Archived [2012-12-21] - Accounting Standard 3.2 - Treasury Board - Transfer Payments (Grants and Contributions)

This standard describles Transfer Statements, which are transfers of money, goods, services or assets to individuals, organizations or other levels of government, without the federal government directly receiving goods or services in return.
Date modified: 2001-01-02

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Disclaimer

This section should be read in conjunction with PSAB Section PS 3410 on Government Transfers and the TBS Transfer Payment Policy.

Other related handbook sections are:

  • PS 3050 - Loans Receivable
  • CICA 3025 - Impaired Loans
  • CICA 3290 - Contingencies

General

1. Transfer payments are transfers of money, goods, services or assets to individuals, organizations or other levels of government, without the federal government directly receiving goods or services in return.

2. Other definitions used in this Standard are:

a. Grants
are transfer payments to an individual or organization which are not subject to being accounted for or audited, but for which eligibility and entitlement may be verified or for which the recipient may need to meet pre-conditions. Should the individual or organization meet all eligibility or other entitlement requirements at the outset and, if required, throughout the term covered by the grant, the government does not expect to receive any goods or services directly in return, to be repaid or to receive a financial return.
b. Contributions
are conditional transfer payments to an individual or organization for a specified purpose pursuant to a contribution agreement that is subject to being accounted for and audited. Should the individual or organization use the transfer payment in the manner specified by the contribution agreement, the government does not expect to receive any goods or services directly in return, to be repaid or to receive a financial return.
c. Repayable contributions
are contributions, whereby the recipient is expected to repay all or part of the amount or the government expects to receive a financial return. The terms may specify a date or dates for repayment, or may describe the particular time(s) or circumstance(s) that will determine repayment. (PS 3050.07) Repayable contributions are further classified as unconditionally repayable and conditionally repayable. They require separate treatment for recording and reporting under accrual accounting.
  1. Unconditionally repayable contributions (URCs) are contributions that must be repaid without qualification. The contribution agreement contains specific repayment terms that set out the time and amount of payment(s) due.
  2. Conditionally repayable contributions (CRCs) are contributions, all or part of which are repayable, if conditions specified in the contribution agreement come into being.
d. Other transfer payments
are those transfer payments based on legislation or an arrangement which normally includes a formula or schedule as one element used to determine the amount; however, once payments are made the recipient may redistribute the funds among the several approved categories of expenditure in the arrangement. Examples are transfers to other levels of government.

Transfers

3. In accordance with Treasury Board Accounting Standard 3.3 Prepayments, advance payment of all transfers shall be recorded as a prepayment and classified as a non-financial asset until such time as the expense recognition criteria have been met.

4. All transfers of goods and/or services shall be recorded at the fair value of the asset or service given up.

5. Transfers, other than unconditional repayable contributions, shall be accounted for in accordance with PS 3410. They shall be recognized as an expense in the department's Statement of Operations in the period that the events giving rise to the transfer occurred, as long as:

  1. the transfer is authorized;
  2. eligibility criteria have been met by the recipient; and,
  3. a reasonable estimate of the amount can be made.

Grants and Contributions

6. Those grants or contributions which the recipient would be required to repay either partially or fully because some or all of the conditions of the transfer were not met shall be accounted for in accordance with PS 3410.49 to .53.

Unconditionally Repayable Contributions

7. Unconditionally repayable contributions (URCs) are, in substance, loans receivable. Consequently, they shall be accounted for in accordance with PS 3050 and be classified and reported as "Loans and Advances on Transfers".

8. In cases where the URC has significant concessionary terms, such as a low or no interest rate, it shall be accounted for in accordance with PS 3050.20. Where the grant portion of the URC is greater than 25% of the contribution it shall be considered to have significant concessionary terms. This definition of concessionary applies only to unconditionally repayable contributions.

9. The Consolidated Revenue Fund Lending Rate in effect for a similar term on the date the contribution agreement is concluded will be used as the discount rate in determining the present value of the loan.

10. Appropriate valuation allowances shall be recorded for URC receivables to reflect collectibility, significant concessionary terms and risk of loss.

Conditionally Repayable Contributions

11. Conditionally repayable contributions (CRCs) are contingencies that may qualify as contingent recoveries.

12. A contingency is defined as an existing condition or situation involving uncertainty as to possible gain or loss to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur. Gain or recovery contingencies are claims or rights to receive assets when existence is uncertain but may become valid eventually.

13. Contingent recoveries are not accrued in financial statements. Nevertheless, disclosure of the existence of a contingent recovery which is considered likely to be realized provides useful information and would, therefore, be included in a note to the financial statements.

14. When the existence of a contingent recovery, which has not been accrued, is disclosed in a note to the financial statements, the following information should be included:

  1. The nature of the contingency; and
  2. An estimate of the amount of the contingent recovery or a statement that such an estimate cannot be made.

15. Once it is certain that full or partial repayment is required, departments will set up a receivable and reduce the transfer expenses of the current period. Appropriate valuation allowances would be recorded.

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