Office of the Superintendent of Financial Institutions
FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014
Statement of Management Responsibility Including Internal Control over Financial Reporting
Management is responsible for the preparation and fair presentation of these quarterly financial statements in accordance
with International Accounting Standard 34: Interim Financial Reporting, and for such internal controls as management
determines are necessary to enable the preparation of quarterly financial statements that are free from material misstatement.
Management is also responsible for ensuring all other information contained in this quarterly financial report is consistent,
where appropriate, with the accompanying quarterly financial statements.
Based on our knowledge, these unaudited quarterly financial statements present fairly, in all material respects, the financial
position, results of operations and cash flows of the Office of the Superintendent of Financial Institutions, as at the date of
and for the periods presented in the quarterly financial statements.
Michele Bridges, CPA, CGA
Chief Financial Officer
Jeremy Rudin
Superintendent of Financial Institutions
Ottawa, Canada
February 20, 2015
1
Office of the Superintendent of Financial Institutions
STATEMENT OF FINANCIAL POSITION
(in thousands of Canadian dollars)
As at
December 31,
2014
(unaudited)
Note
As at
March 31,
2014
ASSETS
Current Assets
Cash Entitlement
Trade and Other Receivables, net
Accrued Base Assessments
Prepaid Expenses
6, 7
6
$
68,253
9,684
1,040
8
9
5,252
13,692
$
30,819
8,793
2,984
1,201
Non-Current Assets
Property, Plant and Equipment
Intangible Assets
TOTAL ASSETS
6,905
13,219
$
97,921
$
63,921
$
16,012
2,697
35,689
5,716
116
6,191
754
$
13,848
4,769
3,043
4,403
268
5,876
698
LIABILITIES AND EQUITY OF CANADA
Current Liabilities
Accrued Salaries and Benefits
Trade and Other Payables
Unearned Base Assessments
Unearned Pension Plan Fees
Deferred Revenue
Employee Benefits – Sick Leave
Employee Benefits – Severance
15
7,15
15
15
10
10
Non-Current Liabilities
Employee Benefits – Severance
10
5,758
72,933
6,028
38,933
16
16
28,327
(3,339)
24,988
28,327
(3,339)
24,988
Equity of Canada
Contributed Surplus
Accumulated Deficit
TOTAL LIABILITIES AND EQUITY OF CANADA
Operating lease arrangements
$
97,921
14
The accompanying notes form an integral part of these financial statements.
Michele Bridges, CPA, CGA
Chief Financial Officer
Jeremy Rudin
Superintendent of Financial Institutions
2
$
63,921
Office of the Superintendent of Financial Institutions
STATEMENT OF OPERATIONS
(in thousands of Canadian dollars)
For the
three months
ended
December 31,
2014
(unaudited)
Note
For the
three months
ended
December 31,
2013
(unaudited)
For the
nine months
ended
December 31,
2014
(unaudited)
For the
nine months
ended
December 31,
2013
(unaudited)
Regulation and Supervision of Federally
Regulated Financial Institutions
Revenue
11, 12
Expenses
12
$
33,597
33,597
31,081
98,725
94,258
Administrative Monetary Penalties Revenue
Administrative Monetary Penalties Revenue Earned on
Behalf of the Government
13
-
35
-
35
-
(35)
-
(35)
Net Results
$
31,081
$
98,725
$
94,258
-
-
-
-
Regulation and Supervision of Federally
Regulated Private Pension Plans
Revenue
11, 12
1,741
1,865
5,149
5,602
Expenses
12
1,741
1,865
5,149
5,602
-
-
-
-
Net Results
Actuarial Valuation and Advisory Services
Revenue
11, 12
1,621
1,665
4,999
4,953
Expenses
12
1,855
1,899
5,702
5,656
Net Results
NET RESULTS OF OPERATIONS
BEFORE GOVERNMENT FUNDING
Government Funding
7
NET RESULTS OF OPERATIONS
(234)
(234)
(703)
(703)
(234)
(234)
(703)
(703)
234
234
703
703
$
The accompanying notes form an integral part of these financial statements.
3
-
$
-
$
-
$
-
Office of the Superintendent of Financial Institutions
STATEMENT OF OTHER COMPREHENSIVE INCOME
For the
three months
ended
December 31,
2014
(unaudited)
(in thousands of Canadian
dollars)
NET RESULTS OF OPERATIONS
$
-
For the
three months
ended
December 31,
2013
(unaudited)
$
-
For the
nine months
ended
December 31,
2014
(unaudited)
$
For the
nine months
ended
December 31,
2013
(unaudited)
-
$
-
OTHER COMPREHENSIVE INCOME
Other Comprehensive Income
Remeasurement Gains (Losses) on Defined
Benefit Plans
Regulation and Supervision of
Federally Regulated Financial
Institutions
Regulation and Supervision of
Federally Regulated Private
Pension Plans
Actuarial Valuation and Advisory
Services
Other Comprehensive Income
TOTAL COMPREHENSIVE INCOME
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
$
-
$
-
The remeasurement gains and losses that comprise OSFI's Other Comprehensive Income are usually recognized in March of each
year when OSFI performs an actuarial valuation of its defined benefit plans.
The accompanying notes form an integral part of these financial statements.
4
Office of the Superintendent of Financial Institutions
STATEMENT OF CHANGES IN EQUITY
Contributed
Surplus
(unaudited)
Accumulated
Deficit
(unaudited)
Total
(in thousands of Canadian dollars)
Equity of Canada at March 31, 2013
$
28,327
$
(3,339)
$
24,988
Net Results of Operations
-
(5)
(5)
Other Comprehensive Income
-
5
5
Total Comprehensive Income for the year ended March 31, 2014
-
-
-
Equity of Canada at March 31, 2014
28,327
(3,339)
24,988
Net Results of Operations
-
-
-
Other Comprehensive Income
-
-
-
Total Comprehensive Income for the nine months ended December 31, 2014
-
-
-
Equity of Canada at December 31, 2014
$
The accompanying notes form an integral part of these financial statements.
5
28,327
$
(3,339)
$
24,988
Office of the Superintendent of Financial Institutions
STATEMENT OF CASH FLOWS
(in thousands of Canadian
dollars)
For the
three months
ended
December 31,
2014
(unaudited)
Note
For the
three months
ended
December 31,
2013
(unaudited)
For the
nine months
ended
December 31,
2014
(unaudited)
For the
nine months
ended
December 31,
2013
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Receipts from Financial
Institutions, Pension Plans and
Other Government Entities
Cash Paid to Suppliers and Employees
Administrative Monetary Penalties Revenue
Remitted to the Consolidated Revenue Fund
$
70,236 $
(35,322)
13
Net Cash Provided by (Used in) Operating Activities
19,317 $
(36,356)
151,473 $
(111,807)
-
(35)
-
34,914
(17,074)
39,666
132,900
(115,088)
(35)
17,777
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Property, Plant and Equipment
8
(284)
(484)
(367)
(1,465)
Acquisition of Intangible Assets
9
(379)
(1,317)
(1,865)
(4,154)
(663)
(1,801)
(2,232)
(5,619)
(18,875)
37,434
12,158
Net Cash Used in Investing Activities
NET INCREASE (DECREASE) IN CASH
ENTITLEMENT
34,251
CASH ENTITLEMENT, BEGINNING OF THE
PERIOD
34,002
CASH ENTITLEMENT, END OF THE PERIOD
$
68,253
The accompanying notes form an integral part of these financial statements.
6
30,819
79,180
$
60,305
$
68,253
48,147
$
60,305
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
1.
AUTHORITY AND OBJECTIVES
Mandate
The Office of the Superintendent of Financial Institutions (OSFI) was established by the Office of the Superintendent
of Financial Institutions Act (OSFI Act) in 1987. Pursuant to the Financial Administration Act (FAA), OSFI is a
division of the Government of Canada for the purposes of that Act and is listed in schedule I.1 of the Act. The
Government of Canada is OSFI’s parent and the ultimate controlling party of OSFI.
In 1996, OSFI subsequently received a legislated mandate that clarified its objectives in the regulation and
supervision of federal financial institutions and pension plans. In support of a safe and sound Canadian financial
system, OSFI’s mandate under the legislation is to:
•
•
•
•
Supervise federally regulated financial institutions (FRFIs) and pension plans to determine whether they are in
sound financial condition and meeting minimum plan funding requirements respectively, and are complying with
their governing law and supervisory requirements;
Promptly advise institutions and plans in the event there are material deficiencies and take, or require
management, boards or plan administrators to take, necessary corrective measures expeditiously;
Advance and administer a regulatory framework that promotes the adoption of policies and procedures designed
to control and manage risk;
Monitor and evaluate system-wide or sectoral issues that may impact institutions negatively.
The Office of the Chief Actuary provides a range of actuarial valuation and advisory services, under the Canada
Pension Plan Act and the Public Pensions Reporting Act to the Canada Pension Plan (CPP) and some federal
government departments, including the provision of advice in the form of reports tabled in Parliament.
Revenue and spending authority
Pursuant to Section 17 of the OSFI Act, the Minister of Finance may spend any revenues collected under Sections 23
and 23.1 of the OSFI Act to defray the expenses associated with the operation of OSFI. The Act also establishes a
ceiling for expenses at $40 million above the amount of revenue collected to be drawn from the Consolidated
Revenue Fund of Canada (CRF).
OSFI’s revenues comprise assessments, service charges and fees. The expenses against which assessments may be
charged include those in connection with the administration of the Bank Act, the Cooperative Credit Associations
Act, the Green Shield Canada Act, the Insurance Companies Act, the Protection of Residential Mortgage or
Hypothecary Insurance Act and the Trust and Loan Companies Act. The formula for the calculation of assessments
is included in regulations.
Subsections 23(1.1) and 23(5) of the OSFI Act provide that assessments may be charged for the administration of
the Pension Benefits Standards Act, 1985 (PBSA, 1985) and the Pooled Registered Pension Plans Act. The
assessments for the administration of pension plans subject to the PBSA are set annually in accordance with the
Assessment of Pension Plans Regulations.
Section 23.1 of the OSFI Act provides that the Superintendent may assess against a person a prescribed charge
(“service charge”) and applicable disbursements for any service provided by or on behalf of the Superintendent for
the person's benefit or the benefit of a group of persons of which the person is a member. “Person” includes
individuals, corporations, funds, unincorporated associations, Her Majesty in Right of Canada or of a province, and a
foreign government. The service charges are detailed in the regulations.
7
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
1.
AUTHORITY AND OBJECTIVES (continued)
Pursuant to Section 16 of the OSFI Act, Parliament has provided annual appropriations to support the operations of
the Office of the Chief Actuary.
2.
BACKGROUND INFORMATION
The financial statements for the period ended December 31, 2014 were authorized for issue by the Superintendent of
Financial Institutions on February 20, 2015. The head office is located at 255 Albert Street in Ottawa, Ontario,
Canada. OSFI’s principal activities are described in Note 1.
3.
BASIS OF PREPARATION
The financial statements have been prepared on a historical cost basis, except for cash entitlement which has been
measured at fair value.
The financial statements are presented in Canadian dollars as this is the currency of the primary economic
environment in which OSFI operates.
Statement of compliance
The financial statements of OSFI have been prepared in accordance with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB). The accounting policies used in the
financial statements are based on the IFRS applicable as at December 31, 2014, and encompasses individual IFRS,
International Accounting Standards (“IAS”), and interpretations made by the International Financial Reporting
Interpretations Committee (“IFRIC”) and the Standing Interpretations Committee (“SIC”). The policies set out
below are consistently applied to all periods presented.
4.
SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies of OSFI are set out below:
a)
Cash entitlement (Cash overdraft)
OSFI does not have its own bank account. The financial transactions of OSFI are processed through the CRF. Cash
entitlement represents the maximum amount OSFI is entitled to withdraw from the CRF without further authority.
OSFI has a statutory revolving expenditure authority pursuant to Section 17.4 of the OSFI Act. This authority
enables OSFI to draw up to $40 million from the CRF to ensure availability of funds prior to receipt of revenue.
Drawings on this facility are presented as cash overdraft.
No interest is earned or charged on these amounts.
8
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
b)
Financial instruments
The classification of financial instruments is determined by OSFI at initial recognition and depends on the purpose
for which the financial assets were acquired, or liabilities were incurred. All financial instruments are recognized
initially at fair value. The fair value of financial instruments on initial recognition is based on the transaction price,
which represents the fair value of the consideration given or received. Subsequent to initial recognition, financial
instruments are measured based on the accounting treatment corresponding to their classification.
Classification
Accounting Treatment
Fair Value Through Net
Results
Cash Entitlement is classified as “Fair Value Through Net results”.
Loans and Receivables
Trade and Other Receivables and Accrued Base Assessments are classified as
“Loans and Receivables”.
Cash Entitlement is measured at fair value.
Loans and Receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market.
Subsequent to initial recognition at fair value, Loans and Receivables are measured
at amortized cost using the effective interest method, less impairment, if any. Any
gain, loss or interest income is recorded in revenues or expenses depending on the
nature of the loan and receivable that gave rise to the gain, loss or income.
Financial Liabilities
Measured at Amortized Cost
Accrued Salaries and Benefits, Trade and Other Payables excluding employer’s
contributions for employee benefit plans, Unearned Base Assessments, and
Unearned Pension Plan Fees are classified as “Financial Liabilities Measured at
Amortized Cost”.
Financial Liabilities Measured at Amortized Cost are non-derivative financial
liabilities that have not been designated as Financial Liabilities at fair value through
net results.
Subsequent to initial recognition at fair value, Financial Liabilities are measured at
amortized cost using the effective interest method. Any gain, loss or interest
expense is recorded in revenues or expenses depending on the nature of the
financial liability that gave rise to the gain, loss or expense.
Impairment of financial assets
OSFI assesses at each reporting date whether there is any objective evidence that a financial asset or a group of
financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if,
there is objective evidence of impairment as a result of one or more events that has occurred after the initial
recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows
of the financial asset or the group of financial assets that can be reliably estimated.
For financial assets carried at amortized cost, OSFI first assesses individually whether objective evidence of
impairment exists individually for financial assets that are individually significant, or collectively for financial assets
that are not individually significant. If OSFI determines that no objective evidence of impairment exists for an
individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets
with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually
assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a
9
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
collective assessment of impairment. If there is objective evidence that an impairment loss has occurred, the amount
of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated
future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the
estimated future cash flows is discounted at the financial asset’s original effective interest rate.
If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event
occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by
adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to the Statement of
Operations.
c)
Property, plant and equipment
Property, plant and equipment are stated at historical cost, net of accumulated depreciation and/or accumulated
impairment losses, if any. Historical cost includes the costs of replacing parts of property and equipment when
incurred, if the recognition criteria are met. Repair and maintenance costs are recognized in the Statement of
Operations as incurred.
Depreciation is recorded using the straight-line method over the estimated useful lives of the assets as follows:
Assets
Leasehold improvements
Furniture and fixtures
Office equipment
Informatics hardware
Informatics infrastructure (Networks)
Informatics software
Useful Life
Lesser of useful life or remaining term of the lease
7 years
4 years
3 or 5 years
4 or 5 years
5 years
Software is capitalized as property, plant and equipment when the software is integral to the use of the related
hardware.
The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end and
adjusted prospectively if appropriate.
10
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
d)
Intangible assets
Intangible assets consist of internally developed and externally purchased software that is not an integral part of the
related hardware.
Following initial recognition of the development expenditure as an asset, the historical cost model is applied
requiring the asset to be carried at cost less any accumulated amortization and accumulated impairment losses, if
any. Intangible assets acquired separately are measured on initial recognition at cost. The cost of internally
developed software consists of directly attributable costs necessary to create, produce, and prepare the software to be
capable of operating in the manner intended by OSFI.
OSFI holds intangible assets that have finite lives and are amortized over the useful economic life and assessed for
impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and
the amortization method are reviewed at least at each financial year end. Amortization is calculated using the
straight-line method over their estimated useful lives of five years and is recorded in the relevant expense line item
depending on the business activity to which the expense pertains.
Amortization of the assets begins when development is complete and the assets are available for use. They are
amortized over the period of expected future benefit.
Costs incurred during the pre-development stage are expensed in the period incurred.
e)
Impairment of non-financial assets
OSFI assesses at each reporting date whether there are any internal indicators that an asset may be impaired (e.g.
damaged assets or assets no longer being used). If any indication exists, or when annual impairment testing for an
asset is required, OSFI estimates the asset’s recoverable amount.
An asset's recoverable amount is the higher of an asset’s fair value less cost to sell and its value in use. Where the
carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to
its recoverable amount. There is no risk of not recovering the carrying amount of the asset given OSFI’s ability to
recover all costs from federally regulated financial institutions and federally regulated private pension plans.
OSFI assesses internally developed intangible assets not yet in use for impairment on an annual basis.
f)
Employee benefits
i.
Short term benefits
Short term benefits are recorded in the Statement of Operations when an employee has rendered the service. Unpaid
short-term compensated leave that has vested at the reporting date is accrued at year end and not discounted. Shortterm compensated leave expected to occur within twelve months of the reporting date is classified as short-term
employee benefits. OSFI contributes to the Government of Canada sponsored Public Service Health Care Plan and
Dental Service Plan for employees. These contributions represent the total obligation of OSFI with respect to these
plans.
11
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
ii.
Post employment benefits
Pension benefits
Substantially all of the employees of OSFI are covered by the public service pension plan (the “Plan”), a
contributory defined benefit plan established through legislation and sponsored by the Government of Canada.
Contributions are required by both the employees and OSFI to cover current service cost. Pursuant to legislation
currently in place, OSFI has no legal or constructive obligation to pay further contributions with respect to any
past service or funding deficiencies of the Plan. Consequently, contributions are recognized as an expense in the
year when employees have rendered service and represent the total pension obligation of OSFI.
Severance
On termination of employment, employees are entitled to certain benefits provided for under their conditions of
employment through a severance benefits plan. The cost of these benefits is accrued as the employees render their
services necessary to earn severance benefits. The severance benefits are based upon the final salary of the
employee.
The cost of benefits is actuarially determined as at March 31 of each year using the projected benefit method
prorated on services. The obligation is unfunded. The calculation of the liability is based upon a current market
discount rate which is based on the market yields at the valuation date on high quality corporate bonds and other
actuarial assumptions, which represent management’s best long-term estimates of factors such as future wage
increases and employee departure rates. All actuarial gains (losses) are recognized in the Statement of Other
Comprehensive Income in the period in which they arise.
Other benefits
The Government of Canada sponsors a variety of other benefit plans from which former employees may benefit upon
retirement. The Public Service Health Care Plan and the Pensioners’ Dental Service Plan are the two major plans
available to OSFI retirees. These are defined benefit plans sponsored by the Government of Canada. Contributions
are required by OSFI to cover current service cost. Pursuant to legislation currently in place, OSFI has no legal or
constructive obligation to pay further contributions with respect to any past service or funding deficiencies of the
Plan. Consequently, contributions are recognized as an expense in the year when employees have rendered service
and represent the total obligation of OSFI with respect to these plans.
iii.
Other long-term benefits
Sick leave
Employees are eligible to accumulate sick leave until retirement or termination. Unused sick leave is not eligible for
payment on retirement or termination, nor can it be used as vacation. All sick leave is an accumulating non-vesting
benefit. A liability is recorded for sick leave balances expected to be taken in excess of future allotments.
The cost of sick leave as well as the present value of the obligation is determined using an actuarial valuation. Any
gains and losses are recognized in the Statement of Operations in the period in which they arise.
12
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
g)
Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases. Payments under operating leases (net of any incentives received from the
lessor) are charged to the Statement of Operations on a straight-line basis over the period of the lease.
OSFI does not have borrowing authority and therefore cannot enter into lease agreements that are classified as
finance leases. OSFI has established procedures to review all lease agreements and identify if the proposed terms
and conditions would result in a transfer to OSFI of substantially all the benefits and risks incidental to ownership.
OSFI records the costs associated with operating leases in the Statement of Operations in the period in which they
are incurred.
h)
Statement of Operations
The format of the Statement of Operations has been designed to show the revenues and expenses by each of OSFI’s
business lines. It is considered that this format best represents the nature of the activities of OSFI. Expenses have
been disclosed by nature in Note 12 of these financial statements.
i)
Revenue recognition
OSFI recognizes revenue so as to recover its expenses. Any amounts that have been billed for which costs have not
been incurred are classified as unearned on the statement of financial position. Revenue is recorded in the
accounting period in which it is earned (service provided) whether or not it has been billed or collected. At the end
of the period, amounts may have been collected in advance of the incurrence of costs or provision of services, or
alternatively, amounts may not have been collected and are owed to OSFI.
Base Assessments – Revenue from base assessments is recognized based on actual costs incurred as services are
charged based on cost recovery and all costs are considered recoverable. Base Assessments are billed annually
based on an estimate of the current fiscal year’s operating costs (an interim assessment) together with a final
accounting of the previous year’s assessment for actual costs incurred. Assessments are calculated prior to
December 31 of each year, in accordance with Section 23(1) of the OSFI Act and the Assessment of Financial
Institutions Regulations, 2001. Differences between billed estimates and actual cost incurred at the end of the period
are recorded as accrued base assessments or unearned base assessments.
Pension Plan Fees are earned from registered pension plans. Fee rates are set annually by regulation based on
budgeted expenses, pension plan membership and actual results from previous years. Pension plan fees are charged
in accordance with Section 23(2) of the OSFI Act. Revenue from pension plan fees is recognized based on actual
costs incurred as services are charged based on cost recovery and all costs are considered recoverable. Differences
between the amounts billed to industry and actual cost incurred at the end of the period are recorded as accrued
pension plan fees or unearned pension plan fees.
13
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
User Fees and Charges include revenue earned pursuant to the Charges for Services Provided by the Office of the
Superintendent of Financial Institutions Regulations, 2002 – as amended from time to time – in respect of legislative
approvals and approvals for supervisory purposes, and surcharges assessed to federally regulated financial
institutions assigned a “stage” rating pursuant to the Guide to Intervention for Federal Financial Institutions.
Assessment surcharges are charged in accordance with the Assessment of Financial Institutions Regulations, 2001.
Revenue from user fees and charges is recognized by reference to the stage of completion of the service. Percentage
of completion is measured based on actual services performed to date as a percentage of total services to be
completed.
Administrative Monetary Penalties are penalties levied to financial institutions when they contravene a provision of a
financial institutions Act and are charged in accordance with the Administrative Monetary Penalties (OSFI)
Regulations. Penalties levied are not available to reduce the net costs that OSFI assesses the industry (i.e., they are
non-respendable) and are remitted to the CRF when collected. OSFI assesses its Administrative Monetary Penalty
revenue against specific criteria in order to determine if it is acting as principal or agent. OSFI has concluded that it
is acting as a principal for Administrative Monetary Penalty revenue.
Cost-Recovered Services represent revenue earned from sources other than those listed above. These services are
provided in accordance with the terms and conditions agreed to by the transacting parties. Revenue from costrecovered services is recognized based on actual costs incurred and all costs are considered recoverable.
Revenue and the matching expenses from cost recovered services not specifically related to the Regulation and
Supervision of Federally Regulated Pension Plans or Actuarial Valuation and Advisory Services are grouped
with the Regulation and Supervision of Federally Regulated Financial Institutions on the Statement of
Operations. This includes costs recovered from other government entities such as the Canada Mortgage and
Housing Corporation for OSFI's supervisory oversight in accordance with the National Housing Act.
j)
Provisions
Provisions are recognized when OSFI has a present obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in
the Statement of Operations. If the effect of the time value of money is material, provisions are discounted using a
rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the
provision due to the passage of time is recognized in net results.
k)
Government funding
Government funding, including parliamentary appropriations, is recognized when there is reasonable assurance that
the funding will be received and all attached conditions will be complied with. When the funding relates to an
expense item, it is recognized in net results over the period necessary to match the funding on a systematic basis to
the costs that it is intended to compensate. The funding and the corresponding expense item are recognized at their
gross amounts.
14
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
5.
SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of OSFI’s financial statements requires management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent
liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes
that require a material adjustment to the carrying amount of the asset or liability, in which case the impact will be
recognized in the financial statements of a future fiscal period.
Judgments
In the process of applying its accounting policies, management has made the following judgments that have the most
significant effect on the amounts recognized in the financial statements:
Recognition of Internally Developed Software
The accounting policy relating to OSFI’s intangible assets is described in Note 4 (d). In applying this policy,
judgment is used in determining whether the internally developed software meets the criteria for recognition as an
asset. If an asset has been developed, judgment is required to identify the point at which the asset is capable of being
used as intended and to identify the directly attributable costs to be included in the carrying value of the developed
asset.
Operating lease commitments – OSFI as lessee
Public Works and Government Services Canada (PWGSC) enters into commercial property leases for OSFI's office
space and recovers such cost from OSFI. OSFI also enters into leases for certain office equipment. OSFI has
determined, based on an evaluation of the terms and conditions of the arrangements, that significantly all of the risks
and rewards of ownership have not been transferred to OSFI and as such accounts for these contracts as operating
leases.
Administrative monetary penalty revenue – OSFI as principal
OSFI collects administrative monetary penalties from financial institutions when they contravene a provision of a
financial institutions Act. OSFI has determined that it is the principal in the arrangement and has recorded the
administrative monetary penalties as revenue.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty as at the Statement of
Financial Position date that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year are discussed below:
Estimated useful lives of assets
The estimated useful lives of property, plant and equipment and intangible assets are based on management’s
intentions with respect to the asset, historical experience with the asset, internal asset management plans and other
factors as determined by management. The useful lives are reviewed on an annual basis and any revisions to the
useful lives are accounted for prospectively.
15
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
5.
SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
(continued)
Severance benefits
The cost of the defined benefit severance plan as well as the present value of the obligation is determined using an
actuarial valuation. The actuarial valuation involves making assumptions about discount rates, future salary
increases, and departure rates. All assumptions are reviewed annually as at March 31. In determining the
appropriate discount rate, management considers the interest rates of corporate bonds in Canada with AAA or AA
ratings and with maturities matching the estimated cash flows of the severance payments. Departure rates are based
on experience from the public service of Canada and include mortality, disability, termination and retirement. Future
salary increases are based on expected future inflation rates in Canada.
Further details about the assumptions used are given in Note 10 (a).
Sick leave
The cost of sick leave as well as the present value of the obligation is determined using an actuarial valuation. The
actuarial valuation involves making assumptions about discount rates, future salary increases, usage rates, and
departure rates. All assumptions are reviewed annually as at March 31. In determining the appropriate discount
rate, management considers the interest rates of corporate bonds in Canada with AAA or AA ratings and with
maturities matching the estimated sick leave usage. Departure rates are based on experience from the public service
of Canada and include mortality, disability, termination and retirement. Future salary increases are based on
expected future inflation rates in Canada.
Discount Rates
Since the estimated future cash flows of severance payments and estimated sick leave usage are unrelated, the
discount rates determined above may differ.
16
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
6. TRADE AND OTHER RECEIVABLES
The breakdown of all amounts owing to OSFI, by type is as follows:
Federally
Regulated
Private
Pension
Plans
Federally
Regulated
Financial
Institutions
Trade Receivables
User Fees and Charges
Cost Recovered Services
and Other
Related Parties
Trade and Other Receivables, gross
Allowance for Doubtful Accounts
Trade and Other Receivables, net
Accrued Base Assessments
Total
$
$
% of Total Exposure
Trade Receivables
User Fees and Charges
Cost Recovered Services
and Other
Related Parties
Trade and Other Receivables, gross
Allowance for Doubtful Accounts
Trade and Other Receivables, net
Accrued Base Assessments
Total
% of Total Exposure
1,221
2,335
$
660
-
Actuarial
Valuation
and
Advisory
Services
$
-
53
-
$
1,934
2,335
-
1,577
2,348
1,950
3,556
(96)
3,460
3,460 $
660
(364)
296
296 $
1,577
1,577
1,577
4,351
4,351
$ 4,351
44.9 %
100.0 %
Other
Total
March 31,
2014
3.1 %
16.3 %
Federally
Regulated
Financial
Institutions
Federally
Regulated
Private
Pension
Plans
Actuarial
Valuation
and
Advisory
Services
$
$
-
35.7 %
$
Other
Total
December 31,
2014
118
3,757
$
427
-
$
-
$
123
-
74
-
-
986
103
3,534
3,949
(84)
3,865
2,984
6,849 $
427
(245)
182
182 $
986
986
986
3,760
3,760
$ 3,760
8.4 %
31.9 %
58.3 %
1.5 %
17
2,348
3,527
$
$
10,144
(460)
9,684
9,684
668
3,757
177
4,520
$
9,122
(329)
8,793
2,984
11,777
100.0 %
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
6. TRADE AND OTHER RECEIVABLES (continued)
The majority of OSFI's revenue is comprised of assessments which are invoiced once a year, usually in the second
quarter. As a result, Trade Receivables balances will vary significantly during the year and may also vary from year
to year depending on the timing of the invoicing.
OSFI records an allowance for doubtful accounts considering the age of an outstanding receivable and the likelihood
of its collection. An allowance for doubtful accounts is also made where collection of the receivable is doubtful
based on information gathered through collection efforts. An allowance is reversed once collection of the debt is
successful or the amount is written off. Impairment losses on trade and other receivables recognized during the nine
month period ended December 31, 2014 were $170 (Year ended March 31, 2014: $93). Recoveries during the same
period totaled $39 (Year ended March 31, 2014: $69).
A receivable will be considered to be impaired and written off when OSFI is certain that collection will not occur
and all requirements of the OSFI Act or the Debt Write-Off Regulations, 1994 have been met. During the period, no
interest was earned on impaired assets and none of the past due amounts were renegotiated. Those that are neither
past due nor provided for or impaired are considered to be fully collectible.
The aging of non-related party trade receivables was as follows (for terms and conditions relating to related party
receivables, refer to Note 7):
Days outstanding
Current
31-60
61-90
91-120
> 120
Total
December 31, 2014
$
39 $
12 $
349 $
1,087 $
447 $
1,934
March 31, 2014
$
157 $
- $
39 $
47 $
425 $
668
Refer to Note 15 (b) for further information on credit risk applicable to OSFI.
7.
RELATED PARTY TRANSACTIONS
a)
The ultimate parent
The Government of Canada is the ultimate parent of OSFI, and has control over OSFI.
18
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
7.
RELATED PARTY TRANSACTIONS (continued)
b)
Compensation of Key Management Personnel
Key Management Personnel includes the following positions: the Superintendent, Deputy Superintendents, Assistant
Superintendent, the Chief Actuary and all Senior and Managing Directors or equivalent level positions at OSFI.
Total compensation paid to key management personnel for the nine month period ended December 31 is provided in
the table below.
2014
Short-term employee benefits (including salaries)
Post-employment benefits
Other long-term benefits
Total
$
10,220
2,467
110
12,797
$
Average Number of Employees
c)
2013
$
$
53
9,621
2,381
106
12,108
48
Government related entities
OSFI is related, in terms of common ownership, to all Government of Canada departments, agencies and crown
corporations. OSFI enters into transactions with these entities in the normal course of business and on normal trade
terms. These transactions are measured at the exchange amount, which is the amount of consideration established
and agreed to by the related parties.
During the nine month period ended December 31, 2014, OSFI purchased goods and services for $25,448 (2013 $28,728) and earned revenue of $8,472 (2013 - $8,917) from transactions with other government entities. Although
most transactions are not individually significant, OSFI did have the following individually significant transactions:
Entity
Treasury Board
Secretariat
Public Works and
Government Services
Canada
Nature
2014
Expenditure
2014
Payable
2013
Expenditure
2013
Payable
Pension contributions,
other employee benefits
and other services
$
16,827 $
1,983 $
17,221 $
1,874
Rent and other services
$
6,170 $
431 $
7,183 $
409
Entity
Nature
Canada Mortgage and
Housing Corporation
Employment and Social
Development Canada
Cost recovered services
Actuarial valuation and
advisory services
2014
Revenue
2014
Receivable
2013
Revenue
2013
Receivable
$
1,749 $
1,749 $
2,063 $
2,063
$
2,721 $
788 $
2,641 $
762
19
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
7.
RELATED PARTY TRANSACTIONS (continued)
As at December 31, 2014, the amounts of trade and other receivables and trade and other payables from these related
parties are $3,527 (2013 - $5,133) and $2,727 (2013 - $3,823), respectively.
OSFI receives an annual parliamentary appropriation pursuant to Section 16 of the OSFI Act to support its mandate
relating to the OCA. In the nine month period ended December 31, 2014 OSFI was granted $703 (2013 - $703)
which was recognized into net results and shown on the Statement of Operations. There are no unfulfilled
conditions or contingencies attached to this appropriation.
8.
PROPERTY, PLANT AND EQUIPMENT
Cost
Balance at March 31, 2013
Additions
Disposals
Balance at March 31, 2014
Additions
Balance at December 31, 2014
Accumulated depreciation
Balance at March 31, 2013
Disposals
Depreciation expense
Balance at March 31, 2014
Depreciation expense
Balance at December 31, 2014
Net book value
Balance at March 31, 2014
Balance at December 31, 2014
Leasehold
improvements
$
8,723
1,782
$
10,505
$
10,505
Furniture
and fixtures
$
4,940
469
$
5,409
69
$
5,478
Office
equipment
$
1,058
257
$
1,315
79
$
1,394
Informatics
hardware
$
5,015
785
$
5,800
219
$
6,019
$
$
$
329
223
552
180
732
$
$
4,096
241
4,337
162
4,499
$
$
6,317
1,307
7,624
1,066
8,690
$
$
2,881
1,815
$
$
1,072
979
$
$
763
662
$
$
$
$
$
$
Total
19,736
3,293
23,029
367
23,396
$
$
2,917
694
3,611
612
4,223
$
13,659
2,465
16,124
2,020
18,144
$
$
2,189
1,796
$
$
6,905
5,252
$
$
None of the assets held have any restriction on title and none of the assets have been pledged as security for
liabilities. As at December 31, 2014 OSFI had $6,559 of property, plant and equipment at cost that were fully
depreciated and still in use. These assets are near the end of their useful life and are scheduled to be replaced. Their
fair value is insignificant.
20
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
9.
INTANGIBLE ASSETS
Externally
purchased
software
Cost:
Balance at March 31, 2013
Additions
Transfer to "in use"
Disposals
Balance at March 31, 2014
Additions
Transfer to "in use"
Balance at December 31, 2014
Accumulated amortization:
Balance at March 31, 2013
Amortization
Disposals
Balance at March 31, 2014
Amortization
Balance at December 31, 2014
Net book value:
Balance at March 31, 2014
Balance at December 31, 2014
$
Internally
developed
software
Internally
developed
software under
development
10,727
89
10,816
90
10,906
$
$
$
9,987
248
10,235
229
10,464
$
1,722 $
1,065
(369)
2,418 $
1,163
3,581 $
$
$
581
442
$
$
5,197
8,152
$
$
$
$
$
$
$
4,274 $
3,710
(369)
7,615 $
4,118
11,733 $
$
$
Total
5,974 $
5,177
(3,710)
7,441 $
1,775
(4,118)
5,098 $
20,975
5,266
(369)
25,872
1,865
27,737
-
$
$
11,709
1,313
(369)
12,653
1,392
14,045
7,441
5,098
$
$
13,219
13,692
$
The internally developed software under development was assessed for impairment at March 31, 2014 and no
impairment was recognized. As at December 31, 2014 OSFI had $11,127 of intangible assets at cost that were fully
amortized and still in use. These assets are near the end of their useful life and are scheduled to be replaced. Their
fair value is insignificant.
21
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
10. EMPLOYEE BENEFITS
a)
Post-employment benefits
i.
Pension benefits
Substantially all of the employees of OSFI are covered by the public service pension plan (the “Plan”), a
contributory defined benefit plan established through legislation and sponsored by the Government of Canada.
Contributions are required by both the employees and OSFI. The President of the Treasury Board of Canada sets the
required employer contributions based on a multiple of the employees’ required contribution. The general
contribution rate effective as at December 31, 2014 was 11.885 % (2013 - 12.234 %). Total contributions of $7,611
(2013 - $7,834) were recognized as expense in the nine months ended December 31, 2014.
The Government of Canada holds a statutory obligation for the payment of benefits relating to the Plan. Pension
benefits generally accrue up to a maximum period of 35 years at an annual rate of 2 percent of pensionable service
times the average of the best five consecutive years of earnings. The benefits are coordinated with Canada/Québec
Pension Plan benefits and they are indexed to inflation.
ii.
Severance benefits
Information about OSFI’s severance benefit plan is presented in the tables below.
Nine months
ended
December 31,
2014
$
6,726
69
177
(460)
6,512
Accrued Benefit Obligation, beginning of the period
Current service cost
Interest cost
Benefits paid
Actuarial (gain) / loss
Accrued Benefit Obligation, end of the period1
Current Portion of Accrued Benefit Obligation, end of the period
Long-term Portion of Accrued Benefit Obligation, end of the period
Accrued Benefit Obligation, end of the period1
754
5,758
6,512
Twelve months
ended
March 31,
2014
$
11,337
101
314
(5,021)
(5)
6,726
698
6,028
6,726
1 The cost corresponding to annual changes in the accrued benefit liability is recovered from OSFI's various sources of revenue outlined in
Note 4 (i) to the financial statements. Amounts collected in excess of benefits paid are presented on the statement of financial position under the
heading of Cash Entitlement.
22
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
10. EMPLOYEE BENEFITS (continued)
Nine months
ended
December 31,
2014
Net Benefit Plan Cost - Severance
Current service cost
Interest cost
Benefit Cost
$
$
69
177
246
Nine months
ended
December 31,
2013
$
$
76
139
215
Annually as at March 31, OSFI obtains an actuarial valuation of its accrued benefit obligation. Actuarial
assumptions are reviewed at each valuation date. Cumulative actuarial losses recorded in net results since April 1,
2010, the date of OSFI’s transition to IFRS, are $2,577 (2013 - $2,582).
The significant actuarial assumption adopted in measuring OSFI’s accrued benefit obligation is a discount rate of
3.70% (2013 - 3.55%,). For measurement purposes, management’s best estimate for the general salary increases to
estimate the current service cost and the accrued benefit obligation as at March 31, 2014 is an annual economic
increase of 1.0% for the plan year 2015 and 1.5% for 2016 (2013 - 2.0% for the plan year 2013 and 2014).
Thereafter, an annual economic increase of 1.5% is assumed (2013 - 2.0%). The average remaining service period
of active employees covered by the benefit plan is 14 years (2013 - 14 years).
Amounts for the current and previous four periods are as follows:
Employee Benefits - Severance
December 31, 2014
March 31, 2014
March 31, 2013
March 31, 2012
March 31, 2011
Actuarial (gains)
Accrued benefit losses recognized
obligation during the period
$
6,512 $
6,726
(5)
11,337
1,251
9,487
1,015
9,210
316
Curtailment
Effective September 30, 2011, OSFI modified its severance plan for executive level employees. All executive level
employees ceased accumulating benefits under the severance plan. Employees were given three options with respect
to the benefits accumulated under this plan. The choices were to take the severance earned to date immediately as a
cash payment, continue to defer payment until retirement or voluntary departure, or a combination of the latter two
options.
Effective March 31, 2013, OSFI modified its severance plan. All employees represented by the Professional
Institute of the Public Service of Canada (PIPSC) union ceased accumulating severance benefits for voluntary
departure. Employees within this group were given the same three options with respect to the benefits accumulated
under this plan. The benefits paid during the year ended March 31, 2014 of $5,021 include payments to employees
who chose an immediate settlement.
23
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
10. EMPLOYEE BENEFITS (continued)
Sensitivity Analysis
The discount rate used to estimate the present value of the severance benefit obligation has a significant effect on the
obligation at the end of the year, as well as on the current service and interest costs. A 1.0% change in the discount
rate would have had the following effects for 2014.
Change in discount rate of 1.0%
Increase
Accrued benefit obligation
$
Decrease
(447)
$
513
These sensitivities are hypothetical and should be used with caution. The relationship of a change in assumption to
the change in value may not be linear. Changes in one factor may result in changes in another which may magnify or
counteract the sensitivities.
b)
Other long-term benefits
i.
Sick leave
Information about OSFI’s sick leave plan is presented in the table below.
Nine months
ended
December 31,
2014
Accrued Benefit Obligation, beginning of the period
Current service cost
Interest cost
Benefits used
Actuarial loss
Accrued Benefit Obligation, end of the period1
$
5,876
513
177
(375)
6,191
Twelve months
ended
March 31,
2014
$
5,387
649
201
(560)
199
5,876
1 The cost corresponding to annual changes in the accrued benefit liability is recovered from OSFI's various sources of revenue outlined in
Note 4 (i) to the financial statements. Amounts collected in excess of benefits paid are presented on the statement of financial position under the
heading of Cash Entitlement.
Nine months
ended
December 31,
2014
Net Benefit Plan Expense - Sick leave
Current service cost
Interest cost
Benefit Cost
$
$
24
513
177
690
Nine months
ended
December 31,
2013
$
$
487
154
641
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
10. EMPLOYEE BENEFITS (continued)
Annually as at March 31, OSFI obtains an actuarial valuation of its accrued benefit obligation. Actuarial
assumptions are reviewed at each valuation date. Cumulative actuarial (gains) losses recorded in net results since
April 1, 2010, the date of OSFI’s transition to IFRS is $2,415 (2013 - $2,216).
The significant actuarial assumption adopted in measuring OSFI’s accrued benefit obligation is a discount rate of
3.99% (2013 - 3.73%). For measurement purposes, management’s best estimate for the general salary increases to
estimate the current service cost and the accrued benefit obligation as at March 31, 2014 is an annual economic
increase of 1.0% for the plan year 2014 and 1.5% for 2015 (2013 - 2.0% for the plan year 2013 and 2014).
Thereafter, an annual economic increase of 1.5% is assumed (2013 - 2.0%). The average remaining service period
of active employees covered by the benefit plan is 14 years (2013 - 14 years).
Amounts for the current and previous four periods are as follows:
Employee Benefits - Sick Leave
December 31, 2014
March 31, 2014
March 31, 2013
March 31, 2012
March 31, 2011
Actuarial losses
Accrued benefit (gains) recognized
obligation during the period
$
6,191 $
5,876
199
5,387
1,857
3,505
531
2,768
(172)
Sensitivity Analysis
The discount rate and sick leave usage rate used to estimate the present value of the sick leave obligation has a
significant effect on the obligation at the end of the year, as well as on the current service and interest costs. A 1.0%
change in the discount rate or the sick leave usage rate would have had the following effects for 2014.
Change in discount rate of 1.0%
Increase
Accrued benefit obligation
$
Change in the sick leave usage rate of 1.0%
(494)
Increase
Accrued benefit obligation
$
280
Decrease
$
579
Decrease
$
(280)
These sensitivities are hypothetical and should be used with caution. The relationship of a change in assumption to
the change in value may not be linear. Changes in one factor may result in changes in another which may magnify or
counteract the sensitivities.
25
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
11. REVENUE AND TOTAL COSTS BY BUSINESS ACTIVITY
Revenue by Business Activity
December 31, 2014
Regulation and Supervision of
Federally Regulated Financial
Institutions
Base
Assessments
$
Regulation and Supervision of Federally
Regulated Private Pension Plans
Actuarial Valuation and Advisory
Services
TOTAL REVENUE EARNED FROM
RESPENDABLE SOURCES
December 31, 2013
Regulation and Supervision of
Federally Regulated Financial
Institutions
$
$
$
3,050 $
Pension
Plan Fees
- $
User Fees
and
Charges
2,832 $
Total
98,725
-
-
5,149
-
5,149
-
4,999
-
-
4,999
92,843 $
Base
Assessments
Regulation and Supervision of Federally
Regulated Private Pension Plans
Actuarial Valuation and Advisory
Services
TOTAL REVENUE EARNED FROM
RESPENDABLE SOURCES
92,843 $
CostRecovered
Services
88,459 $
8,049 $
CostRecovered
Services
2,714 $
5,149 $
Pension
Plan Fees
- $
2,832 $
User Fees
and
Charges
3,085 $
108,873
Total
94,258
-
-
5,602
-
5,602
-
4,953
-
-
4,953
88,459 $
26
7,667 $
5,602 $
3,085 $
104,813
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
11. REVENUE AND TOTAL COSTS BY BUSINESS ACTIVITY (continued)
Total Cost by Business Activity
For the three
months ended
December 31,
2014
Regulation and Supervision of
Federally Regulated
Financial Institutions
Risk Assessment and
Intervention
Regulation and Guidance
Approvals and Precedents
$
Total
Regulation and Supervision of
Federally Regulated
Private Pension Plans
Actuarial Valuation and
Advisory Services
Public Sector Pension and
Insurance Programs
Canada Pension Plan and Old
Age Security Program
Canada Student Loans
Program
Total
TOTAL COSTS
$
For the three
months ended
December 31,
2013
24,105 $
22,197 $
6,557
2,935
For the nine
months ended
December 31,
2014
For the nine
months ended
December 31,
2013
72,202 $
67,226
6,508
2,376
18,822
7,701
19,549
7,483
33,597
31,081
98,725
94,258
1,741
1,865
5,149
5,602
976
933
2,981
2,720
592
677
1,859
2,051
287
289
862
885
1,855
1,899
5,702
5,656
37,193 $
34,845 $
109,576 $
105,516
Total costs include both costs recorded in the Statement of Operations and any actuarial gains or losses recorded in
the Statement of Other Comprehensive Income.
27
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
12.
REVENUE AND EXPENSES BY MAJOR CLASSIFICATION
For the three
months ended
December 31,
2014
Revenue
Base Assessments
Cost-Recovered Services
Pension Plan Fees
User Fees and Charges
Total Revenue Earned from
Respendable Sources
$
Expenses
Human Resources
Information
Management/Technology
Facilities
Administration
Travel
Professional Development
Professional Services
Total Expenses
Net Results of Operations
before Government Funding
and Non-Respendable
Administrative Monetary
Penalties Revenue
For the three
months ended
December 31,
2013
For the nine
months ended
December 31,
2014
92,843 $
8,049
5,149
2,832
For the nine
months ended
December 31,
2013
31,334 $
3,032
1,741
852
28,719 $
2,787
1,865
1,240
88,459
7,667
5,602
3,085
36,959
34,611
108,873
104,813
28,135
27,105
83,215
82,434
4,298
2,714
889
767
260
130
37,193
3,055
2,396
891
880
345
173
34,845
12,318
8,007
2,588
2,299
726
423
109,576
9,609
7,203
2,435
2,409
957
469
105,516
(234)
(234)
(703)
(703)
234
234
703
703
Administrative Monetary
Penalties Revenue
-
35
-
35
Administrative Monetary
Penalties Earned on Behalf of
the Government
-
(35)
-
(35)
Government Funding
Net Results of Operations
Average Number of
Employees
$
- $
- $
691
668
28
- $
683
661
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
12.
REVENUE AND EXPENSES BY MAJOR CLASSIFICATION (continued)
Human Resources Expenses
For the three
months ended
December 31,
2014
Wages and Salaries
Other Benefits
Post-Employment Benefits
other than Severance
Other Personnel Costs
Severance Benefits
Total Human Resources
Expenses
$
$
For the three
months ended
December 31,
2013
For the nine
months ended
December 31,
2013
For the nine
months ended
December 31,
2014
21,532 $
3,831
20,566 $
3,549
63,780 $
11,311
61,853
11,068
2,563
127
82
2,628
290
72
7,612
266
246
7,895
1,403
215
28,135 $
27,105 $
83,215 $
82,434
13. ADMINISTRATIVE MONETARY PENALTIES
Administrative monetary penalties levied by OSFI are remitted to the CRF. The funds are not available for use by
OSFI and are not included in the balance of the Cash Entitlement. As a result, the penalties do not reduce the
amount that OSFI assesses the industry in respect of its operating costs. Refer to Note 4 (i) for further information on
OSFI's accounting policy as it relates to administrative monetary penalty revenue.
In the nine month period ended December 31, 2014, OSFI levied $Nil (2013 - $35) in administrative monetary
penalties.
14. OPERATING LEASE ARRANGEMENTS
Minimum lease payments under operating leases recognized as an expense during the nine month period ended
December 31, 2014 were $5,878 (2013 - $5,450).
OSFI has entered into operating lease agreements for office space and office equipment in four locations across
Canada, and contracts for services. These leases have an average remaining life of between one and eight years with
no renewal option included in the contracts. There are no restrictions placed upon OSFI when entering into these
leases. The minimum aggregate annual payments for future fiscal years are as follows:
As at
December 31, 2014
Within one year
After one year but not more than five years
More than five years
Total
$
$
29
8,901
9,106
257
18,264
As at
December 31, 2013
$
$
5,926
6,389
426
12,741
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
15. FINANCIAL RISK MANAGEMENT
OSFI’s financial liabilities include Accrued Salaries and Benefits, Trade and Other Payables, Unearned Base
Assessments and Unearned Pension Plan Fees. The main purpose of these liabilities is to provide short-term
financing for OSFI’s operations. Financial assets include Cash Entitlement, Trade and Other Receivables and
Accrued Base Assessments.
OSFI is exposed to market risk, credit risk and liquidity risk, in connection with its financial instruments. OSFI's risk
exposures and its processes to manage these risks did not change significantly during the nine month period ended
December 31, 2014.
a)
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: interest rate risk, currency risk and other price
risk, such as equity risk. OSFI is exposed to currency risk on any amounts payable that are to be settled in a
currency other than the Canadian dollar but is not exposed to interest rate risk nor to other price risk.
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. OSFI’s exposure to the risk of changes in foreign exchange rates
relates primarily to OSFI’s operating activities (when expenses are denominated in a currency other than the
Canadian dollar).
OSFI manages its exposure to currency risk by structuring its contracts in Canadian dollars wherever possible. The
majority of OSFI’s transactions presented were denominated in Canadian dollars; as such, OSFI’s exposure to
currency risk for all periods presented is insignificant.
There is no impact to revenues since all billings are in Canadian dollars.
b)
Credit risk
Credit risk is the risk that the counterparty will not meet its obligations under a financial instrument, resulting in a
financial loss. The maximum exposure OSFI has to credit risk as at December 31, 2014 is $9,684
(March 31, 2014 - $11,777) which is equal to the carrying value of its Trade and Other Receivables and Accrued
Base Assessments.
All federally regulated financial institutions and federally regulated private pension plans are required to register
with OSFI and pay the base assessments and fees as established by OSFI. Any loss incurred by OSFI as a result of a
counterparty not meeting its obligations is recorded in the year incurred and collected in the following year through
assessments to the industry to which the balance pertains, as outlined in the OSFI Act. All remaining receivables are
with other Canadian federal and provincial government organizations, where there is minimal potential risk of loss.
OSFI does not hold collateral as security.
30
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
15. FINANCIAL RISK MANAGEMENT (continued)
c)
Liquidity risk
Liquidity risk is the risk that OSFI will encounter difficulty in meeting its obligations associated with current and
future financial liabilities. OSFI’s objective is to maintain sufficient Cash Entitlement through its collection of base
assessments, fees, cost recovered services and other charges in order to meet its operating requirements. OSFI
manages liquidity risk through detailed annual planning and billing processes that are structured to allow for
sufficient liquidity from one billing period to the next. OSFI’s objective is to accurately estimate its operating costs
and cash requirements for the current year and to recover these through its interim base assessments, fees and other
sources of revenue.
OSFI’s policy is to satisfy liabilities by the following means (in decreasing order of priority):
•
•
Disbursing payments from its Cash Entitlement account
Drawing on its revolving expenditure authority, pursuant to Section 17.4 of the OSFI Act.
Drawings on this facility were $Nil as at December 31, 2014 (2013 - $Nil).
Refer to Note 1 for further information on OSFI’s authority and Note 4 (a) for further information on the accounting
policies for its revolving spending authority.
31
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
15. FINANCIAL RISK MANAGEMENT (continued)
The table below summarizes the maturity profile of OSFI’s financial liabilities as at December 31, 2014 and
March 31, 2014 based on contractual undiscounted payments. When counterparty has a choice of when the amount
is paid, the liability is allocated to the earliest period in which OSFI can be required to pay. When amounts are due
in installments, each installment is allocated to the earliest period in which OSFI can be required to pay.
On
Demand
Accrued Salaries & Benefits
Trade and Other Payables
Unearned Base Assessments
Unearned Pension Plan Fees
Total
$
$
5,140 $
5,140 $
On
Demand
Accrued Salaries & Benefits
Trade and Other Payables
Unearned Base Assessments
Unearned Pension Plan Fees
Total
$
$
Less than
3 months
5,461 $
2,697
8,158 $
Less than
3 months
4,815 $
4,815 $
2,713 $
4,769
7,482 $
3 to 12
months
5,411 $
35,689
1,059
42,159 $
3 to 12
months
6,320 $
3,043
1,226
10,589 $
1 to 5
years
- $
4,630
4,630 $
1 to 5
years
- $
3,069
3,069 $
Greater
than 5
years
- $
27
27 $
Greater
than 5
years
- $
108
108 $
December 31,
2014
Total
16,012
2,697
35,689
5,716
60,114
March 31,
2014
Total
13,848
4,769
3,043
4,403
26,063
Unearned Pension Plan Fees represent the accumulation of in-year surplus or deficit against fees collected. These
are in turn paid or collected over a period of five years commencing one year from the year in which they were
established. OSFI does not charge nor pay interest to the various pension plans over the five years.
32
Office of the Superintendent of Financial Institutions
NOTES TO THE FINANCIAL STATEMENTS
For the three and nine months ended December 31, 2014 (in thousands of Canadian dollars)
16. EQUITY OF CANADA
Contributed Surplus - OSFI was established on July 2, 1987 by the OSFI Act. OSFI was created through the
merger of its two predecessor agencies – the Department of Insurance and the Office of the Inspector General of
Banks. To help fund OSFI’s first year of operations and establish a pool of working capital necessary to support its
annual assessment and expenditure cycle, OSFI was credited with the assessments that recovered the costs of its
predecessors for the previous fiscal year. This amount is reflected as contributed surplus.
Accumulated Deficit - The accumulated deficit was created as part of OSFI’s transition to accrual accounting under
Canadian generally accepted accounting principles in fiscal 2000-2001. The transition to Canadian generally
accepted accounting principles (CGAAP) accounts for $789 of the balance. On April 1, 2010 OSFI transitioned to
IFRS from CGAAP which increased the accumulated deficit by $2,170. The balance as at March 31, 2011 increased
by an additional $380 as a result of the operations for the year ended March 31, 2011 as determined under IFRS.
The balance has not changed since March 31, 2011.
Capital Management - OSFI includes Contributed Surplus and Accumulated Deficit, collectively entitled “Equity
of Canada”, in its definition of capital. OSFI operates on a cost recovery basis. Its objective when managing capital
is to closely manage actual costs to those estimated and communicated to its paying stakeholders. Any operating
shortfall or excess is factored into the assessments and fees charged to regulated entities in the following year. OSFI
fully recovered all of its costs incurred in the year.
OSFI is not subject to any externally imposed capital requirement.
OSFI did not change its capital management objectives, policies or processes during the nine month period ended
December 31, 2014.
33