2023 Annual Report I CITY OF CHILLIWACK CITY OF CHILLIWACK I 2023 Annual Report 84 85 CITY OF CHILLIWACK NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2023 City of Chilliwack Notes to Consolidated Financial Statements Year Ended December 31, 2023 General: The Municipality was reincorporated as a City in 1999 by way of Letters Patent under the Municipal Act, now the Local Government Act, a statute of the Province of British Columbia. Its principal activities include the provision of local government services to the residents of the incorporated area. These services include administrative, protective, transportation, recreational, water, sewer and fiscal services. 1 Significant accounting policies: (a) Basis of presentation: It is the City of Chilliwack's (the "City") policy to follow accounting principles generally accepted for British Columbia local governments and to apply such principles consistently. These consolidated financial statements include the operations of the General, Water, Sewer and Reserve Funds and the City's wholly owned subsidiaries, Chilliwack Economic Partners Corporation ("CEPCO") and Tourism Chilliwack Inc. ("Tourism"). These consolidated statements have been prepared using standards issued by the CPA Canada Public Sector Accounting Handbook. All material interfund and intercompany accounts and transactions have been eliminated. (b) Portfolio investments: Portfolio investments are carried at amortized cost. If it is determined that there is a permanent impairment in the value of an investment, it is written down to net realizable value. (c) Property under development: Property under development is recorded at the lower of cost or net realizable value and includes direct costs attributable to the project plus any capitalized interest if incurred. The properties are tangible capital assets under development. (d) Tangible capital assets: Tangible capital assets are recorded on the basis of cost less accumulated amortization. Cost includes amounts that are directly attributable to acquisition, construction, development or betterment of the asset. The cost is amortized on a straight line basis over their estimated useful lives as follows: Asset Useful Life - Years Land n/a Land improvements 0-40 Buildings 40-50 Equipment 4-20 Vehicles 7-25 Engineering structures 10-100 Annual amortization is charged in the year of acquisition. Assets under construction are not amortized until the asset is available for productive use. Infrastructure related tangible capital assets that are contributed from developers as part of a development project, are recorded at fair market value at the date of contribution and recorded in revenue as developer contributions. Works of art and cultural and historic assets are not recorded as assets in these financial statements. (e) Inventories: Inventories of supplies are valued at the lower of cost and net realizable value, on a weighted average basis. (f) Revenue recognition: Revenues from municipal taxation, grants in lieu of taxes and utility charges are recognized when the levies are billed or billable to the property owner. Revenue from sales of services is recognized when the services are provided. Government grants are recognized when they are approved by senior governments and the conditions required to earn the grants have been completed. Development cost charges are recognized as revenue in the period the funds are expended on an eligible development project. Development cost charges collected, but not yet expended, are reported as an unearned revenue. (g) Use of estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and reported amounts of revenues and expenses as at the date of the financial statements. Areas that contain estimates include assumptions used in estimating provisions for accrued liabilities, contingent liabilities, estimated useful lives of tangible capital assets and the value of assets contributed to the City. Actual results could differ from these estimates. CITY OF CHILLIWACK NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2023 City of Chilliwack Notes to Consolidated Financial Statements Year Ended December 31, 2023 (h) Contaminated sites: A liability for contaminated sites is recognized when a site is not in productive use and the following criteria are met: (i) An environmental standard exists; (ii) Contamination exceeds the environmental standard; (iii) The City is directly responsible or accepts responsibility; (iv) It is expected that future economic benefits will be given up; and (v) A reasonable estimate of the amount can be made. The liability is recognized as management's estimate of the cost of post-remediation including operation, maintenance and monitoring that are an integral part of the remediation strategy for a contaminated site. 2 Adoption of new accounting standards: (a) PS3280 Asset Retirement Obligations: On January 1, 2023, the City adopted Canadian public sector accounting standard PS3280 Asset Retirement Obligations (PS3280). An asset retirement obligation is recognized when, as at financial reporting date, all of the following criteria are met: (i) There is a legal obligation to incur retirement costs in relation to a tangible capital asset; (ii) The past transaction or event giving rise to the liability has occurred; (iii) It is expected that future economic benefits will be given up; and, (iv) A reasonable estimate of the amount can be made. The estimate of the asset retirement obligation includes costs directly attributable to the asset retirement activities and is recorded as a liability and increase to the related tangible capital assets if the tangible capital asset is in productive use. The asset retirement obligation is recorded as a liability and expense if the related tangible capital asset is unrecognized or no longer in productive use. The City determined that there were significant asset retirement obligations associated with its tangible capital assets as at December 31, 2023 and December 31, 2022 and has adopted of this standard on a prospective basis. As a result of the introduction of PS3280, PS3270 Solid Waste Landfill Closure and Post-Closure Liability was withdrawn and the City landfill is now accounted for under the provisions of PS3280. As a result of the adoption of the new standard, the City set up an obligation of $10,876,887 as of January 1, 2023 and increased the corresponding tangible capital asset by the same amount. The obligation is then increased over time as the underlying asset approaches its expected retirement date. The prior provision for the landfill liability of $5,031,200 is recorded as a recovery of expenses and is included in other revenue in the consolidated statement of operations and accumulated surplus. The impact of the adoption of the standard is as follows: Landfill liability as at December 31, 2022 5,031,200 $ Recovery of expenses (5,031,200) Initial adoption of PS3280 10,876,887 Accretion expense 477,745 Asset retirement obligation as at December 31, 2023 11,354,632 $ (b) PS3450 Financial Instruments and related standards: On January 1, 2023, the City adopted Canadian public sector accounting standard PS3450 Financial Instruments, PS2601 Foreign Currency Translation, PS1201 Financial Statement Presentation and PS3041 Portfolio Investments. Under PS3450 Financial Instruments, all financial instruments are included on the statement of financial position and are measured at either fair value or cost or amortized cost based on characteristics of the instrument and the City's accounting policy choices (see note 1(b)). The adoption of these standards did not have an impact on the amounts presented in these financial statements. 3 Restricted assets: The City has restrictions on the portfolio investments and cash available for operational use as follows: 2023 2022 Cash 86,980,019 $ 68,269,879 $ Portfolio Investments 145,897,831 141,693,710 232,877,850 209,963,589 Less restricted for: Statutory Reserve Funds 35,173,453 22,960,547 Restricted Revenue 55,762,379 43,028,607 90,935,832 65,989,154 Funds available for operational use 141,942,018 $ $ 143,974,435 The investment portfolio includes bonds of chartered banks, the Government of Canada and provincial governments; deposits and notes of chartered banks, credit unions, the Government of Canada and provincial governments; and deposits in the Municipal Finance Authority short term investment pools.
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