Public Notice
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Ottawa, 10 December 1993
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Public Notice CRTC 1993-174
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ADDITIONAL CLARIFICATION REGARDING THE REPORTING OF CANADIAN PROGRAMMING
EXPENDITURES
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On 22 June 1993 the Commission issued Public Notice CRTC
1993-93 clarifying the Commission's position with respect to a number of
issues relating to the reporting of Canadian programming expenditures by
English-language conventional television licensees who are subject to
Canadian expenditure requirements, whether by condition of licence or by
expectation. The public notice was issued to ensure that all licensees have a
clear understanding of the Commission's definition of eligible Canadian
programming expenditures and its determination as to the appropriateness of
certain accounting practices.
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Further to queries raised with Commission staff by the Chief Financial
Officers' Committee of the Canadian Association of Broadcasters (CAB), the
Commission hereby provides further clarification with respect to the type of
losses that will be accepted as eligible expenditures on Canadian
programming. This notice also sets out how the Commission intends to assess
compliance with expenditure requirements for Canadian programming.
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In Public Notice CRTC 1993-93,
the Commission stated that, while loans provided by licensees to assist in
the financing of a Canadian production do not qualify as acceptable
expenditures, losses on equity investments in productions of Canadian
programs with arm's-length companies would so qualify.
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The CAB representatives pointed out that, in addition to equity investments,
licensees may also provide financing for productions set up in the form of
debt instruments such as loans or advances. Such arrangements are very
similar to equity investments and may result in capital losses.
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The Commission has determined that, while loans will continue to be
ineligible, it will accept as a qualifying Canadian programming expenditure losses
of principal on loans made to arm's-length companies relating to the
production of Canadian programs. Foregone interest or losses of interest
revenue on loans, however, will continue to be ineligible as Canadian
programming expenditures.
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The Commission is satisfied that this approach is consistent with its
position set out in Public Notice CRTC
1993-93, in that the amount of any capital loss by a licensee on an
investment in a Canadian production will be considered an eligible Canadian
programming expenditure, regardless of the vehicle used by the licensee to
make the investment.
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The CAB representatives also addressed how they believed the Commission
should assess television licensees' compliance with their Canadian
programming expenditure requirements over the current licence term in light
of the clarifications regarding the eligibility of program expenditures and
the Commission's determination as to the acceptability of certain accounting
practices, as described in the June 1993 public notice.
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In the CAB's view, Public Notice CRTC
1993-93 constituted a "new policy" and it argued that the
clarifications should not be applied retroactively. The CAB stated that it
expects some licensees may have included, in the financial projections filed
at the time of their last licence renewal, certain Canadian programming
expenditures that the Commission, in its June 1993 public notice, stated it
considers ineligible.
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In its June 1993 notice, the Commission noted that it had discovered "a
number of inconsistencies and interpretation difficulties" in reporting
actual Canadian programming expenditures and stated that it wished to be
satisfied that the Canadian programming expenditures formula was being
applied in a consistent and equitable manner. In publishing its
clarifications regarding the policy, the Commission recognized:
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...that the directives outlined in this public notice will have a
significant impact on some licensees, particularly on the larger corporate
groups. It considers, however, that these findings will result in the
consistent application of reporting and accounting procedures among all
licensees subject to the Canadian programming expenditures formula, whether
by condition of licence or as an expectation.
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The Canadian programming expenditure requirements imposed on the licensees of
most private, conventional, English-language television undertakings are
based upon a formula tied to the figure that each licensee, in its most
recent application for licence renewal, projected it would spend on such
programming in the first year of its new licence term.
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The Commission hereby advises such licensees that they will be provided an
opportunity to demonstrate that an adjustment is warranted in their first
year projections for Canadian programming expenditures, specifically that
provision for expenditures on equity investments had been included in their
projections for year one of the current licence term, and that such
expenditures were in fact made in that year. Any licensee wishing the
Commission to consider an application to amend the terms of its licence to
allow for such an adjustment must provide supporting documentation as to the
actual amount of the equity investments that were made in the first year.
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Allan J. Darling
Secretary General
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