ESTIMATES ACCOUNTING POLICIES AND PRESENTATION CHANGES

ESTIMATES ACCOUNTING POLICIES AND PRESENTATION CHANGES
Estimates Accounting Policies

1	The Estimates is prepared on the Summary Accounts basis. The Summary Accounts combines the Consolidated Revenue Fund, which consists of the General Fund (voted appropriations and all Special Accounts), with the operating results of Crown corporations and agencies.

2	The accounting policies followed in the Estimates comply, in all material respects, with Generally Accepted Accounting Principles (GAAP) for senior governments as modified by the Public Sector Accounting Board (PSAB), with the following exceptions:

	a. Reporting Entity – the government’s Summary Accounts combine the Consolidated Revenue Fund with the operating results of Crown corporations and agencies. PSAB defines the government reporting entity to include organizations that are accountable for the administration of their financial affairs and resources either to a minister of the government or directly to the legislature, and are owned or controlled by government. The Budget Transparency and Accountability Act, 2001 requires government to fully implement GAAP by April 1, 2004. This could result in the inclusion of Schools, Universities, Colleges and Hospitals (SUCH) sectors in the Summary Accounts. The SUCH sectors are not currently included in the government’s Summary Accounts. Inclusion of the SUCH sectors in the 2000/01 Public Accounts would have increased the Summary Accounts surplus by $98 million. In the previous four years, inclusion of the SUCH sectors would have slightly reduced the Summary Accounts deficit in each year except one when it would have slightly increased the Summary Account deficit. The Auditor General has qualified his opinion on the government’s Summary Financial Statements as a result of the exclusion of the SUCH sectors.

	b. Consolidation – the Estimates consolidates taxpayer-supported Crown corporation/agency results using the modified equity basis, which includes the profits/losses of the Crowns/agencies in the Summary Accounts rather than individual revenues and expenses. PSAB recommends line-by-line consolidation for taxpayer-supported entities, which would add the Crown/agency revenues and expenses to the Summary Accounts. Both consolidation methods arrive at the same bottom line deficit. In the government’s opinion, modified equity provides more transparent disclosure of the component parts of the Summary Accounts than line-by-line consolidation. The Public Accounts comply with PSAB consolidation policies. Schedule H discloses fully consolidated revenues and expenses for the Summary Accounts for information purposes. Although the Liquor Distribution Branch is part of the Ministry of the Competition, Science and Enterprise and not a Crown corporation, it is treated as a separate entity and is consolidated on the modified equity basis in both the Estimates and the Public Accounts.

	c. Expense Basis Deficit – the Summary Accounts deficit includes the effects of capitalizing tangible capital assets. PSAB currently recommends that the impact of capitalization be reversed before the bottom line is calculated. The Auditor General concurs with the inclusion of the effects of capitalization of tangible capital assets in the determination of the Summary Accounts bottom line.

	d. Prepaid Capital Advances – Prepaid Capital Advances are provided to school districts, post secondary institutions, health organizations and other specified government organizations to fund capital asset acquisitions. The province has an ongoing claim to these assets and, accordingly, capitalizes the advances and amortizes them over the useful life of the underlying capital assets. PSAB recommends that governments fully expense these advances in the year they are disbursed.

	ESTIMATES ACCOUNTING POLICIES AND PRESENTATION CHANGES – (Continued)

Significant Presentation Changes in the 2002/03 Estimates
In order to improve disclosure and better match the Estimates with the Public Accounts, the following significant presentation changes have been incorporated into the 2002/03 Estimates:
	1. Restatement of 2001/02 Estimates – The 2001/02 Estimates and Forecast have been restated to reflect the dissolution of Forest Renewal BC, the reclassification of the amortization of unfunded pension liabilities and a change to the opening balance of taxpayer-supported debt. Effective March 31, 2002, Forest Renewal BC will be wound up and certain programs formerly provided by the Crown corporation will be transferred to the Ministry of Forests. The effect of the dissolution of Forest Renewal BC increases 2001/02 Estimates and Revised Forecast Consolidated Revenue Fund Revenue and Expense by $187 million and $294 million, respectively, resulting in a net increase to the Consolidated Revenue Fund Operating Result of $107 million. The net increase is offset by a corresponding decrease of $107 million in the Taxpayer-Supported Crown Corporations and Agencies Operating Result. This reclassification does not affect the Summary Accounts Deficit. An interim actuarial evaluation at December 31, 2000 showed the Teachers’ Pension Plan in a surplus position. The 2001/02 Estimates anticipated a December 31, 2000 unfunded pension liability of $184 million that would be amortized over three years, of which $58 million would be amortized in the first year. With the elimination of the unfunded pension liability there will be no amortization. As a result, the $58 million in amortization (negative expense) has been restated from the Consolidated Revenue Fund Operating Result to the Summary Accounts Operating Result to better reflect the Teachers’ Pension Plan change driven by the actuarial evaluation. The correction of an accounting error has resulted in certain vehicle leases being recorded as capital costs rather than operating expenses. The effect of the change increases the opening balance of taxpayer-supported government operating debt in the 2001/02 Revised Forecast by $44 million to reflect the inclusion of the vehicle lease obligations. The impact on current and prior year's Consolidated Revenue Fund Revenue and Expense is not material and has therefore not been restated. This change does not affect the Summary Accounts Deficit. 2. Ministerial Accountability for Operating Expenses – Commencing with the 2002/03 Estimates, a Summary of Ministerial Accountability for Operating Expenses Schedule has been added (Schedule I). Under section 6(1) of the Balanced Budget and Ministerial Accountability Act, an estimated amount of the operating expenses in the Consolidated Revenue Fund which are the responsibility of the minister as set out in the Main Estimates for the fiscal year must be made public. Section 6(2) of the Act requires that the actual amount of those operating expenses be made public for each Minister with the Public Accounts for that fiscal year.