Canadian Intellectual Property Office Revolving Fund
Public Accounts of Canada 2024 Volume III—Top of the page Navigation
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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, 2024 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
Karine Paré
A/Chief Financial Officer
Innovation, Science and Economic Development Canada
June 10, 2024
Gatineau, Canada
| 2024 | 2023 | |||
|---|---|---|---|---|
| EstimatesLinks to footnote 1 in table 1 | Actual | EstimatesLinks to footnote 1 in table 1 | Actual | |
| Net results | (negative 29,540) | (negative 41,061) | (negative 63,022) | (negative 37,865) |
| Items not requiring use of funds | 10,644 | 10,820 | 14,346 | 15,442 |
| Operating use of funds | (negative 18,896) | (negative 30,241) | (negative 48,676) | (negative 22,423) |
| Items requiring use of funds | ||||
| Net tangible capital assets acquisitions | (negative 7,527) | (negative 24,729) | (negative 10,647) | (negative 18,667) |
| Net other assets and liabilities | 15,041 | 19,102 | 18,674 | 26,550 |
| Authority used | (negative 11,382) | (negative 35,868) | (negative 40,649) | (negative 14,540) |
| 2024 | 2023 | |
|---|---|---|
| Debit balance in the accumulated net charge against the Fund's authority | 51,690 | 88,468 |
| Payables charged against the appropriation at year-end | (negative 14,507) | (negative 16,941) |
| Receivables credited to the appropriation at year-end | 258 | 126 |
| Other items | (negative 9,397) | (negative 7,741) |
| Net authority provided, end of year | 28,044 | 63,912 |
| Authority limit | 5,000 | 5,000 |
| Unused authority carried forward | 33,044 | 68,912 |
Independent auditor's report
To the Deputy Minister, Innovation, Science and Economic Development Canada
Report on the audit of the financial statements
Our opinion
We have audited the financial statements of the Canadian Intellectual Property Office Revolving Fund (the Fund), which comprise the statement of financial position as at March 31, 2024, and the statement of operations and net liabilities, and the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying financial statements are prepared, in all material respects, in accordance with the financial reporting provisions of Section 1 of the Receiver General for Canada Instructions for Volume III of the Public Accounts of Canada.
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 are independent of the Fund in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of matter—basis of accounting and restriction on distribution and 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 with the financial reporting provisions 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, Innovation, Science and Economic Development Canada, the Treasury Board of Canada, and the Receiver General for Canada, and should not be used by parties other than the Fund, Innovation, Science and Economic Development Canada, the Treasury Board of Canada and the Receiver General of Canada. Our opinion is not modified in respect to this matter.
Other matter
The financial statements of the Fund for the year ended March 31, 2023, were audited by another auditor who expressed an unmodified opinion on those statements on June 1, 2023.
Responsibilities of management and those charged with governance for the financial statements
Management is responsible for the preparation of these financial statements in accordance with the financial reporting provisions of 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:
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Fund to cease to continue as a going concern.
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.
Ernst & Young LLP
Chartered Professional Accountants,
Licensed Public Accountants
Ottawa, Canada
June 10, 2024
| 2024 | 2023 | |
|---|---|---|
| Assets | ||
| Financial assets | ||
| Accounts receivable (note 3) | 3,633 | 2,869 |
| Unbilled revenues | 529 | 766 |
| Total financial assets | 4,162 | 3,635 |
| Non-financial assets | ||
| Prepaid expenses | 1,065 | 1,057 |
| Tangible capital assets (note 4) | 67,633 | 53,774 |
| Total non-financial assets | 68,698 | 54,831 |
| Total assets | 72,860 | 58,466 |
| Liabilities and net liabilities | ||
| Liabilities | ||
| Deposit accounts | 3,948 | 6,915 |
| Accounts payable and accrued liabilities (note 5) | 20,340 | 17,738 |
| Vacation pay | 7,591 | 6,832 |
| Obligation for employee future benefits (note 6) | 1,643 | 2,000 |
| Deferred revenues | 182,706 | 164,066 |
| Total liabilities | 216,228 | 197,551 |
| Net liabilities (note 7) | (negative 143,368) | (negative 139,085) |
| Total liabilities and net liabilities | 72,860 | 58,466 |
| 2024 | 2023 | |
|---|---|---|
| Revenues | 184,494 | 169,577 |
| Operating expenses | ||
| Salaries and employee benefits | 154,602 | 130,602 |
| Employee future benefits | (negative 127) | (negative 184) |
| Professional services | 46,241 | 46,276 |
| Amortization of tangible capital assets | 10,875 | 12,901 |
| Accommodation | 6,498 | 8,045 |
| Information | 3,703 | 3,386 |
| Materials and supplies | 1,307 | 1,722 |
| Rentals | 756 | 627 |
| Training | 543 | 406 |
| Travel | 451 | 350 |
| Bad debt expense | 379 | 213 |
| Repairs and maintenance | 307 | 403 |
| Communications | 29 | 21 |
| Freight and postage | (negative 4) | 27 |
| Other adjustments | (negative 5) | – |
| Loss on disposal of tangible capital assets | – | 2,647 |
| Total operating expenses | 225,555 | 207,442 |
| Net results | (negative 41,061) | (negative 37,865) |
| Net liabilities, beginning of year | (negative 139,085) | (negative 107,967) |
| Net financial resources used and change in the accumulated net charge against the Fund's authority during the year | 36,778 | 6,747 |
| Net liabilities, end of year | (negative 143,368) | (negative 139,085) |
| 2024 | 2023 | |
|---|---|---|
| Operating activities | ||
| Net results | (negative 41,061) | (negative 37,865) |
| Items not requiring use of funds | ||
| Amortization of tangible capital assets | 10,875 | 12,901 |
| Loss on disposal of tangible capital assets | – | 2,651 |
| Other adjustments | (negative 5) | – |
| Subtotal | (negative 30,191) | (negative 22,313) |
| Variations in statement of financial position | ||
| Decrease (increase) in accounts receivable | (negative 764) | 253 |
| Decrease in unbilled revenues | 237 | 884 |
| Decrease (increase) in prepaid expenses | (negative 8) | 110 |
| Increase (decrease) in deposit accounts | (negative 2,967) | 3,056 |
| Increase in accounts payable and accrued liabilities | 2,602 | 3,776 |
| Increase (decrease) in vacation pay | 759 | (negative 467) |
| Decrease in obligation for employee future benefits | (negative 357) | (negative 240) |
| Increase in deferred revenues | 18,640 | 26,861 |
| Total variations in statement of financial position | 18,142 | 34,233 |
| Net financial resources provided (used) by operating activities | (negative 12,049) | 11,920 |
| Capital investing activity | ||
| Acquisitions of tangible capital assets | (negative 24,729) | (negative 18,667) |
| Net financial resources used and change in the accumulated net charge against the Fund's authority during the year | (negative 36,778) | (negative 6,747) |
| Accumulated net charge against the Fund's authority, beginning of year | 88,468 | 95,215 |
| Accumulated net charge against the Fund's authority, end of year (note 7) | 51,690 | 88,468 |
Notes to the financial statements for the year ended March 31, 2024
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 public accounting standards because:
- the net debt indicator and the statement of change in net debt are not presented in the financial statements;
- expenses are reported by type in the statement of operations and net liabilities and not by function or major program;
- services received without charge from other government departments are not reported as expenses;
- budgeted expenses are not disclosed in the statement of operations and net liabilities;
- no liability is recorded for sick leave; and
- the employee termination benefits liability is based on management's estimates rather than based on actuarial valuations.
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. All other fees are recognized upon receipt. 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:
| 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. The cost of a constructed asset includes direct construction or development costs (such as materials and labour) and overhead costs directly attributable to the construction or development activity. The activities necessary to prepare a tangible capital asset for its intended use encompass more than the physical construction of the tangible capital asset. They include the technical and administrative work prior to the commencement of and during construction.
(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:
- 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
- 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
- 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. The obligation relating to the benefits earned by employees is calculated using information such as salary and years of service and represents management's best estimate of the liability.
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. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.
(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
| 2024 | 2023 | |
|---|---|---|
| Government of Canada | 258 | 126 |
| Outside parties | 3,967 | 2,956 |
| Subtotal | 4,225 | 3,082 |
| Less: allowance for doubtful accounts from outside parties | (negative 592) | (negative 213) |
| Total | 3,633 | 2,869 |
4. Tangible capital assets
| Captial asset categories | Balance et beginning of year | Acquisitions | Other | Disposals | Balance at end of year |
|---|---|---|---|---|---|
| Leasehold improvements | 325 | – | – | (negative 303) | 22 |
| Informatics software | 75,835 | – | – | (negative 2,839) | 72,996 |
| Hardware | 563 | 449 | 24 | (negative 124) | 912 |
| Machinery and equipment | 158 | – | – | – | 158 |
| Furniture | 116 | – | – | (negative 24) | 92 |
| Assets under construction | 32,217 | 24,280 | – | – | 56,497 |
| Total | 109,214 | 24,729 | 24 | (negative 3,290) | 130,677 |
| Captial asset categories | Balance at beginning of year | Amortization | Other | Disposals | Balance at end of year |
|---|---|---|---|---|---|
| Leasehold improvements | 325 | – | – | (negative 303) | 22 |
| Informatics software | 54,559 | 10,780 | – | (negative 2,838) | 62,501 |
| Hardware | 334 | 77 | 18 | (negative 124) | 305 |
| Machinery and equipment | 110 | 16 | – | – | 126 |
| Furniture | 112 | 2 | – | (negative 24) | 90 |
| Total | 55,440 | 10,875 | 18 | (negative 3,289) | 63,044 |
| 2024 | 2023 | |
|---|---|---|
| Leasehold improvements | – | – |
| Informatics software | 10,495 | 21,276 |
| Hardware | 607 | 229 |
| Machinery and equipment | 32 | 48 |
| Furniture | 2 | 4 |
| Assets under construction | 56,497 | 32,217 |
| Total | 67,633 | 53,774 |
5. Accounts payable and accrued liabilities
| 2024 | 2023 | |
|---|---|---|
| Government of Canada | 3,601 | 3,475 |
| Outside parties | 16,739 | 14,263 |
| Total | 20,340 | 17,738 |
6. Obligation for employee future benefits
Pension benefits
The Fund's employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of 2% per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plans' benefits and they are indexed to inflation. Effective January 2013, the age at which a new employee who began participating in the public service pension plan on or after January 1, 2013 can receive an unreduced pension benefit was raised from age 60 to 65. Both plan members and the Fund contribute to the cost of the Plan. The Fund made contributions of $11,054,328 in 2024 (2023—$9,944,066) to the plan.
| 2024 | 2023 | |
|---|---|---|
| Obligation for employee future benefits, beginning of year | 2,000 | 2,240 |
| Benefits paid during the year for retirements and departures from the Public Service | (negative 230) | (negative 56) |
| Expense for the year | (negative 127) | (negative 184) |
| Obligation for employee future benefits, end of year | 1,643 | 2,000 |
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 (deficit)
The accumulated surplus (deficit) 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.
| 2024 | 2023 | |
|---|---|---|
| Accumulated surplus (deficit), beginning of year | (negative 50,617) | (negative 12,752) |
| Net results | (negative 41,061) | (negative 37,865) |
| Accumulated surplus (deficit), end of year | (negative 91,678) | (negative 50,617) |
| Accumulated net charge against the Fund's authority, beginning of year | (negative 88,468) | (negative 95,215) |
| Net financial resources used and change in the accumulated net charge against the Fund's authority during the year | 36,778 | 6,747 |
| Accumulated net charge against the Fund's authority, end of year | (negative 51,690) | (negative 88,468) |
| Net liabilities, end of year | (negative 143,368) | (negative 139,085) |
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:
| 2025 | 4,764 |
|---|---|
| 2026 | 4,093 |
| 2027 | 3,893 |
| 2028 | 3,893 |
| 2029 and thereafter | 11,680 |
| Total | 28,323 |
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 business.
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, 2024, management has not identified legal actions and grievances with financial implications in the financial statements.
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