Effective: April 1, 2002
Responsibility: Vice-President and Chief Financial Officer
Specialty Services Operations are to be accounted for and reported in the Corporate financial statements in accordance with generally accepted accounting principles (GAAP) on a basis consistent with that of the main service. However, the financial system will be maintained to clearly and separately identify and report against all conditions of licence as granted by the CRTC.
For specialty services that are owned in partnership with other organizations, the accounting will be in accordance with the partnership agreements.
- This policy was updated in March 2008
- This policy was updated November 2003.
- This was originally Corporate Finance and Administration Policies:
703.50 CBC Newsworld
703.51 Le Réseau de l’information (RDI)
- Decision CRTC 2000-3
- Decision CRTC 2002-336
- Decision CRTC 2003-172
- Decision CRTC 87-904
- Decision CRTC 89-831
- Decision CRTC 92-529
- Decision CRTC 94-285
- Corporate Policy: 2.3.8 - Delegation of Financial Authorities
- Corporate Policy: 2.9.3 - Delegation of Signing Authorities
- Finance and Administration’s Year-end Procedures and Guidelines
All questions pertaining to the interpretation or application of this policy should be referred to the Director, Policy and Internal Control.
DEPARTMENT RESPONSIBLE TO UPDATE THIS WEBPAGE
- Newsworld, RDI, Country Canada, and Galaxie are Specialty Service (Specialty) operations of the Canadian Broadcasting Corporation. They are not separate legal entities or joint venture / partnership operations and accordingly all financial transactions for these Specialties are recorded in, and are an integral part of, the corporate books of account.
- Accounting for and reporting on these Specialties are done in accordance with Corporate Finance Policies and Generally Accepted Accounting Principles. However, since they do operate under separate CRTC licences, there are some special accounting treatments required to properly reflect the conditions of these licences and support the CRTC financial reporting requirements.
- Financial Aspects of Conditions of Licences
- The CBC/Radio-Canada is to keep separate accounts for each Specialty and by November 30 of each year the corporation must file unaudited financial statements for each Specialty, for the 12 months ended the preceding August 31.
- The purpose of the above condition is to ensure that specialty services, that are funded largely through subscriber fees, are not underwritten by the CBC/Radio-Canada’s parliamentary grants – tax dollars intended to fund the over-the-air radio and television services. To this end:
- Only revenues generated by a Specialty are to be attributed to it.
- Specialties must pay all of the incremental costs incurred by CBC/Radio-Canada to operate the specialty.
- Where joint activities are undertaken, the costs should be shared on a reasonable basis between the participants.
- This section is obsolete and is removed
- CBC/Radio-Canada may use government appropriations to acquire Capital Assets for a Specialty or to finance development and pre-operating costs. These expenditures are to be repaid, in some cases with interest, by the Specialty and these repayments are to be recorded and reported as operating costs of the Specialty.
- Capital Assets
- The Specialties do not own any Capital Assets. They are all the property of the CBC/Radio-Canada.
- All Capital Assets purchased, leased or constructed for a Specialty will be owned by the CBC/Radio-Canada and will be financed from the CBC/Radio-Canada Capital Appropriation. These assets will be accounted for and reported in accordance with CBC/Radio-Canada policies on Capital Asset additions. These assets will be identified as being used by the specific Specialty in the capital asset records of the CBC/Radio-Canada.
- Amortization of these assets will be charged to the CBC/Radio-Canada.
- The Specialty will repay the CBC/Radio-Canada for the cost of these Capital Assets as follows:
- For purchased assets – the full landed cost of the asset, repayable when the CBC/Radio-Canada pays for the asset.
- For leased assets – the full cost of the capital lease, repayable when CBC/Radio-Canada makes the lease payments.
- For constructed assets – the full cost of the work order, excluding overhead allocations thereto, repayable when CBC/Radio-Canada incurs the expenditure.
- Assets originally acquired for CBC/Radio-Canada use but then transferred to the Specialty – the net book value of the assets at time of transfer.
- Assets paid for by the Specialty as in d) but then returned to CBC/Radio-Canada for its use or for trade in or sale will be credited to the Specialty at the net book value of the assets at time of return. This credit will reduce the amount owing by the Specialty for asset additions.
- In the event that significant capital spending is undertaken for a Specialty and it is not in a position to make repayments as required above, repayments can be spread out over an agreed upon repayment period and the Specialty will pay interest annually on the unpaid balance.
- Repayments by the Specialties to CBC/Radio-Canada will be recorded as operating expenses to them and as miscellaneous revenue to CBC/Radio-Canada. These entries will be eliminated when preparing the Corporate Financial Statements that include the Specialties and CBC/Radio-Canada.
- The miscellaneous revenue will support a budgetary adjustment within CBC/Radio-Canada increasing Revenue and Capital budgets so that the CBC/Radio-Canada’s Capital budget will be increased to cover capital acquired for the Specialties.
- Development and Pre-Operating Costs
- Development costs are those that relate to the planning and development work required to launch the Specialty.
- Pre-operating costs are all costs incurred between the date of the original licence and the date the Specialty goes on air.
- Development and pre-operating costs incurred by CBC/Radio-Canada for a Specialty will be recorded as deferred expenditures and will be financed through CBC/Radio-Canada Working Capital Appropriations. Once the Specialty goes on air these costs will be amortized on a straight-line basis.
- The amortization will be charged as an operating cost to the Specialty. The length of the amortization period will depend on the length of licence granted and the particular situation of the Specialty.
- Personnel Assigned to Specialty Services
- The CBC/Radio-Canada engages all personnel assigned to a Specialty. This includes permanent, temporary, contract or casual employees and independent contractors.
- Personnel assigned to a Specialty on a permanent basis will be charged directly to that Specialty during the term of the assignment. Therefore the Specialty will be charged with all salaries, fees and benefits directly from the payroll process.
- Personnel who are shared by a Specialty and CBC/Radio-Canada on a regular fixed assignment basis will be charged to the CBC/Radio-Canada and a standard portion of their salary and benefits costs will be charged to the Specialty monthly under an agreed price contract. The monthly charge will include the appropriate share of benefits, vacation and sick leave.
- Program personnel (technical and editorial) assigned to a Specialty on a scheduled or ad-hoc basis will be charged to the Specialty through CBC/Radio-Canada’s normal labour costing processes. These charges will be based on hours worked for the Specialty at standard regular or overtime labour rates.
- Administrative and support personnel who are not assigned to a Specialty on a regular or permanent basis, but who do provide ad-hoc service thereto will not be charged to the Specialty.
- Vacation Pay, Severance Pay and Termination Benefits
- Specialties will only be charged for these costs as they apply to employees who are assigned to the Specialty on a permanent basis. CBC/Radio-Canada will absorb all of these costs for employees who are charged to a Specialty through agreed price contracts or via the labour costing process.
- Specialties will only be responsible for the cost of vacation earned while the individual is assigned to the Specialty on a permanent basis.
- Severance Pay and Termination Benefits resulting from normal retirements will be absorbed by CBC/Radio-Canada Corporate Personnel Services regardless of where the individual is assigned at the time of retirement.
- Severance Pay and Termination Benefits resulting from layoffs, voluntary separations etc. will be absorbed by the Specialty if the individual was permanently assigned to the Specialty at time of termination. The exception to this would be when the termination results from a CBC/Radio-Canada assigned employee “bumping” the employee permanently assigned to the Specialty, in which case the CBC/Radio-Canada would absorb the costs. The reverse of this will also apply.
- Specialty Services Costs
- All costs associated with a Specialty will be kept separate by using specific Cost Centres, Programs or Projects for each Specialty.
- All costs associated with personnel are dealt with in sections 5 and 6 above and will be charged to the appropriate cost centre, program or project to support financial management and reporting of the Specialty.
- Out of pocket costs incurred specifically for the Specialty will be charged to the Specialty at time of payment.
- Out of pocket costs incurred specifically for the Specialty but not paid at the end of each reporting period will be accrued in accordance with Generally Accepted Accounting Principles.
- Out of pocket costs incurred in a joint activity are to be shared between CBC/Radio-Canada and the Specialty on a predetermined basis. These costs will either be charged to CBC/Radio-Canada operations as incurred and then transferred to the Specialty each month, or vise versa, depending on which operation is heading the joint activity.
- A Specialty’s agreed upon share of the cost of a CBC/Radio-Canada service that it regularly uses is to be charged to the Specialty on a monthly basis.
- Programs, segments or inserts produced, co-produced or procured by CBC/Radio-Canada and broadcast on CBC/Radio-Canada will be available to a Specialty at no cost, except as follows:
- If the original broadcast version requires editing, dubbing, re-taping etc. for use by the Specialty, these costs will be charged to the Specialty.
- If there are additional step-up or rights fees to be paid because of use by the Specialty, these additional costs will be charged to the Specialty. These additional costs may be an add-on determined when the Specialty uses the program or they may be identified up front when CBC/Radio-Canada negotiates the fees. For example a procurement contract could identify use by CBC/Radio-Canada and a Specialty and show a split of the rights fee.
- Costs incurred to transmit, present and distribute Specialty programming will be charged to the Specialty.
- Costs incurred to promote and market a Specialty and costs incurred to sell advertising on a Specialty will be charged to the Specialty.
- Administrative, support and management services provided to a Specialty by CBC/Radio-Canada may be charged to the Specialty as provided for in 5 b) and 5 c).
- Specialty Services use of Facilities
- A Specialty may use CBC/Radio-Canada studios, technical transmission and production equipment, and office space at no cost.
- In the event that CBC/Radio-Canada facilities are not available to meet the needs of a Specialty and the CBC/Radio-Canada elects to acquire capital assets to meet these needs, the cost of these assets will be charged to the Specialty as identified in section 3 Capital Assets.
- In the event that a Specialty must rent facilities from a third party to meet its needs, the costs will be charged to the Specialty as an out of pocket cost.
- Full Program Costing Implications for Specialty Services
- The Corporation operates on the principles of full program costing whereby programs are charged not only for the out of pocket costs incurred for the program, but also for the production labour and facilities used to produce the program and for a share of corporate and media overhead.
- Since Specialties operate and report on an incremental basis some of the principles of full costing cannot be applied to them. Following are the program costing concepts as applied to Specialties:
- Out of pocket costs incurred for a specific program are to be charged to that program within the Specialty.
- The Specialty’s share of costs incurred in joint production activities with CBC/Radio-Canada is to be charged to the program or activity within the Specialty.
- The labour used in the production of Specialty programs is to be charged to those programs. These charges may come from CBC/Radio-Canada through use of personnel as identified in 5 d), or they may arise through labour costing within the Specialty.
- CBC/Radio-Canada facilities used in the production of Specialty programs will not be charged to the Specialty. For facility utilization purposes the CBC/Radio-Canada should schedule and cost these facilities as they do for all CBC/Radio-Canada programs, but the charge would remain within CBC/Radio-Canada media responsibility rather than go to the Specialty.
- Facilities acquired for a Specialty are paid for by the Specialty but these costs are not assigned to Specialty programs.
- No CBC/Radio-Canada overhead (Corporate or Media) will be allocated to a Specialty. In addition, overheads within a Specialty will not be allocated to the Specialty’s programs.
- Cost Allocation / Assessment Implications for Specialty Services
- In the preparation of financial data for its Annual Report, the Corporation uses cost allocations and assessments to distribute property, support and management costs across responsibility lines to the business activities shown on the financial statements.
- Since Specialties operate and report on an incremental basis none of these allocations and assessments are made to Specialties or within Specialties. In addition the operations of the Specialties play no part in determining these allocations and assessments.
- Definition - Incremental Costs:
For the purpose of this policy, incremental costs are defined as all additional costs associated with an operation or activity resulting from a specialty channel's involvement in that operation or activity. The determination of the incremental costs is based on the cost of the main channels' activities (CBC/Radio-Canada / Radio-Canada). In other words, the cost would be considered incremental if all or part of such costs would not exist in the absence of the specialty channel.