FIS INFO
September 2001
Recording of Expenses in Departments and Agencies
Under full accrual accounting, as introduced by the Financial Information Strategy (FIS),
expenses will be recorded in the period in which they are incurred Ğ that is, when the goods and
services are used or consumed.
How will recording of expenses be different under FIS?
Previously, expenses (expenditures)
were recorded when they were paid.
(The single exception was items received
prior to year-end but not yet paid by a
department or agency).
Under full accrual accounting, expenses
incurred during the fiscal year will be
reported on the department's or agency's
Statement of Operations. This means that
expenses related to a specific period will be
recorded and reported in that period.
Hence, more complete information on the
cost of program delivery will be available.
Financial performance will become
increasingly measurable as financial results
are linked to operations and programs.
How will some typical expenses be affected?
-
Prepaid expenses: Any payment for such
things as subscriptions or systems
maintenance contracts will be recorded
first as an asset on the Statement of
Financial Position and subsequently as an
expense on the Statement of Operations, in
the period in which the service is provided.
Previously, such payments were reported as
expenditures in the period in which they
were paid.
-
Capital assets: Under full accrual
accounting, a capital asset is recorded as
an asset. Only the portion of a capital
asset that has been used or consumed
during the reporting period (i. e., the
amortization or depreciation amount) is
recorded as an expense. Previously, the
amount of the capital asset was recorded
and reported as an expenditure in the
period in which the asset was acquired.
-
Accumulated vacation leave: Under full
accrual accounting, departments and
agencies are required to record unused
leave as a liability. The Statement of
Operations for the accounting period
reflects the vacation time earned, rather
than vacation time paid for.
-
Employee salaries: These are recorded
in the same way as other expenses. Even
though the salary earned in one period
may not actually be paid until the next
period, full accrual accounting requires
that departments and agencies record
the expense in the period in which the
salary was earned, with a corresponding
liability recorded.
For more information, contact your
departmental financial advisor or visit the
Treasury Board Secretariat Website at
http://www.tbs-sct.gc.ca/fin/sigs/fis-sif/.
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