Canadian Intellectual Property Office

Public Accounts of Canada 2023 Volume III—Top of the page Navigation

Statement of management responsibility

We have prepared the accompanying financial statements of the Canadian Intellectual Property Office Revolving Fund (the Fund) as required by and in accordance with the Receiver General Instructions related to Volume III of the Public Accounts of Canada. These financial statements were prepared by the management of the Fund in accordance with the significant accounting policies set out in note 2 of the statements, on a basis consistent with that of the preceding year.

Responsibility for the integrity and objectivity of these financial statements rests with the management of the Fund. The information included in these financial statements is based on management's best estimates and judgement with due consideration given to materiality. To fulfill its accounting and reporting responsibilities, the Fund maintains a set of accounts, which provides a centralized record of the Fund's financial transactions. Financial information contained in the ministerial statements and elsewhere in the Public Accounts of Canada is consistent with that in these financial statements, unless indicated otherwise.

The Fund's Directorate of Financial Services develops and disseminates financial management and accounting policies and issues specific directives, which maintain standards of accounting and financial management. The Fund maintains systems of financial management and internal control which gives due consideration to costs, benefits and risks. They are designed to provide reasonable assurance that transactions are properly authorized by Parliament, are executed in accordance with prescribed regulations, and are properly recorded to maintain accountability of Government funds and safeguard the assets under the Fund's administration. The Fund also seeks to assure the objectivity and integrity of data in its financial statements by the careful selection, training and development of qualified staff, by organizational arrangements that provide appropriate divisions of responsibility and by communication programs aimed at ensuring that its regulations, policies, standards and managerial authorities are understood throughout the organization.

At the request of the Fund, these financial statements have been examined by external auditors, their role being to express an opinion as to whether the financial statements present fairly the financial position as at March 31, 2023 and the results of operations and cash flows for the year then ended in accordance with the significant accounting policies as described in note 2 to the financial statements.

Approved by:

Konstantinos Georgaras
Chief Executive Officer
Canadian Intellectual Property Office

Douglas McConnachie
Chief Financial Officer
Innovation, Science and Economic Development Canada

May 26, 2023
Gatineau, Canada

Table 1:Statement of authority used (unaudited) for the year ended March 31, 2023
(in thousands of dollars)
  2023 2022
EstimatesLink to table note 1 Actual EstimatesLink to table note 1 Actual
Net results (negative 63,022) (negative 37,865) (negative 31,387) (negative 39,470)
Items not requiring use of funds 14,346 15,442 7,198 11,016
Operating use of funds (negative 48,676) (negative 22,423) (negative 24,189) (negative 28,454)
Items requiring use of funds
Net tangible capital assets acquisitions (negative 10,647) (negative 18,667) (negative 11,503) (negative 12,620)
Net other assets and liabilities 18,674 26,550 4,158 23,945
Authority used (negative 40,649) (negative 14,540) (negative 31,534) (negative 17,129)

Table 2:Reconciliation of unused authority (unaudited) for the year ended March 31, 2023
(in thousands of dollars)
  2023 2022
Debit balance in the accumulated net charge against the Fund's authority 88,468 95,215
Payables charged against the appropriation, end of year (negative 16,941) (negative 12,242)
Receivables credited to the appropriation, end of year 126 1,698
Other items (negative 7,741) (negative 6,219)
Net authority provided, end of year 63,912 78,452
Authority limit 5,000 5,000
Unused authority carried forward 68,912 83,452

Independent auditor's report

To the Deputy Minister, Innovation, Science and Economic Development Canada

Our opinion

In our opinion, the accompanying financial statements of the Canadian Intellectual Property Office Revolving Fund (the Fund) as at March 31, 2023, and for the year then ended are prepared, in all material respects, in accordance with Section 1 of the Receiver General for Canada Instructions for Volume III of the Public Accounts of Canada.

What we have audited

The Fund's financial statements comprise:

Basis for opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Fund in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements.

Emphasis of matter—basis of accounting and restriction on use

We draw attention to note 2 to the financial statements, which describes the basis of accounting. The financial statements are prepared to assist the Fund to meet the requirements of Section 1 of the Receiver General for Canada Instructions for Volume III of the Public Accounts of Canada. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for the management of the Fund and should not be used by parties other than the Fund, Innovation, Science and Economic Development Canada, the Treasury Board of Canada and Receiver General for Canada. Our opinion is not modified in respect to this matter.

Responsibilities of management and those charged with governance for the financial statements

Management is responsible for the preparation of the financial statements in accordance with Section 1 of the Receiver General for Canada Instructions for Volume III of the Public Accounts of Canada, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Fund's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Fund or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Fund's financial reporting process.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

PricewaterhouseCoopers LLP
Chartered Professional Accountants,
Licensed Public Accountants

Ottawa, Ontario
June 1, 2023

Table 3:Statement of financial position as at March 31, 2023
(in thousands of dollars)
  2023 2022
Assets
Financial assets
Accounts receivable (note 3) 2,869 3,122
Unbilled revenues 766 1,650
Total financial assets 3,635 4,772
Non-financial assets
Prepaid expenses 1,057 1,167
Tangible capital assets (note 4) 53,774 50,659
Total non-financial assets 54,831 51,826
Total assets 58,466 56,598
Liabilities and Net liabilities
Liabilities
Deposit accounts 6,915 3,859
Accounts payable and accrued liabilities (note 5) 17,738 13,962
Vacation pay 6,832 7,299
Obligation for employee future benefits (note 6) 2,000 2,240
Deferred revenues 164,066 137,205
Total liabilities 197,551 164,565
Net liabilities (note 7) (negative 139,085) (negative 107,967)
Total 58,466 56,598

Table 4:Statement of operations and net liabilities for the year ended March 31, 2023
(in thousands of dollars)
  2023 2022
Revenues 169,577 155,888
Operating expenses
Salaries and employee benefits 130,602 123,098
Provision for employee future benefits (negative 184) 160
Professional services 46,276 47,084
Amortization of tangible capital assets 12,901 11,275
Accommodation 8,045 7,691
Information 3,386 3,265
Loss (gain) on disposal of tangible capital assets 2,647 (negative 1)
Materials and supplies 1,722 1,010
Rentals 627 599
Training 406 527
Repairs and maintenance 403 106
Travel 350 101
Bad debt expense 213 –
Freight and postage 27 386
Communications 21 57
Total expenses 207,442 195,358
Net results (negative 37,865) (negative 39,470)
Net liabilities, beginning of year (negative 107,967) (negative 85,041)
Net financial resources used and change in the accumulated net charge against the Fund's authority, during the year 6,747 16,544
Net liabilities, end of year (negative 139,085) (negative 107,967)

Table 5:Statement of cash flows for the year ended March 31, 2023
(in thousands of dollars)
  2023 2022
Operating activities
Net results (negative 37,865) (negative 39,470)
Items not requiring use of funds
Amortization of tangible capital assets 12,901 11,275
Loss on disposal of tangible capital assets 2,651 –
Subtotal (negative 22,313) (negative 28,195)
Variations in statement of financial position
Decrease (increase) in accounts receivable 253 (negative 146)
Decrease in unbilled revenues 884 186
Decrease (increase) in prepaid expenses 110 (negative 493)
Increase in deposit accounts 3,056 145
Increase in accounts payable and accrued liabilities 3,776 400
Decrease in vacation pay (negative 467) (negative 276)
Decrease in obligation for employee future benefits (negative 240) (negative 170)
Increase in deferred revenues 26,861 24,625
Total variations in statement of financial position 34,233 24,271
Net financial resources used by operating activities 11,920 (negative 3,924)
Capital investing activity
Acquisitions of tangible capital assets (negative 18,667) (negative 12,620)
Net financial resources used and change in the accumulated net charge against the Fund's authority, during the year (negative 6,747) (negative 16,544)
Accumulated net charge against the Fund's authority, beginning of year 95,215 111,759
Accumulated net charge against the Fund's authority, end of year (note 7) 88,468 95,215

Notes to the financial statements for the year ended March 31, 2023

1. Authority and purpose

The Canadian Intellectual Property Office grants or registers exclusive ownership of intellectual property in Canada. In exchange, the Canadian Intellectual Property Office acquires intellectual property information and state-of-the-art technology, which it disseminates to Canadian firms, industries and individuals to improve economic performance and competitiveness and to stimulate further invention and innovation.

The Canadian Intellectual Property Office is financed through a revolving fund authority (the Fund), which was established on April 1, 1994. The authority to make expenditures out of the Consolidated Revenue Fund was granted on February 22, 1994 and had an authorized limit of $15 million. During the fiscal year ended March 31, 2002, the Fund's authorized limit was reduced from $15 million to $5 million. The Fund has continuing non-lapsing authority from Parliament to make payments out of the Consolidated Revenue Fund for working capital, capital acquisitions and the temporary financing of accumulated operating deficits. The Fund may retain surpluses to continue to automate operations.

The Fund is not subject to income taxes.

2. Significant accounting policies

The financial statements have been prepared in accordance with the reporting requirements for revolving funds prescribed by the Receiver General for Canada. The basis of accounting used in these financial statements differs from Canadian generally accepted accounting principles for the public sector because:

The significant accounting policies are as follows:

(a) Revenue recognition

Fees received for processing patent, trademark and industrial design applications are recorded as deferred revenues until services are rendered, at which time they are recorded as revenue. Detailed inventory counts of applications are used to determine the amount of deferred revenue taking into account the fee schedule related to the application. Different rates may be charged depending on the size of the entity. Abandonments during the application process are recorded as earned revenue. When work is completed prior to the receipt of the fee, the amount is recorded as unbilled revenue. Fees are prescribed by various Orders in Council. Revenues are reflected on the statement of operations and net liabilities, net of remissions of fees as per requirements of the Service Fees Act.

(b) Tangible capital assets

Tangible capital assets are recorded at cost and are amortized on a straight-line basis over their estimated useful lives, beginning in the month after acquisition, as follows:

Depreciation policy
Asset class Years
Leasehold improvements Over the term of the lease
Informatics software 3 to 10 years
Hardware 5 to 10 years
Machinery and equipment 10 years
Furniture 10 years

The costs for assets under construction are capitalized as incurred with amortization commencing in the month after they are put into service.

(c) Employee future benefits

Employee severance benefits

Employees of the Fund are entitled to severance benefits, calculated based on salary levels in effect at the time of termination as provided for under collective agreements and conditions of employment. These benefits are accrued as employees render the services necessary to earn them. In Budget 2012, the Government of Canada announced that it was eliminating the accumulation of severance benefits for voluntary resignation and retirement for federal government employees. As part of the implementation of this measure, collective agreements had provided three options to address the balances accumulated to date. These included:

  1. a single payment at the rate of pay of the employee's substantive position as of the coming into force of the collective agreement; or
  2. a single payment at the time of the employee's termination of employment from the core public administration, based on the rate of pay of the employee's substantive position at the date of termination of employment from the core public administration; or
  3. a combination of (1) and (2).

With the introduction of captions (1) and (3), the Fund was required to draw down on the obligation for employee future benefits as the collective agreements came into force.

Pension benefits

Employees of the Fund are covered by the Public Service Superannuation Plan (the Plan) administered by the Government of Canada. Under present legislation, contributions made by the Fund to the Plan are limited to an amount equal to the employee's contributions on account of current service. These contributions represent the total pension obligations of the Fund and are charged to operations on a current basis. The Fund is not required under present legislation to make contributions with respect to actuarial deficiencies of the Public Service Superannuation Account and/or with respect to charges to the Consolidated Revenue Fund for the indexation of payments under the Supplementary Retirement Benefits Act.

(d) Use of estimates

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Revenues, unbilled revenues, deferred revenues, remissions, the estimated useful lives of tangible capital assets and salary-related liabilities are the most significant items for which estimates are used. Actual results could differ from these estimates. These estimates are reviewed annually, and as adjustments become necessary, they are recorded in the financial statements in the period in which they become known.

(e) Sick leave

Employees are permitted to accumulate unused sick leave. However, such leave entitlements do not vest and can be used only in the event of illness. Payments of sick leave benefits are included in current operations as incurred.

(f) Foreign currency transactions

Foreign currency transactions are translated into Canadian dollars at the exchange rate prevailing at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the exchange rate prevailing at the financial statement date. Gains and losses resulting from foreign currency transactions are recognized in the statement of operations and net liabilities under each respective financial statement line item.

3. Accounts receivable

Table 7:Accounts receivable
(in thousands of dollars)
  2023 2022
Government of Canada 126 50
Outside parties 2,956 3,072
Subtotal 3,082 3,122
Less: allowance for doubtful accounts from outside parties (negative 213) –
Total 2,869 3,122

4. Tangible capital assets

Table 8:Cost
(in thousands of dollars)
  Balance, beginning of year Acquisitions Transfers Disposals Balance, end of year
Leasehold improvements 325 – – – 325
Informatics software 68,337 – 7,498 – 75,835
Hardware 518 45 – – 563
Machinery and equipment 158 – – – 158
Furniture 116 – – – 116
Assets under construction 23,744 18,622 (negative 7,498) (negative 2,651) 32,217
Total 93,198 18,667 – (negative 2,651) 109,214

Table 9:Accumulated amortization
(in thousands of dollars)
  Balance, beginning of year Amortization Disposals Balance, end of year
Leasehold improvements 325 – – 325
Informatics software 41,738 12,821 – 54,559
Hardware 272 62 – 334
Machinery and equipment 94 16 – 110
Furniture 110 2 – 112
Total 42,539 12,901 – 55,440

Table 10:Net book value
(in thousands of dollars)
  2023 2022
Leasehold improvements – –
Informatics software 21,276 26,599
Hardware 229 246
Machinery and equipment 48 64
Furniture 4 6
Assets under construction 32,217 23,744
Total 53,774 50,659

5. Accounts payable and accrued liabilities

Table 11:Accounts payable and accrued liabilities
(in thousands of dollars)
  2023 2022
Government of Canada 3,475 2,292
Outside parties 14,263 11,670
Total 17,738 13,962

6. Obligation for employee future benefits

Table 12:Obligation for employee future benefits
(in thousands of dollars)
  2023 2022
Obligation for employee future benefits, beginning of year 2,240 2,410
Benefits paid during the year for retirements and departures from the Public Service (negative 56) (negative 330)
Expense (revenue) for the year (negative 184) 160
Obligation for employee future benefits, end of year 2,000 2,240

7. Net liabilities

Accumulated net charge against the Fund's authority

The accumulated net charge against the Fund's authority represents the cumulative receipts and disbursements over the life of the Fund.

Accumulated surplus

The accumulated surplus is an accumulation of the annual net results of operations including the absorption of the opening deficit of $9,448,000 upon establishment of the Fund.

Table 13:Net liabilities
(in thousands of dollars)
  2023 2022
Accumulated surplus (deficit), beginning of year (negative 12,752) 26,718
Net results (negative 37,865) (negative 39,470)
Accumulated deficit, end of year (negative 50,617) (negative 12,752)
Accumulated net charge against the Fund's authority, beginning of year (negative 95,215) (negative 111,759)
Net financial resources used and change in the accumulated net charge against the Fund's authority during the year 6,747 16,544
Accumulated net charge against the Fund's authority, end of year (negative 88,468) (negative 95,215)
Net liabilities, end of year (negative 139,085) (negative 107,967)

8. Contractual obligations

The Canadian Intellectual Property Office leases its premises under occupancy instruments. An occupancy instrument is a formal agreement between the Canadian Intellectual Property Office and Public Services and Procurement Canada recording the terms and conditions that govern the provision and occupancy of the accommodation. Expected future payouts by fiscal year are as follows:

Table 14:Contractual obligations
(in thousands of dollars)
   
2024 5,374
2025 5,004
2026 4,715
2027 4,715
2028 and thereafter 18,861
Total 38,669

9. Related party transactions

Through common ownership, the Fund is related to all Government of Canada created departments, agencies and Crown corporations. Payments for accommodation, legal services, compensation and benefits services, mail services, security services and mainframe and computing services are made to related parties in the normal course of operations.

10. Contingent liabilities

In the normal course of its operations, the Canadian Intellectual Property Office may become involved in various legal actions and grievances with financial implications. Some of these potential liabilities may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense is recorded in the financial statements.

As at March 31, 2023, there were no accruals for contingent liabilities around various legal actions and grievances with financial implications in the financial statements.

Public Accounts of Canada 2023 Volume III—Bottom of the page Navigation

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