For the three months ended June 30, 2024
(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 His 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 airports. There are currently no such arrangements in place.
These condensed interim financial statements have been authorized for issuance by the Board of Directors on August 22, 2024.
2. Basis of preparation
These 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, 2024.
These condensed interim financial statements were prepared under the historical cost convention, except as required or permitted by IFRS and as indicated in note 3. Historical cost is generally based on the fair value of the consideration given up in exchange for goods and services at the transaction date.
3. Summary of material accounting policy information
(a) Use of estimates and judgments
The preparation of these condensed interim financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions based on existing knowledge that affect the reported amounts and disclosures in the condensed interim financial statements and accompanying notes. Actual results may differ from judgments, estimates and assumptions.
In making estimates and using assumptions, management relies on external information and observable conditions where possible, supplemented by internal analysis as required. These estimates and assumptions have been applied in a manner consistent with prior periods. There are no known commitments, events or uncertainties that management believes will materially affect the methodology or assumptions utilized in making these estimates in the condensed interim financial statements.
Estimates and underlying assumptions are regularly reviewed by management and changes in those estimates are recognized prospectively in the period of change, if the change affects that period only; or the period of the change and future periods, if the change affects both.
The critical estimates and assumptions utilized in preparing these condensed interim financial statements include:
- note 3(b), note 3(c), note 5 and note 6 – Property and equipment and intangible assets
Key estimates used for property and equipment include the determination of their useful lives and the valuation of work-in-progress. The key estimate used for intangible assets includes the determination of their useful lives. In determining the expected useful lives of these assets, CATSA takes into account past experience, industry trends and internally-specific factors, such as changing technologies and expectations for the in-service period of the assets. Changes to estimates of useful life would affect future depreciation or amortization expenses and future carrying values of assets. In determining the value of work-in-progress, CATSA takes into account estimates provided by internal and external experts with respect to the stage of completion of an equipment integration project. Changes to the stage of completion would affect trade and other payables and the values of assets. - note 3(e), note 7 and note 10 – Right-of-use assets and lease liabilities
Key estimates used for right-of-use assets and lease liabilities include the determination of an appropriate incremental borrowing rate to discount the lease payments, when the interest rate implicit in the lease is not readily determinable. As CATSA does not have borrowing authority and, in practice, does not have readily observable approved or granted borrowing rates from a financial institution, CATSA’s approach to determining its incremental borrowing rate is based on the Bank of Canada zero-coupon bond rate, CATSA’s entity-specific credit spread, and the lease-specific spread. CATSA’s entity-specific credit spread and lease-specific spread are based on a publicly available yield curve that reflects Canadian agencies with investment grade ratings. The rate used to discount CATSA’s lease payments is also based on the identified lease term. - note 3(g) and note 8 – Employee benefits
Key estimates used for employee benefits include the discount rate, mortality rate, inflation rate, long-term rate of compensation increase and assumed medical cost trend rates. In determining the assumptions, CATSA takes into account past experience, the expertise of its actuaries, and current market conditions and rates. Changes to these assumptions would affect its employee benefits asset and liability, as well as financial performance and other comprehensive income or loss.
The critical judgments made by management in preparing these condensed interim financial statements include:
- note 3(e), note 7 and note 10 – Right-of-use assets and lease liabilities
Judgments are required in determining whether it is reasonably certain that an extension or termination option will be exercised for contracts that contain a lease. In making this assessment, management considers a number of factors, including the nature of CATSA’s work, proximity of other locations, lease extensions exercised in the past, market conditions, recent leasehold improvements and contract specific termination clauses.
Judgments are required in determining whether variable lease payments are in-substance fixed. In-substance fixed lease payments are payments that may, in form, contain variability but that, in substance, are unavoidable. Such payments are included in the measurement of the lease liability. In determining whether variable lease payments are in-substance fixed, CATSA reviews lease contracts to assess the nature of the payments, specifically identifying if payments are subject to adjustments based on actual costs incurred, or payments are based on services that are variable in nature.
(b) Property and equipment
Property and equipment consists of screening equipment, RAIC equipment, computers, integrated software and electronic equipment, office furniture and equipment, leasehold improvements and work-in-progress.
(i) Recognition and measurement
Property and equipment are recorded at cost less accumulated depreciation, except for work-in-progress, which is recorded at cost but not depreciated until the asset is available for use. Cost includes expenditures that are directly attributable to the acquisition and installation of the assets, including integration costs related to the installation of the assets at the airports to ensure they are in a condition necessary for their intended use. These costs include conveyor systems, platforms and other structures required to connect screening equipment to existing airport infrastructures.
Work-in-progress includes costs related to integration projects that remain incomplete at the end of the reporting period. The value of work-in-progress is determined based on estimates performed by independent experts or management, depending on management’s assessment of risk.
The carrying amount of an item of property and equipment is derecognized on disposal, or when no future economic benefits are expected from its use or disposal. Gains and losses on disposal of an item of property and equipment are determined by comparing proceeds, if any, to the carrying amount and are recognized in financial performance.
(ii) Subsequent costs
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to CATSA and that the cost of the item can be measured reliably. The cost of day-to-day servicing of property and equipment is recognized in financial performance as incurred.
(iii) Depreciation
Depreciation is calculated using the straight-line method and is applied over the estimated useful lives of the assets.
| Asset class | Useful life |
|---|---|
| PBS equipment | 10 to 15 years |
| HBS equipment | 10 to 15 years |
| NPS equipment | 10 to 15 years |
| RAIC equipment | 5 years |
| Computers, integrated software and electronic equipment | 3 to 10 years |
| Office furniture and equipment | 5 years |
Leasehold improvements are depreciated on a straight-line basis over the shorter of the related lease term or estimated useful life.
Depreciation methods, estimated useful lives and residual values are reviewed at least annually.
(c) Intangible assets
Separately acquired computer software licences are capitalized based on the costs incurred to acquire and bring the licences to use.
Certain costs incurred in connection with the development of software to be used internally or for providing screening services are capitalized once a project has progressed beyond a conceptual, preliminary stage to that of application development. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by CATSA are recognized as intangible assets when the following criteria are met:
- it is technically feasible to complete the software product so that it will be available for use;
- management intends to complete the software product and use it;
- there is an ability to use the software product;
- it can be demonstrated how the software product will generate probable future economic benefits;
- adequate technical, financial and other resources to complete the development of the software product and to use it are available; and
- the expenditure attributable to the software product during its development can be reliably measured.
Costs that qualify for capitalization include both internal and external costs, but are limited to those that are directly related to the specific project. All other costs associated with developing or maintaining computer software programs are expensed as incurred.
Intangible assets are amortized using the straight-line method over their estimated useful lives of five to 15 years.
(d) Impairment
CATSA’s assets do not generate cash flows. Instead, all assets interact to support CATSA’s mandated activities, which are primarily funded by parliamentary appropriations. Overall levels of cash flow, provided by budgetary funding, reflect public policy requirements and decisions. Therefore, CATSA is considered one cash-generating unit (CGU).
The carrying amounts of CATSA’s property and equipment and intangible assets are reviewed at each reporting period to determine whether there is any indication of impairment. Assets are tested at the CGU level when they cannot be tested individually. Property and equipment and intangible assets are considered to be impaired if they are no longer able to contribute to CATSA’s mandate.
(e) Leases
Contracts are considered to be a lease when the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
(i) Right-of-use assets
CATSA’s right-of-use (ROU) assets are initially measured at cost based on the following:
- amount of the initial measurement of the lease liability; and
- lease payments made at or before the commencement date, less any lease incentives received.
An ROU asset is subsequently measured at cost less accumulated depreciation. The carrying amount of the right-of-use asset may be reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability, if any.
An ROU asset is depreciated using the straight-line method over the shorter of the lease term or the estimated useful life of the underlying asset. The lease term includes periods covered by an option to extend if CATSA is reasonably certain to exercise that option.
(ii) Lease Liabilities
CATSA’s lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, CATSA’s incremental borrowing rate, as identified above in note 3(a).
CATSA’s entity-specific credit spread and lease-specific spread are based on a publicly available yield curve that reflects Canadian agencies with investment grade ratings.
Variable lease payments that do not depend on an index or rate, and are not in-substance fixed, are not included in the measurement of the lease liability and, subsequently, the right-of-use asset. These payments are recognized as an expense in the period in which they occur.
The lease liability is subsequently measured at amortized cost using the effective interest rate method. It is remeasured whenever:
- there is a change in the lease term, including a change in the assessment of whether an extension option will be exercised;
- the payments change due to changes in an index or rate, or a change in expected payments under a residual value guarantee; and
- a lease contract is modified and the lease modification is not accounted for as a separate lease.
Based on the nature and use of CATSA’s right-of-use assets, CATSA has two classes of underlying assets: office space and data centres. CATSA accounts for lease components and any non-lease components as a single lease component for its office space asset class. For its data centre asset class, CATSA separates non-lease components from lease components and accounts for them separately.
CATSA does not recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low value. The lease payments associated with these leases are recognized as an expense on a straight-line basis over the lease term.
(f) Financial instruments
(i) Non-derivative financial instruments
Non-derivative financial assets:
Non-derivative financial assets include cash and receivables related to supplemental and other screening services. The remaining receivables are not classified as non-derivative financial assets because they are not contractual rights but, rather, created as a result of statutory requirements of the federal and provincial governments.
Cash and receivables related to supplemental and other screening services are recognized initially at fair value. Subsequent to initial recognition, these financial assets are measured at amortized cost using the effective interest rate method. At each reporting date, CATSA assesses, on a forward-looking basis, the expected credit losses on any financial assets measured at amortized cost.
CATSA derecognizes a non-derivative financial asset when the contractual rights to the cash flows from the asset are either collected, expire or are transferred to another party.
Non-derivative financial liabilities:
Non-derivative financial liabilities include trade and other payables and holdbacks. Trade and other payables and holdbacks are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest rate method.
CATSA derecognizes a non-derivative financial liability when its contractual obligations are discharged, cancelled or expired.
(ii) Derivative financial instruments
Derivative financial instruments include foreign exchange forward contracts entered into by CATSA for the purpose of managing its exposure to foreign currency risk as it relates to its request for parliamentary appropriations. CATSA does not apply hedge accounting to its derivative financial instruments.
(g) Employee benefits
(i) Post-employment benefit plans – defined benefit
The employee benefits asset and liability presented in the Condensed Interim Statement of Financial Position represent the actual surplus or deficit of each of CATSA’s defined benefit pension plans and its other defined benefits plan. The surplus or deficit is determined by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. The future benefit is then discounted to determine its present value, using a discount rate established at the end of the reporting period. The obligation is recognized over the period of employee service determined actuarially using the projected unit credit method. To the extent applicable, the fair value of any plan assets is deducted from the present value of the future benefit obligation. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
Defined benefit costs are categorized as follows:
- service costs;
- net interest on the net defined benefit asset or liability;
- administration costs; and
- remeasurements.
Service costs are determined separately for each plan using the projected unit credit method, with actuarial valuations for accounting purposes being carried out at the end of each annual reporting period. Current service cost is recognized as employee costs in determining financial performance. Employee contributions are recorded as a reduction to service cost in the period in which the related service is rendered. Administration costs paid from the plan assets during the period exclude the costs of managing plan assets, as those costs are recorded against the actual return on plan assets.
Net interest is calculated by applying the discount rate used to discount the post-employment benefit obligation to the net defined benefit asset or liability, taking into account any changes in the net defined benefit asset or liability during the period as a result of contribution and benefit payments. Net interest is recognized as employee costs in determining financial performance.
Remeasurement of defined benefit plans consists of actuarial gains and losses, the return on plan assets (excluding interest) and the effect of changes in the asset ceiling (if applicable). When a funded plan gives rise to a net pension benefit asset, a remeasurement for the effect of the asset ceiling may occur if it is established that the surplus will not provide future economic benefits with respect to future service costs. Those future economic benefits are available under the terms of CATSA’s defined benefit pension plans, which allow CATSA to take contribution holidays when certain funding thresholds are met.
Remeasurement of defined benefit plans is recognized in other comprehensive income or loss and is included immediately in accumulated surplus (deficit) without reclassification to financial performance in a subsequent period.
(ii) Post-employment benefit plan – defined contribution
Employer contributions to the defined contribution pension plan are recognized as an employee cost in financial performance when employees have rendered service entitling them to the contributions.
(iii) Termination benefits
Termination benefits result from either CATSA’s decision to terminate employment or an employee’s decision to accept the entity’s offer of benefits in exchange for termination of employment. CATSA recognizes termination benefits at the earliest of when the entity can no longer withdraw the offer of those benefits or when restructuring costs are accrued if termination benefits are part of a restructuring plan. If benefits are payable more than 12 months after the reporting period, the liability is determined by discounting the obligation to its present value.
(iv) Short-term employee benefits
Short-term employee benefit obligations, such as salaries, annual leave and bonuses, are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized in trade and other payables for the amount expected to be paid when CATSA has a present legal or constructive obligation to pay the amount as a result of past service provided by the employee and the obligation can be estimated reliably.
(h) Provisions and contingencies
A provision is recognized when, as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle a present legal or constructive obligation, and the obligation can be estimated reliably. In situations where the amount of the obligation cannot be measured with sufficient reliability or the cash outflows are not probable, a contingent liability is disclosed.
Contingent liabilities may arise from uncertainty as to the existence of a liability, or represent an existing liability in respect of which settlement is not probable or, in extremely rare cases, the amount cannot be reliably measured. A liability is recognized when its existence is confirmed by a future event, settlement becomes probable and reliable measurement becomes possible.
(i) Disputed claims
In the normal course of operations, CATSA receives claims requesting monetary compensation from various parties. A provision is accrued to the extent management believes it is probable that a disputed claim arising from a past event results in a present legal or constructive obligation, and the obligation can be estimated reliably. If the timing of the cash outflows associated with the disputed claim can be reasonably determined to be more than 12 months after the reporting period, the provision is determined by discounting the expected future cash flows at a rate that reflects current market assessments of the time value of money and the risks specific to the liability.
(ii) Decommissioning costs
CATSA has future obligations associated with the disposal of certain screening equipment in an environmentally responsible manner, and the restoration of leased premises to an agreed upon standard at the end of the lease. To the extent that it is probable that these obligations will result in an outflow of economic benefits, CATSA recognizes a provision for decommissioning liabilities, and the costs are capitalized as part of the carrying amount of the related asset and depreciated over the asset’s estimated useful life.
Given the nature of provisions and contingencies, judgments and estimates are required in determining the existence and amount of an obligation.
(i) Government funding
CATSA’s primary source of funding is parliamentary appropriations received from the Government of Canada. Parliamentary appropriations are accounted for as Government of Canada grants and are recognized in financial performance on a systematic basis over the periods in which CATSA recognizes as expenses the related costs for which the grants are intended to compensate.
Appropriations related to operating expenses for future periods are recorded as deferred government funding related to operating expenses and are recognized in financial performance in the period in which the related expenses are incurred. Appropriations used for the purchase of property and equipment and intangible assets are recorded as deferred government funding related to capital expenditures and are amortized on the same basis as the related assets.
Upon the disposal of funded depreciable assets, the related remaining deferred government funding is recognized in financial performance in the period of disposal.
Appropriations used for lease payments are recognized in financial performance in the period in which lease payments are made.
4. Trade and other receivables
Trade and other receivables are comprised of:
| (In thousands of Canadian dollars) | June 30, 2024 | March 31, 2024 |
|---|---|---|
| Parliamentary appropriations | $ 129,280 | $ 120,663 |
| GST and HST recoverable | 3,232 | 7,906 |
| PST recoverable | 811 | 1,467 |
| $ 133,323 | $ 130,036 |
5. Property and equipment
A reconciliation of property and equipment is as follows:
| (In thousands of Canadian dollars) |
PBS equipment | HBS equipment | NPS equipment | RAIC equipment | Computers, integrated software and electronic equipment | Office furniture and equipment | Leasehold improve- ments |
Work-in-progress | Total |
|---|---|---|---|---|---|---|---|---|---|
| Cost | |||||||||
| Balance, March 31, 2023 | $ 163,194 | $ 658,885 | $ 20,722 | $ 3,332 | $ 28,193 | $ 118 | $ 8,009 | $ 11,868 | $ 894,321 |
| Additions | 2,828 | 9,120 | - | 1,970 | 1,803 | - | 1,169 | 12,257 | 29,147 |
| Disposals | (833) | (7,416) | (76) | - | (262) | - | (2,182) | - | (10,769) |
| Write-offs | (595) | (291) | (35) | (1,873) | (3,541) | - | (18) | - | (6,353) |
| Reclassifications | 2,523 | 3,547 | - | - | 1,681 | - | 199 | (7,950) | - |
| Balance, March 31, 2024 | $ 167,117 | $ 663,845 | $ 20,611 | $ 3,429 | $ 27,874 | $ 118 | $ 7,177 | $ 16,175 | $ 906,346 |
| Balance, March 31, 2024 | $ 167,117 | $ 663,845 | $ 20,611 | $ 3,429 | $ 27,874 | $ 118 | $ 7,177 | $ 16,175 | $ 906,346 |
| Additions | 605 | 941 | - | - | 23 | - | (3) | 10,312 | 11,878 |
| Disposals | (4,830) | (73) | - | - | (842) | - | - | - | (5,745) |
| Write-offs | - | - | - | - | (164) | - | - | - | (164) |
| Reclassifications | 4,061 | 967 | - | 354 | 247 | - | - | (5,629) | - |
| Balance, June 30, 2024 | $ 166,953 | $ 665,680 | $ 20,611 | $ 3,783 | $ 27,138 | $ 118 | $ 7,174 | $ 20,858 | $ 912,315 |
| Accumulated depreciation | |||||||||
| Balance, March 31, 2023 | $ 113,594 | $ 366,901 | $ 16,563 | $ 2,358 | $ 20,589 | $ 108 | $ 6,953 | $ - | $ 527,066 |
| Depreciation | 5,372 | 30,204 | 652 | 395 | 3,059 | 10 | 410 | - | 40,102 |
| Disposals | (833) | (7,354) | (76) | - | (262) | - | (2,179) | - | (10,704) |
| Write-offs | (470) | (180) | (35) | (1,642) | (3,499) | - | (18) | - | (5,844) |
| Balance, March 31, 2024 | $ 117,663 | $ 389,571 | $ 17,104 | $ 1,111 | $ 19,887 | $ 118 | $ 5,166 | - | $ 550,620 |
| Balance, March 31, 2024 | $ 117,663 | $ 389,571 | $ 17,104 | $ 1,111 | $ 19,887 | $ 118 | $ 5,166 | $ - | $ 550,620 |
| Depreciation | 1,556 | 7,650 | 161 | 136 | 809 | - | 171 | - | 10,483 |
| Disposals | (4,830) | (73) | - | - | (842) | - | - | - | (5,745) |
| Write-offs | - | - | - | - | (164) | - | - | - | (164) |
| Balance, June 30, 2024 | $ 114,389 | $ 397,148 | $ 17,265 | $ 1,247 | $ 19,690 | $ 118 | $ 5,337 | $ - | $ 555,194 |
| Carrying amounts | |||||||||
| As at March 31, 2024 | $ 49,454 | $ 274,274 | $ 3,507 | $ 2,318 | $ 7,987 | $ - | $ 2,011 | $ 16,175 | $ 355,726 |
| As at June 30, 2024 | $ 52,564 | $ 268,532 | $ 3,346 | $ 2,536 | $ 7,448 | $ - | $ 1,837 | $ 20,858 | $ 357,121 |
6. Intangible assets
A reconciliation of intangible assets is as follows:
| (In thousands of Canadian dollars) | Externally acquired software | Internally developed software | Under development |
Total |
|---|---|---|---|---|
| Cost | ||||
| Balance, March 31, 2023 | $ 10,538 | $ 20,442 | $ - | $ 30,980 |
| Additions | 3,334 | 303 | 89 | 3,726 |
| Write-offs | (15) | (3,985) | - | (4,000) |
| Balance, March 31, 2024 | $ 13,857 | $ 16,760 | $ 89 | $ 30,706 |
| Balance, March 31, 2024 | $ 13,857 | $ 16,760 | $ 89 | $ 30,706 |
| Additions | - | (5) | 50 | 45 |
| Reclassifications | - | 56 | (56) | - |
| Balance, June 30, 2024 | $ 13,857 | $ 16,811 | $ 83 | $ 30,751 |
| Accumulated amortization | ||||
| Balance, March 31, 2023 | $ 5,989 | $ 12,159 | $ - | $ 18,148 |
| Amortization | 814 | 1,583 | - | 2,397 |
| Write-offs | (14) | (3,985) | - | (3,999) |
| Balance, March 31, 2024 | $ 6,789 | $ 9,757 | $ - | $ 16,546 |
| Balance, March 31, 2024 | $ 6,789 | $ 9,757 | $ - | $ 16,546 |
| Amortization | 238 | 343 | - | 581 |
| Balance, June 30, 2024 | $ 7,027 | $ 10,100 | $ - | $ 17,127 |
| Carrying amounts | ||||
| As at March 31, 2024 | $ 7,068 | $ 7,003 | $ 89 | $ 14,160 |
| As at June 30, 2024 | $ 6,830 | $ 6,711 | $ 83 | $ 13,624 |
7. Right-of-use assets
A reconciliation of right-of-use assets is as follows:
| (In thousands of Canadian dollars) | Office space | Data centres | Total |
|---|---|---|---|
| Balance, March 31, 2023 | $ 12,688 | $ 893 | $ 13,581 |
| Additions | 6,264 | - | 6,264 |
| Depreciation | (2,575) | (211) | (2,786) |
| Balance, March 31, 2024 | $ 16,377 | $ 682 | $ 17,059 |
| Balance, March 31, 2024 | $ 16,377 | $ 682 | $ 17,059 |
| Additions | 587 | - | 587 |
| Depreciation | (615) | (52) | (667) |
| Balance, June 30, 2024 | $ 16,349 | $ 630 | $ 16,979 |
8. 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:
| (In thousands of Canadian dollars) | June 30, 2024 | March 31, 2024 |
|---|---|---|
| Employee benefits asset | ||
| Registered pension plan (RPP) | $ 59,418 | $ 55,432 |
| Supplementary retirement plan (SRP) | 1,758 | 1,656 |
| 61,176 | 57,088 | |
| Employee benefits liability | ||
| Other defined benefits plan (ODBP) | (18,444) | (18,484) |
| (18,444) | (18,484) | |
| Employee benefits - net asset | $ 42,732 | $ 38,604 |
(b) Employee benefits costs
The elements of employee benefits costs are as follows:
| (In thousands of Canadian dollars) | For the three months ended June 30 | |||||||
|---|---|---|---|---|---|---|---|---|
| RPP | SRP | ODBP | Total | |||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |
| Defined benefit cost recognized in financial performance | ||||||||
| Current service cost | $ 1,299 | $ 1,246 | $ 31 | $ 33 | $ 132 | $ 120 | $ 1,462 | $ 1,399 |
| Administration costs | 81 | 81 | 6 | 6 | - | - | 87 | 87 |
| Interest cost on defined benefit obligation | 2,751 | 2,572 | 91 | 80 | 230 | 207 | 3,072 | 2,859 |
| Interest income on plan assets | (3,357) | (3,136) | (111) | (100) | - | - | (3,468) | (3,236) |
| $ 774 | $ 763 | $ 17 | $ 19 | $ 362 | $ 327 | $ 1,153 | $ 1,109 | |
| Remeasurement of defined benefit plans recognized in other comprehensive income (loss) | ||||||||
| Return on plan assets excluding interest income | $ (719) | $ 1,030 | $ (7) | $ 18 | $ - | $ - | $ (726) | $ 1,048 |
| Actuarial gains (losses) | 4,396 | (3,857) | 126 | (114) | 334 | (312) | 4,856 | (4,283) |
| $ 3,677 | $ (2,827) | $ 119 | $ (96) | $ 334 | $ (312) | $ 4,130 | $ (3,235) | |
For the three months ended June 30, 2024, CATSA recognized an expense of $249 (2023 - $341) 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 income (loss).
For the three months ended June 30, 2024, remeasurement gains of $4,130 resulted from an increase in the discount rate of 10 basis points (from 4.90% at March 31, 2024 to 5.00% at June 30, 2024). 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 (0.96% actual versus 1.23% expected).
For the three months ended June 30, 2023, remeasurement losses of $3,235 resulted from a decrease in the discount rate of 10 basis points (from 4.90% at March 31, 2023 to 4.80% at June 30, 2023). This was partially offset by a higher actual rate of return on plan assets than the rate used in CATSA’s assumptions for the RPP (1.62% actual versus 1.23% expected).
(d) Employer contributions
Employer contributions paid to the defined benefit plans are as follows:
| (In thousands of Canadian dollars) | Three months ended June 30 | |
|---|---|---|
| 2024 | 2023 | |
| Employer contributions | ||
| RPP | $ 1,083 | $ 422 |
| ODBP | 68 | 53 |
| $ 1,151 | $ 475 | |
Total employer contributions to the defined benefit plans are estimated to be $1,709 for the year ending March 31, 2025.
9. Provisions and contingencies
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. As at June 30, 2024, claims, audits and legal proceedings are not expected, individually or in the aggregate, to have a material adverse effect on the financial statements.
(a) Provisions
During the three months ended June 30, 2024, there were no provisions recorded.
(b) Contingencies – Decommissioning costs
During the three months ended June 30, 2024, there have been no material changes to contingencies related to decommissioning costs. For a description of CATSA’s decommissioning costs, refer to note 9(b) of the audited annual financial statements for the year ended March 31, 2024.
10. Lease liabilities
CATSA has leases 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:
| (In thousands of Canadian dollars) | June 30, 2024 | March 31, 2024 |
|---|---|---|
| Balance, beginning of period | $ 19,197 | $ 14,485 |
| Additions | 587 | 6,264 |
| Lease payments (note 11) | (777) | (2,058) |
| Finance costs | 173 | 506 |
| Balance, end of period | $ 19,180 | $ 19,197 |
| Balance, end of period | ||
| Current | $ 2,549 | $ 2,389 |
| Non-current | 16,631 | 16,808 |
CATSA recognized the following expenses not included in the measurement of the lease liabilities as follows:
| (In thousands of Canadian dollars) | Three months ended June 30 | |
|---|---|---|
| 2024 | 2023 | |
| Variable lease payments | $ 494 | $ 472 |
| Short-term leases | 168 | 36 |
| Low value leases | 11 | 13 |
| Other lease costs (note 12) | $ 673 | $ 521 |
Variable lease payments include operating costs, property taxes, insurance, and other service-related costs.
For the three months ended June 30, 2024, CATSA recognized a total cash outflow for leases of $1,450 (2023 - $1,050).
The following table presents the undiscounted cash flows for contractual lease obligations:
| (In thousands of Canadian dollars) | June 30, 2024 | March 31, 2024 |
|---|---|---|
| No later than 1 year | $ 5,169 | $ 4,998 |
| Later than 1 year and no later than 5 years | 11,916 | 12,658 |
| Later than 5 years | 664 | 757 |
| $ 17,749 | $ 18,413 |
11. Government funding
(a) Government funding
CATSA’s Summary of the 2024/25 – 2028/29 Corporate Plan has not yet been tabled in Parliament and, therefore, the total amount of parliamentary appropriations available for the current year is not yet publicly available. As a result, disclosure of parliamentary appropriations approved compared to parliamentary appropriations used has not been provided.
The following table reconciles parliamentary appropriations for operating expenses that were received and receivable with the amount of appropriations used:
| (In thousands of Canadian dollars) | Three months ended June 30 | |
|---|---|---|
| 2024 | 2023 | |
| Parliamentary appropriations received | $ 231,000 | $ 218,000 |
| Amounts received related to prior periods | (110,807) | (117,813) |
| Parliamentary appropriations receivable | 111,714 | 124,065 |
| Parliamentary appropriations used to fund operating expenses | $ 231,907 | $ 224,252 |
The following table reconciles parliamentary appropriations for capital expenditures and lease payments that were received and receivable with the amount of appropriations used:
| (Thousands of Canadian dollars) | Three months ended June 30 | |
|---|---|---|
| 2024 | 2023 | |
| Parliamentary appropriations received | $ 4,223 | $ - |
| Amounts receivable related to prior periods | (9,856) | (2,651) |
| Parliamentary appropriations receivable | 17,566 | 3,819 |
| Parliamentary appropriations used to fund capital expenditures | 11,933 | 1,168 |
| Parliamentary appropriations used to fund lease payments (note 10) | 777 | 529 |
| Parliamentary appropriations used to fund capital expenditures and lease payments | $ 12,710 | $ 1,697 |
(b) Deferred government funding
A reconciliation of the deferred government funding liability is as follows:
| (In thousands of Canadian dollars) | June 30, 2024 | March 31, 2024 |
|---|---|---|
| Deferred government funding related to operating expenses | ||
| Balance, beginning of period | $ 22,968 | $ 19,253 |
| Parliamentary appropriations used to fund operating expense | 231,907 | 935,807 |
| Parliamentary appropriations for operating expenses recognized in financial performance | (234,645) | (932,092) |
| Balance, end of period | $ 20,230 | $ 22,968 |
| Deferred government funding related to capital expenditures | ||
| Balance, beginning of period | $ 368,994 | $ 379,180 |
| Parliamentary appropriations used to fund capital expenditures | 11,933 | 32,798 |
| Amortization of deferred government funding related to capital expenditures recognized in financial performance | (11,041) | $ (42,984) |
| Balance, end of period | $ 369,886 | $ 368,994 |
| Total deferred government funding, end of period | $ 390,116 | $ 391,962 |
12. Expenses
The Condensed Interim Statement of Comprehensive Income (Loss) presents operating expenses by program activity. The following table presents operating expenses by major expense type:
| (In thousands of Canadian dollars) | Three months ended June 30 | |
|---|---|---|
| 2024 | 2023 | |
| Screening services and other related costs | ||
| Payments to screening contractors | $ 195,068 | $ 187,857 |
| Uniforms and other screening costs | 2,300 | 3,167 |
| Trace and consumables | 1,207 | 920 |
| 198,575 | 191,944 | |
| Equipment operating and maintenance | ||
| Equipment maintenance and spare parts | 12,470 | 11,465 |
| Training and certification | 350 | 136 |
| RAIC | 229 | 202 |
| 13,049 | 11,803 | |
| Program support and corporate services | ||
| Employee costs | 19,844 | 18,316 |
| Office and computer expenses | 2,337 | 1,766 |
| Other administrative costs1 | 1,918 | 1,512 |
| Professional services and other business related costs2 | 1,337 | 1,860 |
| Other lease costs (note 10) | 673 | 521 |
| Communications and public awareness | 175 | 300 |
| 26,284 | 24,275 | |
| Depreciation and amortization | ||
| Depreciation of property and equipment (note 5) | 10,483 | 9,908 |
| Depreciation of right-of-use assets (note 7) | 667 | 742 |
| Amortization of intangible assets (note 6) | 581 | 550 |
| 11,731 | 11,200 | |
| $ 249,639 | $ 239,222 | |
1 Other administrative costs include insurance, network and telephone expenses, and facilities maintenance.
2 Other business related costs include travel expenses, conference fees, membership and association fees, and meeting expenses.
13. Fair values of financial instruments
Derivative financial instruments are recorded at fair value in the Condensed Interim Statement of Financial Position. The fair values of CATSA’s derivative financial instruments approximate their carrying amount due to the nature of the instruments.
CATSA’s derivative financial instruments are categorized as Level 2, based on observable inputs other than quoted prices. There were no transfers between levels during the three months ended June 30, 2024, or the year ended March 31, 2024.
14. Contractual arrangements
During the three months ended June 30, 2024, there have been no material changes to CATSA’s contractual commitments, other than the usage of contracts relating to payments to screening contractors.
For a description of CATSA’s contractual commitments, refer to note 14 of the audited annual financial statements for the year ended March 31, 2024.
15. Related party transactions
CATSA had the following transactions with related parties:
(a) Government of Canada, its agencies and other Crown corporations
CATSA is wholly owned by the Government of Canada, and is under common control with other Government of Canada departments, agencies and Crown corporations. CATSA enters into transactions with these entities in the normal course of operations. These related party transactions are based on normal trade terms applicable to all individuals and corporations.
CATSA’s primary source of funding is parliamentary appropriations received from the Government of Canada, as disclosed in note 11. Parliamentary appropriations receivable are included in trade and other receivables, and disclosed in note 4.
(b) Transactions with CATSA’s post-employment benefit plans
Transactions with the RPP, SRP and ODBP are conducted in the normal course of business. The transactions with CATSA’s post-employment benefit plans consist of contributions as disclosed in note 8. No other transactions were made during the three month period.
16. Supplementary cash flow information
The following table presents the net change in working capital balances:
| (In thousands of Canadian dollars) | Three months ended June 30 | |
|---|---|---|
| 2024 | 2023 | |
| Trade and other receivables1 | $ 4,423 | $ (5,699) |
| Inventories | 1,441 | 2 |
| Prepaids | 1,297 | 273 |
| Trade and other payables2 | 2,090 | 15,490 |
| Deferred government funding related to operating expenses | (2,738) | (275) |
| $ 6,513 | $ 9,791 | |
1 The change in trade and other receivables excludes an amount of $7,710 (2023 – $1,168) in relation to government funding related to capital expenditures, as the amount relates to investing activities.
2 The change in trade and other payables excludes an amount of $7,654 (2023 – $187) in relation to the acquisition of property and equipment and intangible assets, as the amount relates to investing activities.