Frequently Asked Questions - Crown Corporation Quarterly Financial Reports
Why do Crown corporations (CCs) have to prepare Quarterly Financial Reports (QFRs)?
The Financial Administration Act (FAA) was amended when Bill C-51 (Economic Recovery Act) received Royal Assent on . As a result, section 131.1 was added to the FAA requiring all CCs to prepare a QFR for the first three quarters of each fiscal year, starting .
When is the first QFR due?
The first report is due for the first quarter ending after ; this could be a CC's 1st, 2nd or 3rd fiscal quarter depending on their year-end date. Based on the legislation, the report is to be made public within 60 days after the quarter-end. For most CCs, the first report will relate to the quarter ending and is to be made public by .
Which entities/subsidiaries must be included in the financial statements included in the QFR?
As per Section 131.1 (1) of the FAA, "each parent Crown corporation shall cause to be prepared, in respect of itself and its wholly-owned subsidiaries, if any, a quarterly financial report". This wording is consistent with Section 131(4) "each parent Crown corporation shall cause financial statements to be prepared annually, in respect of itself and its wholly-owned subsidiaries." Therefore, the QFR should include all wholly-owned subsidiaries and other entities (e.g. variable interest entities, partially owned subsidiaries) that are included in the annual audited consolidated financial statements.
What information is included in the QFR?
The FAA specifies that the Treasury Board will provide the form and manner for the preparation of the QFR. Therefore, Treasury Board Secretariat has issued a Standard on Quarterly Financial Reports for Crown Corporations ("the Standard") to provide parent CCs with the form and manner of QFR.
I prepare my year-end financial statements in accordance with PSAS. Do I need to include a quarterly budget in my QFR?
No. Quarterly budgets are not required to be presented in the financial statements included in the QFR.
Must I disclose compliance with ratios in the QFR that must be reported on in the annual financial statements and/or Annual Report?
No, the legislation does not require that compliance with ratios be reported on quarterly. Unless the underlying requirement to meet certain ratios (e.g. in legislation or agreements) requires reporting more often than annually, the requirement for QFR does not impose new reporting requirements.
For a very specific reason my CEO and CFO are not comfortable signing the attestation this quarter. Can I modify the wording?
You may contact the Office of the Comptroller General (OCG) with the reason for the request and proposed revised wording for the attestation. The OCG will provide their opinion on a case-by-case basis.
Does my Board of Directors/Audit Committee need to approve the quarterly financial statements?
The Standard does not require Board of Directors/Audit Committee approval of the quarterly financial statements or QFR. Normal governance practices in place at the CC for release of public information should be adhered to.
Can I appoint a firm who is not the auditor of my year-end financial statements to perform a review of the quarterly financial statements?
A review of the quarterly financial statements is not required by the legislation, the Standard, or government policy. TBS Legal Services has advised that, pursuant to the FAA, nothing would prevent a CC from hiring a private sector auditor to provide an opinion on quarterly financial statements. However, at all times the incumbent year-end auditor should be advised and consulted to ensure that any and all professional considerations are addressed.
What do you mean by "significant" variance in the narrative part of the QFRs?
Determination of a significant or material variance is judgemental and should be determined by management of each CC.
Should the QFR include a summary of attainment of performance objectives outlined in the Corporate Plan as is required for the Annual Report?
No. This information is not required in the QFR.
Should the QFR narrative discussion adhere to recommendations for "Management Discussion and Analysis" as published by the CICA and/or Securities Commissions?
No. The narrative discussion must meet the requirements of the Treasury Board Standard on Quarterly Financial Reports for Crown Corporations, which has been drafted to ensure compliance with section 131.1 of the FAA. A CC may choose to exceed the requirements and follow management discussion and analysis (MD&A) guidance to have formats consistent with their Annual Report. However, at all times the requirements of the FAA must be adhered to and incorporated into the narrative discussion in the QFR.
Quarterly budget information is not presented in the Corporate Plan. Do we now have to prepare and present our Corporate Plan with quarterly information?
No. The QFR must discuss any significant deviations from planned results. Thus, if it becomes apparent that year end objective/targets outlined in the Corporate Plan will not be met, this must be reflected in the QFR. The format of the Corporate Plan is not changing as a result of the implementation of QFR. Any tables used within the narrative do not need to include planned/budgeted figures.
Where do CCs have to publish their Quarterly Financial Reports?
Each CC is responsible to make its quarterly financial report public, in both official languages, within 60 days after the end of the quarter to which it relates. It is expected that the reports will be published on the CC website and be easily accessible; however, if management feels there is another acceptable manner to "make public", those options can be discussed with their legal advisors to ensure they meet the requirements of the FAA. The QFR is not tabled in Parliament.
Due to the summer parliamentary recess, my Annual Report for March 31 is generally not tabled until September. The QFR presumes that readers have access to my Annual Report and annual financial statements. Can I defer making the quarterly financial report public until the Annual Report is tabled in Parliament?
Per the FAA, the QFR must be tabled within 60 days of quarter end. This legislated requirement is separate from that related to tabling of the Annual Report pursuant to the FAA. Legally, nothing prevents a CC from releasing part of the information included in the Annual Report to the public prior to it being tabled in Parliament.
The following options are available to CCs related to this concern:
- Work with your respective Minister's Office to ensure timely tabling in Parliament of the Annual Reports. There are generally at least two "back door" tabling dates during the summer Parliamentary recess where routine documents such as Annual Reports can be tabled in Parliament; or
- Table the first quarter report within the 60-day deadline even if Annual Report has not yet been tabled in Parliament.
If errors are identified after a quarterly financial report (QFR) is issued, would a previously issued QFR need to be restated and reissued?
Management must use its discretion to assess the significance of errors identified in a previously issued QFR and determine the appropriate course of action.
At a minimum, if management decides that the error is material and the QFR should be restated and reissued, a copy of the revised QFR must be submitted to the responsible Minister and the Comptroller General of Canada.
In the first year of adoption of International Financial Reporting Standards (IFRS) or Public Sector Accounting Standards (PSAS), the accounting policy choices and elections do not need to be finalized until year end. If management were to change a planned accounting policy choice or election after issuing a QFR but prior to issuing of the final audited financial statements, would a previously issued QFR need to be restated and reissued (e.g. in Q2 a policy change made to application of a new standard that was accounted for in the Q1 report)?
Management must use its discretion to assess the significance of any changes to accounting policies or elections presented in a previously issued QFR to determine the appropriate course of action.
One acceptable course of action is to indicate on the cover or first page of the web-version of the previously issued QFR that an accounting policy has been revised as disclosed in the (state period end) financial statements. In the subsequent fiscal year, it is recommended, if it is practicable, that the comparative figures be restated and clearly marked as "restated".
If management decides to restate a previously issued QFR, a copy of the revised QFR must be submitted to the responsible Minister and the Comptroller General of Canada. If management decides to place a notation on the web version of a previously issued QFR that a change in accounting policy was adopted in a later QFR, the Minister and Comptroller General should be advised that this notation was added to the web version of the QFR.
Are the reconciliations of equity and net income from "Blue Book" to IFRS/PSAS required in the quarterly financial statement issued under the new basis of accounting?
It is recommended that the disclosures required in year end financial statements related to the reconciliation of equity and net income as reported in the most recently issued annual financial statements compared to IFRS/PSAS be included in the quarterly financial statements in the first year of preparing a QFR under the new basis of accounting. This disclosure provides useful information to the reader to understand significant differences in the quarterly results as compared to the previous annual financial statements. Since quarterly reports were not issued prior to transition to IFRS/PSAS, there is no requirement to provide reconciliations of quarterly results under "Blue Book" to IFRS/PSAS.
If the information is not readily available when the first quarterly report is issued, management must use professional judgement to determine the disclosures required to adequately explain how the quarterly results compare to the previously issued annual report, or provide caveats within the disclosures to caution readers that the basis of accounting has changed.
Links to relevant websites
- Treasury Board of Canada Secretariat
- Standard on Quarterly Financial Reports for Crown Corporations
- Treasury Board Accounting Standard 1.3 - Departmental and Agency Quarterly Financial Report
- Note that this is the standard applicable to Federal Government Departments and Agencies. The financial tables are not comparable to the financial statements requirements of the Standard applicable to CC; however, the narrative for both CC as well as departments and agencies are analogous.
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