Notes to the Condensed Interim Financial Statements (Unaudited)

 For the three and six months ended September 30, 2022

(In thousands of Canadian dollars)

1.  Corporate Information

CATSA is a Crown corporation listed under Part I, Schedule III of the Financial Administration Act and is an agent of Her Majesty in right of Canada. CATSA is responsible for securing specific elements of the air transportation system, from passenger and baggage screening, to screening airport workers.

CATSA is funded by parliamentary appropriations and accountable to Parliament through the Minister of Transport. In prior years, CATSA provided screening services on a cost recovery basis to certain designated and non-designated airports. In light of the COVID-19 pandemic, no such services were provided from April 1, 2020, until June 24, 2022, when CATSA resumed screening services with Muskoka Airport Authority. The agreement was in place until September 6, 2022.

These condensed interim financial statements have been authorized for issuance by the Board of Directors on November 24, 2022.

 2.  Basis of preparation

The condensed interim financial statements have been prepared in accordance with Section 131.1 of the Financial Administration Act and International Accounting Standard 34 Interim Financial Reporting (IAS 34) as issued by the International Accounting Standards Board (IASB) and approved by the Accounting Standards Board of Canada.

Section 131.1 of the Financial Administration Act requires that most parent Crown corporations prepare and make public quarterly financial reports in compliance with the Treasury Board of Canada’s Directive on Accounting Standards: GC 5200 Crown Corporations Quarterly Financial Report. These condensed interim financial statements have not been audited or reviewed by CATSA’s external auditor.

As permitted by IAS 34, these interim financial statements are presented on a condensed basis and therefore do not include all necessary disclosures to conform, in all material respects, with IFRS disclosure requirements applicable to annual financial statements. These condensed interim financial statements are intended to provide an update on the latest complete set of audited annual financial statements. Accordingly, they should be read in conjunction with the audited annual financial statements for the year ended March 31, 2022.

 3.  Summary of significant accounting policies

Significant accounting policies used in these condensed interim financial statements are disclosed in note 3 of CATSA’s audited annual financial statements for the year ended March 31, 2022, and the condensed interim financial statements for the three months ended June 30, 2022.

 4.  Trade and other receivables

Trade and other receivables are comprised of:

Credit terms on trade receivables are 30 days. As at September 30, 2022, and March 31, 2022, there were no amounts included in trade and other receivables that were past due.

 5. Inventories

Inventories are comprised of:

 6. Property and equipment

A reconciliation of property and equipment is as follows:

As at March 31, 2022, the estimated useful life of some screening equipment and its associated centralized network software assets, was revised from 10 years to 15 years, to better reflect the anticipated lifecycles. The change in accounting estimate was accounted for on a prospective basis starting April 1, 2022.

 7. Intangible assets

A reconciliation of intangible assets is as follows:

 8. Right-of-use assets

A reconciliation of right-of-use assets is as follows:

 9. Employee benefits

(a) Employee benefits asset and liability

Employee benefits asset and liability recognized and presented in the Condensed Interim Statement of Financial Position are detailed as follows:

(b) Employee benefits costs

The elements of employee benefits costs are as follows:

For the three and six months ended September 30, 2022, CATSA recognized an expense of $240 (2021 - $212) and $513 (2021 - $459), respectively, in relation to the defined contribution component of the RPP.

(c) Significant actuarial assumptions

Assumptions used to measure the defined benefit plan assets and liabilities are reviewed and, as necessary, revised at each reporting period. This typically includes reviewing the discount rates and actual rate of return on the plan assets against rates previously estimated, to reflect the current assumptions and circumstances. Changes to actuarial assumptions result in remeasurement gains and/or losses recognized in other comprehensive (loss) income.

For the three months ended September 30, 2022, remeasurement losses of $3,150 resulted from a lower actual rate of return on plan assets than the rate used in CATSA’s assumptions for the RPP (-0.17% actual versus 1.00% expected).

For the three months ended September 30, 2021, remeasurement gains of $8,171 resulted from an increase in the discount rate of 25 basis points (from 3.25% at June 30, 2021 to 3.50% at September 30, 2021). This was partially offset by a lower actual rate of return on plan assets than the rates used in CATSA’s assumptions for the RPP (-1.05% actual versus 0.88% expected).

For the six months ended September 30, 2022, remeasurement gains of $4,384 resulted from an increase in the discount rate of 100 basis points (from 4.00% at March 31, 2022 to 5.00% at September 30, 2022). This was partially offset by a lower actual rate of return on plan assets than the rate used in CATSA’s assumptions for the RPP (-11.49% actual versus 2.00% expected).

For the six months ended September 30, 2021, remeasurement gains of $6,764 resulted from a higher actual rate of return on plan assets than the rate used in CATSA’s assumptions for the RPP (3.55% actual versus 1.75% expected).

(d) Employer contributions

Employer contributions paid to the defined benefit plans are as follows:

Total employer contributions to the defined benefit plans are estimated to be $6,975 for the year ending March 31, 2023.

10. Provisions and contingencies

(a) Provisions

Several claims, audits and legal proceedings have been asserted or instituted against CATSA. By nature, these amounts are subject to many uncertainties and the outcome of the individual matters is not always predictable. The provisions were determined by taking into account internal analysis, consultations with external subject matter experts, and all available information at the time of financial statement preparation.

During the three months ended September 30, 2022, amounts assessed by Transport Canada were reclassified from provisions to trade and other payables.

(b) Contingencies 

CATSA’s contingent liabilities consist of claims and legal proceedings, and decommissioning costs for which no provision is recorded.
(i) Claims and legal proceedings
As at September 30, 2022, there were no significant legal claims outstanding against CATSA.

(ii) Decommissioning costs
During the three and six months ended September 30, 2022, there have been no material changes to contingencies related to decommissioning costs. For a description of CATSA’s decommissioning cost, refer to note 10(b)(ii) of the audited annual financial statement for the year ended March 31, 2022.

11. Lease liabilities

CATSA has leases that are for office space and data centres. CATSA has included extension options in the measurement of its lease liabilities when it is reasonably certain to exercise the extension option.

A reconciliation of lease liabilities is as follows:

CATSA recognized the following expenses not included in the measurement of the lease liabilities as follows:

Variable lease payments include operating costs, property taxes, insurance, and other service-related costs.

For the three and six months ended September 30, 2022, CATSA recognized a total cash outflow for leases of $1,698 (2021 - $1,385) and $3,418 (2021 - $2,996), respectively.

The following table presents the undiscounted cash flows for contractual lease obligations:

12. Deferred government funding

A reconciliation of the deferred government funding liability is as follows:

For additional information on government funding, see note 14.

13. Expenses

The Condensed Interim Statement of Comprehensive Income presents operating expenses by program activity. The following table presents operating expenses by major expense type:

¹ Other business related costs include travel expenses, conference fees, membership and association fees, and meeting expenses.

² Other administrative costs include insurance, network and telephone expenses, and facilities maintenance.

14. Government funding

Parliamentary appropriations approved for the fiscal year and amounts used by CATSA during the six months ended September 30 are as follows:

The following table reconciles parliamentary appropriations for operating expenses that were received and receivable with the amount of appropriations used:

The following table reconciles parliamentary appropriations for capital expenditures and lease payments that were received and receivable with the amount of appropriations used: