Evidence of meeting #18 for Government Operations and Estimates in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was accrual.
A recording is available from Parliament.
Conservative
Chris Warkentin Conservative Peace River, AB
For instance, $4 billion is a number that's thrown out. At what point would it then be put on the books? Is it when a commitment has been made to do something about that? I guess that's what would have to happen.
Vice-President, Standards, Canadian Institute of Chartered Accountants
Not even a commitment.
Vice-President, Standards, Canadian Institute of Chartered Accountants
This is off the top of my head. And, Martha, I'm going to have to rely on you to come up with this, as I don't know if I can remember completely.
The definition of a liability is where you know that a future economic benefit is going to be lost and you have no ability to be able to get out of it. Once you've stated....
Conservative
Vice-President, Standards, Canadian Institute of Chartered Accountants
Almost. It's not quite legal, because I think a constructive liability would fall under that, but where the person who has made the promise cannot get out of it.
October 5th, 2006 / 12:10 p.m.
Vice-President, Standards, Canadian Institute of Chartered Accountants
It's a tough definition.
Vice-President, Standards, Canadian Institute of Chartered Accountants
But that's what we need for financial statements; otherwise people will say, I have a liability here, there, and everywhere, and before you know it you have no rules.
Madam Chair, if you will excuse me, I will leave you in the capable hands of my colleague.
Liberal
The Chair Liberal Diane Marleau
We excuse you.
I have a question of my own, maybe before you leave.
I've been an MP here for 18 years and I was in municipal office before that. Many of the things I have seen, especially on buildings, on owning versus leasing...most of the time I felt that the short-term decision on leasing was certainly based on the fact that you could go and get cash in that year for that lease and not have to worry about getting the cash to actually build the building. But I know of some buildings that I'm convinced the Government of Canada has paid for ten times, and are still paying for. That's where I think accrual accounting is extremely important.
I'm going to ask you the one question, and this is where the problem seems to be, where the bureaucracy says...and I think it is a challenge. Every year we vote on appropriations, which are based on cash. How would you see that change so that the appropriations could be based on multi-year funding either for a purchase or leasing so that it's more accurate? This is always what it comes back to. It's because of Parliament, and they have to vote on the cash. I want that addressed, and I'm going to keep asking that. I think that's an even bigger challenge than all of those valuations, because there are ways of doing all of that. I think there's a way of doing it too, but that's the reason for not moving ahead.
Vice-President, Standards, Canadian Institute of Chartered Accountants
I think that is going to be the mind change that needs to take place, because all the time the belief is that you need to have an envelope system that gives you the spending authority for that cash for the next year and the warrants for times when you don't have that spending authority. Then being able to move to a system where you say we can go to multi-year funding, we can go to an outcome-focused type of delivery system that gets Parliament to approve a particular program based on the total cost for that program, is not going to move forward. I don't know the answer to that, to be honest with you. Whether it's an insurmountable obstacle, I'm not too sure, but I don't know that it's an easy solution; it's a tough one.
Liberal
The Chair Liberal Diane Marleau
I'm anxious to hear from the provincial governments that have actually done it--
Vice-President, Standards, Canadian Institute of Chartered Accountants
B.C. has--
Liberal
The Chair Liberal Diane Marleau
--and they can explain it, more so, I would think, than perhaps you.
Vice-President, Standards, Canadian Institute of Chartered Accountants
A practical way of doing it.
Vice-President, Standards, Canadian Institute of Chartered Accountants
My apologies.
Liberal
Omar Alghabra Liberal Mississauga—Erindale, ON
I have a question that follows up on the previous line of questions about heritage assets and other assets that may not have any firm rules to evaluate their value. I just want to draw a parallel, and you can correct me in regard to whether you think that's an applicable parallel or not, but a lot of businesses put a value on their brand name and on what they call goodwill. It perhaps has some discretion, but the discretion is based on logic and market conditions and historical performances. Could we use the same thing in evaluating some of those assets?
Principal, Public Sector Accounting, Canadian Institute of Chartered Accountants
You're right, they do. They call them intangibles, and goodwill is one of them. They do put a value on them and write them off when the goodwill doesn't seem to be there any longer.
I can't say it's one I've ever seen them try to apply to heritage assets, though I must agree that some of the value of it is intangible because they are part of us as Canadians. I haven't seen that theory applied. I'd have to think about it again. I'm not sure I could answer that off the top of my head. It's an interesting idea. I did not see it put forward in the paper that Ron was talking about, nor when we did capital assets many years ago.
Liberal
Omar Alghabra Liberal Mississauga—Erindale, ON
Usually those values can appreciate or depreciate based on the market condition--the performance of that brand or that business. Then you have auditors who examine these values and determine whether the logic used to attribute that value is reasonable or not.
Principal, Public Sector Accounting, Canadian Institute of Chartered Accountants
Yes, and that same preparer push, auditor pull happens when they look at any of the values of the capital assets on the government's books. Right now all we require for heritage assets is that you have a record of them so you know you have them. Somebody knows they're there. Obviously there are going to be maintenance records as well, and that's as far as we go, because, as Ron said, we have not cracked that nut. We don't really know how to portray them.
Some people say those assets have economic benefits attributed to them because they bring tourists in, and suggest we should perhaps try to put those benefits in with the value. Trying to do that gets extremely messy and nebulous. It's definitely an area that we haven't resolved, and, as Ron said, it's an even bigger issue for the older European countries.
I'm sorry I can't provide anything definitive. I wish I could.
Liberal
Omar Alghabra Liberal Mississauga—Erindale, ON
It just occurred to me that the parallel is there, because even in the brand name or the goodwill there is an intrinsic value to the business itself.
Liberal
The Chair Liberal Diane Marleau
Usually if you have goodwill on the books, you would have purchased it.