RestatedPrior to Restatement Financial Assets$x$52,000,000 DCC$x$50,000,000$0 Deferred Revenue$x$7,000,000$4,000,000 Other Liabilities$x$3,000,000 Non-Financial Assets $x$52,000,000 Accumulated Surplus $x$44,000,000$97,000,000

46. 2007-08 Grants for Student Needs 46 Prior Year DCC Restatement Calculation  The DCC continuity is as follows: DCC at Sept. 1, 2009 + Revenue from Capital Wrap-Up (Note 1) - Disposals during 2009-10 - DCC revenue during 2009-10 = DCC at Aug. 31, 2010 Note 1: Since the capital wrap-up happened at August 31, 2010, this amount should not be included in the September 1, 2009 balance. It includes the additions made during 2009-10.

47. 2007-08 Grants for Student Needs 47 Calculation of Prior Period DCC Revenues  For 2009-10, boards know their TCA amortization.  Boards can also estimate the portion of the TCA that was supported by capital contributions (DCC) in 2009-10.  To do this, the board would divide the September 1, 2010 DCC balance by the September 1, 2010 non-land TCA balance.  The board would then multiply this percentage by the 2009-10 TCA amortization to estimate the 2009-10 DCC amortization.  For example, assume the following information for a board:  2009-10 TCA amortization = $2,062,000  September 1, 2010 TCA balance (excluding land) = $51,500,000  September 1, 2010 DCC balance = $50,000,000  The percentage of TCA supported by DCC is calculated as $50,000,000/$51,500,000 = 97%.  The estimated DCC amortization for 2009-10 is calculated as $2,062,000 x 97% = $2,000,000.  This revenue will be included in the restated Statement of Operations.

48. 2007-08 Grants for Student Needs 48 Calculation of Prior Period DCC Revenues  Assume this additional information:  Revenue from Capital Wrap-Up in 2009-10 = $25,000,000  Disposals in 2009-10 = $3,000,000  The amount received for the Capital Wrap-Up in 2009-10 was a capital contribution representing current and prior period contributions; therefore, the amount was an addition to DCC in year of $25M.  This revenue will be restated as an exclusion from the Statement of Operations since it will be in DCC.  Depreciable real property disposed during the year totalled $3M, and it will be assumed that these disposals were fully supported by DCC*. That means that the board disposed of $3M of DCC in the year.  The $3M DCC reduction caused an increase of $3M to deferred revenue. (The increase to DR has been explained on slide 44.) * Sector-wide, this is a reasonable assumption. Please call the Ministry for guidance if this is a materially different case for your board.

49. 2007-08 Grants for Student Needs 49 Prior Year DCC Restatement Calculation  Using the example in the previous slides, one can extrapolate the opening DCC balance at September 1, 2009: DCC at Sept. 1, 2009 = DCC at Aug. 31, 2010 - Revenue from Capital Wrap-Up (assume $25M) + Disposals during 2009-10 + DCC revenue during 2009-10 = $50M - $25M + $3M+ $2M = $30M  Therefore, the change in DCC from Sept. 1, 2009 to Aug. 31, 2010 is $20M. This will be used in the Statement of Cash Flow.

50. 2007-08 Grants for Student Needs 50 Statement of Operations Comparatives  The 2009-10 column on the Statement of Operations will be restated to include the DCC revenue during 2009-10, and to exclude the revenues that were recognized for depreciable capital contributions.  To make the restatement at August 31, 2010, boards will increase their DCC revenues, as calculated on the previous slide (ex. $2M).  Boards will decrease their Provincial grants by the amount of their 2009-10 capital contributions (ex. $25M). Consolidated Statement of Operations (simplified) 2010-112009-10 RestatedPrior to Restatement DCC Revenues$x$2,000,000$0 Provincial Grants$x$175,000,000$200,000,000 Other Revenues$x$10,000,000 Expenses$x$209,000,000 Annual Surplus/(Deficit)$x($22,000,000)$1,000,000

51. 2007-08 Grants for Student Needs 51 Statement of Cash Flow Comparatives  The 2009-10 column on the Statement of Cash Flow will be restated.  To make the restatement at August 31, 2010, boards will:  Adjust annual surplus/deficit as calculated previously.  Increase the DCC line by the Capital Wrap-Up revenue ($25M), and decrease the DCC line by the disposals ($3M) and DCC revenue ($2M), for a net increase of $20M.  Increase the deferred revenue line by the disposals ($3M).  Note that the restated change in cash remains the same. Consolidated Statement of Cash Flow (simplified) 2010-112009-10 RestatedPrior to Restatement Annual Surplus (Deficit)$x($22,000,000)$1,000,000 DCC$x$20,000,000$0 Deferred Revenue$x$6,000,000$3,000,000 All Other Categories$x($5,000,000) Change in Cash$x($1,000,000)

52. 2007-08 Grants for Student Needs 52 Statement of Change in Net Debt  The 2009-10 column on the Statement of Change in Net Debt will be restated.  To make the restatement at August 31, 2010, boards will:  Adjust annual surplus/deficit as calculated previously. Consolidated Statement of Change in Net Debt (simplified) 2010-112009-10 RestatedPrior to Restatement Annual Surplus (Deficit)$x($22,000,000)$1,000,000 TCA Activity$x($30,000,000) Other Non-Financial Asset Activity $x$0 (Increase) Decrease in Net Debt $x($52,000,000)($29,000,000)

53. 2007-08 Grants for Student Needs 53 Proceeds of Disposition

54. 2007-08 Grants for Student Needs 54 Proceeds of Disposition (POD)  Due to the inclusion of DCC in the 2010-11 Financial Statements, the treatment of proceeds of disposition of tangible capital assets will change.  In 2009-10, portion of the capital contribution related to the net book value of the asset disposed is already recognized and included in the accumulated surplus; Only the gain on sale was recognized in year as revenue or transferred to deferred revenue  In 2010-11, portion of the capital contribution related to the net book value of the asset disposed was restated and reported as deferred revenue. For all disposals after September 1, 2010 both the gain and net book value of asset disposed will be recognized as revenue or transferred to deferred revenue  The treatment will depend on whether the DCC information is available for the asset being disposed.  Assets purchased before September 1, 2010 may not have asset-specific DCC information available, since DCC prior to this date was calculated on an aggregate basis.  Assets purchased on or after September 1, 2010 will have asset-specific DCC information available, since boards are required to track this information starting in 2010-11.

55. 2007-08 Grants for Student Needs 55 POD Journal Entries - Overview  The following slides will present the respective proceeds of disposition journal entries for:  Unrestricted assets (mTCA) – pooled  Unrestricted assets (mTCA) – non-pooled  Restricted depreciable assets (building)  Restricted non-depreciable assets (land)  Each scenario will be presented based on DCC information availability (purchased before or after September 1, 2010) and sold at a gain or loss

56. 2007-08 Grants for Student Needs 56 POD: mTCA  mTCA are assets that are not real property (land and buildings), and generally include pooled and non-pooled assets.  The proceeds of disposition from disposal of mTCA are not restricted by regulation and will be recognized as in year revenue. Pooled Assets  Examples include Equipment 5 and 10 yrs, computers, furniture.  Pooled assets have a deemed disposal at the end of their useful life  Individual disposals are not generally recorded.  If disposed of before the asset has reached the end of its useful life, the proceeds (if any) are to be recorded as revenue. The entry would be: Dr:CashX Cr:RevenueX

57. 2007-08 Grants for Student Needs 57 POD: mTCA Non-Pooled Assets  Equipment 15 years and vehicles are recorded on an asset by asset basis  The journal entries for non-pooled mTCA assets are shown on the following pages.  Non-pooled mTCA purchased post-Sept. 1, 2010 (Gain)  Non-pooled mTCA purchased post-Sept. 1, 2010 (Loss)  Non-pooled mTCA purchased pre-Sept. 1, 2010 (Gain)  Non-pooled mTCA purchased pre-Sept. 1, 2010 (Loss)

58. 2007-08 Grants for Student Needs 58 Non-pooled mTCA purchased post-Sept. 1, 2010 (Gain)  Boards are required to track DCC information after September 1, 2010 on an asset by asset basis. As a result, boards should have DCC information related to each individual asset.  Assume that mTCA was purchased after September 1, 2010, and is now being sold at a later date. At the date of disposition, the following information is available.  NBV = 8 / DCC = 6 / POD = 9 JE 1: To remove the NBV of the asset from the books. Dr:Cash9 Cr:NBV8 Cr:Gain 1 The revenue is increased by the gain of $1. JE 2: To remove the DCC from the books. Dr:DCC6 Cr:Revenue6  The net impact to accumulated surplus is an increase of $7. This includes $6 revenue from prior capital contributions plus the gain of $1.  The difference ($2) between the net impact to accumulated surplus ($7) and the actual cash from the disposal ($9) is the unsupported capital spending for the asset which equals to the NBV less the DCC.

59. 2007-08 Grants for Student Needs 59 Non-pooled mTCA purchased post-Sept. 1, 2010 (Loss)  Assume that mTCA mentioned above is now sold at a loss.  NBV = 8 / DCC = 6 / POD = 7 JE 1: To remove the NBV of the asset from the books. Dr:Cash 7 Dr:Loss on disposal 1 Cr:NBV8 A loss of $1 is recognized in the Statement of Operations. JE 2: To remove the DCC from the books. Dr:DCC6 Cr:Revenue6  The net impact to accumulated surplus is $5, which includes $6 revenue from prior capital contributions less the loss of $1.  The difference ($2) between the net impact on accumulated surplus ($5) and the actual cash from the disposal ($7) is the unsupported portion of the asset which equals to the NBV less the DCC.

60. 2007-08 Grants for Student Needs 60 Non-pooled mTCA purchased pre-Sept. 1, 2010 (Gain)  DCC balance for assets purchased before September 1, 2010 is set up on an aggregate basis  Assume unsupported capital spending as of September 1, 2010 is associated only with buildings and land. As a result, all the mTCA purchased pre-September 1, 2010 is fully supported.  Assume an mTCA asset purchased pre-September 1, 2010 was disposed in 2010-11 and the information available is  NBV = 3 / DCC=NBV=3 / POD = 4

61. 2007-08 Grants for Student Needs 61 The entries for the disposition of asset 1 would be JE 1: To remove the NBV of the asset from the books. Dr:Cash4 Cr:NBV3 Cr: Gain 1 A gain of $1 is recognized in the Statement of Operations. JE 2: To remove the DCC from the books. Dr:DCC3 Cr:Revenue3  The net impact to accumulated surplus is now $4  This includes $3 revenue from prior capital contributions plus the gain of $1  There is no difference between the net impact to accumulated surplus and the actual POD as DCC is assumed to be the same as NBV disposed, which means there is no unsupported spending for asset 1 Non-pooled mTCA purchased pre-Sept. 1, 2010 (Gain)

62. 2007-08 Grants for Student Needs 62 Non-pooled mTCA purchased pre-Sept. 1, 2010 (Loss) Assume the asset is now sold at a loss. Information available is: NBV = 3 / DCC=NBV=3 / POD = 2 The entries for the disposition of asset 1 would be JE 1: To remove the NBV of the asset from the books. Dr:Cash2 Dr:Loss 1 Cr:NBV3 A loss of $1 is recognized in the Statement of Operations. JE 2: To remove the DCC from the books. Dr:DCC3 Cr:Revenue3  The net impact to accumulated surplus is now $2.  This includes $3 revenue from prior capital contributions less the loss of $1.  There is no difference between the net impact to accumulated surplus and the actual POD as DCC is assumed to be the same as NBV disposed, which means there is no unsupported spending for asset 1.

63. 2007-08 Grants for Student Needs 63 Restricted Depreciable Assets (buildings) - Overview  Proceeds of dispositions (POD) from building disposal are restricted under O. Reg. 193/10. All proceeds including gain and the portion related to net book value disposed need to be deferred for future capital use.  If a building is disposed of at a loss, the loss on disposal would be recognized as an in-year expense in the period in which they occur.  The same amount of the loss needs to be recognized as DCC transferred to revenue instead of deferred revenue.  The rationale is that the amount to be spent on a future asset purchase should take into account the loss incurred, otherwise this amount would be inflated.  The net impact on Statement of Operations is zero as the loss equals to the revenue recognized from DCC disposed.

64. 2007-08 Grants for Student Needs 64 Building purchased post-Sept. 1, 2010 (Sold at gain)  For building assets purchased after September 1, 2010, boards are required to track the DCC asset by asset; boards should have specific DCC information related to individual asset  Assume that a building was purchased after September 1, 2010, and is now being sold at a later date. The following information is available.  NBV = 25 / DCC = 24 / POD = 35 JE 1: To remove the NBV of the asset from the books. Dr:Cash35 Cr:NBV25 Cr:Deferred revenue 10 The deferred revenue is increased by the gain of $10. JE 2: To remove the DCC from the books. Dr:DCC24 Cr:Deferred revenue24  The net impact to deferred revenue is $34. This includes $24 from prior capital contributions and the gain of $10.  On a future asset purchase, $34 will be available as a capital contribution (i.e. to transfer to DCC).  The difference ($1) between the net impact to deferred revenue ($34) and the actual cash from the disposal ($35) is the unsupported capital spending ($1 = NBV $25 less DCC $24) for the asset.  If the unsupported capital spending was funded by the unsupported debt, the $1 would be available to pay down that debt.  If the unsupported capital spending was funded by the associated A/S in committed capital, it would be released to ‘available for compliance’.

65. 2007-08 Grants for Student Needs 65 Building purchased post-Sept. 1, 2010 (Sold at loss)  Assume the building mentioned above is now sold at a loss.  NBV = 25 / DCC = 24 / POD = 18 JE 1: To remove the NBV of the asset from the books. Dr:Cash18 Dr:Loss on disposal 7 Cr:NBV25 A loss of $7 is recognized in the Statement of Operations. JE2: To recognize revenue from DCC for the same amount of loss incurred. Dr. DCC 7 Cr: Revenue 7 JE 3: To remove the remaining DCC balance from the books. Dr:DCC17 Cr:Deferred revenue17  The net impact to deferred revenue is $17. This is the prior capital contribution of $24 less the loss of $7.  On a future asset purchase, $17 will be available as a capital contribution (i.e. to transfer to DCC).  The difference ($1) between the net impact to deferred revenue ($17) and the actual cash from the disposal ($18) is the unsupported capital spending ($1 = NBV $25 less DCC $24) for the asset.

66. 2007-08 Grants for Student Needs 66 Building purchased pre-Sept. 1, 2010 - overview  DCC opening balance for September 1, 2010 will be set up on an aggregate basis.  If a board has DCC information for specific assets purchased before September 1, 2010 (for example, admin buildings likely have $0 DCC), the board should use that amount when recording the asset disposal.  The journal entries will be the same for assets purchased after September 1, 2010.  If a board does not have this information, the board will assume that the DCC of the buildings sold first equal to the net book value disposed until the aggregate DCC balance is depleted.  Approach assumes that buildings sold first are fully supported, and last buildings sold would be partially unsupported assets when disposed.

67. 2007-08 Grants for Student Needs 67 Building purchased pre-Sept. 1, 2010  Does not create a material misrepresentation. The reasons include:  Sector wide DCC has been reported as 97% of the TCA value. Thus, very small unsupported TCA.  Boards can use POD deferred revenue to reduce or even close the TCA-DCC gap. Boards will need ministry approval to do so. The journal entries will be Dr:POD Deferred Revenue xx Cr:DCCxx  The sale of last buildings in sector not likely to happen anytime in the foreseeable future, as this would require all or most of the 5000 schools as of September 1, 2010 to have been disposed.  Many of the buildings in the sector have been around since the early part of the last century. These buildings are likely to have been fully depreciated before disposal, thus eliminating the issue altogether.  Any betterments on these buildings after September 1, 2010 will be tracked; therefore, this portion of the DCC will be known.

68. 2007-08 Grants for Student Needs 68 Building purchased pre-Sept. 1, 2010 (Sold at gain)  Assume that building 1 was purchased before September 1, 2010, and is now being sold during 2010-11 for $45. The following information is available. Based on the approach discussed, the journal entries will be: JE 1: To remove the NBV of the asset from the books. Dr:Cash45 Cr:NBV30 Cr:Deferred revenue 15 The deferred revenue is increased by the gain of $15. JE 2: To remove the DCC from the books. Dr:DCC30 Cr:Deferred revenue30  The net impact to deferred revenue is $45. This includes $30 from prior capital contributions plus the gain of $15.  On a future asset purchase, $45 will be available as a capital contribution (i.e. to transfer to DCC).  The net impact to deferred revenue is the same as the actual proceeds of disposition as it is assumed that the asset is fully supported

69. 2007-08 Grants for Student Needs 69 Building purchased pre-Sept. 1, 2010 (Sold at loss)  Assume now the building 1 was sold at a loss for $25. The journal entries will be JE 1: To remove the NBV of the asset from the books. Dr:Cash25 Dr:Loss on disposal 5 Cr:NBV 30 A loss of $5 is recognized in the Statement of Operations. JE2: To recognize revenue from DCC for the same amount of loss incurred. Dr. DCC 5 Cr: Revenue 5 JE 3: To remove the remaining DCC balance from the books Dr:DCC25 Cr:Deferred revenue25  The net impact to deferred revenue is $25. This includes $30 from prior capital contributions less the loss of $5.  On a future asset purchase, this $25 will be available as a capital contribution (i.e. to transfer to DCC).  There is no difference between impact to deferred revenue and actual cash proceeds as it is assumed there is no unsupported capital spending for this asset.

70. 2007-08 Grants for Student Needs 70 POD: Land – Revenue Recovery  Similar to buildings, proceeds on the sale of land are restricted under O. Reg. 193/10. All proceeds including gain and the portion related to net book value disposed need to be deferred for future capital use  Unlike building, capital contributions for the purchase of land are not put into DCC as per PS 3410. Instead, they were recognized as revenue in prior years and included in the accumulated surplus:  This amount is referred to as “revenues recognized for land purchase”.  It represents the book value of the land less the unsupported capital spending.  It is tracked in accumulated surplus - unavailable for compliance  Boards generally have asset-by-asset information on the revenues recognized for each land purchase  To allow for the proceeds on sale to flow back to deferred revenue, boards will record a revenue recovery to reverse the revenue recognized and defer for future use: Dr:Revenue recoveryxx Cr:Deferred revenuexx  If the land purchase was funded by Education Development Charges (EDC), the deferred revenue will be EDC deferred revenue  If the land purchase was funded by other source (provincial grant or third party revenue), the deferred revenue will be POD deferred revenue  This revenue recovery will generate an in-year PSAB deficit. However, it will be excluded from compliance

71. 2007-08 Grants for Student Needs 71 Land (EDC) sold at gain  Assume the following information on a land disposal.  BV = 50  Revenues recognized for land purchase (EDC) = 49  POD = 55 JE 1: To remove the BV of the asset from the books. Dr:Cash55 Cr:BV50 Cr:Deferred revenue (POD) 5 The deferred revenue is increased by the gain of $5. JE 2: To recover the revenue recognized previously. Dr:Revenue recovery49 Cr:Deferred revenue (EDC)49  The net impact to deferred revenue is $54.  This includes $49 from prior capital contributions plus the gain of $5.  On a future EDC asset purchase, this $54 will be available.  The difference ($1) between the impact to deferred revenue ($54) and the actual POD ($55) is the unsupported capital spending, which equals to net book value ($50) less the Revenue recognized for land purchase ($49).

72. 2007-08 Grants for Student Needs 72 Land (Non-EDC) sold at gain  Assume the following information on a land disposal.  BV = 50  Revenues recognized for land purchase (Non-EDC) = 49  POD = 55 JE 1: To remove the BV of the asset from the books. Dr:Cash55 Cr:BV50 Cr:Deferred revenue (POD) 5 The deferred revenue is increased by the gain of $5. JE 2: To recover the revenue recognized previously. Dr:Revenue recovery49 Cr:Deferred revenue (POD)49  The net impact to deferred revenue is $54.  This includes $49 from prior capital contributions plus the gain of $5.  On a future asset purchase, this $54 will be available as a capital contribution (i.e. to transfer to DCC).  The difference ($1) between the impact to deferred revenue ($54) and the actual POD ($55) is the unsupported capital spending, which equals to net book value ($50) less the Revenue recognized for land purchase ($49).

73. 2007-08 Grants for Student Needs 73 Land (EDC) sold at loss  Assume the following information on a land disposal.  BV = 50  Revenues recognized for land purchase (EDC) = 49  POD = 30 JE 1: To remove the BV of the asset from the books. Dr:Cash 30 Dr:Loss on disposal 20 Cr:BV50 A loss of $20 is recognized in the Statement of Operations. JE 2: To recover the revenue recognized previously. Dr:Revenue recovery49 Cr:Deferred revenue (EDC)29 Cr:Revenue20  The net impact to deferred revenue is that it now contains $29.  This includes $49 from prior capital contributions less the loss of $20.  On a future EDC asset purchase, only this $29 will be available.  The difference ($1) between the impact to deferred revenue ($29) and the actual POD ($30) is the unsupported capital spending, which equals to the net book value ($50) less the revenues recognized for land purchase ($49)

74. 2007-08 Grants for Student Needs 74 Land (Non-EDC) sold at loss  Assume the following information on a land disposal.  BV = 50  Revenues recognized for land purchase (Non-EDC) = 49  POD = 30 JE 1: To remove the BV of the asset from the books. Dr:Cash 30 Dr:Loss on disposal 20 Cr:BV50 A loss of $20 is recognized in the Statement of Operations. JE 2: To recover the revenue recognized previously. Dr:Revenue recovery49 Cr:Deferred revenue (POD)29 Cr:Revenue20  The net impact to deferred revenue is that it now contains $29.  This includes $49 from prior capital contributions less the loss of $20.  On a future asset purchase, this $29 will be available as a capital contribution (i.e. to transfer to DCC).  The difference ($1) between the impact to deferred revenue ($29) and the actual POD ($30) is the unsupported capital spending, which equals to the net book value ($50) less the revenues recognized for land purchase ($49)

75. 2007-08 Grants for Student Needs 75 Assets Held for Sale

76. 2007-08 Grants for Student Needs 76 Assets Held for Sale (AHFS)  According to PS1200.051, an asset held for sale should be recognized as a financial asset when all of the following criteria are met: a)prior to the date of the financial statements, the government body, management board or an individual with the appropriate level of authority commits the government to selling the asset; b)the asset is in a condition to be sold; c)the asset is publicly seen to be for sale; d)there is an active market for the asset; e)there is a plan in place for selling the asset; and f)it is reasonably anticipated that the sale to a purchaser external to the government reporting entity will be completed within one year of the financial statement date.  Assets that meet the criteria above would be moved from TCA to Financial Assets (FA) on the Statement of Financial Position.  Financial Assets are subject to valuation allowances such that the assets are reflected at their net recoverable or other appropriate value [PS 1200.049].  TCA may be written down upon transfer to FA; not allowed to write-up TCA.

77. 2007-08 Grants for Student Needs 77 Impact: AHFS  TCA that are in the process of being sold, but that are not yet sold at the Financial Statement date, would be transferred to FA.  TCA that go on the market and are sold within the fiscal year would be recorded as regular TCA disposal instead of FA.  These entries would generally apply to land and buildings, since minor TCA is likely to be sold in the year, or is disposed of after being fully depreciated.  Once an asset is transferred to FA, no capitalized additions/betterments will be reported; all costs incurred will be considered expenses and reported on the Income Statement.  Journal entries on the following slides will illustrate the sale of buildings and land, at both a gain and a loss.

78. 2007-08 Grants for Student Needs 78 AHFS: Building (Period 1) – No write-down  A board decides to sell a building in fiscal period 1, but actually makes the sale in fiscal period 2. Assume the following information:  NBV = 80  DCC = 78  Market value in period 1 = 90 In period 1: JE 1: To record valuation allowance and transfer TCA to financial asset. As the net recoverable value (market value) is higher than the book value, no write down is necessary. Dr:Financial Asset 80 Cr:NBV80 JE2: To remove the associated DCC balance Dr:DCC78 Cr:Deferred Revenue78  The net impact to deferred revenue is $78, which equals to the supported capital spending (DCC balance $78)  The corresponding asset is not the cash, instead, it is the financial asset.

79. 2007-08 Grants for Student Needs 79 AHFS: Building (Period 1) – Write-down  A board decides to sell a building in fiscal period 1, but actually makes the sale in fiscal period 2. Assume the following information:  NBV = 80  DCC = 78  Market value in period 1 = 50 In period 1: JE 1: To record valuation allowance and transfer TCA to financial asset Dr:Loss on write-down 30 Dr:Financial Asset 50 Cr:NBV80 JE 2: To recognize DCC revenue related to the loss on write down. Dr:DCC 30 Cr:Revenue30 JE3: To remove the remaining DCC balance Dr:DCC48 Cr:Deferred Revenue48  The net impact to deferred revenue is $48, which equals to the supported capital spending (DCC balance $78) less the write-down ($30)  The corresponding asset is not the cash, instead, it is the financial asset.  The net impact on in-year surplus/deficit is zero as the DCC revenue equals to write-down

80. 2007-08 Grants for Student Needs 80 AHFS: Building (Period 2) – Sold at a gain  Now assume the above mentioned asset is sold at a gain in period 2. The following information is available:  NBV = 80  DCC = 78  Market value in period 1 = 50  Actual POD in period 2 = 90 In period 2: JE 1: To remove the financial asset from the books and record gain. Dr:Cash90 Cr:Financial Asset50 Cr:Deferred revenue40  The net impact to deferred revenue in this period is $40. The net impact to deferred revenue recorded in period 1 was $48. Total net impact to deferred revenue is $88.  This includes $78 from prior capital contributions plus the gain of $40 in period 2 less the write-down of $30 in period 1.  On a future asset purchase, this $88 will be available as a capital contribution (i.e. to transfer to DCC).

81. 2007-08 Grants for Student Needs 81 AHFS: Building (Period 2) – Sold at a loss  Now assume the above mentioned asset is sold at a loss in period 2. The following information is available:  NBV = 80  DCC = 78  Market value in period 1 = 50  Actual POD in period 2 = 35 In period 2: JE 1: To remove the financial asset from the books and record loss. Dr: Cash35 Dr: Loss 15 Cr:Financial Asset50 Dr: Deferred revenue 15 Cr: Revenue 15  The net impact to deferred revenue in this period is ($15). The net impact to deferred revenue recorded in period 1 was $48. Total net impact to deferred revenue is $33.  This includes $78 from prior capital contributions less the write down of $30 in period 1 and less the loss of $15 incurred in period 2.  On a future asset purchase, this $33 will be available as a capital contribution (i.e. to transfer to DCC).  The net impact on surplus/deficit is zero as the loss equals to DCC revenue.

82. 2007-08 Grants for Student Needs 82 AHFS: Land (Period 1) – No write-down  Similar to building, if a land meets the criteria to be classified as asset held for sale, the board needs to transfer the land to AHFS at the end of accounting period 1.  Assume a board decides to sell land in fiscal period 1, but actually makes the sale in fiscal period 2. The following information is available:  BV = 80  Revenues recognized for land purchase = 78  Market value in period 1 = 90 In period 1: JE 1: To record valuation allowance and transfer TCA to financial asset. Dr:Financial Asset 80 Cr:BV80 Since the net recoverable value is higher than book value, no write-down is needed.

83. 2007-08 Grants for Student Needs 83 AHFS: Land (Period 1) – Write-down  Now assume the net recoverable value is lower than the book value in period 1. The following information is available:  BV = 80  Revenues recognized for land purchase = 78  Market value in period 1 = 50 In period 1: JE 1: To record valuation allowance and transfer TCA to financial asset. Dr: Loss on write-down 30 Dr: Financial Asset 50 Cr:BV80  The write-down is $30 ($80 BV less $50 market value).  The impact to surplus/deficit is $30.

84. 2007-08 Grants for Student Needs 84 AHFS: Land (Period 2) – Sold at a Gain Assume the board disposed the above asset in period 2. The following information is available  BV = 80  Revenues recognized for land purchase = 78  Market value in period 1 = 50  Actual POD in period 2 = 90 In period 2: JE 1: To remove the financial asset from the books and record gain. Dr:Cash90 Cr:Financial Asset50 Cr:Deferred revenue 40 JE 2: To recover revenue recognized before the future capital use Dr:Revenue recovery78 Cr:Deferred revenue 78 JE 3: To recognize deferred revenue related to the loss on write-down in period 1. Dr:Deferred Revenue30 Cr:Revenue (equals to loss on write-down in period 1) 30  The net impact to deferred revenue is $88. This includes $78 from prior capital contributions plus the gain of $40 less the write down of $30.  On a future asset purchase, this $88 will be available.  The net impact on surplus/deficit is ($48) for period 2, which includes the recovery of prior capital contribution ($78) less the loss recognized into revenue for $30 (from period 1).

85. 2007-08 Grants for Student Needs 85 AHFS: Land (Period 2) – Sold at a Loss Assume the AHFS is disposed at a loss in period 2. The following information is available:  BV = 80  Revenues recognized for land purchase = 78  Market value in period 1 = 50  Actual POD in period 2 = 15 In period 2: JE 1: To remove the financial asset from the books and record loss. Dr:Cash15 Dr:Loss on disposal35 Cr:Financial Asset50 JE 2: To recover revenue recognized before for future capital use Dr:Revenue recovery78 Cr:Deferred revenue78 JE 3: To recognize deferred revenue related to the loss on write-down in period 1 and the loss on disposal in period 2. Dr:Deferred Revenue65 Cr:Revenue (equals to loss on write-down) 30 Cr:Revenue (equals to loss on disposal) 35  The net impact to deferred revenue is $13. This includes $78 from prior capital contributions less the loss on write-down recorded in period 1 of $30 and a loss on disposal of financial asset recorded in period 2 of $35.  On a future asset purchase, this $13 will be available.

86. 2007-08 Grants for Student Needs 86 Asset Upload File

87. 2007-08 Grants for Student Needs 87 Overview of Changes  No change to the structure/columns of the asset upload file  Boards can no longer make adjustments to opening gross book value and opening accumulated amortization balances  5 New Asset Classes added for the Assets Held For Sale  Assets being transferred from TCA to AHFS will be mapped into Schedule 3C for any in-year activities prior to the transfer and into Schedule 3D for the closing balances

88. 2007-08 Grants for Student Needs 88 Adjustments  Boards are no longer able to make adjustments to Opening Gross Book Value and Opening Accumulated Amortization Balances  Any adjustments should go through the in year additions/amortization/write down  Implication is that there will be no prior period restatement related to TCA anymore  These two columns are still kept in the asset upload file but boards should enter “0” for these two columns in order to avoid file rejection

89. 2007-08 Grants for Student Needs 89 New Asset Classes  EFIS forms have changed to accommodate the requirements to report asset held for sale (AHFS)  A new schedule 3D is added to capture the AHFS information  Five new asset classes are added in the asset upload file:  40H = Building 40 Held for Sale  20H = Building 20 Held for Sale  LAH = Land Held for Sale  LIH = Land Improvement Held for Sale  PRH = Building 40 Permanently Removed from Service Held for Sale  These asset classes are correspondent to the existing land and building asset classes

90. 2007-08 Grants for Student Needs 90 Assets Held for Sale  Only these assets that are in the process of being sold, but that are not yet sold at the Financial Statement date, would be classified and transferred to AHFS  TCA that go on the market and are sold within the fiscal year would be recorded as regular TCA disposal instead of AHFS  Asset is only transferred to financial asset at the end of the accounting period  Any activities before the transfer is still reported as TCA activities  Example:  An asset met the criteria to be classified as AHFS in December. The asset is not sold on August 31  From September to December the asset is still amortized. Before the transfer from TCA to AHFS, a write-down is recorded if required  Impact - The amortization and write down will be treated as TCA activities and reported in Schedule 3C; any betterments done will also be considered as TCA transactions  The ending balance after the amortization and write down will be transferred to AHFS and reported in Schedule 3D

91. 2007-08 Grants for Student Needs 91 Reporting of AHFS in Asset Upload File  If an asset is newly classified as AHFS, report the asset similar to regular TCA except that report the asset class as one of the 5 AHFS classes  All the in-year activity (addition/amortization, if there is any), no matter what asset class, will be mapped into Schedule 3C as TCA activities  Board needs to enter the total transfer of the ending balance in Transfer to Asset Held for Sale Column in Schedule 3C  Only the ending balance of TCA asset classes will be mapped into the Closing Balance from Asset Upload Data in Schedule 3C  That total ending balance will be checked against calculated ending balance (Closing Balance August 31, 2011 column) based on information reported in Schedule 3C  In the subsequent year, this asset will be removed from asset upload file and reported directly in Schedule 3D  Any disposal of assets held for sale and proceeds from disposal should be reported in Schedule 3D in the subsequent years

92. 2007-08 Grants for Student Needs 92 Schedule 3C - Excerpt

93. 2007-08 Grants for Student Needs 93 Schedule 3D

94. 2007-08 Grants for Student Needs 94 Notes to the Financial Statements

95. 2007-08 Grants for Student Needs 95 Notes to the Financial Statements Sample Independent Auditor’s ReportUpdated Note 1a: Significant Accounting Policies-Basis of AccountingUpdated Note 1h: Significant Accounting Policies-Tangible Capital AssetsUpdated Note 1i: Significant Accounting Policies-Government TransfersUpdated Note 2: Change in Accounting PolicyUpdated Note 4: Accounts Receivable – Government of OntarioUpdated Note 5: Assets Held for SaleNew Note 6: Deferred RevenueUpdated Note 7: Deferred Capital ContributionsNew Note 14: Tangible Capital AssetsUpdated Note 15: Accumulated SurplusUpdated Note 20: Budget DataUpdated Note 22: Repayment of “55 School Board Trust” FundingAdded Back

96. 2007-08 Grants for Student Needs 96 Audit Report and Basis of Accounting Note Sample Independent Auditor’s Report and Note 1a (Significant Accounting Policies – Basis of Accounting)  Discussed in an earlier presentation called “Accounting Standard: Government Transfers”.

97. 2007-08 Grants for Student Needs 97 Note 1h: Significant accounting policies Tangible Capital Assets (TCA)  Updated note.  Added explanation on assets held for sale.  Not amortized.  Recorded at lower of carrying value and estimated net realizable value.

98. 2007-08 Grants for Student Needs 98 Note 1i: Significant accounting policies Government Transfers  Updated note.  Added explanation on government capital transfers that meet the definition of a liability.  Referred to as DCC.  Recognized into revenue as the liability is extinguished over the useful life of the asset.

99. 2007-08 Grants for Student Needs 99 Note 2 - Change in Accounting Policy  Updated note.  First year of implementation of PS 3410 Government Transfers  Implemented as described in Note 1a.  Retroactively with prior periods restated.  The approach to establish the opening balance  Value of depreciable TCA less the unsupported capital debt at August 31, 2010.

100. 2007-08 Grants for Student Needs 100 Note 2 - Change in Accounting Policy continued  The impact on the prior period Statement of Financial Position and Statement of Operations  Restatement of Accumulated Surplus – Deduct amount recorded as DCC.  Restatement of Annual Surplus/Deficit – Add DCC recognized into revenue and deduct in- year provincial capital contributions received.

101. 2007-08 Grants for Student Needs 101 Note 2 - Change in Accounting Policy continued  The impact on the current period Statement of Operations  Starting with Annual Surplus/Deficit as per prior year policy – Add DCC recognized into revenue and deduct in-year provincial capital contributions received at arrive at annual surplus/deficit as currently reported.

102. 2007-08 Grants for Student Needs 102 Note 4 – Accounts Receivable – Government of Ontario  Updated note.  Receivable is adjusted to reflect in-year capital grants, not just the initial capital wrap-up amount.

103. 2007-08 Grants for Student Needs 103 Note 5 – Assets Held for Sale  New note.  Denotes the value of land and buildings recorded as assets held for sale in the period.  Shows the value of assets held for sale at the beginning of the period that were sold.  Proceeds, carrying value, gain/loss.  Gains on assets restricted under Ontario Regulation 193/10 are deferred for future capital purchases.

104. 2007-08 Grants for Student Needs 104 Note 6 – Deferred Revenue  Updated note.  Added a column for transfers to deferred capital contributions.

105. 2007-08 Grants for Student Needs 105 Note 7 – Deferred Capital Contributions  New note.  Includes explanation on government capital transfers that meet the definition of a liability.  Referred to as DCC.  Recognized into revenue as the liability is extinguished over the useful life of the asset.  A continuity table in included.

106. 2007-08 Grants for Student Needs 106 Note 14 – Tangible Capital Assets  Updated note.  Added columns under the cost and accumulated amortization sections for transfer to assets held for sale.

107. 2007-08 Grants for Student Needs 107 Note 15 – Accumulated Surplus  Updated note.  This note is optional as it is not required under PSAB.  Disclose components of accumulated surplus  Invested in non-depreciable tangible capital assets  *new* Employee future benefits to be covered in the future  Designated for future use by board motion  Other  Boards may also disclose detail of the amount restricted by board motion  Sick leave  Retirement gratuities  Amounts restricted for future use on capital expenditures

108. 2007-08 Grants for Student Needs 108 Note 20 – Budget Data  The components of DCC revenue at financial statements are different from the original budget because the budget was prepared based on the third re-exposure draft of the government transfers standard and the financial statements were prepared based on the final standard.  Other changes include the treatment of sinking fund interest.  The Statement of Operations is restated in order to reflect the same basis of accounting in the budget and actuals.  As boards budget only the Statement of Operations, the budget figures in the Statement of Change in Net Debt have not been provided.

109. 2007-08 Grants for Student Needs 109 Note 22: Repayment of “55 School Board Trust” Funding  This note was erroneously deleted in the 2009- 10 financial statement sample notes.  It has been added back.

110. 2007-08 Grants for Student Needs 110 Form Changes

111. 2007-08 Grants for Student Needs 111 Section 1  OMERS contribution supplement is a new allocation at line 1.19.1  Divided into 2 pages:  Section 1A – −Show operating and capital allocation separately −Show revenues on Schedule 9 at line 1.81 and 1.82 −Show allocation amounts transfer to deferred revenues at line 1.84 −Show allocation amounts transfer to deferred capital contribution at line 1.85 −Show the operating allocation to be used for compliance allocation at line 1.92  Section 1B – −Show monthly grant payment base at line 1.80 −Show non-monthly grant payment amount at lines 1.70 to 1.73), e.g. OFA loan payment and 55 school Boards Trust payment.