PEILCC 2023 Annual Report

PRINCE EDWARD ISLAND LIQUOR CONTROL COMMISSION Notes to Financial Statements Year Ended March 31, 2023

4. SIGNIFICANT ACCOUNTING POLICIES (continued) Inventory

Inventories are stated at the lower of cost and net realizable value on a first-in, first-out basis. Cost includes the costs to purchase, duty and excise taxes, and standard freight rates for goods received. Net realizable value represents the amount that may be realized from the sale of an inventory item under normal business conditions. When inventories are sold, the carrying amount of those inventories are recognized as an expense in the period in which the related revenue is recognized. The amount of any write-down of inventories to net realizable value and all losses of inventories shall be recognized as an expense in the period the loss or write-down occurs. The amount of reversal of any write-downs, arising from an increase in net realizable value, shall be recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs. Property and equipment Property and equipment is stated at cost less accumulated amortization and any impairment losses. All capital asset additions over $1,000 are capitalized. Property and equipment are broken down into components when the components are significant and have differing useful lives than the rest of the asset. Amortization is calculated on a straight-line basis at the following rates: Buildings 2.5%, 3.33%, 5%, 6.66% Equipment 20% Vehicles 20% Leasehold improvements 5% and 10% Financial information system 20% Right-of-use assets term of the lease One-half of the annual rate is recorded in the year of acquisition; no amortization is recorded in the year of disposal. Leases The Corporation recognizes right-of-use assets and lease liabilities for its leases except for certain classes of underlying assets in which the lease terms are 12 months or less or for low valued assets. Right-of-use assets are included in property and equipment on the statement of financial position. The amortization expense on right-of-use assets is based on amortization of the right-of-use asset from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. Impairment The Commission assesses, at each reporting date, whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired, and impairment losses are recorded, only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a "loss event") and the loss event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Deferred lease inducements The Commission received inducements to extend a lease at one of its locations. This amount will be amortized over the term of the lease to offset the cost of the leased premise. (continues)

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PEILCC 2022-2023 Annual Report