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PRINCE EDWARD ISLAND
LIQUOR CONTROL COMMISSION
Notes to Financial Statements
March 31,2015
3.
Summary of Significant Accounting Policies (continued...)
h) Finance Leases
A property lease is classified as a finance lease if it transfers substantially all of the risks
and rewards of ownership to the lessee. The Commission currently leases three such
properties that are required to be set up as a leased property asset and an obligation
under finance lease liability based on lAS 17
Leases.
The values of finance lease assets
and liabilities are determined using the lower of the net present value of future lease
payments and the estimated fair market value of property leased. The estimated fair
market value is calculated using an income based approach which converts expected
future income of the property to present market value using market established
capitalization rates. The asset is then amortized over the useful life of the asset and the
liability over the life of the lease, which includes all renewal options. The Commission’s
amortization policy has been disclosed in Note 3(f). The liability is amortized using the
effective interest rate method. Lease payments made during the year are allocated to
interest on finance leases and a reduction in the obligation under finance leases.
i) Capital Management
The Commission’s objective when managing capital is to keep minimal capital on hand.
This objective is achieved by accruing all comprehensive income to the Province of
Prince Edward Island and transferring it on a continuous basis as excess capital
becomes available.
j)
Cash
Cash consists of cash on hand and amounts on deposit with financial institutions.
k) Accounts Receivable, Accounts Payable and Accrued Liabilities
Accounts receivable are recorded at cost less any provision when collection is in doubt.
Accounts payable and accrued liabilities are recorded for all amounts due for work
performed and goods or services received during the fiscal year.
4.
Significant Accounting Judgements and Estimates
The preparation of financial statements requires management to make estimates,
judgements, and assumptions that affect the reported amounts of assets, liabilities,
revenues, and expenses. The actual results may materially differ from management’s
estimation, Items requiring the use of significant estimates include property, plant, and
equipment carried at $6,409,164 (2014
-
$6,816,207), accrued liabilities of $469,554 (2014
-
$554,955), standard inventory freight rates of $223,764 (2014
-
$227,546) and obligations
under finance leases of $1,373,396 (2014
-
$1,047,450).