PUBLIC HEALTH AGENCY OF CANADA Future-oriented Statement of Operations (unaudited) For the year ended March 31, 2011

Notes to the Financial Statement (unaudited)

4. Summary of Significant Accounting Policies

The Future-oriented Statement of Operations has been prepared by management in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

Significant accounting policies are as follows:

(a) Parliamentary Appropriations

The Agency is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to the Agency do not parallel financial reporting according to Canadian generally accepted accounting principles since appropriations are based on a modified cash basis. Consequently, items recognized in the Future-oriented Statement of Operations are not necessarily the same as those provided through appropriations from Parliament. Note 5 provides a high-level reconciliation between the two bases of reporting.

(b) Forecasted Revenues

Revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues.

(c) Forecasted Expenses

Expenses are recorded on an accrual basis:

• Grants are recognized in the year in which the recipient has met the eligibility criteria and the conditions for payment;
• Contributions are recognized in the year in which the recipient has met the conditions and fulfilled the terms of the contractual agreement;
• Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment; and
• Services provided without charge by other government departments for accommodation, the employer's contribution to the health and dental insurance plans, and legal services are recorded as operating expenses at their estimated cost.

(d) Employee Future Benefits

Pension Benefits: Eligible employees participate in the Public Service Pension Plan administered by the Government of Canada. The Agency's contributions to the Plan are expensed in the year incurred and represent the total obligation to the Plan by the Agency. Current legislation does not require the Agency to make contributions for any actuarial deficiencies of the Plan.

Severance Benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment. The obligation for these benefits is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

(e) Tangible Capital Assets

The acquisition costs for 2009-2010 and 2010-2011 include purchases of assets costing $50,000 and more from the capital vote, in addition to $2.1 million for the purchases of assets costing less than $50,000 from the operating vote.

Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

(f) Antiviral:

The Agency purchases antiviral and other related medical supplies in anticipation of a pandemic emergency. The antiviral have a short shelf life and they, as well as the other related medical supplies, are not anticipated to be consumed except in the event of a pandemic. As a result, these purchases are written off in the year in which they are purchased.

(g) Measurement Uncertainty

The preparation of the Future-oriented Statement of Operations requires management to make estimates and assumptions that affect the reported amounts of all assets, liabilities, revenues and expenses. Assumptions are based upon information available and known to management at the time of development, reflect current business and economic conditions, and assume a continuation of current governmental priorities and consistency in Agency mandate and strategic objectives. At the time of preparation of this statement, management believes the estimates and assumptions to be fair and reasonable. Nonetheless, as with all such estimates and assumptions, there is a measure of uncertainty. This uncertainty increases as the forecast horizon extends.