Common language guide to municipal financial statements
This guide has been prepared by the Ontario Ministry of Municipal Affairs and Housing (MMAH). It is based on A Quick Guide to Municipal Financial Statements (2010) produced by Alberta Municipal Affairs. The guide provides examples and explanations of some of the typical information contained in a municipality’s annual audited financial statements. It may help municipal officials, councillors, and other stakeholders understand the information provided in the annual financial statements. This guide does not include all details and does not take into account local facts and circumstances. It is not a substitute for specialized legal or professional advice.
Municipal financial statements report on financial activities and balances. They help ensure accountability and transparency, and assist municipalities with long-term and strategic planning. Financial statements are an important tool for a municipal council and administration to use to report to the taxpayers on the municipal services provided with the resources at their disposal.
Selected legislative requirements and reporting standards
The Municipal Act, 2001 (MA) and the City of Toronto Act, 2006 (COTA) require that every Ontario municipality prepare annual audited financial statements. Each municipality provides a copy to Ministry of Municipal Affairs and Housing (MMAH), when the municipality submits its annual Financial Information Return (FIR) to the Ministry.
According to Chartered Professional Accountants (CPA) Canada, municipal financial statements must be prepared in accordance with generally accepted accounting principles for local governments as recommended by the CPA Canada - Public Sector Accounting Board (PSAB). There are similar requirements in the MA and COTA.
Publication requirements apply to audited municipal financial statements. As part of these requirements, the treasurer of each municipality may publish a copy of the financial statements, along with notes to the financial statements, the auditor’s report and tax rate information, in a newspaper having general circulation in the municipality, or similarly publish a notice stating the information is available to the public at no cost.
Requirements for municipal financial reporting are standardized across Canada and are set out in the Public Sector Accounting Handbook. Municipal financial statements are now prepared using the net financial assets (net debt) model and must include the reporting of tangible capital assets. This approach provides a more complete picture of a municipality’s financial condition.
Financial statements provide information on a municipality’s financial activities and balances for the period. Financial statements also provide information on a municipality’s financial position in terms of its assets and liabilities, its net financial resources (called net debt), accumulated surplus or deficit, and its tangible capital assets and other non-financial assets. Financial statements reflect the outcomes of activities that create revenue and incur expenses to determine whether the municipality operated in a surplus or a deficit for that period. Financial statements also provide a meaningful summary of the sources, allocation and consumption of municipal economic resources, how the activities of the period have affected the municipality’s net debt, how municipal activities were financed, and how cash requirements were met.
Financial statements should include a statement of financial position (referred to as the balance sheet in the private sector), a statement of operations (referred to as the income statement in the private sector), a statement of change in net debt, a statement of cash flow, and a statement of remeasurement gains and losses (if applicable). Additional supplementary information is provided in schedules and notes to the financial statements.
Municipal financial statements
Full accrual basis of accounting
Accrual basis of accounting records financial transactions in the period(s) when they occur, not necessarily when the cash is received or paid. It requires that tangible capital assets be reported on the balance sheet (Statement of Financial Position) at historical (original) cost and expensed (amortized) over their estimated useful lives in the annual financial reports.
Upcoming Public Sector Accounting Standard changes
The new Conceptual Framework and Reporting Model, coming in 2027 for municipalities, will change the financial statement presentation as outlined in this document.
The new Conceptual Framework was issued in the CPA Canada Public Sector Accounting Handbook (PSA Handbook) on December 1, 2022. PS 1202, the new Financial Statement Presentation standard (replaces PS 1201 Financial Statement Presentation), sets out PSAB’s new Reporting Model and was approved in March 2023.
Both the Conceptual Framework and the Reporting Model in Section PS 1202 will be effective for fiscal years beginning on or after April 1, 2026 (2027 for municipalities). Earlier adoption is permitted only if the Conceptual Framework is also adopted at the same time. Prior period amounts would need to be restated to conform to the presentation requirements for comparative financial information in this Section.
Components of Municipal Financial Statements
A sample of each of the five main components of municipal financial statements is presented along with explanatory notes and helpful tips. A checklist to assist the readers of the financial statement with analysis and evaluation of the financial statements can be found near the end of this guide. A glossary of terms is also included.
Generally, financial statements are prepared by municipalities on an annual basis in accordance with Canadian standards established by the PSAB. They include:
- comparative figures from the prior year
- a comparison of actual to budget results
Municipal financial statements are prepared on an accrual basis recognizing revenues and expenses when they occur and not necessarily when they are paid. As such, they can provide insight on the cost of decisions that may not need to be funded until a future period.
There are five main components to the financial statements of a municipality:
- The Consolidated Statement of Financial Position is a statement that reports on:
- assets – what the municipality owns or controls
- liabilities – what the municipality owes
- net financial assets/net debt – liabilities minus financial assets
- accumulated surplus or deficit – what remains after the assets have been used to meet the liabilities. These remaining assets will be available to provide services to future period
- The Consolidated Statement of Operations is a statement that reports on:
- revenues
- expenses
- results for a fiscal year or reporting period
- The Consolidated Statement of Change in Net Financial Assets (Net Debt) is a statement that:
- explains the difference between the annual surplus or deficit and the change in net financial assets (net debt)
- reports spending to acquire tangible capital assets and inventories of supplies
- reports disposal of tangible capital assets and the use of inventory
- The Consolidated Statement of Cash Flow is a statement that provides details on changes in cash and cash equivalents since the previous reporting period by:
- identifying where cash came from
- showing how cash was used
- The Consolidated Statement of Remeasurement Gains and Losses (if applicable) is a statement that records:
- unrealized changes in the fair value of derivative and equity instruments (investments) at the financial statement reporting date
- annual fluctuations in exchange rates from financial assets or liabilities held in foreign currency reported in Canadian dollars at the financial statement reporting date
Notes and schedules
Supplementary Schedules to municipal financial statements contain additional detailed information for the reader. Although the schedules will vary depending on the size and complexity of the municipal operation there is generally some consistency in form and content.
The Notes to the Financial Statements contain important information and explanations, some of which may be required by legislation and regulation. The notes highlight various aspects of the financial statements and provide background information and insight on the impacts of specific values in the financial statements. Many users review the notes before examining the main statements.
Typical notes to financial statements include information on:
- accounting policies
- cash and cash equivalents
- receivables
- equity instruments, derivatives and other investments
- deferred revenue
- employee benefit obligations
- asset retirement obligations
- long-term debt
- tangible capital assets
- commitments and contingencies
- accumulated surplus or deficit
Specimen financial statements
The specimen financial statements for the fictional Town of Sample River, found at throughout this page, include the five main statements:
- statement of financial position
- statement of operations
- statement of change in net financial assets (net debt)
- statement of remeasurement gains or losses (if applicable)
- statement of cash flow.
Statements for your municipality will vary. For example, line items and terminology differ between municipalities due to local distinctions and decision making, such as programs and services offered and the municipal tier (upper, lower, or single), or the advice of an accounting professional.
Town of Sample River - Consolidated Statement of Financial Position
| As at December 31, | 2024 ($) | 2023 ($) |
|---|---|---|
| Cash and cash equivalents | 6,500,000 | 5,800,000 |
| Accounts receivable | 200,000 | 200,000 |
Taxes receivable | 200,000 | 170,000 |
Other | 20,000 | 10,000 |
| Investments | 900,000 | 1,000,000 |
| Total financial assets | 7,820,000 | 7,180,000 |
| As at December 31, | 2024 ($) | 2023 ($) |
|---|---|---|
| Accounts payable and accrued liabilities | 605,000 | 400,000 |
| Deferred revenue | 400,000 | 300,000 |
| Long-term liabilities | 700,000 | 600,000 |
| Employee benefits | 800,000 | 400,000 |
| Asset retirement obligations | 500,000 | 400,000 |
| Total liabilities | 3,005,000 | 2,100,000 |
| As at December 31, | 2024 ($) | 2023 ($) |
|---|---|---|
| Total net financial assets (Net debt) | 4,815,000 | 5,080,000 |
| As at December 31, | 2024 ($) | 2023 ($) |
|---|---|---|
| Tangible capital assets | 20,000,000 | 19,000,000 |
| Prepaid expenses | 100,000 | 100,000 |
| Inventories of supplies | 200,000 | 200,000 |
| Total non-financial assets | 20,300,000 | 19,300,000 |
| As at December 31, | 2024 ($) | 2023 ($) |
|---|---|---|
| Accumulated surplus is comprised of: | ||
Accumulated surplus (deficit) before remeasurement gains (losses) | 25,210,000 | 24,400,000 |
Accumulated surplus (deficit), remeasurement gains (losses) | (95,000) | (20,000) |
| Total accumulated surplus | 25,115,000 | 24,380,000 |
Consolidated Statement of Financial Position
The Consolidated Statement of Financial Position (Balance Sheet) reports on a municipality’s:
- assets
- liabilities
- accumulated surplus or deficit
A review of the Consolidated Statement of Financial Position typically is in the context of a long-term view of the municipality’s financial health and does not focus solely on how much money is currently in the bank. A reader may wish to consider whether the municipality has the necessary assets to provide future services, and whether there are sufficient future revenues to cover existing liabilities.
Net debt occurs when the total debt to be repaid in future years is more than the financial assets (such as cash and investments) at year end. If the municipality has sufficient future revenues to repay the principal and interest on debt in the future, then a net debt position does not necessarily mean that the municipality is in financial difficulty.
An in-place viable debt management plan helps ensure that the debt is sufficiently funded or that the municipality has the capability to fund annual debt principal and interest costs without jeopardizing the provision of municipal services.
- Financial assets are comprised of cash or items that will eventually be turned into cash. Land for resale and long-term investments are examples of items that will eventually be turned into cash. They are used to settle liabilities.
- Liabilities are financial obligations to external parties (they include temporary bank indebtedness, accounts payable, long-term debt, asset retirement obligation liabilities, and unearned or deferred revenue).
- Non-financial assets are assets that will be used up when providing future services to the public. They are acquired to deliver services over many years.
- Temporary bank indebtedness is the total of any unpaid short term debt (loans, lines of credit or bank overdrafts) that the municipality is required to repay within one year.
- Deferred revenue, such as development charges, are restricted funds that have been received but not yet used for their specific purposes.
- The amount of long-term debt (usually for capital purposes) is recorded separately from short-term debt. The notes to the financial statements provide important information regarding future debt repayments.
- The amount recorded for tangible capital assets (fixed assets such as land, buildings and equipment) is the net book value, which is the actual cost less the accumulated amortization and represents the remaining value of the asset that relates to the future services that will be received from the asset.
- The accumulated surplus (deficit) is the primary indicator of the resources (financial and physical) the municipality has available to provide future services.
- It consists of both cash and non-cash components and is comprised of two components:
- all of the municipality’s past operating surpluses and deficits (accumulated surplus before remeasurement gains or losses)
- the municipality’s remeasurement gains and losses (accumulated surplus, remeasurement gains and losses)
- The notes to the financial statements generally identify what portions of the accumulated surplus (deficit) are:
- held in reserves, including unrestricted (including cash, accounts receivable and other non-cash financial assets) or restricted reserves such as cash that can only be used for a pre-determined purpose)
- equity in tangible capital assets – the value of tangible capital assets a municipality owns that is, the cost of capital assets less outstanding debt and accumulated amortization
- If the municipality is in an accumulated deficit position, it must raise future revenues to cover past transactions and events.
- It consists of both cash and non-cash components and is comprised of two components:
Town of Sample River - Consolidated Statement of Operations
| For the year ended December 31, | Budget ($) | 2024 ($) | 2023 ($) |
|---|---|---|---|
| Taxation | 2,050,000 | 2,100,000 | 2,000,000 |
| User fees and charges | 2,200,000 | 2,300,000 | 2,100,000 |
| Government Transfers | |||
Provincial | 1,000,000 | 1,200,000 | 800,000 |
Federal | 250,000 | 300,000 | 200,000 |
Other municipalities | 4,000 | 10,000 | - |
| Other Revenue | 200,000 | 300,000 | 200,000 |
| Total revenue | 5,704,000 | 6,210,000 | 5,300,000 |
| For the year ended December 31, | Budget ($) | 2024 ($) | 2023 ($) |
|---|---|---|---|
| General government | 1,600,000 | 1,700,000 | 1,500,000 |
| Protection services | 500,000 | 500,000 | 500,000 |
| Transportation services | 300,000 | 300,000 | 300,000 |
| Environmental services | 1,300,000 | 1,400,000 | 1,100,000 |
| Health services | 300,000 | 300,000 | 300,000 |
| Social and family services | 200,000 | 200,000 | 200,000 |
| Social housing | 100,000 | 100,000 | 100,000 |
| Recreation services | 700,000 | 700,000 | 700,000 |
| Planning and development | 200,000 | 200,000 | 200,000 |
| Total expenses | 5,200,000 | 5,400,000 | 4,900,000 |
| For the year ended December 31, | Budget ($) | 2024 ($) | 2023 ($) |
|---|---|---|---|
| Annual surplus (deficit) | 504,000 | 810,000 | 400,000 |
| Accumulated surplus, beginning of year | 24,400,000 | 24,400,000 | 24,000,000 |
| Accumulated surplus, end of year | 24,904,000 | 25,210,000 | 24,400,000 |
Consolidated Statement of Operations
The Consolidated Statement of Operations (Income Statement) reports on revenues, expenses and the results for a fiscal year or reporting period. The Consolidated Statement of Operations provides detailed information on what transactions have impacted the accumulated surplus or deficit during the year. Non-cash items such as amortization expense, accretion expense, post-employment benefits, and contributed assets are included.
- Government transfers are grants provided by federal and provincial governments to municipalities for operating and/or capital purposes.
- Contributed assets are normally tangible capital assets that have been donated or transferred to the municipality. Contributed assets are reported as revenue on the Statement of Operations because they create an expected future economic benefit through the municipality’s ownership of the assets and ability to provide services with the assets. As a result there is a corresponding increase in the accumulated surplus (or deficit). Although contributed assets are reported as revenue, they do not represent cash received by the municipality.
- Cost of service information is summarized and reported at the functional level (for instance, protection services or transportation services).
- The amortization expense is a non-cash amount that represents the portion of the historical cost of the municipality’s tangible capital assets that is used up during the reporting period. Amortization expense is normally included in the costs of the specific service provided.
- The accumulated surplus (deficit) may increase (decrease) significantly without a corresponding increase in financial assets. For example, a subdivision turned over to the municipality by a developer would be recorded as contributed asset revenue, which would increase (decrease) the accumulated surplus (deficit) amount without any change in financial assets, such as cash.
Financial assets comprise cash or items that will eventually be turned into cash. A subdivision would typically not be considered a financial asset because it is not being held for sale.
Town of Sample River - Consolidated Statement of Change in Net Financial Assets (Net Debt)
| For the year ended December 31, | Budget ($) | 2024 ($) | 2023 ($) |
|---|---|---|---|
| Annual surplus (deficit) | 504,000 | 810,000 | 400,000 |
| Acquisition of tangible capital assets | (1,000,000) | (1,600,000) | (880,000) |
| Amortization of tangible capital assets | - | 400,000 | 350,000 |
| Accretion expense | - | 20,000 | 15,000 |
| Loss (gain) on sale of tangible capital assets | - | 30,000 | 20,000 |
| Proceeds on sale of tangible capital assets | 100,000 | 190,000 | - |
| Total | (396,000) | (1,000,000) | (565,000) |
| For the year ended December 31, | Budget ($) | 2024 ($) | 2023 ($) |
|---|---|---|---|
| Acquisition of inventories of supplies | - | (200,000) | (250,000) |
| Acquisition of prepaid expenses | (100,000) | (120,000) | |
| Consumption of inventories of supplies | 200,000 | 250,000 | |
| Use of prepaid expenses | 100,000 | 120,000 | |
| Total | - | - | - |
| For the year ended December 31, | Budget ($) | 2024 ($) | 2023 ($) |
|---|---|---|---|
| Net remeasurement gains (losses) | - | (75,000) | (20,000) |
| For the year ended December 31, | Budget ($) | 2024 ($) | 2023 ($) |
|---|---|---|---|
| Net change in net financial assets | 108,000 | (265,000) | (185,000) |
| Net financial assets (net debt), beginning of year | 5,080,000 | 5,080,000 | 5,265,000 |
| Net financial assets (net debt), end of year | 5,188,000 | 4,815,000 | 5,080,000 |
Consolidated Statement of Change in Net Financial Assets (Net Debt)
The Consolidated Statement of Change in Net Financial Assets (Net Debt) reports the significant items that explain the difference between the surplus or deficit for the year as reported on the statement of operations and the change in net financial assets or net debt in the period. In any given period, a government finances its expenditures by raising revenues, applying existing financial resources or incurring liabilities. Unlike expenses, which are the cost of goods and services consumed in the accounting period, expenditures are the cost of goods and services acquired by the government in the period. The statement can provide information useful for explaining why a government can have a surplus from operations, but still have an increase in its net debt. The statement presents what the municipality has spent to acquire tangible capital assets and inventories of supplies. It also reports on the disposal of tangible capital assets and the use of inventory.
- Acquisition of tangible capital assets is the amount spent on tangible capital assets in the current year. Funding sources could include cash reserves, property taxes, long-term debt or government transfers (grants).
- A gain is reported when a tangible capital asset is sold or disposed of and the proceeds are greater than the net book value of the asset. A loss is reported if the proceeds are less than the net book value of the asset.
- These amounts are also reported on the Consolidated Statement of Operations, with a gain reported as revenue and a loss reported as an expense.
- An increase in the net debt position is most likely the result of the municipality funding capital acquisitions with debt or with financial assets accumulated in a previous year.
To assess the impact of a net debt position on the financial health of a municipality, considerations typically include:
- Is there a debt management plan in place?
- What is the term of the debt?
- Are the municipality’s financial assets liquid and current?
- What portion, if any, of the municipality’s financial assets are restricted?
- Will projected future revenues be sufficient to pay the net debt?
Town of Sample River - Consolidated Statement of Remeasurement Gains and Losses
| For the year ended December 31, | 2024 ($) | 2023 ($) |
|---|---|---|
| Accumulated remeasurement gains (losses), beginning of the year | (20,000) | - |
| For the year ended December 31, | 2024 ($) | 2023 ($) |
|---|---|---|
| Foreign Exchange | - | - |
| Derivatives | (75,000) | - |
| Portfolio investments | - | (20,000) |
| Other financial instruments, designated to fair market value | - | - |
| Total | (75,000) | (20,000) |
| For the year ended December 31, | 2024 ($) | 2023 ($) |
|---|---|---|
| Foreign Exchange | - | - |
| Derivatives | - | - |
| Portfolio investments | - | - |
| Other financial instruments, designated to fair market value | - | - |
| Total | - | - |
| For the year ended December 31, | 2024 ($) | 2023 ($) |
|---|---|---|
| Other Comprehensive Income | - | - |
| For the year ended December 31, | 2024 ($) | 2023 ($) |
|---|---|---|
| Net Change in remeasurement gains (losses) for the year | (75,000) | (20,000) |
| Accumulated remeasurement gains (losses), end of the year | (95,000) | (20,000) |
Statement of Remeasurement Gains and Losses (if applicable)
Municipal financial statements may include a statement of remeasurement gains and losses (this statement is only prepared when the municipality has unrealized gains or losses to report). Remeasurement gains and losses result from changes in the value of financial assets and liabilities arising from:
- remeasurement of financial assets (derivatives and equity instruments) to fair value
- foreign currency exchange rate fluctuations
The annual change in the fair value of financial assets and the annual fluctuations in exchange rates are reported as unrealized gains or losses. Once the asset is sold or liability paid, unrealized gains or losses are recognized, and the realized gain or loss is reallocated from the accumulated remeasurement gains and losses to the statement of operations.
Town of Sample River - Consolidated Statement of Cash Flows
| For the year ended December 31, | 2024 ($) | 2023 ($) |
|---|---|---|
| Cash provided by (used in) |
| For the year ended December 31, | 2024 ($) | 2023 ($) |
|---|---|---|
| Annual Surplus | 810,000 | 400,000 |
| Amortization | 400,000 | 350,000 |
| Accretion expense | 20,000 | 15,000 |
| Contributed (donated) tangible capital assets | - | - |
| Loss on sale of tangible capital assets | 30,000 | (20,000) |
| Change in employee benefits | 400,000 | - |
| Change in prepaid expenses | - | - |
| Change in inventory | - | - |
| Net change in cash from operating activities | 1,660,000 | 745,000 |
| For the year ended December 31, | 2024 ($) | 2023 ($) |
|---|---|---|
| Proceeds on sale of tangible capital assets | 190,000 | - |
| Cash used to acquire tangible capital assets | (1,600,000) | (880,000) |
| Net change in cash from capital activities | (1,410,000) | (880,000) |
| For the year ended December 31, | 2024 ($) | 2023 ($) |
|---|---|---|
| Proceeds from sale of Investments | 60,000 | 250,000 |
| Purchases of investments | (70,000) | (300,000) |
| Net change in cash from investing activities | (10,000) | (50,000) |
| For the year ended December 31, | 2024 ($) | 2023 ($) |
|---|---|---|
| Proceeds from long-term debt issuance | 485,000 | 60,000 |
| Principal long-term debt repayment | (25,000) | (24,000) |
| Net change in cash from financing activities | 460,000 | 36,000 |
| For the year ended December 31, | 2024 ($) | 2023 ($) |
|---|---|---|
| Net change in cash and cash equivalents | 700,000 | (149,000) |
| Cash and cash equivalents, beginning of year | 5,800,000 | 5,949,000 |
| Cash and cash equivalents, end of year | 6,500,000 | 5,800,000 |
Consolidated statement of cash flows
The Consolidated Statement of Cash Flows:
- identifies where cash came from
- shows how cash was used
- provides details on changes to cash and cash equivalents since the last reporting period
The statement helps explain how the financial activities recorded on an accrual basis relates to the change in the cash balance in the statement.
- The Consolidated Statement of Cash Flows begins with the net results of municipal operations (or annual surplus/deficit) on an accrual basis. If the municipality settled every transaction with cash instantly, all operational activities would result in changes to the cash balance. However, sometimes when the municipality buys goods or charges fees the payment or collection will happen at a later period. Typically, accrual based revenues and expenses need to be adjusted for what was bought or sold “on account” to determine how much cash was generated or used from these transactions. Similarly, operational results include items like amortization, which is a non-cash expense. To determine the change in the municipality’s cash position, all non-cash amounts are added back into the operation’s results.
On the other hand, the value of tangible capital assets contributed is generally reflected as non-cash revenue in the Consolidated Statement of Operations. To determine the change in the municipality’s cash position, this amount is deducted from the operations result.
- The Capital and Financing categories provide a summary of the capital transactions that took place and are an indicator of what portion of the capital transactions were financed with long-term debt. This area is usually one of the biggest differences between cash and accrual accounting because of the large upfront cost of infrastructure assets providing value to the public over a long period of time.
The Capital section provides information on the amount the municipality spent on tangible capital assets as well as the amount the municipality received from selling tangible capital assets during the reporting period.
The Financing section identifies funds received from long-term debt financing, as well as the amount of long-term debt principal repaid during the reporting period.
- The cash and cash equivalents balance at the end of the year are equal to the yearend cash balance less the temporary bank indebtedness.
The Consolidated Statement of Cash Flows provides detailed information on significant cash transactions that are not included in the Statement of Operations.
Checklist for financial statements – sample review questions
Use these sample questions for discussions about the effect of budgets and long-term plans on financial statements.
- Are there long-range planning or budgetary issues the municipality needs to address? Financial indicators of concern that may be found in financial statements may include:
- continued increase in the net debt
- high level of short-term debt indicating working capital position is insufficient
- low net book value of tangible capital assets indicating useful life nearing an end
- Are there some “red flags” in the financial statements? Potential red flags may include:
- significant decrease in the municipality’s cash position from the previous year
- restricted surplus that exceeds the amount of cash and cash equivalents
- significant decrease in the net financial assets from the previous year
- significant increase in net debt from the previous year
- the unrestricted portion of the accumulated surplus is in a deficit position
- Have there been any extraordinary or unusual financial transactions that may have future implications for the municipality?
- How did the current year’s financial decisions and operations impact the overall financial position of the municipality?
- What are the costs of providing specific services?
- What services have full or partial cost recovery associated with them?
- What is the cash position and debt level?
- Are there adequate operating and capital funds for future projects, or will borrowing be required?
- Does the municipality have sufficient working capital?
- Is short term borrowing required before property tax revenues are received?
- What is the remaining useful life of the municipality’s tangible capital assets?
- What are the financial and budgetary impacts of replacing or rehabilitating tangible capital assets nearing the end of their life?
- How does this compare with the municipal asset management plan?
- What is the content of the auditor’s management letter?
- Is there a clean audit report?
- Are there any items of concern that need to be mitigated or addressed?
- Have the municipality’s financial statements been sufficiently communicated to the residents and businesses in the municipality?
Glossary of terms
Amortization – the systematic allocation of the historical cost of a tangible capital asset over its useful life.
Accumulated Amortization – the total amortization pertaining to a tangible capital asset from the time the asset was placed into service until the date of the financial statement.
Assets under Construction – tangible capital assets under construction at the end of the fiscal year that have not been put into service (e.g., engineered structures, buildings, land improvements).
Consolidated Financial Statements –statements containing financial information for the municipality and its owned or controlled organizations (e.g., fire, library).
Contributed Assets – assets that have been transferred or donated to the municipality and that will provide a future economic benefit.
Deferred Revenue – income received that will not be recorded as revenue until certain transactions or events take place.
Equity in Tangible Capital Assets – the net book value of recorded tangible capital assets less capital debt.
Expenditure – an outlay of cash, payment or disbursement.
Expense – the cost to the municipality of an activity and can be cash or non-cash cost (e.g., wages, materials, amortization).
Financial Assets – current cash resources plus any items or holdings that are expected to be converted into cash in the future.
Gain or Loss on Sale – proceeds from the sale of a tangible capital asset that are greater than (gain) or less than (loss), the net book value of the asset.
Government Transfers – entitlements, transfers under cost-share agreements, and/or grants from other levels of government.
Net Book Value – the total cost of a tangible capital asset minus the accumulated amortization and any write-down of the asset.
Net Financial Assets (Net Debt) – an amount equal to the total financial assets less the total liabilities.
Restricted Surplus – the amount that results from excess revenues that have been internally designated for a specified future purpose or externally restricted, such as by provincial legislation or contract.
Tangible Capital Assets – non-financial assets having a physical substance that are held for use in the supply of goods and services, have economic lives beyond the accounting period, are used on a continuing basis and are not for sale in the ordinary course of operations (e.g., bridge, snow plow).
Unrealized Gains or Losses – new financial instruments standards require equity investments and derivatives that can be quoted on an active market to be recorded at fair value, with any unrealized gains/losses recorded annually in the statement of remeasurement gains (losses). Once those investments expire or are sold, the unrealized gain or loss becomes realized and is reallocated to the statement of operations.
Unrestricted Surplus – the portion of the accumulated surplus that results from excess revenue and expenses available for any future use.
Links to the financial information return
The Financial Information Return (FIR) is the main data collection tool used by the Ministry of Municipal Affairs and Housing (MMAH) to collect financial and statistical information on municipalities. The FIR is a standard document comprising a number of schedules that are updated each year, to reflect current legislation and reporting requirements. The FIR website is: https://efis.fma.csc.gov.on.ca/fir/Welcome.htm
At a high level, municipal consolidated financial statements are linked to MMAH’s FIR as follows:
| Financial statement | Financial statement component | FIR schedule |
|---|---|---|
| Consolidated Statement of Financial Position | Full statement | 70 – Consolidated Statement of Financial Position |
| Taxes receivable | 72 – Continuity of Taxes Receivable | |
| Long-term debt | 74 – Long-Term Liabilities and Commitments | |
| Non-financial assets | 51 – Schedule of Tangible Capital Assets | |
| Reserves and reserve funds | 60 – Continuity of Reserves and Reserve Funds | |
| Obligatory Reserves | 60 – Continuity of Reserves and Reserve Funds 61A – Development Charges Receivable 61B - Development Charges Cash Collected and Amounts Earned (DC Inflows/Outflows) | |
| Accumulated surplus – remeasurement gains and losses | 71 – Statement of Remeasurement Gains and Losses | |
| Consolidated Statement of Operations | Revenues | 10 – Consolidated Statement of Operations: Revenue 12 – Grants, User Fees, and Service Charges |
| Property taxes | 20 – Taxation Information 22 – Municipal and School Board Taxation 24 – Payments-in-lieu of taxation 26 – Taxation and Payments-in-lieu Summary 28 – Upper-tier Entitlements 72 – Continuity of Taxes Receivable | |
| Expenses | 40 – Consolidated Statement of Operations: Expenses 42 – Additional Information | |
| Consolidated Statement of Changes in Net Financial Assets (Net Debt) | Full statement | 53 – Consolidated Statement of Change in Net Financial Assets (Net Debt) |
| Consolidated Statement of Cash Flows | Full statement | 54 – Consolidated Statement of Cash Flows |
| Statement of Remeasurement Gains (Losses) | Full statement | 71 – Statement of Remeasurement Gains (Losses) |